**UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 **FORM
        10-Q**
 (Mark
        One)
 **x**   QUARTERLY
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
 
 For
        the
        quarterly period
        ended June
        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
                  filerx
              Non-accelerated
                  filer ̈
 Smaller
        reporting company  ̈
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule 12b-2
        of
        the Exchange Act). Yes  ̈   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 July 31, 2008(Common
                  stock, $.01 par value)
              
              30,382,412
                  Shares
  
 **AMCOL
          INTERNATIONAL CORPORATION**
 
 **INDEX**
 Page
                  No.Part
                  I - Financial InformationItem
                  1
              *Financial
                  Statements*Condensed
                  Consolidated Balance Sheets – June 30, 2008 and December 31,
                  2007
              3Condensed
                  Consolidated Statements of Operations – three and six months ended June
                  30, 2008 and 2007
              5Condensed
                  Consolidated Statements of Comprehensive Income – three and six
                  months ended June 30, 2008 and 2007
              6Condensed
                  Consolidated Statements of Cash Flows – six months ended June 30, 2008 and
                  2007
              7Notes
                  to Condensed Consolidated Financial Statements
              8Item
                  2
              *Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations*
              16Item
                  3
              *Quantitative
                  and Qualitative Disclosures About Market Risk*
              32Item
                  4
              *Controls
                  and Procedures*
              33Part
                  II - Other InformationItem
                  1A
              *Risk
                  Factors*
              33Item
                  2
              *Unregistered
                  Sales of Equity Securities and Use of Proceeds*
              33Item
                  4
              *Submission
                  of Matters to a Vote of Security Holders*
              34Item
                  6
              *Exhibits*
              34
  2
  **AMCOL
        INTERNATIONAL CORPORATION AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 **(In
        thousands)**
 
 Item
        1.
        Financial Statements
 
 **June 30,**
              
              **December 31,****2008**
              
              **2007****(unaudited)**
              
              *******ASSETS**Current
                  assets:Cash
                  and cash equivalents
              
              $
              21,982
              
              $
              25,282Accounts
                  receivable, net
              
              
              212,999
              
              
              166,835Inventories
              
              
              109,642
              
              
              91,367Prepaid
                  expenses
              
              
              13,279
              
              
              13,529Deferred
                  income taxes
              
              
              5,035
              
              
              4,374Income
                  tax receivable
              
              
              -
              
              
              2,768Other
              
              
              7,341
              
              
              475Total
                  current assets
              
              
              370,278
              
              
              304,630Investment
                  in and advances to affiliates and joint ventures
              
              
              62,524
              
              
              49,309Property,
                  plant, equipment, and mineral rights and reserves:Land
                  and mineral rights
              
              
              21,594
              
              
              21,394Depreciable
                  assets
              
              
              403,682
              
              
              352,100425,276
              
              
              373,494Less:
                  accumulated depreciation and depletion
              
              
              210,258
              
              
              196,904215,018
              
              
              176,590Other
                  assets:Goodwill
              
              
              75,153
              
              
              59,840Intangible
                  assets, net
              
              
              55,247
              
              
              41,257Deferred
                  income taxes
              
              
              5,075
              
              
              5,513Other
                  assets
              
              
              16,386
              
              
              15,007151,861
              
              
              121,617$
              799,681
              
              $
              652,146
 
 Continued...
  3
  **AMCOL
        INTERNATIONAL CORPORATION AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 **(In
        thousands)**
  **June 30,**
              
              **December 31,****2008**
              
              **2007****(unaudited)**
              
              *******LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  liabilities:Accounts
                  payable
              
              $
              54,580
              
              $
              44,274Accrued
                  liabilities
              
              
              65,401
              
              
              57,833Total
                  current liabilities
              
              
              119,981
              
              
              102,107Long-term
                  debt
              
              
              249,541
              
              
              164,232Long-term
                  debt - corporate building
              
              
              11,081
              
              
              -Total
                  long-term debt
              
              
              260,622
              
              
              164,232Minority
                  interests in subsidiaries
              
              
              3,208
              
              
              327Pension
                  liabilities
              
              
              9,302
              
              
              7,559Other
                  liabilities
              
              
              25,525
              
              
              25,59838,035
              
              
              33,484Stockholders’
                  equity:Common
                  stock
              
              
              320
              
              
              320Additional
                  paid in capital
              
              
              84,791
              
              
              81,599Retained
                  earnings
              
              
              274,966
              
              
              258,164Accumulated
                  other comprehensive income
              
              
              39,820
              
              
              33,248399,897
              
              
              373,331Less:Treasury
                  stock
              
              
              18,854
              
              
              21,008381,043
              
              
              352,323$
              799,681
              
              $
              652,146
 
 *Condensed
        from audited financial statements.
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements.
  4
 **AMCOL
        INTERNATIONAL CORPORATION**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(unaudited)**
 **(In
        thousands, except per share data)**
  **Six Months Ended**
                **June 30,**
              
              **Three Months Ended**
                **June 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Net
                  sales
              
              $
              425,256
              
              $
              346,182
              
              $
              233,847
              
              $
              182,454Cost
                  of sales
              
              
              316,246
              
              
              252,892
              
              
              171,187
              
              
              132,663Gross
                  profit
              
              
              109,010
              
              
              93,290
              
              
              62,660
              
              
              49,791General,
                  selling and administrative expenses
              
              
              72,847
              
              
              59,459
              
              
              39,209
              
              
              30,654Operating
                  profit
              
              
              36,163
              
              
              33,831
              
              
              23,451
              
              
              19,137Other
                  income (expense):Interest
                  expense, net
              
              
              (5,238
              )
              
              (4,097
              )
              
              (2,837
              )
              
              (2,155
              )Other,
                  net
              
              
              288
              
              
              (170
              )
              
              523
              
              
              (3
              )(4,950
              )
              
              (4,267
              )
              
              (2,314
              )
              
              (2,158
              )Income
                  before income taxes and income from affiliates and joint
                  ventures
              
              
              31,213
              
              
              29,564
              
              
              21,137
              
              
              16,979Income
                  tax expense
              
              
              8,383
              
              
              7,501
              
              
              5,666
              
              
              4,190Income
                  before income from affiliates and joint ventures
              
              
              22,830
              
              
              22,063
              
              
              15,471
              
              
              12,789Income
                  from affiliates and joint ventures
              
              
              3,643
              
              
              4,032
              
              
              2,381
              
              
              2,466Income
                  from continuing operations
              
              
              26,473
              
              
              26,095
              
              
              17,852
              
              
              15,255Income
                  (Loss) from discontinued operations, net of tax
              
              
              -
              
              
              (286
              )
              
              -
              
              
              (286
              )Net
                  income
              
              $
              26,473
              
              $
              25,809
              
              $
              17,852
              
              $
              14,969Weighted
                  average common shares outstanding
              
              
              30,336
              
              
              30,154
              
              
              30,413
              
              
              30,155Weighted
                  average common and common equivalent shares outstanding
              
              
              30,938
              
              
              30,951
              
              
              30,993
              
              
              30,879Basic
                  earnings per share:Continuing
                  operations
              
              $
              0.87
              
              $
              0.87
              
              $
              0.59
              
              $
              0.51Discontinued
                  operations
              
              
              -
              
              
              (0.01
              )
              
              -
              
              
              (0.01
              )Basic
                  earnings per share
              
              $
              0.87
              
              $
              0.86
              
              $
              0.59
              
              $
              0.50Diluted
                  earnings per share:Continuing
                  operations
              
              $
              0.86
              
              $
              0.84
              
              $
              0.58
              
              $
              0.49Discontinued
                  operations
              
              
              -
              
              
              (0.01
              )
              
              -
              
              
              (0.01
              )Diluted
                  earnings per share
              
              $
              0.86
              
              $
              0.83
              
              $
              0.58
              
              $
              0.48Dividends
                  declared per share
              
              $
              0.32
              
              $
              0.28
              
              $
              0.16
              
              $
              0.14
 
 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)**
 **Six Months Ended**
                  **June 30,**
                
                **Three Months Ended**
                  **June 30,****2008**
                
                **2007**
                
                **2008**
                
                **2007**Net income
                
                $
                26,473
                
                $
                25,809
                
                $
                17,852
                
                $
                14,969Other
                    comprehensive income (loss):Foreign
                    currency translation adjustment
                
                
                6,645
                
                
                4,567
                
                
                1,406
                
                
                3,162Unrealized
                    gain (loss) on interest rate swap agreement
                
                
                (3
                )
                
                -
                
                
                2,109
                
                
                -Other
                
                
                (70
                )
                
                140
                
                
                (663
                )
                
                55Comprehensive
                    income
                
                $
                33,045
                
                $
                30,516
                
                $
                20,704
                
                $
                18,186
 
 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)**
  **Six Months Ended**
                **June 30,****2008**
              
              **2007**Cash
                  flow from operating activities:Net
                  income
              
              $
              26,473
              
              $
              25,809Adjustments
                  to reconcile from net income to net cashprovided
                  by (used in) operating activities:Depreciation,
                  depletion, and amortization
              
              
              15,747
              
              
              13,805Other
                  non-cash charges
              
              
              (3,199
              )
              
              (4,893
              )Changes
                  in assets and liabilities, net of effects of acquisitions:Decrease
                  (increase) in current assets
              
              
              (53,864
              )
              
              (22,625
              )Decrease
                  (increase) in noncurrent assets
              
              
              (650
              )
              
              (1,582
              )Increase
                  (decrease) in current liabilities
              
              
              12,065
              
              
              7,289Increase
                  (decrease) in noncurrent liabilities
              
              
              1,416
              
              
              7,783Net
                  cash provided by (used in) operating activities
              
              
              (2,012
              )
              
              25,586Cash
                  flow from investing activities:Capital
                  expenditures
              
              
              (23,313
              )
              
              (21,000
              )Capital
                  expenditures - corporate building
              
              
              (6,273
              )
              
              (906
              )Acquisitions,
                  net of cash
              
              
              (42,257
              )
              
              (38,393
              )Investments
                  in and advances to affiliates and joint ventures
              
              
              (9,715
              )
              
              (4,191
              )Investments
                  in restricted cash
              
              
              (1,908
              )
              
              (816
              )Other
              
              
              (5,290
              )
              
              2,425Net
                  cash used in investing activities
              
              
              (88,756
              )
              
              (62,881
              )Cash
                  flow from financing activities:Net
                  change in outstanding debt
              
              
              84,820
              
              
              55,564Net
                  change in outstanding debt - corporate building
              
              
              11,081
              
              
              -Proceeds
                  from sales of treasury stock
              
              
              1,272
              
              
              1,283Purchases
                  of treasury stock
              
              
              (2,062
              )
              
              (6,115
              )Dividends
              
              
              (9,671
              )
              
              (8,393
              )Excess
                  tax benefits from stock-based compensation
              
              
              913
              
              
              927Net
                  cash provided by financing activities
              
              
              86,353
              
              
              43,266Effect
                  of foreign currency rate changes on cash
              
              
              1,115
              
              
              1,396Net
                  increase (decrease) in cash and cash equivalents
              
              
              (3,300
              )
              
              7,367Cash
                  and cash equivalents at beginning of period
              
              
              25,282
              
              
              17,805Cash
                  and cash equivalents at end of period
              
              $
              21,982
              
              $
              25,172
 
 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:
 
 **Six Months Ended**
                **June 30,**
              
              **Three Months Ended**
                **June 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Minerals
              
              
              49
              %
              
              50
              %
              
              46
              %
              
              47
              %Environmental
              
              
              32
              %
              
              33
              %
              
              33
              %
              
              36
              %Oilfield
                  services
              
              
              15
              %
              
              13
              %
              
              16
              %
              
              13
              %Transportation
              
              
              7
              %
              
              7
              %
              
              7
              %
              
              7
              %Intersegment
                  shipping
              
              
              -3
              %
              
              -3
              %
              
              -2
              %
              
              -3
              %**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 June 30, 2008 and 2007, and our financial
        position as of June 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.
 
 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.
  8
 
 **AMCOL
        INTERNATIONAL CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(In
        thousands, except share and per share amounts)**
 
 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, 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 thereby improves 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 Statement 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.
  **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.
 
 **Six Months Ended**
                **June 30,**
              
              **Three Months Ended**
                **June 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Weighted average number
                  of common shares outstanding
              
              
              30,336,315
              
              
              30,154,043
              
              
              30,412,832
              
              
              30,155,216Dilutive
                  impact of stock options
              
              
              602,087
              
              
              796,962
              
              
              580,598
              
              
              723,851Weighted
                  average number of common and common equivalent shares outstanding
                  for the
                  period
              
              
              30,938,402
              
              
              30,951,005
              
              
              30,993,430
              
              
              30,879,067Number
                  of common shares outstanding at the end of the period
              
              
              30,380,915
              
              
              29,937,103
              
              
              30,380,915
              
              
              29,937,103Weighted
                  average number of anti-dilutive shares excluded from the computation
                  of
                  diluted earnings per share
              
              
              640,207
              
              
              268,875
              
              
              18,333
              
              
              657,309
 
 **Note
        3:**  **ADDITIONAL
        BALANCE SHEET INFORMATION**
 
 Our
        inventories at June 30, 2008 and December 31, 2007 are comprised of the
        following components:
 
 **June 30,**
              
              **December 31,****2008**
              
              **2007**Crude
                  stockpile inventories
              
              $
              37,100
              
              $
              25,601In-process
                  and finished goods inventories
              
              
              43,283
              
              
              39,473Other
                  raw material, container, and supplies inventories
              
              
              29,259
              
              
              26,293$
              109,642
              
              $
              91,367
 
  10
 
 **AMCOL
        INTERNATIONAL CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(In
        thousands, except share and per share amounts)**
 
 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:
 
 **Six
                  Months Ended****June
                  30,****2008**
              
              **2007**Balance
                  at beginning of period
              
              $
              5,699
              
              $
              5,715Settlement
                  of obligations
              
              
              (625
              )
              
              (852
              )Liabilities
                  incurred and accretion expense
              
              
              1,579
              
              
              1,310Balance
                  at end of period
              
              $
              6,653
              
              $
              6,173
 
 **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:
  **Six
                  Months Ended**
                **June
                  30,**
              
              **Three
                  Months Ended**
                **June
                  30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Net
                  sales:Minerals
              
              $
              206,347
              
              $
              171,526
              
              $
              107,003
              
              $
              85,713Environmental
              
              
              136,260
              
              
              113,806
              
              
              78,041
              
              
              65,108Oilfield
                  services
              
              
              61,798
              
              
              44,994
              
              
              37,655
              
              
              23,030Transportation
              
              
              31,233
              
              
              24,273
              
              
              16,883
              
              
              13,380Intersegment
                  shipping
              
              
              (10,382
              )
              
              (8,417
              )
              
              (5,735
              )
              
              (4,777
              )Total
              
              $
              425,256
              
              $
              346,182
              
              $
              233,847
              
              $
              182,454Operating
                  profit (loss):Minerals
              
              $
              16,207
              
              $
              17,571
              
              $
              8,520
              
              $
              8,314Environmental
              
              
              18,226
              
              
              16,178
              
              
              12,255
              
              
              9,935Oilfield
                  services
              
              
              12,697
              
              
              8,090
              
              
              8,748
              
              
              4,924Transportation
              
              
              1,613
              
              
              1,272
              
              
              833
              
              
              732Corporate
              
              
              (12,580
              )
              
              (9,280
              )
              
              (6,905
              )
              
              (4,768
              )Total
              
              $
              36,163
              
              $
              33,831
              
              $
              23,451
              
              $
              19,137**As of June 30,**
                **2008**
              
              
              **As of Dec. 31,**
                **2007**Assets:Minerals
              
              $
              364,697
              
              $
              319,921Environmental
              
              
              216,550
              
              
              184,992Oilfield
                  services
              
              
              153,907
              
              
              95,866Transportation
              
              
              4,749
              
              
              3,807Corporate
              
              
              59,778
              
              
              47,560Total
              
              $
              799,681
              
              $
              652,146
 
  12


**AMCOL
      INTERNATIONAL CORPORATION AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**


**(In
      thousands, except share and per share amounts)**





**Six
                Months Ended**
            
            **Three
                Months Ended****June
                30,**
            
            **June
                30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Depreciation,
                depletion and amortization:Minerals
            
            $
            7,667
            
            $
            7,145
            
            $
            3,993
            
            $
            3,711Environmental
            
            
            3,180
            
            
            2,977
            
            
            1,605
            
            
            1,556Oilfield
                services
            
            
            4,023
            
            
            3,166
            
            
            2,249
            
            
            1,554Transportation
            
            
            16
            
            
            31
            
            
            7
            
            
            13Corporate
            
            
            861
            
            
            486
            
            
            458
            
            
            257Total
            
            $
            15,747
            
            $
            13,805
            
            $
            8,312
            
            $
            7,091Capital
                expenditures:Minerals
            
            $
            11,911
            
            $
            9,142
            
            $
            4,224
            
            $
            4,744Environmental
            
            
            2,311
            
            
            4,387
            
            
            1,453
            
            
            1,832Oilfield
                services
            
            
            6,209
            
            
            4,080
            
            
            2,925
            
            
            2,361Transportation
            
            
            17
            
            
            16
            
            
            5
            
            
            16Corporate
            
            
            9,138
            
            
            4,281
            
            
            5,216
            
            
            2,077Total
            
            $
            29,586
            
            $
            21,906
            
            $
            13,823
            
            $
            11,030Research
                and development expense:Minerals
            
            $
            2,573
            
            $
            1,854
            
            $
            1,297
            
            $
            927Environmental
            
            
            1,130
            
            
            1,088
            
            
            486
            
            
            553Oilfield
                services
            
            
            256
            
            
            88
            
            
            137
            
            
            85Corporate
            
            
            576
            
            
            435
            
            
            428
            
            
            332Total
            
            $
            4,535
            
            $
            3,465
            
            $
            2,348
            
            $
            1,897





**Note
      5:**  **EMPLOYEE
      BENEFIT PLANS**





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





**Six
                Months Ended**
            
            **Three
                Months Ended****June
                30,**
            
            **June
                30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Service
                cost
            
            $
            835
            
            $
            830
            
            $
            417
            
            $
            415Interest
                cost
            
            
            1,187
            
            
            1,104
            
            
            594
            
            
            552Expected
                return on plan assets
            
            
            (1,561
            )
            
            (1,347
            )
            
            (780
            )
            
            (673
            )Amortization
                of prior service cost
            
            
            2
            
            
            33
            
            
            1
            
            
            16Net
                periodic benefit cost
            
            $
            463
            
            $
            620
            
            $
            232
            
            $
            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 six months ended June
      30,
      2008 was 26.8%, 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 26.8% includes a
      decrease to income tax expense of $118, primarily due to adjustments related
      to
      filing of foreign tax returns combined with adjustments to our reserve for
      uncertain tax positions. Excluding the $118, the effective tax rate would have
      been 27.2%.




Our
      effective tax rate from continuing operations for the six months ended June
      30,
      2007 was 25.4%, which varies from the U.S. federal statutory rate of 35.0%
      for
      the same depletion and foreign tax rates mentioned above. Additionally, the
      25.4% includes an increase to income tax expense of $373 for changes in
      estimates related to provision to return differences. Excluding the $373, the
      effective tax rate would have been 24.1%.





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 our U.S.
      federal income tax returns for all years through 2003.





**Note
      7:**  **ACQUISITIONS**





We
      made
      payments of $1,362 in the six months ended June 30, 2008 to former owners of
      businesses we acquired pursuant to contingent payment arrangements associated
      with those 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 $40,895 in cash and $3,648 in our common stock and recorded
      $14,071 of goodwill and $16,156 of intangible assets for this acquisition as
      of
      June 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, extended the maturity to April 1, 2013
      and
      changed 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. The
      aggregate fair value of the foreign exchange collars as of June 30, 2008,
      $1,990, is recorded within other current assets on our condensed balance sheet.
      We have recorded a gain of $1,699 and $1,990 for three and six months ended
      June
      30, 2008, respectively, in other income (expense).




*Interest
      Rate Swap*




At
      June
      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. Accordingly,
      the
      aggregate fair value of the interest rate swap as of June 30, 2008, $1,340,
      is
      recorded within other long-term liability on our condensed balance sheet. Net
      of
      tax, we have recorded a gain of $2,109 for the three months ended June 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 $18,208 as of June 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.




15




**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
      industry. 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.


16


The
      majority of our revenues are generated in North America; consequently, the
      state
      of the United States economy impacts our revenues. 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.





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.





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.


17


**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, one should also 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 June 30, 2008 vs. June 30, 2007***





***Consolidated
      Review***





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


18


**Three
                  Months Ended June 30,****Consolidated**
              
              **2008**
              
              **2007**
              
              **2008 vs. 2007**(Dollars
                  in Thousands)Net
                  sales
              
              $
              233,847
              
              $
              182,454
              
              
              28.2
              %Cost
                  of sales
              
              
              171,187
              
              
              132,663Gross
                  profit
              
              
              62,660
              
              
              49,791
              
              
              25.8
              %*margin
                  %*
              
              
              *26.8*
              *%*
              
              *27.3*
              *%*General,
                  selling and administrative expenses
              
              
              39,209
              
              
              30,654
              
              
              27.9
              %Operating
                  profit
              
              
              23,451
              
              
              19,137
              
              
              22.5
              %*margin
                  %*
              
              
              *10.0*
              *%*
              
              *10.5*
              *%*Other
                  income (expense):Interest
                  expense, net
              
              
              (2,837
              )
              
              (2,155
              )
              
              31.6
              %Other,
                  net
              
              
              523
              
              
              (3
              )
              
              
              *(2,314
              )
              
              (2,158
              )Income
                  before income taxes and income from affiliates and joint
                  ventures
              
              
              21,137
              
              
              16,979Income
                  tax expense
              
              
              5,666
              
              
              4,190
              
              
              35.2
              %*effective
                  tax rate*
              
              
              *26.8*
              *%*
              
              *24.7*
              *%*Income
                  before income from affiliates and joint ventures
              
              
              15,471
              
              
              12,789Income
                  from affiliates and joint ventures
              
              
              2,381
              
              
              2,466
              
              
              -3.4
              %Income
                  from continuing operations
              
              
              17,852
              
              
              15,255Gain
                  (Loss) on disposal of discontinued operations
              
              
              -
              
              
              (286
              )
              
              -100.0
              %Net
                  income
              
              $
              17,852
              
              $
              14,969
              
              
              19.3
              %




*
      Not
      meaningful




We
      measure sales growth by the relevant components: organic or base businesses,
      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 or base business growth.
      The table details the consolidated sales growth components over the prior year’s
      comparable period:





****
            
            **Base Business**
            
            **Acquisitions**
            
            **Foreign Exchange**
            
            **Total**Minerals
            
            
            9.1
            %
            
            1.8
            %
            
            0.8
            %
            
            11.7
            %Environmental
            
            
            3.9
            %
            
            1.0
            %
            
            2.2
            %
            
            7.1
            %Oilfield
                services
            
            
            6.1
            %
            
            1.9
            %
            
            0.0
            %
            
            8.0
            %Transportation
            
            
            1.4
            %
            
            0
            %
            
            0.0
            %
            
            1.4
            %Total
            
            
            20.5
            %
            
            4.7
            %
            
            3.0
            %
            
            28.2
            %%
                of growth
            
            
            72.7
            %
            
            16.9
            %
            
            10.4
            %
            
            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:




19




**Americas**
            
            **EMEA**
            
            **Asia Pacific**
            
            **Total**Minerals
            
            
            32.2
            %
            
            7.0
            %
            
            6.6
            %
            
            45.8
            %Environmental
            
            
            17.1
            %
            
            13.9
            %
            
            2.4
            %
            
            33.4
            %Oilfield
                services
            
            
            13.1
            %
            
            2.4
            %
            
            0.6
            %
            
            16.1
            %Transportation
            
            
            4.8
            %
            
            0.0
            %
            
            0.0
            %
            
            4.8
            %Total
                - current year's period
            
            
            67.1
            %
            
            23.3
            %
            
            9.6
            %
            
            100.0
            %Total
                from prior year's comparable period
            
            
            70.3
            %
            
            22.1
            %
            
            7.6
            %
            
            100.0
            %





**Net
      sales:**





Our
      overall increase in net sales was driven by increases from base businesses
      (those operations owned for greater than one year) predominantly within our
      minerals and oilfield services segments. Marginal increases in net sales
      resulted from foreign currency fluctuations and acquisitions.





**Gross
      profit:**





Overall
      gross profit increased due to the increase in net sales. The decrease in gross
      profit margin is driven by our minerals segment.




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





GS&A
      expenses increased in all segments with the largest increases coming from our
      oilfield services and corporate segments. Overall increases in GS&A are
      being driven by acquisitions, increased infrastructure to support sales and
      business growth, and increased employee related benefit expenses.





**Operating
      profit:**





Operating
      profit increased across all segments, except corporate, due to increased gross
      profits. Our environmental and oilfield services segments increased the most
      due
      to the seasonality of these businesses, organic growth, acquisitions 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 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 the foreign currency transaction and translation gains and
      losses for third party and intercompany related activity. It also includes
      the
      net effect of foreign currency derivatives. Other income increased in 2008
      largely due to a $1.7 million gain 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. A future gain or loss of this size
      is
      unlikely.





20


**Income
      tax expense:**




Our
      effective tax rate increased in 2008 to 26.8% due largely to an increase in
      income being generated from domestic businesses, especially our oilfield
      services operations, 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.





**Net
      income:**





The
      increase in current-period net income results largely from the increase in
      operating profits previously discussed.





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





Earnings
      per share increased commensurately with the increase in net income. The weighted
      average common and common shares outstanding increased by 0.1 million shares.





**Segment
      analysis:**





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





***Minerals
      Segment***


**Three
                  Months Ended June 30,****Minerals**
              
              **2008**
              
              **2007**
              
              **2008
                  vs. 2007**(Dollars
                  in Thousands)Net
                  sales
              
              $
              107,003
              
              
              100.0
              %
              $
              85,713
              
              
              100.0
              %
              $
              21,290
              
              
              24.8
              %Cost
                  of sales
              
              
              88,659
              
              
              82.9
              %
              
              69,381
              
              
              80.9
              %Gross
                  profit
              
              
              18,344
              
              
              17.1
              %
              
              16,332
              
              
              19.1
              %
              
              2,012
              
              
              12.3
              %General,
                  selling and administrative expenses
              
              
              9,824
              
              
              9.2
              %
              
              8,018
              
              
              9.4
              %
              
              1,806
              
              
              22.5
              %Operating
                  profit
              
              
              8,520
              
              
              7.9
              %
              
              8,314
              
              
              9.7
              %
              
              206
              
              
              2.5
              %




21


**Three
                  Months Ended June 30,****Minerals
                  Product Line Sales**
              
              **2008**
              
              **2007**
              
              **%
                  change**(Dollars
                  in Thousands)Metalcasting
              
              $
              44,709
              
              $
              37,283
              
              
              19.9
              %Specialty
                  materials
              
              
              27,328
              
              
              20,031
              
              
              36.4
              %Pet
                  products
              
              
              19,179
              
              
              15,593
              
              
              23.0
              %Basic
                  minerals
              
              
              13,317
              
              
              11,636
              
              
              14.4
              %Other
                  product lines
              
              
              2,470
              
              
              1,170
              
              
              *Total
              
              
              107,003
              
              
              85,713*
                  Not meaningful.





Organic,
      or base business, growth comprised the majority of the growth in 2008 due to
      strong demand across all product lines. Pass thru freight revenues comprised
      approximately one quarter of the growth. The metalcasting product group revenues
      increased due to strong demand in the Asia-Pacific region and selling price
      increases in our domestic markets. Specialty materials revenues grew due to
      revenues being generated from our new and developing operations overseas,
      notably South Africa and China.





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 freight revenues, which do not generate
      profits.





Approximately
      one third of the increase in GS&A expenses in 2008 is due to acquisitions.
      The remainder is attributable to greater expenditures on research and
      development activities within our specialty materials division and personnel
      costs in our Asia-Pacific businesses.





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





***Environmental
      Segment***


**Three
                  Months Ended June 30,****Environmental**
              
              **2008**
              
              **2007**
              
              **2008
                  vs. 2007**(Dollars
                  in Thousands)Net
                  sales
              
              $
              78,041
              
              
              100.0
              %
              $
              65,108
              
              
              100.0
              %
              $
              12,933
              
              
              19.9
              %Cost
                  of sales
              
              
              51,165
              
              
              65.6
              %
              
              42,521
              
              
              65.3
              %Gross
                  profit
              
              
              26,876
              
              
              34.4
              %
              
              22,587
              
              
              34.7
              %
              
              4,289
              
              
              19.0
              %General,
                  selling and administrative expenses
              
              
              14,621
              
              
              18.7
              %
              
              12,652
              
              
              19.4
              %
              
              1,969
              
              
              15.6
              %Operating
                  profit
              
              
              12,255
              
              
              15.7
              %
              
              9,935
              
              
              15.3
              %
              
              2,320
              
              
              23.4
              %
  22
  **Three
                  Months Ended June 30,****Environmental
                  Product Line Sales**
              
              **2008**
              
              **2007**
              
              **%
                  change**(Dollars
                  in Thousands)Lining
                  technologies
              
              $
              48,452
              
              $
              39,753
              
              
              21.9
              %Building
                  materials
              
              
              22,858
              
              
              19,862
              
              
              15.1
              %Other
                  product lines
              
              
              6,731
              
              
              5,493
              
              
              *Total
              
              
              78,041
              
              
              65,108*
                  Not meaningful.





Revenues
      in the environmental segment grew significantly within base businesses and
      due
      to foreign currency fluctuations. Increased shipments in lining technologies,
      building materials and more installation services in Western Europe and Poland
      were the main drivers of organic growth and foreign currency
      growth.





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





GS&A
      expenses increased mostly due to greater employee related costs and increased
      expenses, such as compensation and sales commissions, in our faster growing
      markets overseas, especially our Polish and Chinese operations.





Operating
      profits increased due to the increase in gross profits previously mentioned
      and
      the ability of this segment to leverage profits off less increases in GS&A
      expenses.





***Oilfield
      Services Segment***


**Three
                  Months Ended June 30,****Oilfield
                  Services**
              
              **2008**
              
              **2007**
              
              **2008
                  vs. 2007**(Dollars
                  in Thousands)Net
                  sales
              
              $
              37,655
              
              
              100.0
              %
              $
              23,030
              
              
              100.0
              %
              $
              14,625
              
              
              63.5
              %Cost
                  of sales
              
              
              21,904
              
              
              58.2
              %
              
              13,660
              
              
              59.3
              %Gross
                  profit
              
              
              15,751
              
              
              41.8
              %
              
              9,370
              
              
              40.7
              %
              
              6,381
              
              
              68.1
              %General,
                  selling and administrative expenses
              
              
              7,003
              
              
              18.6
              %
              
              4,446
              
              
              19.3
              %
              
              2,557
              
              
              57.5
              %Operating
                  profit
              
              
              8,748
              
              
              23.2
              %
              
              4,924
              
              
              21.4
              %
              
              3,824
              
              
              77.7
              %




Oilfield
      services revenues grew significantly in the 2008 period due to organic growth
      and an acquisition made in the quarter, Premium Reeled Tubing (“PRT”). Demand
      for domestic waste water treatment services in the Gulf of Mexico was the
      largest contributor to organic growth, but was significantly helped by strong
      increases in our West African and Malaysian operations. 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
      $3.5 million of revenues in the second quarter of 2008 versus the comparable
      2007 period.





Gross
      profit and operating margins increased due to a greater portion of revenues
      being derived in more profitable service lines and geographies (especially
      our
      overseas markets), the acquisition of PRT, and an ability to generate the
      increased revenues without comparable increases in GS&A
      expenses.




23




***Transportation
      Segment***


**Three
                  Months Ended June 30,****Transportation**
              
              **2008**
              
              **2007**
              
              **2008
                  vs. 2007**(Dollars
                  in Thousands)Net
                  sales
              
              $
              16,883
              
              
              100.0
              %
              $
              13,380
              
              
              100.0
              %
              $
              3,503
              
              
              26.2
              %Cost
                  of sales
              
              
              15,194
              
              
              90.0
              %
              
              11,878
              
              
              88.8
              %Gross
                  profit
              
              
              1,689
              
              
              10.0
              %
              
              1,502
              
              
              11.2
              %
              
              187
              
              
              12.5
              %General,
                  selling andadministrative
                  expenses
              
              
              856
              
              
              5.1
              %
              
              770
              
              
              5.8
              %
              
              86
              
              
              11.2
              %Operating
                  profit
              
              
              833
              
              
              4.9
              %
              
              732
              
              
              5.4
              %
              
              101
              
              
              13.8
              %





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. Unrecovered
      fuel surcharges led to the decrease in gross and operating profit
      margins.





***Corporate
      Segment***


**Three
                  Months Ended June 30,****Corporate**
              
              **2008**
              
              **2007**
              
              **2008
                  vs. 2007**(Dollars
                  in Thousands)Intersegment
                  shipping sales
              
              $
              (5,735
              )
              $
              (4,777
              )
              
              (958
              )Intersegment
                  shipping costs
              
              
              (5,735
              )
              
              (4,777
              )Gross
                  profit
              
              
              -
              
              
              -General,
                  sellingand
                  administrative expenses
              
              
              6,905
              
              
              4,768
              
              
              2,137
              
              
              44.8
              %Operating
                  loss
              
              
              6,905
              
              
              4,768
              
              
              2,137
              
              
              44.8
              %





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 benefit related expenses and
      IT infrastructure investments.





***Six
      months ended June 30, 2008 vs. June 30, 2007***





***Consolidated
      Review***





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




24





**Consolidated**
            
            **Six Months Ended June 30,****2008**
            
            **2007**
            
            **2008 vs. 2007**(Dollars
                in Thousands)Net
                sales
            
            $
            425,256
            
            $
            346,182
            
            
            22.8
            %Cost
                of sales
            
            
            316,246
            
            
            252,892Gross
                profit
            
            
            109,010
            
            
            93,290
            
            
            16.9
            %*margin
                %*
            
            
            *25.6*
            *%*
            
            *26.9*
            *%*General,
                selling and administrative expenses
            
            
            72,847
            
            
            59,459
            
            
            22.5
            %Operating
                profit
            
            
            36,163
            
            
            33,831
            
            
            6.9
            %*margin
                %*
            
            
            *8.5*
            *%*
            
            *9.8*
            *%*Other
                income (expense):Interest
                expense, net
            
            
            (5,238
            )
            
            (4,097
            )
            
            27.8
            %Other,
                net
            
            
            288
            
            
            (170
            )
            
            -269.4
            %(4,950
            )
            
            (4,267
            )Income
                before income taxes and income from affiliates and joint
                ventures
            
            
            31,213
            
            
            29,564Income
                tax expense
            
            
            8,383
            
            
            7,501
            
            
            11.8
            %*effective
                tax rate*
            
            
            *26.9*
            *%*
            
            *25.4*
            *%*Income
                before income from affiliates and joint ventures
            
            
            22,830
            
            
            22,063Income
                from affiliates and joint ventures
            
            
            3,643
            
            
            4,032
            
            
            -9.6
            %Income
                from continuing operations
            
            
            26,473
            
            
            26,095Gain
                (Loss) on disposal of discontinued operations
            
            
            -
            
            
            (286
            )
            
            -100.0
            %Net
                income
            
            $
            26,473
            
            $
            25,809




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





****
            
            **Base Business**
            
            **Acquisitions**
            
            **Foreign**
              **Exchange**
            
            **Total**Minerals
            
            
            7.0
            %
            
            2.3
            %
            
            0.8
            %
            
            10.1
            %Environmental
            
            
            3.6
            %
            
            0.9
            %
            
            2.0
            %
            
            6.5
            %Oilfield
                services
            
            
            3.8
            %
            
            1.0
            %
            
            0.0
            %
            
            4.9
            %Transportation
            
            
            1.4
            %
            
            0
            %
            
            0.0
            %
            
            1.4
            %Total
            
            
            15.8
            %
            
            4.2
            %
            
            2.8
            %
            
            22.9
            %%
                of growth
            
            
            69.4
            %
            
            18.4
            %
            
            12.2
            %
            
            100.0
            %





The
      following table shows the distribution of 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
            
            
            34.5
            %
            
            7.1
            %
            
            7.0
            %
            
            48.6
            %Environmental
            
            
            16.2
            %
            
            13.8
            %
            
            2.0
            %
            
            32.0
            %Oilfield
                services
            
            
            12.0
            %
            
            2.0
            %
            
            0.5
            %
            
            14.5
            %Transportation
            
            
            4.9
            %
            
            0.0
            %
            
            0.0
            %
            
            4.9
            %Total
                - current year's period
            
            
            67.6
            %
            
            22.9
            %
            
            9.5
            %
            
            100.0
            %Total
                from prior year's comparable period
            
            
            69.4
            %
            
            22.6
            %
            
            8.0
            %
            
            100.0
            %


25





**Net
      sales:**





Our
      overall increase in net sales was driven by increases across all segments,
      especially organic growth across all segments. Net sales increases were also
      attributable to acquisitions in our minerals, environmental and oilfield
      services segments. Growth due to foreign currency fluctuation predominantly
      occurred within our environmental business.





**Gross
      profit:**





Overall
      gross profit increased due to the increase in net sales. Gross profit margins
      decreased, however, across all segments except our oilfield services segment.
      Gross margins were depressed in the 2008 period due to decreases incurred within
      the first quarter of 2008 not yet recouped by increases in the second quarter
      of
      2008. The decreased gross margins in our minerals segment had the largest effect
      on the overall decrease in margins.




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





Increased
      GS&A expenses in the minerals, environmental and corporate segments drove
      the overall increase in GS&A. The increase in our GS&A is predominantly
      driven by expenses in our corporate segment, acquisitions, and increases due
      to
      greater revenues, such as increased employee compensation and sales commissions
      expenses within our environmental segment.





**Operating
      profit:**





Operating
      profits increased largely due to the increased operating profits in our oilfield
      services and environmental segments exceeding the decrease in minerals and
      corporate segments. Foreign exchange fluctuations favorably impacted operating
      profit growth in the period largely due to strong growth in European currencies
      within our environmental segment. Organic growth declines in our minerals
      segment and increased expenses in our corporate segment combined with organic
      growth in other segments led to a net decrease in operating profit from organic
      growth and drove the decrease in operating margins. Operating profit growth
      from
      acquisitions was largely attained from the PRT acquisition previously mentioned.




**Interest
      expense, net:**





Net
      interest expense increased due to increased average debt levels required to
      fund
      increased capital spending and 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 the foreign currency transaction and translation gains and
      losses for third party and intercompany related activity. It also includes
      the
      net effect of foreign currency derivatives. Other income increased in 2008
      largely due to a $2.0 million gain 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. A future gain or loss of this size
      is
      unlikely.


26




**Income
      tax expense:**




The
      effective tax rate increased to 26.9% in 2008 from 25.4% 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.





**Net
      income:**





The
      increase in current-period net income results largely from the increase in
      operating profits previously discussed.





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





Earnings
      per share increased commensurately with the increase 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***





**Six
                Months Ended June 30,****Minerals**
            
            **2008**
            
            **2007**
            
            **2008
                vs 2007**(Dollars
                in Thousands)Net
                sales
            
            $
            206,347
            
            
            100.0
            %
            $
            171,526
            
            
            100.0
            %
            $
            34,821
            
            
            20.3
            %Cost
                of sales
            
            
            171,326
            
            
            83.0
            %
            
            138,395
            
            
            80.7
            %Gross
                profit
            
            
            35,021
            
            
            17.0
            %
            
            33,131
            
            
            19.3
            %
            
            1,890
            
            
            5.7
            %General,
                selling and administrative expenses
            
            
            18,814
            
            
            9.1
            %
            
            15,560
            
            
            9.1
            %
            
            3,254
            
            
            20.9
            %Operating
                profit
            
            
            16,207
            
            
            7.9
            %
            
            17,571
            
            
            10.2
            %
            
            (1,364
            )
            
            -7.8
            %


27


**Six
                  Months Ended June 30,****Minerals
                  Product Line Sales**
              
              **2008**
              
              **2008**
              
              **2008**(Dollars
                  in Thousands)Metalcasting
              
              $
              85,387
              
              $
              73,869
              
              
              15.6
              %Specialty
                  materials
              
              
              52,991
              
              
              40,099
              
              
              32.2
              %Pet
                  products
              
              
              38,702
              
              
              32,081
              
              
              20.6
              %Basic
                  minerals
              
              
              25,358
              
              
              22,563
              
              
              12.4
              %Other
                  product lines
              
              
              3,909
              
              
              2,914
              
              
              *Total
              
              
              206,347
              
              
              171,526





*
      Not
      meaningful.





Approximately
      70% 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 $7.9 million of revenue from businesses acquired in prior
      periods mostly related to 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 by freight revenues, which do not generate
      profits.





Acquisitions
      contributed to the increase in GS&A expenses, adding approximately $1.3
      million. The remainder is attributable to greater expenditures on research
      and
      development activities within our specialty materials division and personnel
      costs in our Asia-Pacific businesses.





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





***Environmental
      Segment***





**Six
                Months Ended June 30,****Environmental**
            
            **2008**
            
            **2007**
            
            **2008
                vs 2007**(Dollars
                in Thousands)Net
                sales
            
            $
            136,260
            
            
            100.0
            %
            $
            113,806
            
            
            100.0
            %
            $
            22,454
            
            
            19.7
            %Cost
                of sales
            
            
            89,963
            
            
            66.0
            %
            
            73,684
            
            
            64.7
            %Gross
                profit
            
            
            46,297
            
            
            34.0
            %
            
            40,122
            
            
            35.3
            %
            
            6,175
            
            
            15.4
            %General,
                selling and administrative expenses
            
            
            28,071
            
            
            20.6
            %
            
            23,944
            
            
            21.0
            %
            
            4,127
            
            
            17.2
            %Operating
                profit
            
            
            18,226
            
            
            13.4
            %
            
            16,178
            
            
            14.3
            %
            
            2,048
            
            
            12.7
            %


28





**Six
                Months Ended June 30,****Environmental
                Product Line Sales**
            
            **2008**
            
            **2007**
            
            **%
                change**(Dollars
                in Thousands)Lining
                technologies
            
            $
            80,947
            
            $
            63,745
            
            
            27.0
            %Building
                materials
            
            
            42,853
            
            
            39,445
            
            
            8.6
            %Other
                product lines
            
            
            12,460
            
            
            10,616
            
            
            *Total
            
            
            136,260
            
            
            113,806





*
      Not
      meaningful.





Organic
      growth comprised 55% 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 services 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 mostly due to greater employee related costs, commissions
      expenses and increased headcount incurred to support the revenue growth. In
      addition, approximately $1.1 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.





***Oilfield
      Services Segment***





**Six
                Months Ended June 30,****Oilfield
                Services**
            
            **2008**
            
            **2007**
            
            **2008
                vs 2007**(Dollars
                in Thousands)Net
                sales
            
            $
            61,798
            
            
            100.0
            %
            $
            44,994
            
            
            100.0
            %
            $
            16,804
            
            
            37.3
            %Cost
                of sales
            
            
            37,345
            
            
            60.4
            %
            
            27,737
            
            
            61.6
            %Gross
                profit
            
            
            24,453
            
            
            39.6
            %
            
            17,257
            
            
            38.4
            %
            
            7,196
            
            
            41.7
            %General,
                selling and administrative expenses
            
            
            11,756
            
            
            19.0
            %
            
            9,167
            
            
            20.4
            %
            
            2,589
            
            
            28.2
            %Operating
                profit
            
            
            12,697
            
            
            20.6
            %
            
            8,090
            
            
            18.0
            %
            
            4,607
            
            
            56.9
            %





Organic
      growth comprised 80% of the net sales increase for our oilfield services segment
      with the remainder arising from the acquisition of PRT in May 2008. Our organic
      growth was achieved due to an increase in the amount of service equipment in
      the
      field, equipment acquired in previous periods, greater demand for water
      treatment services, especially in the Gulf of Mexico, and growth in our
      developing businesses in Asia and Africa.


29


Gross
      profits increased with sales and became more profitable due to the ability
      to
      greater utilization of equipment and resources and increased revenues with
      more
      profitable business lines, such as water treatment, nitrogen services and
      premium reeled tubing. GS&A expenses increased to help support revenue
      growth, especially in our foreign businesses.





Operating
      profits and margins increased due to the increased gross margins mentioned
      above
      and moderate increases in GS&A expenses.




***Transportation
      Segment***





**Six
                Months Ended June 30,****Transportation**
            
            **2008**
            
            **2007**
            
            **2008
                vs 2007**(Dollars
                in Thousands)Net
                sales
            
            $
            31,233
            
            
            100.0
            %
            $
            24,273
            
            
            100.0
            %
            $
            6,960
            
            
            28.7
            %Cost
                of sales
            
            
            27,994
            
            
            89.6
            %****
            
            21,493
            
            
            88.5
            %****Gross
                profit
            
            
            3,239
            
            
            10.4
            %
            
            2,780
            
            
            11.5
            %
            
            459
            
            
            16.5
            %General,
                  selling andadministrative expenses
            
            
            1,626
            
            
            5.2
            %
            
            1,508
            
            
            6.2
            %
            
            118
            
            
            7.8
            %Operating
                profit
            
            
            1,613
            
            
            5.2
            %
            
            1,272
            
            
            5.3
            %
            
            341
            
            
            26.8
            %





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. Unrecovered
      fuel surcharges led to the decrease in gross profit margins. Operating profits
      and margins increased due to the increase in sales and stability of GS&A
      costs.





***Corporate
      Segment***





**Six
                Months Ended June 30,****Corporate**
            
            **2008**
            
            **2007**
            
            **2008
                vs 2007**(Dollars
                in Thousands)Intersegment
                shipping sales
            
            $
            (10,382
            )
            $
            (8,417
            )Intersegment
                shipping costs
            
            
            (10,382
            )
            
            (8,417
            )Gross
                profit
            
            
            -
            
            
            -
            
            
            -General,
                  selling andadministrative expenses
            
            
            12,580
            
            
            9,280
            
            
            3,300
            
            
            35.6
            %Operating
                loss
            
            
            12,580
            
            
            9,280
            
            
            3,300
            
            
            35.6
            %





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 benefit related expenses and
      increased expenses associated with information technology investments.


30


**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 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 will need additional
      credit facilities in order to pursue additional acquisitions, when and if these
      opportunities become available. If necessary, we believe we will be able to
      obtain such credit at terms substantially similar to our current facilities.
      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 of
      this report.





**Six Months Ended****Cash Flows**
            
            **June
                30,****($
                in millions)**
            
            **2008**
            
            **2007**Net
                cash provided by (used in) operating activities
            
            $
            (2.0
            )
            $
            25.6Net
                cash used in investing activities
            
            $
            (88.8
            )
            $
            (62.9
            )Net
                cash provided by financing activities
            
            $
            86.4
            
            $
            43.3





Cash
      flows from operating activities decreased from the prior year period largely
      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
      acquisition activity, investments to construct a corporate building, a $6
      million loan made to a third party related to the agreement to invest in a
      chrome mine in South Africa, and increased investments in joint-ventures, namely
      a $6.6 million investment made into a group of Russian bentonite companies.
      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, an organization that provides
      coiled tubing services to on and offshore oil and gas drilling operations.
      In
      2007, we paid approximately $38.4 million for acquisitions, primarily the Liquid
      Boot Technologies 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 declared increased in 2008 to $0.32 per
      share
      from $0.28 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 June 30, 2008, we have $6.6 million of funds
      available to repurchase shares under a program which expires on November 10,
      2008.


31





**As at****Financial Position**
            
            **June 30,**
            
            **December 31,****($ in millions)**
            
            **2008**
            
            **2007**Working
                capital
            
            $
            250.3
            
            $
            202.5Goodwill
                & intangible assets
            
            $
            130.4
            
            $
            101.1Total
                assets
            
            $
            799.7
            
            $
            652.1Long-term
                debt
            
            $
            260.6
            
            $
            164.2Other
                long-term obligations
            
            $
            38.0
            
            $
            33.5Stockholders'
                equity
            
            $
            381.0
            
            $
            352.3





Working
      capital at June 30, 2008, increased over the amount at December 31, 2007 due
      to
      loans made to a third party as mentioned above 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 quarter of
      the
      year. Our current ratio was 3.1-to-1 and 3.0-to-1 at June 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 40.6% at June 30, 2008, compared with 31.8% at December
      31, 2007. We have approximately $69.4 million of borrowing capacity available
      from our revolving credit facility at June 30, 2008. We are in compliance with
      financial covenants related to the revolving credit facility as of June 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.





**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.


32


**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. 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:


33




**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
            
            
            -
            
            $
            -
            
            $
            6,557,43480,000
            
            $
            25.45
            
            $
            6,557,434





**Item
      4** :  **Submission
      of Matters to a Vote of Security Holders**




(a)
            The
                Annual Meeting of Shareholders was held on May 8,
                2008.





(b)
            See
                Item 4(c) below.





(c)
            At
                the Annual Meeting of Shareholders, the shareholders voted on the
                election
                of three directors, each to serve a three year term. The voting results
                were as follows:





In
      the
      election of directors, each nominee was elected by a vote of shareholders as
      follows to serve for three years or until their successors are elected and
      qualified:


**Director**
              
              **For**
              
              **Against**John
                  Hughes
              
              16,984,051
              
              5,477,888Clarence
                  O. Redman
              
              19,596,183
              
              2,865,756Audrey
                  L. Weaver
              
              22,326,656
              
              135,284





**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.


34


**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: August
                8, 2008
            
            /s/
                Lawrence E. WashowLawrence
                E. WashowPresident
                and Chief Executive OfficerDate: August
                8, 2008
            
            /s/
                Donald W. PearsonDonald
                W. PearsonVice
                President and Chief Financial
                Officer




35




**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.


36