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; oil and gas prices and conditions in those 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 our mineral based 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 segment's customer base is primarily comprised of oil and gas 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 Eastern 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, as appropriate, when we believe those businesses are fairly valued and fit with our overall growth strategy. However, the global economic and credit crisis that existed in the beginning of 2009 will make it more challenging for us to do this than it has in recent years. Over the last several years, we have acquired a number of businesses.

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, 2008. In general, the significance of these risks has not materially changed over the past year except as they are affected by the recent credit crisis occurring in the United States and throughout many of the economies in which we operate. The ongoing credit crisis is characterized by increased volatility, and lack of available capital for short and long term financing. The credit crisis may increase the risks outlined in our latest Annual Report on Form 10-K, especially in the areas of our reliance on key industries (which could be more adversely affected due to the credit crisis), volatility of our stock price, and increased exchange rate sensitivity. In addition, the credit crisis may affect our ability to obtain additional financing to fund acquisitions or other activities on terms substantially similar to our current debt facilities should that need arise in the future. Any of these factors could adversely affect our business opportunities and results.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States. We evaluate the accounting policies and estimates used to prepare the financial statements on an ongoing basis. We consider the accounting policies used in preparing our financial statements to be critical accounting policies when they are both important to the portrayal of our financial condition and results of operations, and require us to make estimates, complex judgments, and assumptions, including with respect to events which are inherently uncertain. As a result, actual results could differ from these estimates. For more information on our critical accounting policies, please read our Annual Report on Form 10-K for the year ended December 31, 2008.

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 March 31, 2009 vs. March 31, 2008

Consolidated Review

The following table compares our operating results for the quarters ended March 31, 2009 and March 31, 2008:

                                                                   Three Months Ended March 31,
                   Consolidated                           2009                2008             2009 vs. 2008
                                                         (Dollars in Thousands, Except Per Share Amounts)
Net sales                                            $      164,419       $     191,409                  -14.1 %
Cost of sales                                               121,199             145,059
Gross profit                                                 43,220              46,350                   -6.8 %
margin %                                                       26.3 %              24.2 %
General, selling and administrative expenses                 33,053              33,638                   -1.7 %
Operating profit                                             10,167              12,712                  -20.0 %
margin %                                                        6.2 %               6.6 %
Other income (expense):
Interest expense, net                                        (3,407 )            (2,401 )                 41.9 %
Other, net                                                   (1,212 )              (235 )                415.7 %
                                                             (4,619 )            (2,636 )

Income before income taxes and income (loss) from
affiliates and joint ventures                                 5,548              10,076
Income tax expense                                            1,571               2,717                  -42.2 %
effective tax rate                                             28.3 %              27.0 %

Income before income (loss) from affiliates and
joint ventures                                                3,977               7,359
Income (loss) from affiliates and joint ventures                 (8 )             1,295                 -100.6 %

Net income                                                    3,969               8,654

Net income (loss) attributable to noncontrolling
interests                                                      (207 )                33                 -727.3 %

Net income (loss) attributable to AMCOL
shareholders                                         $        4,176       $       8,621                  -51.6 %

Basic earnings per share attributable to AMCOL
shareholders                                         $         0.14       $        0.28

Diluted earnings per share attributable to AMCOL
shareholders                                         $         0.14       $        0.28

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

                                                                             Foreign
                                            Organic       Acquisitions       Exchange        Total
Minerals                                         -6.6 %             0.0 %         -3.5 %       -10.1 %
Environmental                                    -3.1 %             0.0 %         -4.2 %        -7.3 %
Oilfield services                                 2.2 %             2.0 %         -0.1 %         4.1 %
Transportation & intersegment shipping           -0.8 %             0.0 %          0.0 %        -0.8 %
Total                                            -8.3 %             2.0 %         -7.8 %       -14.1 %
% of change                                      59.4 %           -13.9 %         54.5 %       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                                          33.6 %         8.7 %             6.6 %        48.9 %
Environmental                                     13.7 %        11.0 %             2.2 %        26.9 %
Oilfield services                                 18.1 %         0.3 %             0.9 %        19.3 %
Transportation                                     4.9 %         0.0 %             0.0 %         4.9 %
Total - current year's period                     70.3 %        20.0 %             9.7 %       100.0 %
Total from prior year's comparable period         68.0 %        22.5 %             9.5 %       100.0 %

Net sales:

The decrease in net sales is driven almost equally between an overall decrease in our organic revenues as well as adverse currency movements on sales in our overseas businesses. Our oilfield services segment revenues increased, however, over the comparable prior year's quarter due to the acquisition in May 2008 of our coil tubing business.

Gross profit:

Overall gross profit decreased due to the decrease in net sales mentioned above. However, gross margin increased due to price increases in our minerals segment implemented in 2008 which were not in full effect during the prior year's quarter.

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

GS&A expenses decreased slightly with large increases in our oilfield services and corporate segments offset by a large decrease in our environmental segment. The increases are largely due to the acquisition of our coil tubing business in May 2008, commissions resulting from increased sales in our oilfield services segment, and increased professional fees in our corporate segment associated with restating our quarterly results for the second and third quarter of 2008 for items associated with our Indian investment in Ashapura Minechem Limited ("Ashapura"). The decrease is primarily due to fluctuations in foreign currency exchange rates and lower personnel related cost in our environmental segment.

Operating profit:

Operating profit decreased due to the decrease in gross profit as mentioned earlier. On a segment basis, our environmental segment experienced the largest decrease while our oilfield services segment experienced an increase in operating profits. Operating profit margin decreased across all segments except our minerals segment.

Interest expense, net:

Net interest expense increased due to increased average debt levels - we began 2009 with debt levels significantly greater than those that existed at the beginning of 2008 due to increased capital spending, an acquisition, and increased working capital levels generated in 2008. 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 as well as gains and losses on foreign currency derivatives. Other expense increased in 2009 largely due to losses on derivatives associated with our purchase of a chrome mine in South Africa, the purchase price for which was denominated in Australian Dollars (AUD).

Income tax expense:

Our effective tax rate increased in 2009 to 28.3% compared with 27.0% in the prior year's period. This difference equates to an approximate $70 thousand difference in income taxes, which is insignificant. Our effective tax rate in both reporting periods continues to differ from the U.S. federal statutory 35.0% rate largely due to depletion deductions and differences in local tax rates on the income of our foreign subsidiaries which are generally lower than the U.S. rates.

Income (loss) from affiliates & joint ventures:

As reported in our Form 10-K for 2008, income from our investment in Ashapura has historically comprised the majority of income from affiliates and joint-ventures. As also reported therein, we have written off our investment in this entity as of December 31, 2008, and have suspended recognition of further losses on this investment in accordance with the equity method of accounting. As such, the lack of income from Ashapura in 2009 caused the decrease as compared to the 2008 period.

Net income (loss) attributable to AMCOL shareholders:

The decrease in net income from the prior year period results largely from the decrease in operating profit, increased expenses for interest and derivative losses, and the lack of income from Ashapura.

Diluted earnings per share:

Diluted EPS decreased commensurate with the decrease in net income as previously outlined.

Segment analysis:

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

Minerals Segment

                                                 Three Months Ended March 31,
      Minerals                   2009                        2008                    2009 vs. 2008
                                                    (Dollars in Thousands)
Net sales               $  80,157         100.0 %   $  99,344         100.0 %   $ (19,187 )       -19.3 %
Cost of sales              63,975          79.8 %      82,667          83.2 %
Gross profit               16,182          20.2 %      16,677          16.8 %        (495 )        -3.0 %
General, selling and
administrative
expenses                    8,574          10.7 %       8,990           9.0 %        (416 )        -4.6 %
Operating profit            7,608           9.5 %       7,687           7.8 %         (79 )        -1.0 %



                                              Three Months Ended March 31,
          Minerals Product Line Sales      2009            2008        % change
                                                 (Dollars in Thousands)
          Metalcasting                  $   31,541       $ 40,678          -22.5 %
          Specialty materials               22,662         25,663          -11.7 %
          Pet products                      17,415         19,523          -10.8 %
          Basic minerals                     7,850         12,041          -34.8 %
          Other product lines                  689          1,439              *
          Total                             80,157         99,344

* Not meaningful.

Decreased sales volumes accounted for the decrease in revenues over the prior year quarter, primarily in metalcasting and drilling products (part of basic minerals) due to the global recession. The segment also experienced decreased revenues due to adverse movements in foreign currency exchange rates, primarily the British pound and Turkish Lira to the US dollar, which was almost entirely offset by the effect of a full period of selling price increases that were instituted in the prior year but were not in effect in the prior year's quarter. The increased selling prices also accounted for the increase in gross profit margins.

GS&A expenses decreased marginally due to foreign exchange rate movements and decreases in employee related expenses due to greater cost controls. This decrease, along with the increase in gross profit margin, contributed to the increase in operating profit margins.

Environmental Segment

                                                 Three Months Ended March 31,
    Environmental                2009                        2008                    2009 vs. 2008
                                                    (Dollars in Thousands)

Net sales               $  44,233         100.0 %   $  58,219         100.0 %   $ (13,986 )       -24.0 %
Cost of sales              30,134          68.1 %      38,798          66.6 %
Gross profit               14,099          31.9 %      19,421          33.4 %      (5,322 )       -27.4 %
General, selling and
administrative
expenses                   10,405          23.5 %      13,450          23.1 %      (3,045 )       -22.6 %
Operating profit            3,694           8.4 %       5,971          10.3 %      (2,277 )       -38.1 %



                                                Three Months Ended March 31,
       Environmental Product Line Sales      2009            2008        % change
                                                   (Dollars in Thousands)
       Lining technologies                $   26,753       $ 32,495          -17.7 %
       Building materials                     12,378         19,995          -38.1 %
       Other product lines                     5,102          5,729              *
       Total                                  44,233         58,219

* Not meaningful.

Revenues in the environmental segment decreased due to adverse movements in foreign currency exchange rates, primarily the British pound and Polish zloty to the US dollar, and organic decreases across all product lines due to the recession and credit crisis. These decreases also led to the decrease in gross profit margins.

GS&A expenses decreased in part due to the currency movements as mentioned above as well as due to decreased employee incentives and third party commissions stemming from decreased sales levels. Operating profit margin decreased due to the decrease in sales and gross profit margin.

Oilfield Services Segment

                                                 Three Months Ended March 31,
  Oilfield Services              2009                        2008                    2009 vs. 2008
                                                    (Dollars in Thousands)

Net sales               $  31,898         100.0 %   $  24,143         100.0 %   $   7,755          32.1 %
Cost of sales              20,293          63.6 %      15,441          64.0 %
Gross profit               11,605          36.4 %       8,702          36.0 %       2,903          33.4 %
General, selling and
administrative
expenses                    6,688          21.0 %       4,753          19.7 %       1,935          40.7 %
Operating profit            4,917          15.4 %       3,949          16.3 %         968          24.5 %

Strong increased demand for offshore, deep water filtration services was the primary driver of the increased sales over the prior year quarter. Sales levels were also helped by the inclusion of our coil tubing business, which we acquired in May 2008 and thus is not present in the prior year quarterly results.

GS&A expenses increased due to the acquisition of our coil tubing business and increases in employee related expenses due to greater sales levels. Operating profits increased due to the increased gross profits mentioned above. Operating margin, however, decreased as the profitability of our coil tubing business was lower than other parts of the business, thereby decreasing the overall profitability. Our coil tubing business has experienced significant competitive pressures as customers reduce their use of these services given the drop in oil prices.

Transportation Segment

                                                 Three Months Ended March 31,
   Transportation                2009                        2008                    2009 vs. 2008
                                                    (Dollars in Thousands)

Net sales               $  11,291         100.0 %   $  14,350         100.0 %   $  (3,059 )       -21.3 %
Cost of sales               9,957          88.2 %      12,800          89.2 %
Gross profit                1,334          11.8 %       1,550          10.8 %        (216 )       -13.9 %
General, selling and
administrative
expenses                      853           7.6 %         770           5.4 %          83          10.8 %
Operating profit              481           4.2 %         780           5.4 %        (299 )       -38.3 %

Traffic levels decreased as compared to the prior year period due to the recession in the United States. In addition, prices for gasoline have decreased, leading to decreased fuel surcharges. Both of these factors contributed to the decrease in this segment's performance.

Corporate Segment

                                                        Three Months Ended March 31,
                  Corporate                       2009         2008         2009 vs. 2008
                                                           (Dollars in Thousands)
 Intersegment shipping sales                    $ (3,160 )   $ (4,647 )     1,487
 Intersegment shipping costs                      (3,160 )     (4,647 )
 Gross profit                                          -            -           -
 General, selling and administrative expenses      6,533        5,675         858       15.1 %
 Operating loss                                    6,533        5,675         858       15.1 %

Intersegment shipping revenues and costs are related to billings from our transportation segment to its domestic minerals and environmental segment sister companies for services. These services are invoiced 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 both non-recurring professional fees incurred to restate our second and third quarter results for 2008 (related to our investment in Ashapura as previously discussed) and greater employee and employee benefit related expenses.

. . .