UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C.  20549


FORM
10-Q/A


(Amendment
No. 1)


(Mark
One)





x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934




For the
quarterly period ended September 30,
2008


or


 ̈
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934




For the
transition period from ________________________ to
_________________________________________________





Commission
file number 0-15661





AMCOL INTERNATIONAL
    CORPORATION(Exact
      name of registrant as specified in its
charter)





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





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





(847) 851-1500(Registrant’s
      telephone number, including area
code)





Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.YesxNo ̈





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


Large accelerated
filer ̈                        
          Accelerated
filerx          
                            Non-accelerated
filer ̈


Smaller reporting
company ̈





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule


12b-2 of the Exchange
Act).   Yes ̈     Nox





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


Class
              
              Outstanding at October 31,
    2008(Common
      stock, $.01 par value)
              
              30,414,787
      Shares









AMCOL
International Corporation





Quarterly
Report on Form 10-Q/A





For
the Quarter Ended September 30, 2008





EXPLANATORY
NOTE




This Form
10-Q/A is being filed to amend our Quarterly Report on Form 10-Q for the quarter
ended September 30, 2008 in order to reflect the restatement of our unaudited
consolidated financial statements and amendments to related disclosures,
including Management’s Discussion and Analysis of Financial Condition and
Results of Operations.  As previously reported in our Form 8-K filed
with the Securities and Exchange Commission on January 29, 2009 (the Form 8-K),
this restatement is required to properly account for the value of derivative
instruments held by Ashapura Minechem Limited, a publicly traded Indian company
in which we hold a 21% interest accounted for using the equity method of
accounting (Ashapura).  Note 2 of this Form 10-Q/A discloses
previously reported results as well as the restated results in our unaudited
condensed financial statements for the nine and three month periods ended
September 30, 2008.




In
addition, Item 6 of Part II has been updated to contain current certifications
of the Chief Executive Officer and the Chief Financial Officer as required by
Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.





Except as
described above and as otherwise required to reflect the effects of the
restatement, we have not modified or updated other disclosures presented in the
original report on Form 10-Q.  Information not affected by the
restatement is unchanged and reflects the disclosure made at the time of the
original filing of the Form 10-Q on November 10, 2008.




2




AMCOL INTERNATIONAL
CORPORATION
 
 INDEX




Page No.Part I - Financial
    InformationItem
      1:
                                                                    Financial
      StatementsCondensed
      Consolidated Balance Sheets –September
      30, 2008 and December 31, 2007
                                                                    
                                                                    4Condensed
      Consolidated Statements of Operations –three
      and nine months ended September 30, 2008 and 2007
                                                                    
                                                                    6Condensed
      Consolidated Statements of Comprehensive Income –three
      and nine months ended September 30, 2008 and 2007
                                                                    
                                                                    7Condensed
      Consolidated Statements of Cash Flows –nine
      months ended September 30, 2008 and 2007
                                                                    
                                                                    8Notes
      to Condensed Consolidated Financial Statements
                                                                    
                                                                    9Item
      2:
                                                                    Management’s
      Discussion and Analysis of FinancialCondition
      and Results of Operations
                                                                    
                                                                    25Part II - Other InformationItem
      6:
                                                                    Exhibits
                                                                    
                                                                    43




3




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(In
thousands)





Item
1.  Financial Statements





September
      30,
                                        
                                        
                                        December
      31,2008
                                        
                                        
                                        2007(Unaudited)(Restated)ASSETS
                                        
                                        (Note 2)
                                        
                                        
                                        *Current
      assets:Cash
      and cash equivalents
                                        
                                        $
                                        33,646
                                        
                                        
                                        $
                                        25,282Accounts
      receivable, net
                                        
                                        
                                        224,854
                                        
                                        
                                        
                                        166,835Inventories
                                        
                                        
                                        116,898
                                        
                                        
                                        
                                        91,367Prepaid
      expenses
                                        
                                        
                                        15,088
                                        
                                        
                                        
                                        13,529Deferred
      income taxes
                                        
                                        
                                        5,589
                                        
                                        
                                        
                                        4,374Income
      tax receivable
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,768Other
                                        
                                        
                                        7,345
                                        
                                        
                                        
                                        475Total
      current assets
                                        
                                        
                                        403,420
                                        
                                        
                                        
                                        304,630Investment
      in and advances to affiliates and joint ventures
                                        
                                        
                                        41,391
                                        
                                        
                                        
                                        49,309Property,
      plant, equipment, and mineral rights and reserves:Land
      and mineral rights
                                        
                                        
                                        20,807
                                        
                                        
                                        
                                        21,394Depreciable
      assets
                                        
                                        
                                        406,707
                                        
                                        
                                        
                                        352,100427,514
                                        
                                        
                                        
                                        373,494Less:
      accumulated depreciation and depletion
                                        
                                        
                                        212,436
                                        
                                        
                                        
                                        196,904215,078
                                        
                                        
                                        
                                        176,590Other
      assets:Goodwill
                                        
                                        
                                        73,700
                                        
                                        
                                        
                                        59,840Intangible
      assets, net
                                        
                                        
                                        53,456
                                        
                                        
                                        
                                        41,257Deferred
      income taxes
                                        
                                        
                                        7,775
                                        
                                        
                                        
                                        5,513Other
      assets
                                        
                                        
                                        15,093
                                        
                                        
                                        
                                        15,007150,024
                                        
                                        
                                        
                                        121,617$
                                        809,913
                                        
                                        
                                        $
                                        652,146





Continued...




4




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(In
thousands)





September
      30,
                                                                
                                                                
                                                                December
      31,2008
                                                                
                                                                
                                                                2007(Unaudited)(Restated)LIABILITIES
      AND STOCKHOLDERS' EQUITY
                                                                
                                                                (Note
      2)
                                                                
                                                                
                                                                *Current
      liabilities:Accounts
      payable
                                                                
                                                                $
                                                                55,779
                                                                
                                                                
                                                                $
                                                                44,274Accrued
      liabilities
                                                                
                                                                
                                                                67,537
                                                                
                                                                
                                                                
                                                                57,833Total
      current liabilities
                                                                
                                                                
                                                                123,316
                                                                
                                                                
                                                                
                                                                102,107Long-term
      debt
                                                                
                                                                
                                                                266,926
                                                                
                                                                
                                                                
                                                                164,232Long-term
      debt - corporate building
                                                                
                                                                
                                                                20,692
                                                                
                                                                
                                                                
                                                                -Total
      long-term debt
                                                                
                                                                
                                                                287,618
                                                                
                                                                
                                                                
                                                                164,232Minority
      interests in subsidiaries
                                                                
                                                                
                                                                1,513
                                                                
                                                                
                                                                
                                                                327Pension
      liabilities
                                                                
                                                                
                                                                9,649
                                                                
                                                                
                                                                
                                                                9,576Deferred
      compensation
                                                                
                                                                
                                                                7,640
                                                                
                                                                
                                                                
                                                                7,559Other
      liabilities
                                                                
                                                                
                                                                17,087
                                                                
                                                                
                                                                
                                                                16,02235,889
                                                                
                                                                
                                                                
                                                                33,484Stockholders’
      equity:Common
      stock
                                                                
                                                                
                                                                320
                                                                
                                                                
                                                                
                                                                320Additional
      paid in capital
                                                                
                                                                
                                                                85,672
                                                                
                                                                
                                                                
                                                                81,599Retained
      earnings
                                                                
                                                                
                                                                268,398
                                                                
                                                                
                                                                
                                                                258,164Accumulated
      other comprehensive income
                                                                
                                                                
                                                                27,175
                                                                
                                                                
                                                                
                                                                33,248381,565
                                                                
                                                                
                                                                
                                                                373,331Less:Treasury
      stock
                                                                
                                                                
                                                                18,475
                                                                
                                                                
                                                                
                                                                21,008363,090
                                                                
                                                                
                                                                
                                                                352,323$
                                                                809,913
                                                                
                                                                
                                                                $
                                                                652,146




*Condensed
from audited financial statements.


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




5




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)


(In
thousands, except per share amounts)





Nine
      Months Ended
                                                                            
                                                                            
                                                                            Three
      Months EndedSeptember
      30,
                                                                            
                                                                            
                                                                            September
      30,2008
                                                                              (Restated)
                                                                              (Note
      2)
                                                                            
                                                                            
                                                                            2007
                                                                            
                                                                            
                                                                            2008
                                                                              (Restated)
                                                                              (Note
      2)
                                                                            
                                                                            
                                                                            2007Net
      sales
                                                                            
                                                                            $
                                                                            678,304
                                                                            
                                                                            
                                                                            $
                                                                            549,780
                                                                            
                                                                            
                                                                            $
                                                                            253,048
                                                                            
                                                                            
                                                                            $
                                                                            203,598Cost
      of sales
                                                                            
                                                                            
                                                                            505,727
                                                                            
                                                                            
                                                                            
                                                                            402,190
                                                                            
                                                                            
                                                                            
                                                                            189,481
                                                                            
                                                                            
                                                                            
                                                                            149,298Gross
      profit
                                                                            
                                                                            
                                                                            172,577
                                                                            
                                                                            
                                                                            
                                                                            147,590
                                                                            
                                                                            
                                                                            
                                                                            63,567
                                                                            
                                                                            
                                                                            
                                                                            54,300General,
      selling and administrative expenses
                                                                            
                                                                            
                                                                            109,061
                                                                            
                                                                            
                                                                            
                                                                            87,756
                                                                            
                                                                            
                                                                            
                                                                            36,214
                                                                            
                                                                            
                                                                            
                                                                            28,297Operating
      profit
                                                                            
                                                                            
                                                                            63,516
                                                                            
                                                                            
                                                                            
                                                                            59,834
                                                                            
                                                                            
                                                                            
                                                                            27,353
                                                                            
                                                                            
                                                                            
                                                                            26,003Other
      income (expense):Interest
      expense, net
                                                                            
                                                                            
                                                                            (8,642
                                                                            )
                                                                            
                                                                            
                                                                            (6,506
                                                                            )
                                                                            
                                                                            
                                                                            (3,404
                                                                            )
                                                                            
                                                                            
                                                                            (2,409
                                                                            )Other,
      net
                                                                            
                                                                            
                                                                            (1,475
                                                                            )
                                                                            
                                                                            
                                                                            (1,000
                                                                            )
                                                                            
                                                                            
                                                                            (1,763
                                                                            )
                                                                            
                                                                            
                                                                            (830
                                                                            )(10,117
                                                                            )
                                                                            
                                                                            
                                                                            (7,506
                                                                            )
                                                                            
                                                                            
                                                                            (5,167
                                                                            )
                                                                            
                                                                            
                                                                            (3,239
                                                                            )Income
      before income taxes and income (loss) fromaffiliates and joint
      ventures
                                                                            
                                                                            
                                                                            53,399
                                                                            
                                                                            
                                                                            
                                                                            52,328
                                                                            
                                                                            
                                                                            
                                                                            22,186
                                                                            
                                                                            
                                                                            
                                                                            22,764Income
      tax expense
                                                                            
                                                                            
                                                                            13,950
                                                                            
                                                                            
                                                                            
                                                                            12,205
                                                                            
                                                                            
                                                                            
                                                                            5,567
                                                                            
                                                                            
                                                                            
                                                                            4,704Income
      before income (loss) from affiliates andjoint
      ventures
                                                                            
                                                                            
                                                                            39,449
                                                                            
                                                                            
                                                                            
                                                                            40,123
                                                                            
                                                                            
                                                                            
                                                                            16,619
                                                                            
                                                                            
                                                                            
                                                                            18,060Income
      (loss) from affiliates and joint ventures
                                                                            
                                                                            
                                                                            (14,072
                                                                            )
                                                                            
                                                                            
                                                                            6,118
                                                                            
                                                                            
                                                                            
                                                                            (14,697
                                                                            )
                                                                            
                                                                            
                                                                            2,086Income
      from continuing operations
                                                                            
                                                                            
                                                                            25,377
                                                                            
                                                                            
                                                                            
                                                                            46,241
                                                                            
                                                                            
                                                                            
                                                                            1,922
                                                                            
                                                                            
                                                                            
                                                                            20,146Income
      (loss) from discontinued operations, net of tax
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            (286
                                                                            )
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Net
      income
                                                                            
                                                                            $
                                                                            25,377
                                                                            
                                                                            
                                                                            $
                                                                            45,955
                                                                            
                                                                            
                                                                            $
                                                                            1,922
                                                                            
                                                                            
                                                                            $
                                                                            20,146Weighted
      average common shares outstanding
                                                                            
                                                                            
                                                                            30,405
                                                                            
                                                                            
                                                                            
                                                                            30,146
                                                                            
                                                                            
                                                                            
                                                                            30,540
                                                                            
                                                                            
                                                                            
                                                                            30,130Weighted
      average common and common equivalent shares outstanding
                                                                            
                                                                            
                                                                            30,993
                                                                            
                                                                            
                                                                            
                                                                            30,934
                                                                            
                                                                            
                                                                            
                                                                            31,129
                                                                            
                                                                            
                                                                            
                                                                            30,887Basic
      earnings per share:Continuing
      operations
                                                                            
                                                                            $
                                                                            0.83
                                                                            
                                                                            
                                                                            $
                                                                            1.53
                                                                            
                                                                            
                                                                            $
                                                                            0.06
                                                                            
                                                                            
                                                                            $
                                                                            0.67Discontinued
      operations
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            (0.01
                                                                            )
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Basic
      earnings per share
                                                                            
                                                                            $
                                                                            0.83
                                                                            
                                                                            
                                                                            $
                                                                            1.52
                                                                            
                                                                            
                                                                            $
                                                                            0.06
                                                                            
                                                                            
                                                                            $
                                                                            0.67Diluted
      earnings per share:Continuing
      operations
                                                                            
                                                                            $
                                                                            0.82
                                                                            
                                                                            
                                                                            $
                                                                            1.49
                                                                            
                                                                            
                                                                            $
                                                                            0.06
                                                                            
                                                                            
                                                                            $
                                                                            0.65Discontinued
      operations
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            (0.01
                                                                            )
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Diluted
      earnings per share
                                                                            
                                                                            $
                                                                            0.82
                                                                            
                                                                            
                                                                            $
                                                                            1.48
                                                                            
                                                                            
                                                                            $
                                                                            0.06
                                                                            
                                                                            
                                                                            $
                                                                            0.65Dividends
      declared per share
                                                                            
                                                                            $
                                                                            0.50
                                                                            
                                                                            
                                                                            $
                                                                            0.44
                                                                            
                                                                            
                                                                            $
                                                                            0.18
                                                                            
                                                                            
                                                                            $
                                                                            0.16





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




6




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(Unaudited)


(In
thousands)





Nine
      Months Ended
                                  
                                  
                                  Three
      Months EndedSeptember
      30,
                                  
                                  
                                  September
      30,2008
                                  
                                  
                                  2007
                                  
                                  
                                  2008
                                  
                                  
                                  2007(Restated)
                                  
                                  
                                  
                                  
                                  
                                  (Restated)(Note
      2)
                                  
                                  
                                  
                                  
                                  
                                  (Note
      2)Net
      income
                                  
                                  $
                                  25,377
                                  
                                  
                                  $
                                  45,955
                                  
                                  
                                  $
                                  1,922
                                  
                                  
                                  $
                                  20,146Other
      comprehensive income (loss):Foreign
      currency translation adjustment
                                  
                                  
                                  (5,782
                                  )
                                  
                                  
                                  9,737
                                  
                                  
                                  
                                  (12,456
                                  )
                                  
                                  
                                  5,170Unrealized
      gain (loss) on interest rate swap agreement
                                  
                                  
                                  (278
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (275
                                  )
                                  
                                  
                                  -Other
                                  
                                  
                                  (13
                                  )
                                  
                                  
                                  172
                                  
                                  
                                  
                                  57
                                  
                                  
                                  
                                  32Comprehensive
      income (loss)
                                  
                                  $
                                  19,304
                                  
                                  
                                  $
                                  55,864
                                  
                                  
                                  $
                                  (10,752
                                  )
                                  
                                  $
                                  25,348





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




7




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


(In
thousands)





Nine
      Months EndedSeptember
      30,2008
                                              
                                              
                                              2007(Restated)(Note
      2)Cash
      flow from operating activities:Net
      income
                                              
                                              $
                                              25,377
                                              
                                              
                                              $
                                              45,955Adjustments
      to reconcile from net income to net cash provided by (used in) operating
      activities:Depreciation,
      depletion, and amortization
                                              
                                              
                                              24,872
                                              
                                              
                                              
                                              21,688Undistributed
      (earnings) losses from affiliates and joint ventures
                                              
                                              
                                              14,808
                                              
                                              
                                              
                                              (5,916
                                              )Other
      non-cash charges
                                              
                                              
                                              2,409
                                              
                                              
                                              
                                              (3,186
                                              )Changes
      in assets and liabilities, net of effects of acquisitions:Decrease
      (increase) in current assets
                                              
                                              
                                              (86,237
                                              )
                                              
                                              
                                              (44,716
                                              )Decrease
      (increase) in noncurrent assets
                                              
                                              
                                              496
                                              
                                              
                                              
                                              (1,620
                                              )Increase
      (decrease) in current liabilities
                                              
                                              
                                              20,116
                                              
                                              
                                              
                                              23,435Increase  (decrease)
      in noncurrent liabilities
                                              
                                              
                                              788
                                              
                                              
                                              
                                              6,382Net
      cash provided by (used in) operating activities
                                              
                                              
                                              2,629
                                              
                                              
                                              
                                              42,022Cash
      flow from investing activities:Capital
      expenditures
                                              
                                              
                                              (29,686
                                              )
                                              
                                              
                                              (36,319
                                              )Capital
      expenditures - corporate building
                                              
                                              
                                              (14,273
                                              )
                                              
                                              
                                              (1,258
                                              )Acquisitions,
      net of cash
                                              
                                              
                                              (42,549
                                              )
                                              
                                              
                                              (38,783
                                              )Investments
      in and advances to affiliates and joint ventures
                                              
                                              
                                              (10,993
                                              )
                                              
                                              
                                              (7,369
                                              )Advances
      to non-affiliates
                                              
                                              
                                              (6,000
                                              )
                                              
                                              
                                              -Proceeds
      from sale of land and depreciable assets
                                              
                                              
                                              772
                                              
                                              
                                              
                                              6,636Investments
      in restricted cash
                                              
                                              
                                              (1,796
                                              )
                                              
                                              
                                              (856
                                              )Other
                                              
                                              
                                              (1,169
                                              )
                                              
                                              
                                              (173
                                              )Net
      cash used in investing activities
                                              
                                              
                                              (105,694
                                              )
                                              
                                              
                                              (78,122
                                              )Cash
      flow from financing activities:Net
      change in outstanding debt
                                              
                                              
                                              105,495
                                              
                                              
                                              
                                              50,368Net
      change in outstanding debt - corporate building
                                              
                                              
                                              20,692
                                              
                                              
                                              
                                              -Proceeds
      from sales of treasury stock
                                              
                                              
                                              1,550
                                              
                                              
                                              
                                              2,574Purchases
      of treasury stock
                                              
                                              
                                              (2,062
                                              )
                                              
                                              
                                              (6,115
                                              )Dividends
                                              
                                              
                                              (15,143
                                              )
                                              
                                              
                                              (13,194
                                              )Excess
      tax benefits from stock-based compensation
                                              
                                              
                                              1,087
                                              
                                              
                                              
                                              1,463Net
      cash provided by financing activities
                                              
                                              
                                              111,619
                                              
                                              
                                              
                                              35,096Effect
      of foreign currency rate changes on cash
                                              
                                              
                                              (190
                                              )
                                              
                                              
                                              3,972Net
      increase (decrease) in cash and cash equivalents
                                              
                                              
                                              8,364
                                              
                                              
                                              
                                              2,968Cash
      and cash equivalents at beginning of period
                                              
                                              
                                              25,282
                                              
                                              
                                              
                                              17,805Cash
      and cash equivalents at end of period
                                              
                                              $
                                              33,646
                                              
                                              
                                              $
                                              20,773





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




8




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


(In
thousands, except share and per share amounts)





Note
      1:
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





Company
Operations





AMCOL International Corporation (the
Company) operates in five segments:  minerals, environmental, oilfield
services, transportation and corporate.  The minerals segment mines,
processes and distributes clays and products with similar applications to
various industrial and consumer markets.  The environmental segment
processes and distributes clays and products with similar applications for use
as a moisture barrier in commercial construction, landfill liners and in a
variety of other industrial and commercial applications.  The oilfield
services segment provides onshore and offshore water treatment filtration,
pipeline separation, waste fluid treatment, rental tools, coil tubing and well
testing data services for the oil and gas industry.  The
transportation segment includes a long-haul trucking business and a freight
brokerage business, which provide services to our other segments as well as
third-party customers.  Intersegment sales are insignificant, other
than intersegment shipping, which is eliminated in the corporate segment. The
composition of our revenues by segment is as follows:




Nine
      Months Ended
                      
                      
                      Three
      Months EndedSeptember
      30,
                      
                      
                      September
      30,2008
                      
                      
                      2007
                      
                      
                      2008
                      
                      
                      2007Minerals
                      
                      
                      48
                      %
                      
                      
                      48
                      %
                      
                      
                      46
                      %
                      
                      
                      45
                      %Environmental
                      
                      
                      33
                      %
                      
                      
                      35
                      %
                      
                      
                      34
                      %
                      
                      
                      37
                      %Oilfield
      services
                      
                      
                      15
                      %
                      
                      
                      13
                      %
                      
                      
                      15
                      %
                      
                      
                      13
                      %Transportation
                      
                      
                      7
                      %
                      
                      
                      7
                      %
                      
                      
                      7
                      %
                      
                      
                      7
                      %Intersegment
      shipping
                      
                      
                      -3
                      %
                      
                      
                      -3
                      %
                      
                      
                      -2
                      %
                      
                      
                      -2
                      %100
                      %
                      
                      
                      100
                      %
                      
                      
                      100
                      %
                      
                      
                      100
                      %




Further discussion of segment
information is included in Note 5, “Business Segment Information.”





Basis
of Presentation





The financial information included
herein has been prepared by management and, other than the condensed
consolidated balance sheet as of December 31, 2007, is unaudited.  The
condensed consolidated balance sheet as of December 31, 2007 has been derived
from, but does not include all of the disclosures contained in, the audited
consolidated financial statements for the year ended December 31,
2007.  The information furnished herein includes all adjustments that
are, in our opinion, necessary for a fair presentation of our results of
operations and cash flows for the interim periods ended September 30, 2008 and
2007, and our financial position as of September 30, 2008, and all such
adjustments are of a normal recurring nature.  The accompanying
condensed consolidated financial information should be read in conjunction with
the consolidated financial statements and related notes included in our Annual
Report on Form 10-K for the year ended December 31, 2007.




9




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




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





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





New
Accounting Standards





In
September 2006, Financial Accounting Standard Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“FAS
157”).  This statement defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles (GAAP), and
expands disclosures about fair value measurements. In February 2008, the FASB
issued FASB Staff Position FAS157-2, Effective Date of FASB Statement No.
157,which delays our effective date of FAS 157 to January 1, 2009, for nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis.  Therefore,
FAS 157 applies to financial instruments, and items that are recognized or
disclosed at fair value in an entity’s financial statements on a recurring
basis. The adoption of FAS 157 on January 1, 2008 did not have a material impact
on our financial statements.





In March 2008, the FASB issued SFAS No.
161, “Disclosures about
Derivative Instruments and Hedging Activities an amendment of FASB Statement No.
133(“FAS 161”).This standard requires enhanced disclosures about an entity’s derivative
and hedging activities and is intended to improve the transparency of financial
reporting. Entities are required to provide enhanced disclosures about (a) how
and why an entity uses derivative instruments, (b) how derivative instruments
and related hedged items are accounted for under SFAS No. 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. We
do not believe this standard will have a material impact on our financial
statements when we adopt it on January 1, 2009.




In April 2008, the FASB issued FASB
Staff Position (“FSP”) No. 142-3, “Determination of the Useful Life of
Intangible Assets,” (“FSP FAS 142-3”). 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 FASB Statement
No. 142, “Goodwill and Other
Intangible Assets” (“SFAS 142”). This FSP intends 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 FASB Statement No. 141(R), “Business Combinations,” and
other U.S. generally accepted accounting principles. We do not believe this
standard will have a material impact on our financial statements when we adopt
it on January 1, 2009.




10




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




In May 2008, the FASB issued SFAS No.
162, “The Hierarchy of
Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 is
intended to improve financial reporting by identifying a consistent framework,
or hierarchy, for selecting accounting principles to be used in preparing
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles in the United States.
This statement will be effective 60 days following the Securities and Exchange
Commission’s approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles. We do not
believe this standard will have a material impact on our financial statements
when we adopt it.





In
October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active” (“FSP FAS
157-3”). FSP FAS 157-3 clarifies the application of SFAS 157 in a market that is
not active and provides an example to illustrate key considerations in
determining the fair value of a financial asset when the market for that
financial asset is not active. FSP FAS 157-3 is effective for prior periods
whose financial statements have not yet been issued.  Accordingly, our
adoption of FSP FAS 157-3 on September 30, 2008 did not materially impact our
financial statements.




Note
      2:
            RESTATEMENT




Our
condensed financial statements as of and for the nine and three month periods
ended September 30, 2008 have been restated to correct an error relating to the
fair value of derivative instruments held by Ashapura Minechem Limited, a
publicly traded Indian company (Ashapura). We hold a 21% interest in Ashapura
and account for this investment using the equity method of accounting.
Historically, Ashapura has entered into a variety of derivative contracts to
hedge foreign currency exposure on its receivables and payables. These
derivative contracts primarily relate to the conversion of currencies between
the United States Dollar (USD) and the Indian Rupee. Unlike Indian accounting
principles, US GAAP requires that we record the fair value of these derivative
contracts in our balance sheet as of the end of each reporting period and record
the changes in such fair values in our statement of operations. In the course of
preparing our financial statements for the year ended December 31, 2008, we
discovered that we have not included some of Ashapura’s derivative contracts in
the fair value calculations and have not correctly computed the fair value of
their other derivative contracts.




The
adjustment to correct the error, which is a non-cash charge, had the effect of
decreasing Income from affiliates and joint ventures by $19,686 and $16,668 for
the nine and three month periods ended September 30, 2008 respectively, and
increasing Accumulated other comprehensive income by $657, decreasing Investment
in and advances to affiliates and joint ventures by $22,277, and increasing long
term Deferred income tax assets by $3,248 as of September 30, 2008.




11




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




The
adjustment previously discussed affects the condensed consolidated balance sheet
at September 30, 2008 as illustrated below:




September
      30, 2008ASSETS
                                                                              
                                                                              As Previously
                                                                                Reported
                                                                              
                                                                              
                                                                              Adjustment
                                                                              
                                                                              
                                                                              As
      RestatedCurrent
      assets:Cash
      and cash equivalents
                                                                              
                                                                              $
                                                                              33,646
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              $
                                                                              33,646Accounts
      receivable, net
                                                                              
                                                                              
                                                                              224,854
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              224,854Inventories
                                                                              
                                                                              
                                                                              116,898
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              116,898Prepaid
      expenses
                                                                              
                                                                              
                                                                              15,088
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              15,088Deferred
      income taxes
                                                                              
                                                                              
                                                                              5,589
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              5,589Income
      tax receivable
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              -Other
                                                                              
                                                                              
                                                                              7,345
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              7,345Total
      current assets
                                                                              
                                                                              
                                                                              403,420
                                                                              
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              403,420Investment
      in and advances to affiliates and joint ventures
                                                                              
                                                                              
                                                                              63,668
                                                                              
                                                                              
                                                                              
                                                                              (22,277
                                                                              )
                                                                              
                                                                              
                                                                              41,391Property,
      plant, equipment, and mineral rights and reserves:Land
      and mineral rights
                                                                              
                                                                              
                                                                              20,807
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              20,807Depreciable
      assets
                                                                              
                                                                              
                                                                              406,707
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              406,707427,514
                                                                              
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              427,514Less:
      accumulated depreciation and depletion
                                                                              
                                                                              
                                                                              212,436
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              212,436215,078
                                                                              
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              215,078Other
      assets:Goodwill
                                                                              
                                                                              
                                                                              73,700
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              73,700Intangible
      assets, net
                                                                              
                                                                              
                                                                              53,456
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              53,456Deferred
      income taxes
                                                                              
                                                                              
                                                                              4,527
                                                                              
                                                                              
                                                                              
                                                                              3,248
                                                                              
                                                                              
                                                                              
                                                                              7,775Other
      assets
                                                                              
                                                                              
                                                                              15,093
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              15,093146,776
                                                                              
                                                                              
                                                                              
                                                                              3,248
                                                                              
                                                                              
                                                                              
                                                                              150,024$
                                                                              828,942
                                                                              
                                                                              
                                                                              $
                                                                              (19,029
                                                                              )
                                                                              
                                                                              $
                                                                              809,913




Continued...




12




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




September
      30, 2008As
      PreviouslyLIABILITIES
      AND STOCKHOLDERS' EQUITY
                                                              
                                                              Reported
                                                              
                                                              
                                                              Adjustment
                                                              
                                                              
                                                              As
      RestatedCurrent
      liabilities:Accounts
      payable
                                                              
                                                              $
                                                              55,779
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              $
                                                              55,779Accrued
      liabilities
                                                              
                                                              
                                                              67,537
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              67,537Total
      current liabilities
                                                              
                                                              
                                                              123,316
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              123,316Long-term
      debt
                                                              
                                                              
                                                              266,926
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              266,926Long-term
      debt - corporate building
                                                              
                                                              
                                                              20,692
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              20,692Total
      long-term debt
                                                              
                                                              
                                                              287,618
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              287,618Minority
      interests in subsidiaries
                                                              
                                                              
                                                              1,513
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              1,513Pension
      liabilities
                                                              
                                                              
                                                              9,649
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              9,649Deferred
      compensation
                                                              
                                                              
                                                              7,640
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              7,640Other
      liabilities
                                                              
                                                              
                                                              17,087
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              17,08735,889
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              35,889Stockholders’
      equity:Common
      stock
                                                              
                                                              
                                                              320
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              320Additional
      paid in capital
                                                              
                                                              
                                                              85,672
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              85,672Retained
      earnings
                                                              
                                                              
                                                              288,084
                                                              
                                                              
                                                              
                                                              (19,686
                                                              )
                                                              
                                                              
                                                              268,398Accumulated
      other comprehensive income
                                                              
                                                              
                                                              26,518
                                                              
                                                              
                                                              
                                                              657
                                                              
                                                              
                                                              
                                                              27,175400,594
                                                              
                                                              
                                                              
                                                              (19,029
                                                              )
                                                              
                                                              
                                                              381,565Less:Treasury
      stock
                                                              
                                                              
                                                              18,475
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              18,475382,119
                                                              
                                                              
                                                              
                                                              (19,029
                                                              )
                                                              
                                                              
                                                              363,090$
                                                              828,942
                                                              
                                                              
                                                              $
                                                              (19,029
                                                              )
                                                              
                                                              $
                                                              809,913




13




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




The
adjustment discussed previously also affects the condensed consolidated
statement of operations for the nine and three month periods ended September 30,
2008 as illustrated below:




Nine
      Months EndedSeptember
      30, 2008As
      Previously
                                                                                                                                                                  Reported
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                Adjustment
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                As
      RestatedNet
      sales
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                678,304
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                678,304Cost
      of sales
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                505,727
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                505,727Gross
      profit
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                172,577
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                172,577General,
      selling and administrative expenses
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                109,061
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                109,061Operating
      profit
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                63,516
                                                                                                                                                                
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                63,516Other
      income (expense):Interest
      expense, net
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (8,642
                                                                                                                                                                )
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (8,642
                                                                                                                                                                )Other,
      net
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (1,475
                                                                                                                                                                )
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (1,475
                                                                                                                                                                )(10,117
                                                                                                                                                                )
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (10,117
                                                                                                                                                                )Income
      before income taxes and income (loss) fromaffiliates and joint
      ventures
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                53,399
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                53,399Income
      tax expense
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                13,950
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                13,950Income
      before income (loss) from affiliates andjoint
      ventures
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                39,449
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                39,449Income
      (loss) from affiliates and joint ventures
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                5,614
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (19,686
                                                                                                                                                                )
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (14,072
                                                                                                                                                                )Income
      from continuing operations
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                45,063
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (19,686
                                                                                                                                                                )
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                25,377Income
      (loss) from discontinued operations, net of tax
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -Net
      income
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                45,063
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                (19,686
                                                                                                                                                                )
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                25,377Weighted
      average common shares outstanding
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                30,405
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                30,405Weighted
      average common and common equivalent shares outstanding
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                30,993
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                30,993Basic
      earnings per share:Continuing
      operations
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                1.48
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                0.83Discontinued
      operations
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -Basic
      earnings per share
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                1.48
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                0.83Diluted
      earnings per share:Continuing
      operations
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                1.45
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                0.82Discontinued
      operations
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                -Diluted
      earnings per share
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                1.45
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                0.82Dividends
      declared per share
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                0.50
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                0.50




Continued...




14




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




Three
      Months EndedSeptember
      30, 2008As
      Previously
                                                                          Reported
                                                                        
                                                                        
                                                                        Adjustment
                                                                        
                                                                        
                                                                        As
      RestatedNet
      sales
                                                                        
                                                                        $
                                                                        253,048
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        $
                                                                        253,048Cost
      of sales
                                                                        
                                                                        
                                                                        189,481
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        189,481Gross
      profit
                                                                        
                                                                        
                                                                        63,567
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        63,567General,
      selling and administrative expenses
                                                                        
                                                                        
                                                                        36,214
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        36,214Operating
      profit
                                                                        
                                                                        
                                                                        27,353
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        27,353Other
      income (expense):Interest
      expense, net
                                                                        
                                                                        
                                                                        (3,404
                                                                        )
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (3,404
                                                                        )Other,
      net
                                                                        
                                                                        
                                                                        (1,763
                                                                        )
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (1,763
                                                                        )(5,167
                                                                        )
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        (5,167
                                                                        )Income
      before income taxes and income (loss) fromaffiliates and joint
      ventures
                                                                        
                                                                        
                                                                        22,186
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        22,186Income
      tax expense
                                                                        
                                                                        
                                                                        5,567
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        5,567Income
      before income (loss) from affiliates andjoint
      ventures
                                                                        
                                                                        
                                                                        16,619
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        16,619Income
      (loss) from affiliates and joint ventures
                                                                        
                                                                        
                                                                        1,971
                                                                        
                                                                        
                                                                        
                                                                        (16,668
                                                                        )
                                                                        
                                                                        
                                                                        (14,697
                                                                        )Income
      from continuing operations
                                                                        
                                                                        
                                                                        18,590
                                                                        
                                                                        
                                                                        
                                                                        (16,668
                                                                        )
                                                                        
                                                                        
                                                                        1,922Income
      (loss) from discontinued operations, net of tax
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        -Net
      income
                                                                        
                                                                        $
                                                                        18,590
                                                                        
                                                                        
                                                                        $
                                                                        (16,668
                                                                        )
                                                                        
                                                                        $
                                                                        1,922Weighted
      average common shares outstanding
                                                                        
                                                                        
                                                                        30,540
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        30,540Weighted
      average common and common equivalent shares outstanding
                                                                        
                                                                        
                                                                        31,129
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        31,129Basic
      earnings per share:Continuing
      operations
                                                                        
                                                                        $
                                                                        0.61
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        $
                                                                        0.06Discontinued
      operations
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        -Basic
      earnings per share
                                                                        
                                                                        $
                                                                        0.61
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        $
                                                                        0.06Diluted
      earnings per share:Continuing
      operations
                                                                        
                                                                        $
                                                                        0.60
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        $
                                                                        0.06Discontinued
      operations
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        -Diluted
      earnings per share
                                                                        
                                                                        $
                                                                        0.60
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        $
                                                                        0.06Dividends
      declared per share
                                                                        
                                                                        $
                                                                        0.18
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        $
                                                                        0.18




15




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




The
effect of the adjustment previously discussed in this Note 2 on the condensed
consolidated statement of comprehensive income for the nine and three month
periods ended September 30, 2008, when compared to the amounts originally
reported, is as follows:




Nine
      Months Ended
                                    
                                    
                                    Three
      Months EndedSeptember
      30,
                                    
                                    
                                    September
      30,2008
                                    
                                    
                                    2008
                                    
                                    
                                    2008
                                    
                                    
                                    2008(As
      Reported)
                                    
                                    
                                    (As
      Restated)
                                    
                                    
                                    (As
      Reported)
                                    
                                    
                                    (As
      Restated)(Note
      2)
                                    
                                    
                                    
                                    
                                    
                                    (Note
      2)Net
      income
                                    
                                    $
                                    45,063
                                    
                                    
                                    $
                                    25,377
                                    
                                    
                                    $
                                    18,590
                                    
                                    
                                    $
                                    1,922Other
      comprehensive income (loss):Foreign
      currency translation adjustment
                                    
                                    
                                    (6,439
                                    )
                                    
                                    
                                    (5,782
                                    )
                                    
                                    
                                    (13,084
                                    )
                                    
                                    
                                    (12,456
                                    )Unrealized
      gain (loss) on interest rate swap agreement
                                    
                                    
                                    (278
                                    )
                                    
                                    
                                    (278
                                    )
                                    
                                    
                                    (275
                                    )
                                    
                                    
                                    (275
                                    )Other
                                    
                                    
                                    (13
                                    )
                                    
                                    
                                    (13
                                    )
                                    
                                    
                                    57
                                    
                                    
                                    
                                    57Comprehensive
      income (loss)
                                    
                                    $
                                    38,333
                                    
                                    
                                    $
                                    19,304
                                    
                                    
                                    $
                                    5,288
                                    
                                    
                                    $
                                    (10,752
                                    )




16




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




The
effect of the adjustment previously discussed in this Note 2 on the condensed
consolidated statement of cash flows for the nine month period ended September
30, 2008, when compared to the amounts originally reported, is as
follows:




Nine
      Months EndedSeptember
      30,2008
                                                
                                                
                                                2008As
      Reported
                                                
                                                
                                                (As
      Restated)(Note
      2)Cash
      flow from operating activities:Net
      income
                                                
                                                $
                                                45,063
                                                
                                                
                                                $
                                                25,377Adjustments
      to reconcile from net income to net cashprovided by (used in)
      operating activities:Depreciation,
      depletion, and amortization
                                                
                                                
                                                24,872
                                                
                                                
                                                
                                                24,872Undistributed
      (earnings) losses from affiliates and joint ventures
                                                
                                                
                                                (4,878
                                                )
                                                
                                                
                                                14,808Other
      non-cash charges
                                                
                                                
                                                2,409
                                                
                                                
                                                
                                                2,409Changes
      in assets and liabilities, net of effects of acquisitions:Decrease
      (increase) in current assets
                                                
                                                
                                                (86,237
                                                )
                                                
                                                
                                                (86,237
                                                )Decrease
      (increase) in noncurrent assets
                                                
                                                
                                                496
                                                
                                                
                                                
                                                496Increase
      (decrease) in current liabilities
                                                
                                                
                                                20,116
                                                
                                                
                                                
                                                20,116Increase  (decrease)
      in noncurrent liabilities
                                                
                                                
                                                788
                                                
                                                
                                                
                                                788Net
      cash provided by (used in) operating activities
                                                
                                                
                                                2,629
                                                
                                                
                                                
                                                2,629Cash
      flow from investing activities:Capital
      expenditures
                                                
                                                
                                                (29,686
                                                )
                                                
                                                
                                                (29,686
                                                )Capital
      expenditures - corporate building
                                                
                                                
                                                (14,273
                                                )
                                                
                                                
                                                (14,273
                                                )Acquisitions,
      net of cash
                                                
                                                
                                                (42,549
                                                )
                                                
                                                
                                                (42,549
                                                )Investments
      in and advances to affiliates and joint ventures
                                                
                                                
                                                (10,993
                                                )
                                                
                                                
                                                (10,993
                                                )Advances
      to non-affiliates
                                                
                                                
                                                (6,000
                                                )
                                                
                                                
                                                (6,000
                                                )Proceeds
      from sale of land and depreciable assets
                                                
                                                
                                                772
                                                
                                                
                                                
                                                772Investments
      in restricted cash
                                                
                                                
                                                (1,796
                                                )
                                                
                                                
                                                (1,796
                                                )Other
                                                
                                                
                                                (1,169
                                                )
                                                
                                                
                                                (1,169
                                                )Net
      cash used in investing activities
                                                
                                                
                                                (105,694
                                                )
                                                
                                                
                                                (105,694
                                                )Cash
      flow from financing activities:Net
      change in outstanding debt
                                                
                                                
                                                105,495
                                                
                                                
                                                
                                                105,495Net
      change in outstanding debt - corporate building
                                                
                                                
                                                20,692
                                                
                                                
                                                
                                                20,692Proceeds
      from sales of treasury stock
                                                
                                                
                                                1,550
                                                
                                                
                                                
                                                1,550Purchases
      of treasury stock
                                                
                                                
                                                (2,062
                                                )
                                                
                                                
                                                (2,062
                                                )Dividends
                                                
                                                
                                                (15,143
                                                )
                                                
                                                
                                                (15,143
                                                )Excess
      tax benefits from stock-based compensation
                                                
                                                
                                                1,087
                                                
                                                
                                                
                                                1,087Net
      cash provided by financing activities
                                                
                                                
                                                111,619
                                                
                                                
                                                
                                                111,619Effect
      of foreign currency rate changes on cash
                                                
                                                
                                                (190
                                                )
                                                
                                                
                                                (190
                                                )Net
      increase (decrease) in cash and cash equivalents
                                                
                                                
                                                8,364
                                                
                                                
                                                
                                                8,364Cash
      and cash equivalents at beginning of period
                                                
                                                
                                                25,282
                                                
                                                
                                                
                                                25,282Cash
      and cash equivalents at end of period
                                                
                                                $
                                                33,646
                                                
                                                
                                                $
                                                33,646




17




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




Note
      3:
            EARNINGS
      PER SHARE




The table below provides further share
information used in computing our earnings per share for the periods presented
herein.  Basic earnings per share was computed by dividing net income
by the weighted average number of common shares outstanding during each
period.  Diluted earnings per share was computed by dividing net income by
the weighted average common shares outstanding after consideration of the
dilutive effect of stock options outstanding during each period.




Nine
      Months Ended
                  
                  
                  Three
      Months EndedSeptember 30,
                  
                  
                  September 30,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Weighted
      average number of common shares outstanding
                  
                  
                  30,404,745
                  
                  
                  
                  30,145,918
                  
                  
                  
                  30,540,122
                  
                  
                  30,129,934Dilutive
      impact of stock options
                  
                  
                  588,567
                  
                  
                  
                  788,234
                  
                  
                  
                  589,167
                  
                  
                  
                  757,540Weighted
      average number of common and common equivalent shares outstanding for the
      period
                  
                  
                  30,993,312
                  
                  
                  
                  30,934,152
                  
                  
                  
                  31,129,289
                  
                  
                  
                  30,887,474Number
      of common shares outstanding at the end of the period
                  
                  
                  30,413,787
                  
                  
                  
                  30,031,014
                  
                  
                  
                  30,413,787
                  
                  
                  
                  30,031,014Weighted
      average number of anti-dilutive shares excluded from the computation of
      diluted earnings per share
                  
                  
                  307,958
                  
                  
                  
                  300,730
                  
                  
                  
                  -
                  
                  
                  
                  375,675




Note
      4:
            ADDITIONAL
      BALANCE SHEET INFORMATION





Our inventories at September 30, 2008
and December 31, 2007 are comprised of the following components:




September
      30,
                  
                  
                  December
      31,2008
                  
                  
                  2007Crude
      stockpile inventories
                  
                  $
                  35,854
                  
                  
                  $
                  25,601In-process
      and finished goods inventories
                  
                  
                  44,730
                  
                  
                  
                  39,473Other
      raw material, container, and supplies inventories
                  
                  
                  36,314
                  
                  
                  
                  26,293$
                  116,898
                  
                  
                  $
                  91,367




We mine
various minerals using a surface mining process that requires the removal of
overburden.  Under various governmental regulations, we are obligated
to restore the land comprising each mining site to its original condition at the
completion of mining activity.  The obligation is adjusted to reflect
the passage of time and changes in estimated future cash outflows.  A
reconciliation of the activity within our reclamation obligation is as
follows:




18




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




Nine Months Ended
                    September 30,2008
                  
                  
                  2007Balance
      at beginning of period
                  
                  $
                  5
      ,699
                  
                  
                  $
                  5,715Settlement
      of obligations
                  
                  
                  (1,191
                  )
                  
                  
                  (1,531
                  )Liabilities
      incurred and accretion expense
                  
                  
                  1,799
                  
                  
                  
                  1,396Balance
      at end of period
                  
                  $
                  6 ,307
                  
                  
                  $
                  5,580




Note
      5:
            BUSINESS
      SEGMENT INFORMATION





As previously mentioned, we operate in
five business segments.  We measure segment performance based on
operating profit, which is defined as net sales less cost of sales and general,
selling and administrative expenses related to a segment’s
operations.  The costs deducted to arrive at operating profit do not
include interest or income taxes.  Segment assets are those assets
used in the operations of that segment.  Corporate assets include cash
and cash equivalents, corporate leasehold improvements, and other miscellaneous
equipment.




19




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




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





Nine
      Months Ended
                              
                              
                              Three
      Months EndedSeptember
      30,
                              
                              
                              September
      30,2008
                              
                              
                              2007
                              
                              
                              2008
                              
                              
                              2007Net
      sales:Minerals
                              
                              $
                              323,228
                              
                              
                              $
                              262,432
                              
                              
                              $
                              116,881
                              
                              
                              $
                              90,906Environmental
                              
                              
                              222,393
                              
                              
                              
                              189,927
                              
                              
                              
                              86,133
                              
                              
                              
                              76,121Oilfield
      services
                              
                              
                              100,177
                              
                              
                              
                              72,137
                              
                              
                              
                              38,379
                              
                              
                              
                              27,143Transportation
                              
                              
                              49,216
                              
                              
                              
                              38,654
                              
                              
                              
                              17,983
                              
                              
                              
                              14,381Intersegment
      shipping
                              
                              
                              (16,710
                              )
                              
                              
                              (13,370
                              )
                              
                              
                              (6,328
                              )
                              
                              
                              (4,953
                              )Total
                              
                              $
                              678,304
                              
                              
                              $
                              549,780
                              
                              
                              $
                              253,048
                              
                              
                              $
                              203,598Operating
      profit (loss):Minerals
                              
                              $
                              27,317
                              
                              
                              $
                              26,706
                              
                              
                              $
                              11,110
                              
                              
                              $
                              9,135Environmental
                              
                              
                              32,945
                              
                              
                              
                              31,016
                              
                              
                              
                              14,719
                              
                              
                              
                              14,838Oilfield
      services
                              
                              
                              18,891
                              
                              
                              
                              13,843
                              
                              
                              
                              6,194
                              
                              
                              
                              5,753Transportation
                              
                              
                              2,571
                              
                              
                              
                              2,002
                              
                              
                              
                              958
                              
                              
                              
                              730Corporate
                              
                              
                              (18,208
                              )
                              
                              
                              (13,733
                              )
                              
                              
                              (5,628
                              )
                              
                              
                              (4,453
                              )Total
                              
                              $
                              63,516
                              
                              
                              $
                              59,834
                              
                              
                              $
                              27,353
                              
                              
                              $
                              26,003





As
      of Sep. 30,
                                        2008 (Restated)
                                        (Note
      2)
                                      
                                      
                                      As
      of Dec. 31,
                                        2007Assets:Minerals
                                      
                                      $
                                      357,584
                                      
                                      
                                      $
                                      319,921Environmental
                                      
                                      
                                      211,816
                                      
                                      
                                      
                                      184,992Oilfield
      services
                                      
                                      
                                      168,527
                                      
                                      
                                      
                                      95,866Transportation
                                      
                                      
                                      4,871
                                      
                                      
                                      
                                      3,807Corporate
                                      
                                      
                                      67,115
                                      
                                      
                                      
                                      47,560Total
                                      
                                      $
                                      809,913
                                      
                                      
                                      $
                                      652,146




20




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




Nine
      Months Ended
                            
                            
                            Three
      Months EndedSeptember
      30,
                            
                            
                            September
      30,2008
                            
                            
                            2007
                            
                            
                            2008
                            
                            
                            2007Depreciation,
      depletion and amortization:Minerals
                            
                            $
                            11,564
                            
                            
                            $
                            11,301
                            
                            
                            $
                            3,897
                            
                            
                            $
                            4,156Environmental
                            
                            
                            4,857
                            
                            
                            
                            4,605
                            
                            
                            
                            1,677
                            
                            
                            
                            1,628Oilfield
      services
                            
                            
                            7,286
                            
                            
                            
                            4,900
                            
                            
                            
                            3,263
                            
                            
                            
                            1,734Transportation
                            
                            
                            25
                            
                            
                            
                            42
                            
                            
                            
                            9
                            
                            
                            
                            11Corporate
                            
                            
                            1,140
                            
                            
                            
                            840
                            
                            
                            
                            279
                            
                            
                            
                            354Total
                            
                            $
                            24,872
                            
                            
                            $
                            21,688
                            
                            
                            $
                            9,125
                            
                            
                            $
                            7,883Capital
      expenditures:Minerals
                            
                            $
                            15,743
                            
                            
                            $
                            14,960
                            
                            
                            $
                            3,832
                            
                            
                            $
                            5,818Environmental
                            
                            
                            3,318
                            
                            
                            
                            6,918
                            
                            
                            
                            1,007
                            
                            
                            
                            2,531Oilfield
      services
                            
                            
                            7,593
                            
                            
                            
                            7,235
                            
                            
                            
                            1,384
                            
                            
                            
                            3,155Transportation
                            
                            
                            48
                            
                            
                            
                            61
                            
                            
                            
                            31
                            
                            
                            
                            45Corporate
                            
                            
                            17,257
                            
                            
                            
                            8,403
                            
                            
                            
                            8,119
                            
                            
                            
                            4,122Total
                            
                            $
                            43,959
                            
                            
                            $
                            37,577
                            
                            
                            $
                            14,373
                            
                            
                            $
                            15,671Research
      and development expense:Minerals
                            
                            $
                            3,732
                            
                            
                            $
                            3,107
                            
                            
                            $
                            1,159
                            
                            
                            $
                            1,253Environmental
                            
                            
                            1,652
                            
                            
                            
                            1,673
                            
                            
                            
                            522
                            
                            
                            
                            585Oilfield
      services
                            
                            
                            401
                            
                            
                            
                            133
                            
                            
                            
                            145
                            
                            
                            
                            45Corporate
                            
                            
                            645
                            
                            
                            
                            758
                            
                            
                            
                            69
                            
                            
                            
                            323Total
                            
                            $
                            6,430
                            
                            
                            $
                            5,671
                            
                            
                            $
                            1,895
                            
                            
                            $
                            2,206




Note
      6:
            EMPLOYEE
      BENEFIT PLANS





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




Nine
      Months Ended
                  
                  
                  Three
      Months EndedSeptember 30,
                  
                  
                  September 30,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Service
      cost
                  
                  $
                  1,253
                  
                  
                  $
                  1,245
                  
                  
                  $
                  418
                  
                  
                  $
                  415Interest
      cost
                  
                  
                  1,780
                  
                  
                  
                  1,656
                  
                  
                  
                  593
                  
                  
                  
                  552Expected
      return on plan assets
                  
                  
                  (2,342
                  )
                  
                  
                  (2,021
                  )
                  
                  
                  (781
                  )
                  
                  
                  (674
                  )Amortization
      of prior service cost
                  
                  
                  3
                  
                  
                  
                  50
                  
                  
                  
                  1
                  
                  
                  
                  17Net
      periodic benefit cost
                  
                  $
                  694
                  
                  
                  $
                  930
                  
                  
                  $
                  231
                  
                  
                  $
                  310





We
previously disclosed in our Annual Report on Form 10-K for the year ended
December 31, 2007 that we expected to contribute $1,000 to our pension plan in
2008. That full contribution was made in the first quarter of 2008.




21




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




Note
      7:
            INCOME
      TAXES





Our effective tax rate from continuing
operations for the nine months ended September 30, 2008 was 26.1%, which differs
from the U.S. federal statutory rate of 35.0% largely due to depletion
deductions and differences in local tax rates on the income from our foreign
subsidiaries.  Additionally, the 26.1% includes a decrease to income
tax expense of $1,221 primarily due to the release of liabilities for uncertain
tax positions for which the statute of limitations has expired. Excluding the
$1,221, the effective tax rate would have been 28.4%.





Our effective tax rate from continuing
operations for the nine months ended September 30, 2007 was 23.3%, which varies
from the U.S. federal statutory rate of 35.0% for the same depletion and foreign
tax rates mentioned above.  Additionally, the 23.3% includes a
decrease to income tax expense of $590 primarily due to release of liabilities
for uncertain tax positions for which the statute of limitations had
expired.  Excluding the $590, the effective tax rate would have been
24.5%.





In the
normal course of business, we are subject to examination by taxing authorities
throughout the world.  With few exceptions, we are no longer subject
to U.S. federal, state, local, or non-US income tax examinations by tax
authorities for years prior to 2001.  The Internal Revenue Service
(“IRS”) has examined or the statute of limitations is closed for our U.S.
federal income tax returns for all years through 2004. The IRS has recently
begun auditing the 2005 and 2006 tax years.




Note
      8:
            ACQUISITIONS





In May 2008, our oilfield services
segment acquired the business assets of Premium Reeled Tubing, L.L.C. (PRT). PRT
provides coiled tubing services commonly used in workovers and completions of
oil and gas production wells. We paid approximately $40,967 in cash and $3,648
in our common stock and recorded $14,143 of goodwill and $16,156 of intangible
assets for this acquisition as of September 30, 2008. The allocation of this
purchase price has not been finalized as we are in the process of determining
the fair values of the assets acquired and liabilities assumed.




Note
      9:
            DEBT





On May 20, 2008, we amended our
revolving credit agreement to increase the borrowing capacity from $150,000 to
$225,000, extend the maturity to April 1, 2013 and change certain terms
affecting the amount of interest we pay; all other substantive terms and
conditions remained the same.




22




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




Note
      10:
            DERIVATIVE
      INSTRUMENTS AND HEDGING ACTIVITES




Foreign
Exchange Collars





We have
entered into a series of foreign exchange collars to mitigate the risk of
currency fluctuations on our potential purchase of a chrome mine in South
Africa, the purchase price of which is payable in Australian dollars as well as
on exposures we have to various foreign currencies. See Note 13 for further
information.  We are currently recording all gains and losses on
foreign currency derivatives within Other income, net within our Condensed
Consolidated Statement of Operations. We have recorded a net gain of $1,463 for
the nine months ended September 30, 2008 in Other income, net.




Interest
Rate Swap




At
September 30, 2008, we had an interest rate swap agreement outstanding which
effectively hedges the variable interest rate of our senior notes to a fixed
rate of 5.6% per annum. We have designated this hedge as a cash flow hedge, and
the aggregate fair value of the interest rate swap as of September 30, 2008,
$1,732, is recorded within Other liabilities on our Condensed Consolidated
Balance Sheet. Net of tax, we have recorded a loss of $275 for the three months
ended September 30, 2008, in other comprehensive income.





Note
      11:
            SALE-LEASEBACK
      TRANSACTION





On March 10, 2008, we entered into a
sale-leaseback transaction involving a new corporate facility which will be
completed in late 2008. During construction, we have and will continue to record
the expenditures for land and building on our balance sheet as land and
construction in progress assets, respectively. The total carrying value of the
property was approximately $23,144 as of September 30, 2008. Upon completion of
construction, we will sell and leaseback the facility under an operating lease
commitment with rental payments occurring January 2009 through December 2028.
Lease payments in fiscal 2009 approximate $2,532 and increase 2% annually
thereafter.




Note
      12:
            CONTINGENCIES





We are party to a number of lawsuits
arising in the normal course of business.  We do not believe that any
pending litigation will have a material adverse effect on our consolidated
financial statements.




23




AMCOL
INTERNATIONAL CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (In
thousands, except share and per share amounts)




Note
      13:
            SUBSEQUENT
      EVENTS





Australian
Dollar Derivatives





As
previously announced in March 2008, we entered into a transaction to acquire a
74% interest in chrome sand deposits in South Africa for 41,000 Australian
dollars (AUD).  At the time we entered into the transaction, the
purchase price approximated $38,032 given the then existing exchange rate
between the AUD and the United States dollar (USD).  In the nine month
period ending September 30, 2008, we recorded a $1,806 gain on a derivative that
established a fixed cash outflow for the purchase of these deposits. We entered
into this derivative in March 2008 and settled it in July 2008.





On
October 1, 2008, we entered into another derivative to again fix the cash
outflow.  However, global credit markets and economies have led to
unprecedented fluctuations in the exchange rates between the AUD and the USD
since October 1, 2008, and when we settled this derivative on November 7, 2008,
we recorded a loss of $4,305.  We will include this loss in our
financial statements for the quarter ending December 31, 2008.  As of
November 7, 2008, we do not have any derivatives in place to hedge the purchase
price.  After considering the net after tax effect of all our
derivative activities associated with this future investment and assuming the
investment is made at an exchange rate of .69 AUD to one US$, the rate that
existed at the time we settled our last derivative, our net cash outflow for the
purchase of the chrome sand deposit will be $29,854.  This $29,854 is
$8,178 less than the $38,032 that existed in March 2008 when we signed the
agreement to acquire the deposit.





Results
of Ashapura Minechem Limited (“Ashapura”)





As
reported in our Annual Report on Form 10-K for the year ended December 31, 2007,
we use the equity method to incorporate the results of our investments in
companies in which we have significant influence, which is generally represented
by ownership interests of  between 20% and 50% of the
investee.  We use this method of accounting to incorporate the results
of Ashapura, the largest contributor to the amounts recorded in Income (loss)
from affiliates and joint ventures in our Condensed Consolidated Statement of
Operations.  As allowed under the equity method, we incorporate the
results of Ashapura on a one quarter lag basis as Ashapura’s financial
statements are not available on a timely basis.





As
previously discussed in Note 2, Ashapura has experienced significant losses on
foreign currency derivative contracts. Also, in October 2008, we communicated
with Ashapura and understand that they have experienced a material loss in their
third quarter results due to fluctuations in foreign currency exchange rates as
well as decreased bauxite shipments resulting from changes in government
regulation. The loss from the foreign currency derivatives significantly exceed
the losses generated by their business due to decreased bauxite sales, and we
cannot predict for how long Ashapura will continue to generate
losses.




24




Item
2:  Management’s Discussion and Analysis of Financial Condition and
Results of Operations
 
 Forward-Looking
Statements
 
 From time to time, certain statements
we make, including statements in this Management's Discussion and Analysis of
Financial Condition and Results of Operations section, constitute
"forward-looking statements" made in reliance upon the safe harbor contained in
Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements include statements relating to our Company or our
operations that are preceded by terms such as "expects," "believes,"
"anticipates," "intends" and similar expressions, and statements relating to
anticipated growth and levels of capital expenditures. Such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties. Our actual results, performance or achievements could differ
materially from the results, performance or achievements expressed in, or
implied by, these forward-looking statements as a result of various factors,
including without limitation the following: actual performance in our various
markets; conditions in the metalcasting and construction industries; operating
costs; competition; currency exchange rates and devaluations; delays in
development, production and marketing of new products; integration of acquired
businesses; and other factors set forth from time to time in our reports filed
with the Securities and Exchange Commission.  We undertake no duty to
update any forward looking statements to actual results or changes in our
expectations.
 
 Overview
 
 We are a global, specialty minerals
company and earn our revenues and profits from a diverse group of industrial and
consumer product lines.  Our principal operations are located in North
America, Europe and the Asia-Pacific region.
 
 We
operate in five segments:  minerals, environmental, oilfield services,
transportation and corporate.  Our minerals segment operates in three
principal markets:  metalcasting, pet products and specialty
minerals.  The environmental segment’s principal markets include
lining technologies, building materials and water treatment.  Our
oilfield services segment provides both onshore and offshore water treatment
filtration, pipeline separation, waste fluid treatment, rental tools, coil
tubing and well testing data services for the oil and gas
industries.  Our transportation segment provides trucking services for
our domestic businesses as well as third parties.  Intersegment
shipping revenues are eliminated in our corporate segment.
 
 The principal mineral that we utilize
to generate revenues is bentonite.  We own or lease bentonite reserves
in the United States, China, Turkey and Australia.  Additionally,
through our affiliates and joint ventures, we have access to bentonite reserves
in Egypt, India, Mexico, Russia and Azerbaijan.  Bentonite deposits
have varying physical properties which require us to identify which markets our
reserves can serve.  We believe that our understanding of bentonite
properties, mining methods, processing and application to markets are the core
components of our longevity and future prospects.
  25





Our customers are engaged in various
end-markets and geographies.  Customers in the minerals segment range
from foundries that produce castings for automotive, industrial, and
transportation equipment, including heavy-duty trucks and railroad cars, to
producers of consumer goods, including cat box filler, cosmetics and
detergents.  The customers for our environmental segment’s lining
technologies and building materials products are predominantly engineering
contractors.  The oilfield services customer base is primarily
comprised of oil service or exploration companies.  A significant
portion of our products have been used in the same applications for decades and
have experienced minimal technological obsolescence.  A majority of
our business is performed under short-term agreements; therefore, terms of sale,
such as pricing and volume, can change within our fiscal year.





The majority of our revenues are
generated in North America; our fastest growing markets are in the Asia-Pacific
and Central European regions, which have continued to outpace the United States
in economic growth in recent years.  Consequently, the state of the US
and international economies impacts our revenues.





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





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





·
            Globalization:  We
      have expanded our manufacturing and marketing organizations into European
      and Asia-Pacific regions over the last 40 years.  This operating
      experience enables us to expand further into emerging
      markets.  We see significant opportunities in the Asia-Pacific
      and Eastern European regions for expanding our revenues and earnings over
      the long-term as a number of markets we serve, such as metalcasting and
      lining technologies, are expected to grow.  We expect to take
      advantage of these growth areas either through our wholly owned
      subsidiaries or investments in affiliates and joint
    ventures.





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





·
            Acquisitions:  We
      continually seek opportunities to add complementary businesses to our
      portfolio of products.  Over the last four years, we have
      acquired a number of businesses.  A strong financial position
      will enable us to continue to acquire businesses which, in our assessment,
      are fairly valued and fit with our growth
  strategy.




26


A number of risks will challenge us in
meeting these long-term objectives, and there can be no assurance that we will
achieve success in implementing any one or more of them.  We describe
certain risks under “Item 1A. Risk Factors” and “Item 7A. Quantitative and
Qualitative Disclosure About Market Risk” within our Annual Report on Form 10-K
for the year ended December 31, 2007.  In general, the significance of
these risks has not materially changed over the past year except as they are
affected by the recent credit crisis occurring in the United States and
throughout many of the economies in which we operate. The ongoing credit crisis
is characterized by increased volatility, and lack of available capital for
short and long term financing. The credit crisis may increase the risks outlined
in our latest Annual Report on Form 10-K, especially in the areas of our
reliance on key industries (which could be more adversely affected due to the
credit crisis), volatility of our stock price, and increased exchange rate
sensitivity. In addition, the credit crisis may affect our ability to obtain
additional financing to fund acquisitions or other activities on terms
substantially similar to our current debt facilities should that need arise in
the future. Any of these factors could adversely affect our business
opportunities and results.





Critical Accounting Policies
and Estimates





The discussion and analysis of our
financial condition and results of operations are based upon our condensed
consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States.  We evaluate the
accounting policies and estimates used to prepare the financial statements on an
ongoing basis.  We consider the accounting policies used in preparing
our financial statements to be critical accounting policies when they are both
important to the portrayal of our financial condition and results of operations,
and require us to make estimates, complex judgments, and assumptions, including
with respect to events which are inherently uncertain.  As a result,
actual results could differ from these estimates.  For more
information on our critical accounting policies, please read our Annual Report
on Form 10-K for the year ended December 31, 2007.





Analysis of Results of
Operations





Following
is a discussion and analysis that describes certain factors that have affected,
and may continue to affect, our financial position and operating
results.  This discussion should be read with the accompanying
condensed consolidated financial statements.





Three
months ended September 30, 2008 vs. September 30, 2007





Consolidated
Review





The
following table compares our operating results for the quarters ended September
30, 2008 and September 30, 2007:


27





Three Months Ended September 30,Consolidated
                            
                            2008
                              (Restated)
                              (Note 2)
                            
                            
                            2007
                            
                            
                            2008 vs.
                              2007(Dollars
      in Thousands)Net
      sales
                            
                            $
                            253,048
                            
                            
                            $
                            203,598
                            
                            
                            
                            24.3
                            %Cost
      of sales
                            
                            
                            189,481
                            
                            
                            
                            149,298Gross
      profit
                            
                            
                            63,567
                            
                            
                            
                            54,300
                            
                            
                            
                            17.1
                            %margin
      %
                            
                            
                            25.1
                            %
                            
                            
                            26.7
                            %General,
      selling and administrative expenses
                            
                            
                            36,214
                            
                            
                            
                            28,297
                            
                            
                            
                            28.0
                            %Operating
      profit
                            
                            
                            27,353
                            
                            
                            
                            26,003
                            
                            
                            
                            5.2
                            %margin
      %
                            
                            
                            10.8
                            %
                            
                            
                            12.8
                            %Other
      income (expense):Interest
      expense, net
                            
                            
                            (3,404
                            )
                            
                            
                            (2,409
                            )
                            
                            
                            41.3
                            %Other,
      net
                            
                            
                            (1,763
                            )
                            
                            
                            (830
                            )
                            
                            
                            *(5,167
                            )
                            
                            
                            (3,239
                            )Income
      before income taxes and income (loss) from affiliates and joint
      ventures
                            
                            
                            22,186
                            
                            
                            
                            22,764Income
      tax expense
                            
                            
                            5,567
                            
                            
                            
                            4,704
                            
                            
                            
                            18.3
                            %effective
      tax rate
                            
                            
                            25.1
                            %
                            
                            
                            20.7
                            %Income
      before income (loss) from affiliates and joint ventures
                            
                            
                            16,619
                            
                            
                            
                            18,060Income
      (loss) from affiliates and joint ventures
                            
                            
                            (14,697
                            )
                            
                            
                            2,086
                            
                            
                            
                            -804.6
                            %Net
      income
                            
                            $
                            1,922
                            
                            
                            $
                            20,146
                            
                            
                            
                            -90.5
                            %


* Not
meaningful




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





Organic
                  
                  
                  Acquisitions
                  
                  
                  Foreign
                    Exchange
                  
                  
                  TotalMinerals
                  
                  
                  11.8
                  %
                  
                  
                  0.9
                  %
                  
                  
                  0.1
                  %
                  
                  
                  12.8
                  %Environmental
                  
                  
                  2.5
                  %
                  
                  
                  0.8
                  %
                  
                  
                  1.6
                  %
                  
                  
                  4.9
                  %Oilfield
      services
                  
                  
                  2.9
                  %
                  
                  
                  2.7
                  %
                  
                  
                  -0.1
                  %
                  
                  
                  5.5
                  %Transportation
      & intersegment shipping
                  
                  
                  1.1
                  %
                  
                  
                  0.0
                  %
                  
                  
                  0.0
                  %
                  
                  
                  1.1
                  %Total
                  
                  
                  18.3
                  %
                  
                  
                  4.4
                  %
                  
                  
                  1.6
                  %
                  
                  
                  24.3
                  %%
      of growth
                  
                  
                  75.2
                  %
                  
                  
                  18.4
                  %
                  
                  
                  6.4
                  %
                  
                  
                  100.0
                  %





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


28





Americas
                
                
                EMEA
                
                
                Asia Pacific
                
                
                TotalMinerals
                
                
                31.1
                %
                
                
                8.4
                %
                
                
                6.7
                %
                
                
                46.2
                %Environmental
                
                
                17.9
                %
                
                
                14.0
                %
                
                
                2.2
                %
                
                
                34.1
                %Oilfield
      services
                
                
                13.3
                %
                
                
                1.0
                %
                
                
                0.8
                %
                
                
                15.1
                %Transportation
                
                
                4.6
                %
                
                
                0.0
                %
                
                
                0.0
                %
                
                
                4.6
                %Total
      - current year's period
                
                
                66.9
                %
                
                
                23.4
                %
                
                
                9.7
                %
                
                
                100.0
                %Total
      from prior year's comparable period
                
                
                67.8
                %
                
                
                25.4
                %
                
                
                6.9
                %
                
                
                100.0
                %





Net
sales:





Our overall increase in net sales was
driven by organic growth predominantly within our minerals
segment.  Our oilfield services and environmental segments also
experienced growth not only organically but also through fluctuations in foreign
currencies within our environmental segment and acquisitions within our oilfield
services segment.





Gross
profit:





Overall
gross profit increased due to the increase in net sales.  The decrease
in gross profit margin is driven by our oilfield services segment as we discuss
later in our discussion of this segment’s results for the quarter.





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





GS&A expenses increased in all
segments with the largest increases coming from our environmental and oilfield
services segments.  The increase in the environmental segment is
somewhat skewed by the comparison to the prior year’s quarter, which included a
$2.4 million reduction to GS&A costs resulting from the gain on the sale of
vacant land.  Overall increases in GS&A are being driven by
acquisitions, increased infrastructure to support sales and business growth, and
increased employee and related benefit expenses.





Operating
profit:





Excluding the $2.4 million gain on the
sale of vacant land previously mentioned, operating profit increased across all
segments, except corporate, due to increased gross profits.  Excluding
the $2.4 million gain, our environmental and minerals segments increased the
most due to organic growth and the ability to leverage increased sales without
commensurate increases in GS&A expenses.





Interest
expense, net:





Net interest expense increased due to
increased average debt levels required to fund acquisitions, increased capital
spending and increased working capital levels.  We began 2008 with
debt levels significantly greater than those that existed at the beginning of
2007 due to increased capital spending and acquisitions in 2007. The majority of
our long-term debt has a variable rate of interest which is primarily influenced
by changes in LIBOR.


29





Other
income (expense):





Other expense includes foreign currency
transaction gains and losses for third party and intercompany related
activity.  It also includes gains and losses on foreign currency
derivatives.  Other expense increased in 2008 largely due to foreign
currency transaction losses driven by exchange fluctuations in our EMEA based
businesses, which are primarily subject to fluctuations in the Euro, British
pound and Polish zloty.  See Note 10 for further information on
derivative activities.





Income
tax expense:





Our
effective tax rate increased in 2008 to 25.1% due largely to an increase in
income being generated from domestic businesses, which are taxed at greater
rates.  Our effective tax rate in both reporting periods continues to
differ from the U.S. federal statutory 35.0% rate due to depletion deductions
and differences in local tax rates on the income of our foreign subsidiaries
which are generally lower than the U.S. rates.





Income
(loss) from affiliates & joint ventures:





Our investment in Ashapura gave rise to
the loss from affiliates and joint ventures due to the significant loss in fair
value of derivative instruments held by them.  See Note 2 of Notes to
Condensed Consolidated Financial Statements for more information.





Net
income:





The
decrease in current-period net income results largely from losses recognized on
our Ashapura investment, as previously discussed.





Diluted
earnings per
share:





Diluted earnings per share decreased
commensurate with the decrease in net income as mentioned above.  The
weighted average common and common shares outstanding increased by 0.2 million
shares.





Segment
analysis:





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


30





Minerals
Segment





Three
      Months Ended September 30,Minerals
                                  
                                  2008
                                  
                                  
                                  2007
                                  
                                  
                                  2008
      vs. 2007(Dollars
      in Thousands)Net
      sales
                                  
                                  $
                                  116,881
                                  
                                  
                                  
                                  100.0
                                  %
                                  
                                  $
                                  90,906
                                  
                                  
                                  
                                  100.0
                                  %
                                  
                                  $
                                  25,975
                                  
                                  
                                  
                                  28.6
                                  %Cost
      of sales
                                  
                                  
                                  96,206
                                  
                                  
                                  
                                  82.3
                                  %
                                  
                                  
                                  73,610
                                  
                                  
                                  
                                  81.0
                                  %Gross
      profit
                                  
                                  
                                  20,675
                                  
                                  
                                  
                                  17.7
                                  %
                                  
                                  
                                  17,296
                                  
                                  
                                  
                                  19.0
                                  %
                                  
                                  
                                  3,379
                                  
                                  
                                  
                                  19.5
                                  %General,
      selling and administrative expenses
                                  
                                  
                                  9,565
                                  
                                  
                                  
                                  8.2
                                  %
                                  
                                  
                                  8,161
                                  
                                  
                                  
                                  9.0
                                  %
                                  
                                  
                                  1,404
                                  
                                  
                                  
                                  17.2
                                  %Operating
      profit
                                  
                                  
                                  11,110
                                  
                                  
                                  
                                  9.5
                                  %
                                  
                                  
                                  9,135
                                  
                                  
                                  
                                  10.0
                                  %
                                  
                                  
                                  1,975
                                  
                                  
                                  
                                  21.6
                                  %





Three Months Ended September
      30,Minerals Product Line Sales
                  
                  2008
                  
                  
                  2007
                  
                  
                  % change(Dollars
      in Thousands)Metalcasting
                  
                  $
                  46,392
                  
                  
                  $
                  40,232
                  
                  
                  
                  15.3
                  %Specialty
      materials
                  
                  
                  26,587
                  
                  
                  
                  22,893
                  
                  
                  
                  16.1
                  %Pet
      products
                  
                  
                  19,559
                  
                  
                  
                  15,826
                  
                  
                  
                  23.6
                  %Basic
      minerals
                  
                  
                  21,917
                  
                  
                  
                  11,140
                  
                  
                  
                  96.7
                  %Other
      product lines
                  
                  
                  2,426
                  
                  
                  
                  815
                  
                  
                  
                  
                  *Total
                  
                  
                  116,881
                  
                  
                  
                  90,906


* Not
meaningful.





Organic
growth comprised the majority of the growth in 2008 due to increased selling
prices and volumes, predominantly in the United States, and geographical
expansion, especially in our South African chrome sand
operations.  These South African operations along with bentonite sales
for well drilling applications in the United States comprise the growth in basic
minerals sales.  Specialty materials sales increased due to increased
sales from our Turkish operations.  Metalcasting sales increased due
to increased selling prices, mostly in our domestic markets, and increased
volumes primarily in our overseas markets.





Although
tempered by sales price increases mentioned above, gross profit margins
decreased mainly due to increased energy, production and mining costs in the
United States.  The decrease was also impacted by a greater
concentration of sales being derived from pass through freight revenues, which
do not generate profits.





Approximately
22% of the $1,404 increase in GS&A expenses in 2008 is due to acquisitions
and increases in newly developed businesses.  The remainder is
attributable to greater employee related expenses and increased provision for
bad debts related to customers within our metalcasting markets.





Operating
margin decreased due to decreased gross margins and increased GS&A expenses
as previously discussed.




31


Environmental
Segment





Three Months Ended September 30,Environmental
                            
                            2008
                            
                            
                            2007
                            
                            
                            2008 vs. 2007(Dollars
      in Thousands)Net
      sales
                            
                            $
                            86,133
                            
                            
                            
                            100.0
                            %
                            
                            $
                            76,121
                            
                            
                            
                            100.0
                            %
                            
                            $
                            10,012
                            
                            
                            
                            13.2
                            %Cost
      of sales
                            
                            
                            57,731
                            
                            
                            
                            67.0
                            %
                            
                            
                            50,839
                            
                            
                            
                            66.8
                            %Gross
      profit
                            
                            
                            28,402
                            
                            
                            
                            33.0
                            %
                            
                            
                            25,282
                            
                            
                            
                            33.2
                            %
                            
                            
                            3,120
                            
                            
                            
                            12.3
                            %General,
      selling and administrative expenses
                            
                            
                            13,683
                            
                            
                            
                            15.9
                            %
                            
                            
                            10,444
                            
                            
                            
                            13.7
                            %
                            
                            
                            3,239
                            
                            
                            
                            31.0
                            %Operating
      profit
                            
                            
                            14,719
                            
                            
                            
                            17.1
                            %
                            
                            
                            14,838
                            
                            
                            
                            19.5
                            %
                            
                            
                            (119
                            )
                            
                            
                            -0.8
                            %





Three Months Ended September 30,Environmental Product Line Sales
                      
                      2008
                      
                      
                      2007
                      
                      
                      % change(Dollars
      in Thousands)Lining
      technologies
                      
                      $
                      57,320
                      
                      
                      $
                      48,914
                      
                      
                      
                      17.2
                      %Building
      materials
                      
                      
                      22,237
                      
                      
                      
                      20,638
                      
                      
                      
                      7.7
                      %Other
      product line s
                      
                      
                      6,576
                      
                      
                      
                      6,569
                      
                      
                      
                      
                      *Total
                      
                      
                      86,133
                      
                      
                      
                      76,121


* Not
meaningful.





Revenues
in the environmental segment grew predominantly due to organic growth within our
domestic business, a majority of which was driven by increased volumes of lining
technologies products and services.  Approximately one-third of the
growth in sales came from fluctuations in foreign currencies, mainly the Polish
zloty.





Gross
profit increased due to increased sales whilst gross margins remained relatively
constant.





GS&A
expenses increased primarily due to a $2.4 million gain on the sale of vacant
land that occurred in the 2007 period.  Excluding this gain, GS&A
expenses increased marginally.





Excluding
the $2.4 million gain on sale of vacant land from 2007’s operating profit,
operating profits increased in 2008 over the 2007 comparable period due to the
increase in gross profits previously mentioned.  Again excluding this
gain, operating profit margin actually increased due to the ability to leverage
increased gross profits with less of an increase in GS&A
expenses.




32


Oilfield
Services Segment




Three Months Ended September 30,Oilfield Services
                  
                  2008
                  
                  
                  2007
                  
                  
                  2008 vs. 2007(Dollars in Thousands)Net sales
                  
                  $
                  38,379
                  
                  
                  
                  100.0
                  %
                  
                  $
                  27,143
                  
                  
                  
                  100.0
                  %
                  
                  $
                  11,236
                  
                  
                  
                  41.4
                  %Cost
      of sales
                  
                  
                  25,785
                  
                  
                  
                  67.2
                  %
                  
                  
                  16,896
                  
                  
                  
                  62.2
                  %Gross
      profit
                  
                  
                  12,594
                  
                  
                  
                  32.8
                  %
                  
                  
                  10,247
                  
                  
                  
                  37.8
                  %
                  
                  
                  2,347
                  
                  
                  
                  22.9
                  %General,
      selling and administrative expenses
                  
                  
                  6,400
                  
                  
                  
                  16.7
                  %
                  
                  
                  4,494
                  
                  
                  
                  16.6
                  %
                  
                  
                  1,906
                  
                  
                  
                  42.4
                  %Operating
      profit
                  
                  
                  6,194
                  
                  
                  
                  16.1
                  %
                  
                  
                  5,753
                  
                  
                  
                  21.2
                  %
                  
                  
                  441
                  
                  
                  
                  7.7
                  %





Organic
growth comprised 53% of the growth in oilfield services revenues in the 2008
period with another 48% being derived from our coiled tubing acquisition in May
2008.  The organic growth occurred in our domestic, land based
businesses as well as our foreign operations.  Land based business, as
opposed to our offshore business in the Gulf of Mexico, increased due to
hurricane activity that occurred in the later part of 2008’s third
quarter.  In May 2008, we acquired PRT, whose operations are based in
Louisiana.  PRT provides coil tubing services to both on and offshore
operations used as a means for customers to deliver liquids or gasses into
production wells beneath the earth’s surface.  PRT added $5.5 million
of revenues in the third quarter of 2008.





Gross profits increased due to
increased sales and acquisitions.  Gross profit margins decreased due
to product mix, that is, a greater proportion of lower-margin, land based sales,
and the effect of two hurricanes, as mentioned above.  This decline
was tempered by improved margins in our foreign businesses.





GS&A
expenses increased due to acquisitions and increased employee and employee
related expenses.





Operating
profits increased due to increased gross profits.  Operating profit
margins decreased due to the decrease in gross profit margins and increases in
GS&A expenses.





Transportation
Segment





Three Months Ended September 30,Transportation
                  
                  2008
                  
                  
                  2007
                  
                  
                  2008 vs. 2007(Dollars in Thousands)Net
      sales
                  
                  $
                  17,983
                  
                  
                  
                  100.0
                  %
                  
                  $
                  14,381
                  
                  
                  
                  100.0
                  %
                  
                  $
                  3,602
                  
                  
                  
                  25.0
                  %Cost
      of sales
                  
                  
                  16,087
                  
                  
                  
                  89.5
                  %
                  
                  
                  12,906
                  
                  
                  
                  89.7
                  %Gross
      profit
                  
                  
                  1,896
                  
                  
                  
                  10.5
                  %
                  
                  
                  1,475
                  
                  
                  
                  10.3
                  %
                  
                  
                  421
                  
                  
                  
                  28.5
                  %General,
      selling and administrative expenses
                  
                  
                  938
                  
                  
                  
                  5.2
                  %
                  
                  
                  745
                  
                  
                  
                  5.2
                  %
                  
                  
                  193
                  
                  
                  
                  25.9
                  %Operating
      profit
                  
                  
                  958
                  
                  
                  
                  5.3
                  %
                  
                  
                  730
                  
                  
                  
                  5.1
                  %
                  
                  
                  228
                  
                  
                  
                  31.2
                  %





Traffic
levels increased as compared to the prior year period due to greater demand from
consumer products shippers, leading to the increase in net
sales.  Gross and operating profit margins remained relatively
stable.




33


Corporate
Segment





Three Months Ended September
      30,Corporate
                      
                      2008
                      
                      
                      2007
                      
                      
                      2008
      vs. 2007(Dollars
      in Thousands)Intersegment
      shipping sales
                      
                      $
                      (6,328
                      )
                      
                      $
                      (4,953
                      )
                      
                      
                      (1,375
                      )Intersegment
      shipping costs
                      
                      
                      (6,328
                      )
                      
                      
                      (4,953
                      )Gross
      profit
                      
                      
                      -
                      
                      
                      
                      -General,
      selling and administrative expenses
                      
                      
                      5,628
                      
                      
                      
                      4,453
                      
                      
                      
                      1,175
                      
                      
                      
                      26.4
                      %Operating
      loss
                      
                      
                      5,628
                      
                      
                      
                      4,453
                      
                      
                      
                      1,175
                      
                      
                      
                      26.4
                      %





Intersegment
shipping revenues and costs are related to billings from the transportation
segment to the domestic minerals and environmental segments for
services.  These services are invoiced to the minerals and
environmental segments at arms-length rates and those costs are subsequently
charged to customers.  Intersegment sales and costs reported above
reflect the elimination of these transactions.





Corporate GS&A expenses increased
due to greater employee and employee benefit related expenses, especially losses
on assets invested in publicly traded securities used to fund pension related
benefits.





Nine
months ended September 30, 2008 vs. September 30, 2007





Consolidated
Review





The
following table compares our year-to-date operating results for the period ended
September 30, 2008 and September 30, 2007:




34





Nine Months Ended September 30,Consolidated
                                    
                                    2008(Restated)(Note 2)
                                    
                                    
                                    2007
                                    
                                    
                                    2008 vs. 2007(Dollars
      in Thousands)Net
      sales
                                    
                                    $
                                    678,304
                                    
                                    
                                    $
                                    549,780
                                    
                                    
                                    
                                    23.4
                                    %Cost
      of sales
                                    
                                    
                                    505,727
                                    
                                    
                                    
                                    402,190Gross
      profit
                                    
                                    
                                    172,577
                                    
                                    
                                    
                                    147,590
                                    
                                    
                                    
                                    16.9
                                    %margin
      %
                                    
                                    
                                    25.4
                                    %
                                    
                                    
                                    26.8
                                    %General,
      selling andadministrative expenses
                                    
                                    
                                    109,061
                                    
                                    
                                    
                                    87,756
                                    
                                    
                                    
                                    24.3
                                    %Operating
      profit
                                    
                                    
                                    63,516
                                    
                                    
                                    
                                    59,834
                                    
                                    
                                    
                                    6.2
                                    %margin
      %
                                    
                                    
                                    9.4
                                    %
                                    
                                    
                                    10.9
                                    %Other
      income (expense):Interest
      expense, net
                                    
                                    
                                    (8,642
                                    )
                                    
                                    
                                    (6,506
                                    )
                                    
                                    
                                    32.8
                                    %Other,
      net
                                    
                                    
                                    (1,475
                                    )
                                    
                                    
                                    (1,000
                                    )
                                    
                                    
                                    47.5
                                    %(10,117
                                    )
                                    
                                    
                                    (7,506
                                    )Income
      before income taxes and income (loss) from affiliates and joint
      ventures
                                    
                                    
                                    53,399
                                    
                                    
                                    
                                    52,328Income
      tax expense
                                    
                                    
                                    13,950
                                    
                                    
                                    
                                    12,205
                                    
                                    
                                    
                                    14.3
                                    %effective
      tax rate
                                    
                                    
                                    26.1
                                    %
                                    
                                    
                                    23.3
                                    %Income
      before income (loss) from affiliates and joint ventures
                                    
                                    
                                    39,449
                                    
                                    
                                    
                                    40,123Income
      (loss) from affiliates and joint ventures
                                    
                                    
                                    (14,072
                                    )
                                    
                                    
                                    6,118
                                    
                                    
                                    
                                    -330.0
                                    %Income
      from continuing operations
                                    
                                    
                                    25,377
                                    
                                    
                                    
                                    46,241Gain
      (loss) on disposal of discontinued operations
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (286
                                    )
                                    
                                    
                                    -100.0
                                    %Net
      income
                                    
                                    $
                                    25,377
                                    
                                    
                                    $
                                    45,955




The
following table details our consolidated net sales growth components over the
prior year’s comparable period:





Organic
                    
                    
                    Acquisitions
                    
                    
                    Foreign
                      Exchange
                    
                    
                    TotalMinerals
                    
                    
                    8.8
                    %
                    
                    
                    1.8
                    %
                    
                    
                    0.5
                    %
                    
                    
                    11.1
                    %Environmental
                    
                    
                    3.2
                    %
                    
                    
                    0.9
                    %
                    
                    
                    1.8
                    %
                    
                    
                    5.9
                    %Oilfield
      services
                    
                    
                    3.5
                    %
                    
                    
                    1.6
                    %
                    
                    
                    0.0
                    %
                    
                    
                    5.1
                    %Transportation
      & intersegment shipping
                    
                    
                    1.3
                    %
                    
                    
                    0.0
                    %
                    
                    
                    0.0
                    %
                    
                    
                    1.3
                    %Total
                    
                    
                    16.8
                    %
                    
                    
                    4.3
                    %
                    
                    
                    2.3
                    %
                    
                    
                    23.4
                    %%
      of growth
                    
                    
                    71.6
                    %
                    
                    
                    18.4
                    %
                    
                    
                    10.0
                    %
                    
                    
                    100.0
                    %




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


35





Americas
                  
                  
                  EMEA
                  
                  
                  Asia Pacific
                  
                  
                  TotalMinerals
                  
                  
                  33.2
                  %
                  
                  
                  7.6
                  %
                  
                  
                  6.9
                  %
                  
                  
                  47.7
                  %Environmental
                  
                  
                  16.8
                  %
                  
                  
                  13.9
                  %
                  
                  
                  2.1
                  %
                  
                  
                  32.8
                  %Oilfield
      services
                  
                  
                  12.5
                  %
                  
                  
                  1.6
                  %
                  
                  
                  0.6
                  %
                  
                  
                  14.7
                  %Transportation
                  
                  
                  4.8
                  %
                  
                  
                  0.0
                  %
                  
                  
                  0.0
                  %
                  
                  
                  4.8
                  %Total
      - current year's period
                  
                  
                  67.3
                  %
                  
                  
                  23.1
                  %
                  
                  
                  9.6
                  %
                  
                  
                  100.0
                  %Total
      from prior year's comparable period
                  
                  
                  68.8
                  %
                  
                  
                  23.7
                  %
                  
                  
                  7.5
                  %
                  
                  
                  100.0
                  %





Net
sales:





Our overall increase in net sales was
driven by growth, especially organic growth, across all
segments.  Growth through acquisition occurred in almost all segments
as well. Growth due to foreign currency fluctuations predominantly occurred
within our European-based environmental business.





Gross
profit:





Overall
gross profit increased due to the increase in net sales.  Gross profit
margins decreased, however, across all segments.  The decreased gross
margins in our minerals segment and a greater proportion of revenues being
derived from pass through freight revenues had the largest effect on the overall
decrease in margins.





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





GS&A expenses increased in all
segments. Approximately $3.1 million and $2.4 million of the increase relates to
acquisitions and the non-recurring gain on the 2007 sale of vacant land,
respectively.  The remaining increase in our GS&A is predominantly
driven by currency fluctuations, expenses in our corporate segment, and
increases due to greater revenues, such as increased employee related and sales
commissions expenses within our environmental segment.





Operating
profit:





Operating profits increased across all
segments, except corporate, and results from the increase in gross profits
without commensurate increases in GS&A expenses.  The increases
largely occurred in our oilfield services and environmental
segments.  Acquisitions, predominantly within our environmental
(Poland acquisition in December 2007) and oilfield services businesses, and
foreign exchange fluctuations, largely in our environmental segment, increased
operating profits in the period.  Excluding the $2.4 million gain on
sale of vacant land, operating profit increased due to organic
growth.





Interest
expense, net:





Net interest expense increased due to
increased average debt levels required to fund acquisitions, capital
expenditures, and increased working capital levels.  We began 2008
with debt levels significantly greater than those that existed at the beginning
of 2007 due to increased capital spending and acquisitions in 2007. The majority
of our long-term debt has a variable rate of interest which is primarily
influenced by changes in LIBOR.




36


Other
income (expense):





Other income includes foreign currency
transaction gains and losses for third party and intercompany related
activity.  It also includes the gains and losses on foreign currency
derivatives.  Other expense increased by $0.5 million in 2008 due to
two factors.  First, we generated $1.8 million of income on a foreign
currency derivative related to our potential purchase of a chrome mine in South
Africa, the purchase price of which is payable in Australian
dollars.  See Note 10 for further information on our derivative
activities.  Next, we incurred significantly greater foreign currency
losses in our Minerals and Environmental segments, largely due to fluctuations
in European based currencies and cross currency exchange rates.





Income
tax expense:





The
effective tax rate increased to 26.1% in 2008 from 23.3% due to an increase in
income being generated in domestic jurisdictions, largely due to growth in our
oilfield services business.  Our effective tax rate in both reporting
periods continues to differ from the U.S. federal statutory 35.0% rate due to
depletion deductions and differences in local tax rates on the income of our
foreign subsidiaries which are generally lower than the U.S. rates.





Income
(loss) from affiliates & joint ventures:





Our investment in Ashapura gave rise to
the loss from affiliates and joint ventures due to the significant loss in fair
value of derivative instruments held by them.  See Note 2 of Notes to
Condensed Consolidated Financial Statements for more information.





Net
income:





The
decrease in current-period net income results largely from losses recognized on
our investment in Ashapura, as previously mentioned.





Diluted
earnings per
share:





Earnings per share decreased
commensurately with the decrease in net income.  Weighted average
common and common equivalent shares outstanding remained relatively constant
compared to the prior year period.





Segment
analysis:





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




37




Minerals
Segment
 
 Nine Months Ended September
    30,Minerals
                    
                    2008
                    
                    
                    2007
                    
                    
                    2008 vs. 2007(Dollars
      in Thousands)Net
      sales
                    
                    $
                    323,228
                    
                    
                    
                    100.0
                    %
                    
                    $
                    262,432
                    
                    
                    
                    100.0
                    %
                    
                    $
                    60,796
                    
                    
                    
                    23.2
                    %Cost
      of sales
                    
                    
                    267,532
                    
                    
                    
                    82.8
                    %
                    
                    
                    212,005
                    
                    
                    
                    80.8
                    %Gross
      profit
                    
                    
                    55,696
                    
                    
                    
                    17.2
                    %
                    
                    
                    50,427
                    
                    
                    
                    19.2
                    %
                    
                    
                    5,269
                    
                    
                    
                    10.4
                    %General,
      selling and administrative expenses
                    
                    
                    28,379
                    
                    
                    
                    8.8
                    %
                    
                    
                    23,721
                    
                    
                    
                    9.0
                    %
                    
                    
                    4,658
                    
                    
                    
                    19.6
                    %Operating
      profit
                    
                    
                    27,317
                    
                    
                    
                    8.4
                    %
                    
                    
                    26,706
                    
                    
                    
                    10.2
                    %
                    
                    
                    611
                    
                    
                    
                    2.3
                    %
 
 Nine Months Ended September
    30,Minerals Product Line Sales
                      
                      2008
                      
                      
                      2007
                      
                      
                      %
      change(Dollars
      in Thousands )Metalcasting
                      
                      $
                      134,118
                      
                      
                      $
                      114,101
                      
                      
                      
                      17.5
                      %Specialty
      materials
                      
                      
                      77,239
                      
                      
                      
                      62,992
                      
                      
                      
                      22.6
                      %Pet
      products
                      
                      
                      58,261
                      
                      
                      
                      47,907
                      
                      
                      
                      21.6
                      %Basic
      minerals
                      
                      
                      47,275
                      
                      
                      
                      33,703
                      
                      
                      
                      40.3
                      %Other
      product lines
                      
                      
                      6,335
                      
                      
                      
                      3,729
                      
                      
                      
                      
                      *Total
                      
                      
                      323,228
                      
                      
                      
                      262,432
 * Not
meaningful.
 
 Approximately
79% of the minerals segment’s increase in net sales occurred organically due in
large part to increased volumes, pass through freight revenues and selling price
increases within our domestic businesses, especially the metalcasting and pet
products groups.  In addition, this segment continued to benefit from
acquisitions, adding $9.8 million of revenue from businesses acquired in prior
periods, mainly our Mexican joint venture and Turkish bentonite
facilities.  Greater demand in Asia for metalcasting products and for
certain specialty materials products also contributed to the organic increase in
sales.
 
 Gross
profit margin decreased mainly due to increased energy, production and mining
costs in the United States.  The decrease was also impacted by
unfavorable product mix, as a greater proportion of sales were generated not
only in lower priced products but also in freight revenues, which do not
generate profits.
 
 Acquisitions
contributed to the increase in GS&A expenses, adding approximately $1.5
million.  The remainder is attributable to increased personnel costs
in our domestic and Asia-Pacific businesses as well as increased research and
development activities within our specialty materials division.
 
 Operating
margin decreased due to decreased gross margins and increased GS&A expenses
as previously discussed.
  38
 
 Environmental
Segment
 
 Nine
      Months Ended September 30,Environmental
                      
                      2008
                      
                      
                      2007
                      
                      
                      2008 vs. 2007(Dollars
      in Thousands)Net
      sales
                      
                      $
                      222,393
                      
                      
                      
                      100.0
                      %
                      
                      $
                      189,927
                      
                      
                      
                      100.0
                      %
                      
                      $
                      32,466
                      
                      
                      
                      17.1
                      %Cost
      of sales
                      
                      
                      147,694
                      
                      
                      
                      66.4
                      %
                      
                      
                      124,523
                      
                      
                      
                      65.6
                      %Gross
      profit
                      
                      
                      74,699
                      
                      
                      
                      33.6
                      %
                      
                      
                      65,404
                      
                      
                      
                      34.4
                      %
                      
                      
                      9,295
                      
                      
                      
                      14.2
                      %General,
      selling and administrative expenses
                      
                      
                      41,754
                      
                      
                      
                      18.8
                      %
                      
                      
                      34,388
                      
                      
                      
                      18.1
                      %
                      
                      
                      7,366
                      
                      
                      
                      21.4
                      %Operating
      profit
                      
                      
                      32,945
                      
                      
                      
                      14.8
                      %
                      
                      
                      31,016
                      
                      
                      
                      16.3
                      %
                      
                      
                      1,929
                      
                      
                      
                      6.2
                      %
 
 Nine
      Months Ended September 30,Environmental Product Line
      Sales
                      
                      2008
                      
                      
                      2007
                      
                      
                      % change(Dollars
      in Thousands )Lining
      technologies
                      
                      $
                      138,267
                      
                      
                      $
                      112,659
                      
                      
                      
                      22.7
                      %Building
      materials
                      
                      
                      65,090
                      
                      
                      
                      60,083
                      
                      
                      
                      8.3
                      %Other
      product lines
                      
                      
                      19,036
                      
                      
                      
                      17,185
                      
                      
                      
                      
                      *Total
                      
                      
                      222,393
                      
                      
                      
                      189,927
 * Not
meaningful.
 
 Organic
growth comprised 54% of the increase in environmental segment revenues, which
were largely gained in the lining technologies sectors of the USA as well as
Central and Eastern European regions.  Some of the growth in the
lining technologies product group arises from installation service revenues
earned in these same markets.  Foreign currency fluctuations, mainly
in Poland and Europe, contributed 31% of the growth with the remainder arising
from a Polish acquisition in December 2007.
 
 Gross
profit increased due to increased sales.  However, gross profit
margins decreased due to a greater concentration of sales occurring in less
profitable product lines, such as installation services within the lining
technologies product group.  In addition, increased production costs
in the United States negatively impacted gross margins.
 
 GS&A
expenses increased due to several factors.  First, the 2007 period
includes a $2.4 million gain on the sale of vacant land which did not recur in
the 2008 period.  Expenses to support the growth in revenues, such as
employee related costs, commissions expenses and wages due to increased
headcount, also increased.  In addition, approximately $1.3 million of
the increase arose from foreign currency fluctuations.
 
 Operating
profits increased due to the increase in gross profit mentioned earlier without
equally commensurate increases in GS&A expenses.  Operating profit
margins decreased due to the decrease in gross margin mentioned above and the
$2.4 million gain also previously mentioned.
  39
 
 Oilfield
Services Segment
 
 Nine Months Ended September
    30,Oilfield Services
                    
                    2008
                    
                    
                    2007
                    
                    
                    2008 vs. 2007(Dollars
      in Thousands)Net
      sales
                    
                    $
                    100,177
                    
                    
                    
                    100.0
                    %
                    
                    $
                    72,137
                    
                    
                    
                    100.0
                    %
                    
                    $
                    28,040
                    
                    
                    
                    38.9
                    %Cost
      of sales
                    
                    
                    63,130
                    
                    
                    
                    63.0
                    %
                    
                    
                    44,633
                    
                    
                    
                    61.9
                    %Gross
      profit
                    
                    
                    37,047
                    
                    
                    
                    37.0
                    %
                    
                    
                    27,504
                    
                    
                    
                    38.1
                    %
                    
                    
                    9,543
                    
                    
                    
                    34.7
                    %General,
      selling and administrative expenses
                    
                    
                    18,156
                    
                    
                    
                    18.1
                    %
                    
                    
                    13,661
                    
                    
                    
                    18.9
                    %
                    
                    
                    4,495
                    
                    
                    
                    32.9
                    %Operating
      profit
                    
                    
                    18,891
                    
                    
                    
                    18.9
                    %
                    
                    
                    13,843
                    
                    
                    
                    19.2
                    %
                    
                    
                    5,048
                    
                    
                    
                    36.5
                    %
 
 Organic
growth comprised 69% of the net sales increase in oilfield services segment with
the remainder arising from the acquisition of PRT in May 2008.  Our
organic growth was achieved due the development of new water filtration
technologies, increased demand for services associated with pipelines, growth in
our developing businesses in Asia and Africa, and a greater amount of service
equipment in the field.
 
 Gross profits increased with sales but
were less profitable as a significant amount of sales, especially in the third
quarter, were generated from less profitable, land-based jobs given the
hurricanes in the Gulf of Mexico.
 
 Approximately
$1.0 million of the increase in GS&A expenses came from
acquisitions.  Another $1.0 million came from continued expansion into
international markets.  Of the remaining increase, the majority of it
arose from increased benefits expenses incurred to support the revenue
growth.
 
 The
changes in operating profits and operating margin followed the changes in gross
profits and gross margins.
 
 Transportation
Segment
 
 Nine Months Ended September
    30,Transportation
                                
                                2008
                                
                                
                                2007
                                
                                
                                2008 vs. 2007(Dollars
      in Thousands)Net
      sales
                                
                                $
                                49,216
                                
                                
                                
                                100.0
                                %
                                
                                $
                                38,654
                                
                                
                                
                                100.0
                                %
                                
                                $
                                10,562
                                
                                
                                
                                27.3
                                %Cost
      of sales
                                
                                
                                44,081
                                
                                
                                
                                89.6
                                %
                                
                                
                                34,399
                                
                                
                                
                                89.0
                                %Gross
      profit
                                
                                
                                5,135
                                
                                
                                
                                10.4
                                %
                                
                                
                                4,255
                                
                                
                                
                                11.0
                                %
                                
                                
                                880
                                
                                
                                
                                20.7
                                %General,
      selling and administrative expenses
                                
                                
                                2,564
                                
                                
                                
                                5.2
                                %
                                
                                
                                2,253
                                
                                
                                
                                5.8
                                %
                                
                                
                                311
                                
                                
                                
                                13.8
                                %Operating
      profit
                                
                                
                                2,571
                                
                                
                                
                                5.2
                                %
                                
                                
                                2,002
                                
                                
                                
                                5.2
                                %
                                
                                
                                569
                                
                                
                                
                                28.4
                                %
 
 Increases
in traffic levels, largely from consumer products shippers, and fuel surcharges
led to the increase in net sales over the prior year’s
period.  Unrecovered fuel surcharges led to the decrease in gross
profit margins.  Operating profits increased due to the increase in
sales and relative stability of GS&A costs.
  40
 
 Corporate
Segment
 
 Nine Months Ended September
    30,Corporate
                            
                            2008
                            
                            
                            2007
                            
                            
                            2008 vs. 2007(Dollars
      in Thousands)Intersegment
      shipping sales
                            
                            $
                            (16,710
                            )
                            
                            $
                            (13,370
                            )
                            
                            
                            (3,340
                            )Intersegment
      shipping costs
                            
                            
                            (16,710
                            )
                            
                            
                            (13,370
                            )Gross
      profit
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -General,
      selling and administrative expenses
                            
                            
                            18,208
                            
                            
                            
                            13,733
                            
                            
                            
                            4,475
                            
                            
                            
                            32.6
                            %Operating
      loss
                            
                            
                            18,208
                            
                            
                            
                            13,733
                            
                            
                            
                            4,475
                            
                            
                            
                            32.6
                            %
 
 Intersegment
shipping revenues and costs are related to billings for services provided by our
transportation segment to the domestic minerals and environmental segments for
services.  These services are invoiced to the minerals and
environmental segments at arms-length rates and those costs are subsequently
charged to customers.  Intersegment sales and costs reported above
reflect the elimination of these transactions.
 
 Corporate GS&A expenses increased
due to greater employee benefit related expenses and increased expenses
associated with information technology investments.
 
 Liquidity and Capital
Resources
 
 Cash flows from operations, an ability
to issue new debt instruments, borrowings from our revolving credit facility and
proceeds from the exercise of stock options by employees have been our sources
of funds to provide working capital; purchase property, plant and equipment;
acquire businesses; repurchase common stock; and pay dividends to
shareholders.  We believe cash flows from operations and borrowings
from an unused and committed revolving credit facility will be adequate to
support our current businesses for the foreseeable future.  However,
we may need additional credit facilities in order to pursue additional
acquisitions, when and if these opportunities become available. Given general
economic conditions within the United States commonly referred to as the “credit
crunch”, we may or may not be able to obtain such credit at terms substantially
similar to our current facilities. See our additional comments on this in the
Overview section of Part 1, Item 2 of this report. Following is a discussion and
analysis of our cash flow activities as presented in the Condensed Consolidated
Statement of Cash Flows presented within Part 1, Item 1 of this
report.
 
 Cash Flows
                      
                      Nine Months Ended
                        September 30,($ in millions)
                      
                      2008
                      
                      
                      2007Net
      cash provided by (used in) operating activities
                      
                      $
                      2.6
                      
                      
                      $
                      42.0Net
      cash used in investing activities
                      
                      $
                      (105.7
                      )
                      
                      $
                      (78.1
                      )Net
      cash provided by financing activities
                      
                      $
                      111.6
                      
                      
                      $
                      35.1
 
 Cash
flows from operating activities decreased from the prior year period due to
increased working capital levels.  Historically, cash flows from
operations have increased over the course of the year and we anticipate this
pattern will continue for the remainder of 2008.
  41
 
 Cash
flows used in investing activities increased in the 2008 period due to increased
capital expenditures, especially related to our corporate building, and the lack
of $6.6 million of proceeds from the sale of land and depreciable assets related
to the non-recurring sale of vacant land that occurred in
2007.  Investing activities this year also increased due a $6 million
loan made to a third party related to the agreement to invest in a chrome mine
in South Africa and to additional investments in joint-ventures, namely a $6.6
million investment made into a group of Russian bentonite
companies.  Excluding our potential purchase of a chrome sand mine in
South Africa and our corporate building, capital expenditures for 2008 are
estimated to be in the range of $45 million to $55 million.
 
 In May
2008, we paid approximately $40.9 million for PRT, a business that provides
coiled tubing services to on and offshore oil and gas drilling
operations.  In 2007, we paid approximately $38.8 million for
acquisitions, primarily the Liquid Boot Technologies, Bensan A.S, and
Microsponge® operations.
 
 Cash flows provided by financing
activities increased in the 2008 period as we required more external debt
funding to support our working capital and investing
activities.  Year-to-date dividends increased in 2008 to $0.50 per
share from $0.44 per share in the prior year’s comparable period.  We
repurchased 80 thousand shares of our common stock in the current year period at
an average price of $25.45 per share; as of October 31, 2008, we have $6.6
million of funds available to repurchase shares under a program which expires on
November 10, 2008.
  As
      atSeptember
      30,
                                            
                                            
                                            December
      31,Financial
      Position
                                            
                                            2008
                                            
                                            
                                            2007($
      in millions)
                                            
                                            (Restated)(Note
      2)Working
      capital
                                            
                                            $
                                            280.1
                                            
                                            
                                            $
                                            202.5Goodwill
      & intangible assets
                                            
                                            $
                                            127.2
                                            
                                            
                                            $
                                            101.1Total
      assets
                                            
                                            $
                                            809.9
                                            
                                            
                                            $
                                            652.1Long-term
      debt
                                            
                                            $
                                            287.6
                                            
                                            
                                            $
                                            164.2Other
      long-term obligations
                                            
                                            $
                                            35.9
                                            
                                            
                                            $
                                            33.5Stockholders'
      equity
                                            
                                            $
                                            363.1
                                            
                                            
                                            $
                                            352.3
 
 Working
capital at September 30, 2008, increased over the amount at December 31, 2007
due to loans made to a third party as mentioned earlier and an increase in other
working capital items, such as inventories and accounts receivable, commensurate
with our increase in sales.  Given the seasonality of our
environmental business and the project nature of some of our services provided
in the oilfield services segment, working capital levels typically increase in
the second and third quarters of the year.  Our current ratio was
3.3-to-1 and 3.0-to-1 at September 30, 2008, and December 31, 2007,
respectively.
 
 Long-term debt increased due to
increased financing needs for working capital requirements and other investing
activities.  Consequently, long-term debt relative to total
capitalization rose to 44.2% at September 30, 2008, compared with 31.8% at
December 31, 2007.  Before considering funding needed for our
potential purchase of a chrome sand mine in South Africa, we have approximately
$45.0 million of borrowing capacity available from our revolving credit facility
at September 30, 2008.  We are in compliance with financial covenants
related to the revolving credit facility as of September 30,
2008.
  42
 
 Since the mid 1980’s, we have been
named as one of a number of defendants in product liability lawsuits relating to
the minor free-silica content within our bentonite products used in the
metalcasting industry.  The plaintiffs in these lawsuits are primarily
employees of our former and current customers.  To date, we have not
incurred significant costs in defending these matters.  We believe we
have adequate insurance coverage and do not believe the litigation will have a
material adverse impact on our financial position, liquidity or results of
operations.
 
 Contractual Obligations and
Off-Balance Sheet Arrangements (in millions)
 
 Item 7 of our Annual Report on Form
10-K for the year ended December 31, 2007 discloses our contractual obligations
and off-balance sheet arrangements.  Other than the increase in our
long-term bank debt as disclosed in our condensed consolidated financial
statements herein and the contribution to our defined benefit plan as discussed
in Note 6 of the Notes to Condensed Consolidated Financial Statements within
this Form 10-Q, there were no material changes in our contractual obligations
and off-balance sheet arrangements.
 
 PART
II - OTHER INFORMATION
 
 Item
6:           Exhibits
 
 Exhibit
                      Number31.1
                    
                    Certification
      of Chief Executive Officer Pursuant to Rule
      13a-14(a)/15d-14(a)*31.2
                    
                    Certification
      of Chief Financial Officer Pursuant to Rule
      13a-14(a)/15d-14(a)*32
                    
                    Certification
      of Periodic Financial Report Pursuant to 18 U.S.C. Section
      1350*
 * Filed
herewith.
  43
 
 SIGNATURES
 
 Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this amendment
to be signed on its behalf by the undersigned thereunto duly
authorized.
 
 AMCOL
      INTERNATIONAL CORPORATIONDate:                  March
      13, 2009
                        
                        /s/ Lawrence E. WashowLawrence
      E. WashowPresident
      and Chief Executive OfficerDate:                  March
      13, 2009
                        
                        /s/ Donald W. PearsonDonald
      W. PearsonVice
      President and Chief Financial
Officer
  44




INDEX TO EXHIBITS




31.1
                Certification
      of Chief Executive Officer Pursuant to Rule
      13a-14(a)/15d-14(a)*31.2
                Certification
      of Chief Financial Officer Pursuant to Rule
      13a-14(a)/15d-14(a)*32
                Certification
      of Periodic Financial Report Pursuant to 18 U.S.C. Section
      1350**
      Filed herewith.





45