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 27A of the Securities Act of 1933, as amended, and 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 two of 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 ensure 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 existing global economic will make it more challenging for us to do this than it has in recent years.

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 throughout this report as well as 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 global economic and 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 June 30, 2009 vs. June 30, 2008

Consolidated Review

The following table compares our operating results for the quarters ended June 30, 2009 and June 30, 2008:

                                                                      Three Months Ended June 30,
                   Consolidated                          2009                2008                2009 vs. 2008
                                                           (Dollars in Thousands, Except Per Share Amounts)
Net sales                                            $     171,200       $     233,847                       -26.8 %
Cost of sales                                              124,052             171,187
Gross profit                                                47,148              62,660                       -24.8 %
margin %                                                      27.5 %              26.8 %
General, selling and administrative expenses               33,368              39,209                       -14.9  %
Operating profit                                            13,780              23,451                       -41.2 %
margin %                                                       8.0 %              10.0 %
Other income (expense):
Interest expense, net                                       (3,159 )            (2,837 )                      11.4 %
Other, net                                                  (1,502 )               830                      -281.0 %
                                                            (4,661 )            (2,007 )

Income before income taxes and income (loss) from
affiliates and joint ventures                                9,119              21,444
Income tax expense                                           1,546               5,666                       -72.7 %
effective tax rate                                            17.0 %              26.4 %

Income before income (loss) from affiliates and
joint ventures                                               7,573              15,778
Income (loss) from affiliates and joint ventures            (1,634 )              (670 )                     143.9 %

Net income                                                   5,939              15,108

Net income (loss) attributable to noncontrolling
interests                                                     (158 )               274                      -157.7 %

Net income (loss) attributable to AMCOL
shareholders                                         $       6,097       $      14,834                       -58.9 %

Basic earnings per share attributable to AMCOL
shareholders                                         $        0.20       $        0.49

Diluted earnings per share attributable to AMCOL
shareholders                                         $        0.20       $        0.48

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 components. The table details the consolidated sales fluctuations by components over the prior year's comparable period:

                                                                              Foreign
                                            Organic        Acquisitions       Exchange        Total
Minerals                                        -11.5 %              0.0 %         -2.0 %       -13.5 %
Environmental                                    -5.8 %              0.3 %         -4.2 %        -9.7 %
Oilfield services                                -3.9 %              1.7 %         -0.2 %        -2.4 %
Transportation & intersegment shipping           -1.3 %              0.0 %          0.0 %        -1.3 %
Total                                           -22.5 %              2.0 %         -6.4 %       -26.9 %
% of change                                      83.7 %             -7.5 %         23.8 %       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                                          26.3 %        10.1 %              7.7 %        44.1 %
Environmental                                     15.7 %        14.3 %              2.3 %        32.3 %
Oilfield services                                 16.9 %         0.8 %              1.1 %        18.8 %
Transportation                                     4.8 %         0.0 %              0.0 %         4.8 %
Total - current year's period                     63.7 %        25.2 %             11.1 %       100.0 %
Total from prior year's comparable period         67.1 %        23.3 %              9.6 %       100.0 %

Net sales:

The decrease in net sales is driven by an overall decrease in our organic revenues predominantly within our minerals and environmental services segments.

Gross profit:

Overall gross profit decreased due to the decrease in net sales mentioned above. However, gross margin increased due primarily 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 14.9%, with all of our segments reducing expenses as compared to last year's quarter. The decreases were greatest in our environmental and corporate segments. Favorable exchange rate movements helped drive the decrease in the environmental segment, especially from fluctuations in European currencies. Efforts to reduce costs within our corporate departments combined with favorable gains on benefit plan assets helped decrease operating expenses in that segment.

Operating profit:

Operating profit decreased due to the decrease in gross profit as mentioned earlier. On a segment basis, our environmental and oilfield services segments experienced the largest decreases as these businesses are more heavily impacted by the current economic environment, the impact of which is heightened as these businesses move into their busiest time of the season. Operating profit margin decreased across all segments as the reductions in GS&A expenses were not large enough to offset the impact of decreased gross profits.

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 expenses increased in 2009 largely due to losses on foreign currency transactions and derivatives to manage the risk of these foreign currency fluctuations.

Income tax expense:

Our effective tax rate decreased in 2009 to 17.0% compared with 26.4% in the prior year's period because a greater proportion of our income is being derived by our foreign subsidiaries, whose tax rates are lower than the 35% US federal income tax rate.

Income (loss) from affiliates & joint ventures:

Our joint ventures experienced a loss during the quarter largely due to the fact that they are geographically less diversified businesses. For example, the majority of our Russian investee's sales are generated within Russia, leading to losses as the Russian economy experiences significant decreases in the markets for its products. In addition, losses from our investment in Belgium increased as that business begins to establish operating activities after recently completing a production processing facility.

Diluted earnings per share:

Diluted EPS decreased commensurate with the decrease in net income as opposed to a change in the weighted average shares outstanding, which remained relatively constant.

Segment analysis:

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

Minerals Segment

                                                   Three Months Ended June 30,
         Minerals                    2009                     2008                  2009 vs. 2008
                                                      (Dollars in Thousands)
  Net sales                 $ 75,479       100.0 %   $ 107,003       100.0 %   $ (31,524 )     -29.5 %
  Cost of sales               60,567        80.2 %      88,659        82.9 %
  Gross profit                14,912        19.8 %      18,344        17.1 %      (3,432 )     -18.7 %
  General, selling and
  administrative expenses      9,129        12.1 %       9,824         9.2 %        (695 )      -7.1 %
  Operating profit             5,783         7.7 %       8,520         7.9 %      (2,737 )     -32.1 %




                                              Three Months Ended June 30,
          Minerals Product Line Sales      2009          2008         % change
                                                (Dollars in Thousands)
          Metalcasting                  $   30,954     $  44,709          -30.8 %
          Specialty materials               22,007        27,328          -19.5 %
          Pet products                      15,355        19,179          -19.9 %
          Basic minerals                     6,090        13,317          -54.3 %
          Other product lines                1,073         2,470              *
          Total                             75,479       107,003

* 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. 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 worked to slightly ameliorate these decreases. The increased selling prices, however, were the primary driver behind the increase in gross margins.

GS&A expenses decreased marginally due principally to favorable foreign exchange rate movements, again primarily in European currencies. However, they did not decrease proportionally to revenues, leading to a slight decrease in operating profit margin.

Environmental Segment

                                                   Three Months Ended June 30,
       Environmental                 2009                     2008                 2009 vs. 2008
                                                     (Dollars in Thousands)
  Net sales                 $ 55,370       100.0 %   $ 78,041       100.0 %   $ (22,671 )     -29.1 %
  Cost of sales               35,843        64.7 %     51,165        65.6 %
  Gross profit                19,527        35.3 %     26,876        34.4 %      (7,349 )     -27.3 %
  General, selling and
  administrative expenses     12,373        22.3 %     14,621        18.7 %      (2,248 )     -15.4 %
  Operating profit             7,154        13.0 %     12,255        15.7 %      (5,101 )     -41.6 %



                                                 Three Months Ended June 30,
        Environmental Product Line Sales       2009          2008        % change
                                                   (Dollars in Thousands)
        Lining technologies                $   34,670      $ 48,452          -28.4 %
        Building materials                     15,099        22,858          -33.9 %
        Other product lines                     5,601         6,731              *
        Total                                  55,370        78,041

* 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. Gross margins improved due to decreased raw material costs, such as resin and lower freight costs.

More than 75% of the decrease in GS&A expenses is attributable to foreign currency exchange rate fluctuations which, while they reduce the value of foreign denominated revenues, also reduce foreign denominated expenses. Operating profit margin decreased due to the combination of the above reasons.

Oilfield Services Segment

                                                  Three Months Ended June 30,
      Oilfield Services               2009                    2008                2009 vs. 2008
                                                     (Dollars in Thousands)
   Net sales                 $ 32,133       100.0 %   $ 37,655       100.0 %   $ (5,522 )     -14.7 %
   Cost of sales               20,770        64.6 %     21,904        58.2 %
   Gross profit                11,363        35.4 %     15,751        41.8 %     (4,388 )     -27.9 %
   General, selling and
   administrative expenses      6,913        21.5 %      7,003        18.6 %        (90 )      -1.3 %
   Operating profit             4,450        13.9 %      8,748        23.2 %     (4,298 )     -49.1 %

Several of our oilfield services segment service offerings experienced fluctuations in revenues as compared to the prior year's period. Although foreign markets were down overall, our foreign operations benefited from new revenues in Brazil that were not present in the prior year's period as our activities were not operational in the prior year period. Domestically, our on-shore operations suffered more than our offshore operations, especially our Nitrogen services which experienced the largest decrease in revenues.

Certain of our businesses are experiencing significant selling price competition, especially our coil tubing and nitrogen businesses, due to reductions in demand and the entrance of competitors who used to primarily serve the offshore market but have focused more on the on-shore market given depressed activities offshore. All these factors led to significant decreases in gross margins, combined with the fact that the prior year's gross margins were very good as certain of our businesses, such as our European business, experienced record profits in last year's quarter.

Operating profits decreased due to the decreased gross profits mentioned above without commensurate decreases in GS&A expenses. Operating margin 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 and natural gas prices.

Transportation Segment

                                                  Three Months Ended June 30,
       Transportation                2009                     2008                2009 vs. 2008
                                                     (Dollars in Thousands)
   Net sales                 $ 11,558       100.0 %   $ 16,883       100.0 %   $ (5,325 )     -31.5 %
   Cost of sales               10,212        88.4 %     15,194        90.0 %
   Gross profit                 1,346        11.6 %      1,689        10.0 %       (343 )     -20.3 %
   General, selling and
   administrative expenses        837         7.2 %        856         5.1 %        (19 )      -2.2 %
   Operating profit               509         4.4 %        833         4.9 %       (324 )     -38.9 %

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 June 30,
                  Corporate              2009         2008          2009 vs. 2008
                                                   (Dollars in Thousands)
         Intersegment shipping sales   $ (3,340 )   $ (5,735 )      2,395
         Intersegment shipping costs     (3,340 )     (5,735 )
         Gross profit                         -            -
         General, selling and
         administrative expenses          4,116        6,905       (2,789 )     -40.4 %
         Operating loss                   4,116        6,905       (2,789 )     -40.4 %

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 decreased in many areas due to reduced consulting, IT and personnel related costs.

Six months ended June 30, 2009 vs. June 30, 2008

Consolidated Review

The following table compares our operating results for the period ended June 30, 2009 and June 30, 2008:

. . .