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 its 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 litter 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 EMEA 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 economy 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, as amended, for the year ended December 31, 2008. In general, the significance of these risks has not materially changed since our Quarterly Report on From 10-Q for the period ended June, 30, 2009, 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, as amended, and our Quarterly Report on From 10-Q for the period ended June 30, 2009, 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, as amended, 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.

The following paragraphs discuss the three and nine month results ending September 30, 2009 with the comparable results in the prior year. However, on a sequential quarter basis, the three months ending September 30, 2009 include a few highlights as compared to the three months ending June 30, 2009. In particular, our minerals segment experienced an increase in both sales and margins. This is due in part to increased activity in our metalcasting business resulting from both the government's "cash for clunkers" program as well as model year change-overs in automobile production, both of which increased foundry activity. Our minerals business is also improving in both Asia and Europe, which has a significant consumer products related business. Also, our environmental segment has more construction project activity, but customers are still cautious about starting new projects.

Three months ended September 30, 2009 vs. September 30, 2008

Consolidated Review

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

                                                                 Three Months Ended September 30,
                   Consolidated                            2009                   2008          2009 vs. 2008
                                                         (Dollars in Thousands, Except Per Share Amounts)
Net sales                                            $        190,920         $    253,048               -24.6 %
Cost of sales                                                 137,069              189,481
Gross profit                                                   53,851               63,567               -15.3 %
margin %                                                         28.2 %               25.1 %
General, selling and
administrative expenses                                        34,626               36,214                -4.4 %
Operating profit                                               19,225               27,353               -29.7 %
margin %                                                         10.1 %               10.8 %
Other income (expense):
Interest expense, net                                          (2,833 )             (3,404 )             -16.8 %
Other, net                                                        119               (2,128 )            -105.6 %
                                                               (2,714 )             (5,532 )

Income before income taxes and income (loss) from
affiliates and joint ventures                                  16,511               21,821
Income tax expense                                              3,271                5,567               -41.2 %
effective tax rate                                               19.8 %               25.5 %

Income before income (loss) from affiliates and
joint ventures                                                 13,240               16,254
Income (loss) from affiliates and joint ventures                  721              (14,697 )            -104.9 %

Net income                                                     13,961                1,557

Net income (loss) attributable to noncontrolling
interests                                                         661                 (365 )            -281.1 %

Net income (loss) attributable to AMCOL
shareholders                                         $         13,300         $      1,922               592.0 %

Basic earnings per share attributable to AMCOL
shareholders                                         $           0.43         $       0.06

Diluted earnings per share attributable to AMCOL
shareholders                                         $           0.43         $       0.06

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

                                                                              Foreign
                                            Organic        Acquisitions       Exchange        Total
Minerals                                         -9.2 %              0.0 %         -1.8 %       -11.0 %
Environmental                                    -5.6 %              0.2 %         -3.2 %        -8.6 %
Oilfield services                                -3.2 %              0.0 %         -0.5 %        -3.7 %
Transportation & intersegment shipping           -1.3 %              0.0 %          0.0 %        -1.3 %
Total                                           -19.3 %              0.2 %         -5.5 %       -24.6 %
% of change                                      78.2 %             -0.9 %         22.7 %       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                                          29.0 %         9.7 %              8.0 %        46.7 %
Environmental                                     17.0 %        15.0 %              1.8 %        33.8 %
Oilfield services                                 13.7 %         0.4 %              1.1 %        15.2 %
Transportation                                     4.3 %         0.0 %              0.0 %         4.3 %
Total - current year's period                     64.0 %        25.1 %             10.9 %       100.0 %
Total from prior year's comparable period         66.9 %        23.4 %              9.7 %       100.0 %

Net sales:

The decrease in net sales is driven by decreased revenues in all segments, mostly occurring from organic operations within our minerals and environmental segments. Please see the segment discussion for further details.

Gross profit:

Overall gross profit decreased due to the decrease in net sales mentioned above, with the decrease in our environmental segment having the largest impact. Expenses associated with a $2.3 million write off of certain U.S. metal casting operations within our Minerals segment also contributed to the decrease in gross profits. However, gross margin increased substantially due to price increases in our minerals segment, which were implemented in 2008 and thus not in full effect during the prior year's quarter, and reduced raw material costs in our environmental segment.

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

GS&A expenses decreased due to decreased costs in our environmental segment as other segment GS&A costs remained relatively constant. Please see the segment discussion for further details.

Operating profit:

Operating profit decreased due to the decrease in gross profit mentioned earlier, partially offset by the improvement in GS&A expenses in our environmental segment. Operating profit margin decreased across all segments except the minerals segment. Please see the segment discussions for further details.

Interest expense, net:

Net interest expense decreased due to decreased average debt levels. In the 2008 comparable period, we increased debt levels due to increased spending on acquisitions, capital expenditures and investments in working capital. In 2009, we have limited our expenditures, decreased working capital, and have not made any business acquisitions. Thus, we have significantly reduced our quarterly average debt levels in 2009 as compared to 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. This line item includes income in 2009 whereas the prior year's quarter included expenses. The improvement results primarily from our entrance into markets where our activities were not significant in the prior year, most notably Brazil and South Africa. With these countries' currencies, the exchange rate to the US dollar moved in our favor.

Income tax expense:

Our effective tax rate decreased in 2009 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 affiliates and joint ventures generated income during the 2009 third quarter whereas they experienced a loss in the previous year's quarter. In the prior year, the expenses resulted from our investment in Ashapura Minechem Limited, a publicly traded Indian company ("Ashapura"), in which we hold a 21% interest accounted for using the equity method of accounting. Ashapura suffered significant foreign currency derivative expenses as a result of the derivative contracts it entered into to hedge foreign currency exposure on its receivables and payables, primarily related to the conversion of currencies between the US dollar and the Indian Rupee. US GAAP required that we record the fair value of these derivative contracts in our balance sheet as of the end of each reporting period and record the changes in such fair values in our statement of operations. Ashapura's losses resulted in a significant non-cash charge against our income from affiliates and joint ventures. In the current year, the income was primarily generated from our other Indian investment, Ashapura Volclay.

Diluted earnings per share:

Diluted EPS increased commensurate with the increase 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 September 30,
         Minerals                   2009                     2008                  2009 vs. 2008
                                                     (Dollars in Thousands)
  Net sales                 $ 89,021       100.0 %   $ 116,881       100.0 %   $ (27,860 )     -23.8 %
  Cost of sales               69,232        77.8 %      96,206        82.3 %
  Gross profit                19,789        22.2 %      20,675        17.7 %        (886 )      -4.3 %
  General, selling and
  administrative expenses      9,317        10.5 %       9,565         8.2 %        (248 )      -2.6 %
  Operating profit            10,472        11.7 %      11,110         9.5 %        (638 )      -5.7 %



                                           Three Months Ended September 30,
       Minerals Product Line Sales      2009               2008          % change
                                                (Dollars in Thousands)
       Metalcasting                  $    38,097       $     46,392          -17.9 %
       Specialty materials                26,661             29,033           -8.2 %
       Pet products                       16,959             19,559          -13.3 %
       Basic minerals                      6,348             19,471          -67.4 %
       Other product lines                   956              2,426              *
       Total                              89,021            116,881

* 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 full 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. Our gross profits suffered due to the decreased sales in addition to a $2.3 million write off of certain assets within our U.S. metal casting operations.

GS&A expenses decreased marginally due to favorable foreign exchange rate movements, again primarily in European currencies. Operating margins increased due to the significant increase in gross profit margin mentioned previously.

Environmental Segment

                                               Three Months Ended September 30,
       Environmental                2009                     2008                 2009 vs. 2008
                                                    (Dollars in Thousands)

  Net sales                 $ 64,493       100.0 %   $ 86,133       100.0 %   $ (21,640 )     -25.1 %
  Cost of sales               41,603        64.5 %     57,731        67.0 %
  Gross profit                22,890        35.5 %     28,402        33.0 %      (5,512 )     -19.4 %
  General, selling and
  administrative expenses     12,135        18.8 %     13,683        15.9 %      (1,548 )     -11.3 %
  Operating profit            10,755        16.7 %     14,719        17.1 %      (3,964 )     -26.9 %



                                              Three Months Ended September 30,
     Environmental Product Line Sales      2009              2008          % change
                                                   (Dollars in Thousands)
     Lining technologies                $    44,727       $    57,320          -22.0 %
     Building materials                      14,227            22,237          -36.0 %
     Other product lines                      5,539             6,576              *
     Total                                   64,493            86,133

* Not meaningful.

Revenues in the environmental segment decreased due to decreased demand as a result of the depressed construction activity in the U.S. and fewer large projects within our U.S. contracting services business. Also fueling the decrease were adverse movements in foreign currency exchange rates, primarily the British pound and Polish zloty to the US dollar. 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 September 30,
      Oilfield Services              2009                     2008                2009 vs. 2008
                                                     (Dollars in Thousands)

   Net sales                 $ 29,109       100.0 %   $ 38,379       100.0 %   $ (9,270 )     -24.2 %
   Cost of sales               19,491        67.0 %     25,785        67.2 %
   Gross profit                 9,618        33.0 %     12,594        32.8 %     (2,976 )     -23.6 %
   General, selling and
   administrative expenses      6,522        22.4 %      6,400        16.7 %        122         1.9 %
   Operating profit             3,096        10.6 %      6,194        16.1 %     (3,098 )     -50.0 %

Several of our oilfield services segment service offerings experienced fluctuations in revenues as compared to the prior year's period. Domestically, our nitrogen and coil tubing operations experienced large revenues decreases from the prior period as lower demand for oil and natural gas has led to reduced production activities, decreasing demand for the services we offer. Although foreign markets were down overall, our 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; we also experienced growth in our Malaysian operations.

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 profit, especially considering that the prior year period's gross profit was 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.

Transportation Segment

                                                Three Months Ended September 30,
       Transportation                2009                     2008                2009 vs. 2008
                                                     (Dollars in Thousands)
   Net sales                 $ 12,487       100.0 %   $ 17,983       100.0 %   $ (5,496 )     -30.6 %
   Cost of sales               10,933        87.6 %     16,087        89.5 %
   Gross profit                 1,554        12.4 %      1,896        10.5 %       (342 )     -18.0 %
. . .