Forward-Looking Statements

From time to time, certain statements we make, including statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations section, constitute "forward-looking statements" made in reliance upon the safe harbor contained in Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements relating to our Company or our operations that are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions, and statements relating to anticipated growth and levels of capital expenditures. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Our actual results, performance or achievements could differ materially from the results, performance or achievements expressed in, or implied by, these forward-looking statements as a result of various factors, including without limitation the following: actual performance in our various markets; conditions in the metalcasting and construction industries; operating costs; competition; currency exchange rates and devaluations; delays in development, production and marketing of new products; integration of acquired businesses; and other factors set forth from time to time in our reports filed with the Securities and Exchange Commission. We undertake no duty to update any forward looking statements to actual results or changes in our expectations.

Overview

We are a global, specialty minerals company and earn our revenues and profits from a diverse group of industrial and consumer product lines. Our principal operations are located in North America, Europe and the Asia-Pacific region.

We operate in five segments: minerals, environmental, oilfield services, transportation and corporate. Our minerals segment operates in three principal markets: metalcasting, pet products and specialty minerals. The environmental segment's principal markets include lining technologies, building materials and water treatment. Our oilfield services segment provides both onshore and offshore water treatment filtration, pipeline separation, waste fluid treatment, rental tools, coil tubing and well testing data services for the oil and gas industries. Our transportation segment provides trucking services for our domestic businesses as well as third parties. Intersegment shipping revenues are eliminated in our corporate segment.

The principal mineral that we utilize to generate revenues is bentonite. We own or lease bentonite reserves in the United States, China, Turkey and Australia. Additionally, through our affiliates and joint ventures, we have access to bentonite reserves in Egypt, India, Mexico, Russia and Azerbaijan. Bentonite deposits have varying physical properties which require us to identify which markets our reserves can serve. We believe that our understanding of bentonite properties, mining methods, processing and application to markets are the core components of our longevity and future prospects.

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

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

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

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

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

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

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

Critical Accounting Policies and Estimates

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

Analysis of Results of Operations

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

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

Consolidated Review

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

                                                      Three Months Ended September 30,
                                                                                  2008 vs.
                Consolidated                        2008             2007           2007
                                                           (Dollars in Thousands)
Net sales                                       $     253,048    $     203,598          24.3 %
Cost of sales                                         189,481          149,298
Gross profit                                           63,567           54,300          17.1 %
margin %                                                 25.1 %           26.7 %
General, selling and
administrative expenses                                36,214           28,297          28.0 %
Operating profit                                       27,353           26,003           5.2 %
margin %                                                 10.8 %           12.8 %
Other income (expense):
Interest expense, net                                  (3,404 )         (2,409 )        41.3 %
Other, net                                             (1,763 )           (830 )             *
                                                       (5,167 )         (3,239 )

Income before income taxes and income from
affiliates and joint ventures                          22,186           22,764
Income tax expense                                      5,567            4,704          18.3 %
effective tax rate                                       25.1 %           20.7 %

Income before income from affiliates and
joint ventures                                         16,619           18,060
Income from affiliates and joint ventures               1,971            2,086          -5.5 %
Net income                                      $      18,590    $      20,146          -7.7 %

* Not meaningful

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

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

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

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

Net sales:

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

Gross profit:

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

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

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

Operating profit:

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

Interest expense, net:

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

Other income (expense):

Other expense includes foreign currency transaction gains and losses for third party and intercompany related activity. It also includes gains and losses on foreign currency derivatives. Other expense increased in 2008 largely due to foreign currency transaction losses driven by exchange fluctuations in our EMEA based businesses, which are primarily subject to fluctuations in the Euro, British pound and Polish zloty. See Note 12 for further information on derivative activities.

Income tax expense:

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

Income from affiliates & joint ventures:

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

Net income:

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

Diluted earnings per share:

Excluding the $0.06 per share gain on sale of vacant land in the 2007 period, earnings per share remained relatively constant. The weighted average common and common shares outstanding increased by 0.2 million shares.

Segment analysis:

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

Minerals Segment

                                         Three Months Ended September 30,
        Minerals                  2008                  2007            2008 vs. 2007
                                              (Dollars in Thousands)

Net sales                  $ 116,881     100.0 % $ 90,906     100.0 % $ 25,975     28.6 %
Cost of sales                 96,206      82.3 %   73,610      81.0 %
Gross profit                  20,675      17.7 %   17,296      19.0 %    3,379     19.5 %
General, selling and
administrative expenses        9,565       8.2 %    8,161       9.0 %    1,404     17.2 %
Operating profit              11,110       9.5 %    9,135      10.0 %    1,975     21.6 %



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

* Not meaningful.

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

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

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

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

Environmental Segment

                                        Three Months Ended September 30,
     Environmental                2008                 2007            2008 vs. 2007
                                             (Dollars in Thousands)

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



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

* Not meaningful.

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

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

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

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

Oilfield Services Segment

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

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

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

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

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

Transportation Segment

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

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

Corporate Segment

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

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

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

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

Consolidated Review

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

. . .