**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**







**FORM
      10-Q**




(Mark
      One)


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





For
      the
      quarterly period ended September
      30, 2008


or


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





For
      the
      transition period from _______________ to
      ________________________________





Commission
      file number 0-15661





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.)





1500
                West Shure Drive, Suite 500, Arlington Heights, Illinois
                60004-7803(Address
                of principal executive offices)
            (Zip
                Code)





(847)
      394-8730





(Registrant’s
      telephone number, including area code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes x  No  ̈





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


Large
      accelerated filer  ̈  Accelerated
      filer x  Non-accelerated
      filer  ̈


Smaller
      reporting company  ̈





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule 12b-2
      of
      the Exchange Act). Yes  ̈  No x




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




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









**AMCOL
      INTERNATIONAL CORPORATION**





**INDEX**


Page No.Part
                I - Financial InformationItem
                1
            *Financial
                Statements*Condensed
                Consolidated Balance Sheets –September
                30, 2008 and December 31, 2007
            3Condensed
                Consolidated Statements of Operations –three
                and nine months ended September 30, 2008 and 2007
            5Condensed
                Consolidated Statements of Comprehensive Income –three
                and nine months ended September 30, 2008 and 2007
            6Condensed
                Consolidated Statements of Cash Flows –nine
                months ended September 30, 2008 and 2007
            7Notes
                to Condensed Consolidated Financial Statements
            8Item
                2
            *Management’s
                Discussion and Analysis of Financial*
              *Condition
                and Results of Operations*
            17Item
                3
            *Quantitative
                and Qualitative Disclosures About Market Risk*
            35Item
                4
            *Controls
                and Procedures*
            35Part
                II - Other InformationItem
                1A
            *Risk
                Factors*
            35Item
                2
            *Unregistered
                Sales of Equity Securities and Use of Proceeds*
            35Item
                6
            *Exhibits*
            36




2




**AMCOL
      INTERNATIONAL CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(In
      thousands)**





Item
      1.
      Financial Statements


**September 30,**
              
              **December 31,****2008**
              
              **2007****(unaudited)**
              
              *******ASSETS**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
              
              
              63,668
              
              
              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
              
              
              4,527
              
              
              5,513Other
                  assets
              
              
              15,093
              
              
              15,007146,776
              
              
              121,617$
              828,942
              
              $
              652,146





Continued...




3


**AMCOL
      INTERNATIONAL CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(In
      thousands)**





**September 30,**
            
            **December 31,****2008**
            
            **2007****(unaudited)**
            
            *******LIABILITIES
                AND STOCKHOLDERS' EQUITY**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
            
            
            288,084
            
            
            258,164Accumulated
                other comprehensive income
            
            
            26,518
            
            
            33,248400,594
            
            
            373,331Less:Treasury
                stock
            
            
            18,475
            
            
            21,008382,119
            
            
            352,323$
            828,942
            
            $
            652,146





*Condensed
      from audited financial statements.


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




4




**AMCOL
        INTERNATIONAL CORPORATION AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(Unaudited)**
 **(In
        thousands, except per share amounts)**


**Nine Months Ended**
              
              **Three Months Ended****September 30,**
              
              **September 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Net
                  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 from affiliates and joint
                  ventures
              
              
              53,399
              
              
              52,328
              
              
              22,186
              
              
              22,764Income
                  tax expense
              
              
              13,950
              
              
              12,205
              
              
              5,567
              
              
              4,704Income
                  before income from affiliates and joint ventures
              
              
              39,449
              
              
              40,123
              
              
              16,619
              
              
              18,060Income
                  from affiliates and joint ventures
              
              
              5,614
              
              
              6,118
              
              
              1,971
              
              
              2,086Income
                  from continuing operations
              
              
              45,063
              
              
              46,241
              
              
              18,590
              
              
              20,146Income
                  (Loss) from discontinued operations, net of tax
              
              
              -
              
              
              (286
              )
              
              -
              
              
              -Net
                  income
              
              $
              45,063
              
              $
              45,955
              
              $
              18,590
              
              $
              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
              
              $
              1.48
              
              $
              1.53
              
              $
              0.61
              
              $
              0.67Discontinued
                  operations
              
              
              -
              
              
              (0.01
              )
              
              -
              
              
              -Basic
                  earnings per share
              
              $
              1.48
              
              $
              1.52
              
              $
              0.61
              
              $
              0.67Diluted
                  earnings per share:Continuing
                  operations
              
              $
              1.45
              
              $
              1.49
              
              $
              0.60
              
              $
              0.65Discontinued
                  operations
              
              
              -
              
              
              (0.01
              )
              
              -
              
              
              -Diluted
                  earnings per share
              
              $
              1.45
              
              $
              1.48
              
              $
              0.60
              
              $
              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.




5




**AMCOL
      INTERNATIONAL CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**


**(Unaudited)**


**(In
      thousands)**




**Nine Months Ended**
              
              **Three Months Ended****September 30,**
              
              **September 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Net
                  income
              
              $
              45,063
              
              $
              45,955
              
              $
              18,590
              
              $
              20,146Other
                  comprehensive income (loss):Foreign
                  currency translation adjustment
              
              
              (6,439
              )
              
              9,737
              
              
              (13,084
              )
              
              5,170Unrealized
                  gain (loss) on interest rate swap agreement
              
              
              (278
              )
              
              -
              
              
              (275
              )
              
              -Other
              
              
              (13
              )
              
              172
              
              
              57
              
              
              32Comprehensive
                  income
              
              $
              38,333
              
              $
              55,864
              
              $
              5,288
              
              $
              25,348





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




6




**AMCOL
      INTERNATIONAL CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(Unaudited)**


**(In
      thousands)**




**Nine Months Ended**
              **September 30,****2008**
            
            **2007**Cash
                flow from operating activities:Net
                income
            
            $
            45,063
            
            $
            45,955Adjustments
                to reconcile from net income to net cash provided by (used in) operating
                activities:Depreciation,
                depletion, and amortization
            
            
            24,872
            
            
            21,688Other
                non-cash charges
            
            
            (2,469
            )
            
            (9,102
            )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.




7





**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 Ended****September 30,**
            
            **September 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Minerals
            
            
            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 4, “Business Segment
      Information.”





**Basis
      of Presentation**





The
      financial information included herein has been prepared by management and,
      other
      than the condensed consolidated balance sheet as of December 31, 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.




8





**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 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.




9
 
  **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:**  **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 Ended****September 30,**
            
            **September 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Weighted
                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





10
 
  **AMCOL
          INTERNATIONAL CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(In
          thousands, except share and per share amounts)**


**Note
      3:**  **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**
            
            **2007**Crude
                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:




**Nine Months Ended****September 30,****2008**
              
              **2007**Balance
                  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
      4:**  **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.




11




**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 Ended****September 30,**
            
            **September 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Net
                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**
            
            
            **As
                of Dec. 31,**
              **2007**Assets:Minerals
            
            $
            376,613
            
            $
            319,921Environmental
            
            
            211,816
            
            
            184,992Oilfield
                services
            
            
            168,527
            
            
            95,866Transportation
            
            
            4,871
            
            
            3,807Corporate
            
            
            67,115
            
            
            47,560Total
            
            $
            828,942
            
            $
            652,146








12




**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 Ended****September 30,**
            
            **September 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Depreciation,
                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
      5:**  **EMPLOYEE
      BENEFIT PLANS**





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





**Nine
                Months Ended**
            
            **Three
                Months Ended****September
                30,**
            
            **September
                30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Service
                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.





13
 
  **AMCOL
          INTERNATIONAL CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(In
          thousands, except share and per share amounts)**


**Note
      6:**  **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
      7:**  **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
      8:**  **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.





14
 
  **AMCOL
          INTERNATIONAL CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(In
          thousands, except share and per share amounts)**


**Note
      9:**  **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 12 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
      10:**  **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
      11:**  **CONTINGENCIES**





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





**Note
      12:**  **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.





15
 
  **AMCOL
          INTERNATIONAL CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(In
          thousands, except share and per share amounts)**


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 income recorded in Income from affiliates and joint ventures
      in our Condensed Consolidated Statement of Operations. For example, in the
      three
      months ended September 30, 2008, approximately $1,543 of the $1,971 Income
      from
      affiliates and joint ventures was derived from Ashapura. 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.





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. We will include this loss
      in
      our results for the three months ending December 31, 2008, and believe this
      loss
      could approximate $943, which is a $2,486 decrease from the income we recorded
      for Ashapura in our financial statements for the three months ending September
      30, 2008.


16





**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.





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.





17


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.





18


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:





19





**Three
                Months Ended September 30,****Consolidated**
            
            **2008**
            
            **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 andadministrative
                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 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 from affiliates and joint ventures
            
            
            16,619
            
            
            18,060Income
                from affiliates and joint ventures
            
            
            1,971
            
            
            2,086
            
            
            -5.5
            %Net
                income
            
            $
            18,590
            
            $
            20,146
            
            
            -7.7
            %





*
    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**
            
            **Total**Minerals
            
            
            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:


20





**Americas**
            
            **EMEA**
            
            **Asia Pacific**
            
            **Total**Minerals
            
            
            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.


21





**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 12 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
      from affiliates & joint ventures:**





Our
      India-based investments contributed the majority of the income from joint
      ventures and affiliates in both 2008 and 2007; income from these affiliates
      remained relatively constant over the comparable periods. For a discussion
      of
      recent decreases in the results for Ashapura Minchem Limited, the largest
      contributor to this item, see Note 12 in Notes to Condensed Consolidated
      Financial Statements.





**Net
      income:**





The
      decrease in current-period net income results largely from increased expenses
      for interest, foreign exchange losses and income taxes partly ameliorated by
      the
      increase in operating profits previously discussed. Excluding the gain on the
      sale of vacant land in 2007 mentioned previously, net income would have
      increased.





**Diluted
      earnings per share:**  ****





Excluding
      the $0.06 per share gain on sale of vacant land in the 2007 period, earnings
      per
      share remained relatively constant. 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:


22





***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 andadministrative
                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.


23





***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 andadministrative
                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 lines
            
            
            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.


24


***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 andadministrative
                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 andadministrative
                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.


25





***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,
                sellingand
                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:


26





**Nine
                Months Ended September 30,****Consolidated**
            
            **2008**
            
            **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 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 from affiliates and joint ventures
            
            
            39,449
            
            
            40,123Income
                from affiliates and joint ventures
            
            
            5,614
            
            
            6,118
            
            
            -8.2
            %Income
                from continuing operations
            
            
            45,063
            
            
            46,241Gain
                (Loss) on disposal of discontinued operations
            
            
            *-*
            
            
            (286
            )
            
            -100.0
            %Net
                income
            
            $
            45,063
            
            $
            45,955





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





**Organic**
            
            **Acquisitions**
            
            **Foreign**
              **Exchange**
            
            **Total**Minerals
            
            
            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:





**Americas**
            
            **EMEA**
            
            **Asia Pacific**
            
            **Total**Minerals
            
            
            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
            %


27





**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.





**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
      12 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.


28





**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
      from affiliates & joint ventures:**





Our
      India-based investments contributed the majority of the income from joint
      ventures and affiliates in the periods presented. Those investments also
      accounted for the current period decrease in the income from the prior period
      and resulted from decreased bauxite shipments. See our related comments in
      Note
      12 in Notes to Condensed Consolidated Financial Statements.





**Net
      income:**





The
      decrease in current-period net income results largely from the increase in
      operating profits offset by increased interest and tax expenses as well as
      foreign currency losses.





**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:





***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 andadministrative
                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
            %


29





**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.





***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 andadministrative
                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
            %


30







**Environmental Product Line Sales**
            
            **Nine Months Ended September 30,****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.





***Oilfield
      Services Segment***





**Oilfield Services**
            
            **Nine Months Ended September 30,****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.


31





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***





**Transportation**
            
            **Nine Months Ended September 30,****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.





***Corporate
      Segment***




**Corporate**
            
            **Nine Months Ended September 30,****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.


32





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****($ in millions)**
            
            **September 30,****2008**
            
            **2007**Net
                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.





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.




33





**Financial Position**
            
            **As at****($ in millions)**
            
            **September 30,**
            
            **December 31,****2008**
            
            **2007**Working
                capital
            
            $
            280.1
            
            $
            202.5Goodwill
                & intangible assets
            
            $
            127.2
            
            $
            101.1Total
                assets
            
            $
            828.9
            
            $
            652.1Long-term
                debt
            
            $
            287.6
            
            $
            164.2Other
                long-term obligations
            
            $
            35.9
            
            $
            33.5Stockholders'
                equity
            
            $
            382.1
            
            $
            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 42.9% 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.





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 5 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.





34


**Item
      3:**  **Quantitative
      and Qualitative Disclosures About Market Risk**





There
      were no material changes in our market risk from the disclosures made in our
      Annual Report on Form 10-K for the year ended December 31, 2007 other than
      those
      discussed in Part 1, Item 2 of this report.








**Item
      4:**  **Controls
      and Procedures**





**Evaluation
      of Disclosure Controls and Procedures**





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





**Changes
      in Internal Control Over Financial Reporting**





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





**PART
      II - OTHER INFORMATION**





**Item
      1A:**  **Risk
      Factors**





Information
      regarding risk factors appears in Part 1, “Item 1A. Risk Factors” of our Annual
      Report on Form 10-K for the year ended December 31, 2007. Except as discussed
      previously in our Management’s Discussion and Analysis section of this report,
      there have been no material changes from the risk factors disclosed therein.





**Item
      2:**  **Unregistered
      Sales of Equity Securities and Use of Proceeds**





In
      2006,
      the Board of Directors announced a program to repurchase up to $15 million
      of
      our outstanding stock; this authorization expires November 10, 2008. The table
      below illustrates our stock repurchases in 2008 and the amount remaining under
      this program:




35




**Total Number of**
            
            
            
            **Maximum Value of****Shares Repurchased**
            
            **Average**
            
            **Shares that May Yet Be****as Part of the Stock**
            
            **Price Paid**
            
            **Repurchased Under the****2008**
            
            **Repurchase Program**
            
            **Per Share**
            
            **Program**Balance
                at the beginning of the year
            
            
            
            
            
            
            
            $
            8,593,575Activity
                in 2008 calendar month of:January
            
            
            60,000
            
            $
            25.35
            
            $
            7,072,792February
            
            
            20,000
            
            $
            25.77
            
            $
            6,557,434March
            
            
            -
            
            $
            -
            
            $
            6,557,434April
            
            
            -
            
            $
            -
            
            $
            6,557,434May
            
            
            -
            
            $
            -
            
            $
            6,557,434June
            
            
            -
            
            $
            -
            
            $
            6,557,434July
            
            
            -
            
            $
            -
            
            $
            6,557,434August
            
            
            -
            
            $
            -
            
            $
            6,557,434September
            
            
            -
            
            $
            -
            
            $
            6,557,43480,000
            
            $
            25.45
            
            $
            6,557,434





**Item
      6** :  **Exhibits**




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




36


**SIGNATURES**


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





AMCOL
                INTERNATIONAL CORPORATIONDate:
            November
                10, 2008
            /s/
                Lawrence E. WashowLawrence
                E. WashowPresident
                and Chief Executive OfficerDate:
            November
                10, 2008
            /s/
                Donald W. PearsonDonald
                W. Pearson
              Vice
                President and Chief Financial Office
                r





37




**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.




38