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, and well testing data services for the oil and gas industry. Our transportation segment provides trucking services for our domestic businesses as well as third parties. Intersegment shipping revenues are eliminated in our corporate segment.

The principal mineral that we utilize to generate revenues is bentonite. We own or lease bentonite reserves in the United States, China, Turkey and Australia. Additionally, through our affiliates and joint ventures, we have access to bentonite reserves in Egypt, India and Mexico. 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.

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

ˇ 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.

ˇ 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.

ˇ 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.

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

A number of risks will challenge us in meeting these long-term objectives, and there can be no assurance that we will achieve success in implementing any one or more of them. We describe certain risks under "Item 1A. Risk Factors" and "Item 7A. Quantitative and Qualitative Disclosure About Market Risk" within our Annual Report on Form 10-K for the year ended December 31, 2007. In general, the significance of these risks has not materially changed over the past year.

Critical Accounting Policies and Estimates

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

Analysis of Results of Operations

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

Three months ended March 31, 2008 vs. March 31, 2007

Consolidated Review

The following table compares our operating results for the quarters ended March 31, 2008 and March 31, 2007:

                                                    Three Months Ended March 31,
                                                                            2008 vs.
                Consolidated                       2008         2007         2007
                                                       (Dollars in Thousands)
Net sales                                       $  191,409   $  163,728         16.9 %
Cost of sales                                      145,059      120,229
Gross profit                                        46,350       43,499          6.6 %
margin %                                              24.2 %       26.6 %
General, selling and administrative expenses        33,638       28,805         16.8 %
Operating profit                                    12,712       14,694        -13.5 %
margin %                                               6.6 %        9.0 %
Other income (expense):
Interest expense, net                               (2,401 )     (1,942 )       23.6 %
Other, net                                            (235 )       (167 )       40.7 %
                                                    (2,636 )     (2,109 )

Income before income taxes and income from
affiliates and joint ventures                       10,076       12,585
Income tax expense                                   2,717        3,311        -17.9 %
effective tax rate                                    27.0 %       26.3 %

Income before income from affiliates and
joint ventures                                       7,359        9,274
Income from affiliates and joint ventures            1,262        1,566        -19.4 %

Net income                                           8,621       10,840        -20.5 %

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

                      Base Business      Acquisitions      Foreign Exchange      Total
Minerals                         4.7 %             2.8 %                 0.8 %      8.3 %
Environmental                    3.2 %             0.8 %                 1.8 %      5.8 %
Oilfield services                1.3 %             0.0 %                 0.0 %      1.3 %
Transportation                   1.5 %               0 %                 0.0 %      1.5 %
Total                           10.7 %             3.6 %                 2.6 %     16.9 %
% of growth                     63.3 %            21.3 %                15.4 %    100.0 %

In addition, the following table shows the distribution of the quarter's 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                                           37.3 %    7.2 %           7.4 %    51.9 %
Environmental                                      15.0 %   13.8 %           1.7 %    30.4 %
Oilfield services                                  10.7 %    1.6 %           0.4 %    12.6 %
Transportation                                      5.1 %    0.0 %           0.0 %     5.1 %

Total - current year's period                      68.1 %   22.5 %           9.5 %   100.0 %
Total from prior year's comparable period          68.3 %   22.9 %           8.8 %   100.0 %

Net sales:

Our overall increase in net sales was driven by increases from base businesses (those operations owned for greater than one year) predominantly within our minerals and environmental segments. Marginal increases in net sales resulted from foreign currency and acquisitions, the latter of which was generated by our Turkish acquisition and our Mexican joint-venture.

Gross profit:

Overall gross profit increased due to the increase in net sales. Gross profit margins decreased, however, across all segments except our oilfield services segment. The decreased gross margins in our minerals segment had the largest effect on the overall decrease in margins.

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

Increased GS&A expenses in the minerals, environmental and corporate segments drove the overall increase in GS&A. The increase in our GS&A is predominantly driven by employee related expenses in our corporate segment and acquisitions, which increased GS&A approximately $1.0 million over the prior-year's period.

Operating profit:

Although sales increased, operating profit declined due to the decreased gross margins and increased GS&A expenses previously discussed. Our oilfield services segment, however, experienced an increase in operating profit and operating margins by leveraging 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 increased capital spending and working capital levels. We began 2008 with debt levels significantly greater than those that existed at the beginning of 2007 due to increased capital spending and acquisitions in 2007. The majority of our long-term debt has a variable rate of interest which is primarily influenced by changes in LIBOR.

Other income / (expense):

In the current reporting period, we recognized foreign exchange losses primarily resulting from transactions originated at our international subsidiaries. We do not actively hedge our exposures to foreign currencies.

Income tax expense:

The effective tax rate in the first quarter of 2008 is 27.0% whereas the prior year's comparable period had a rate of 26.3%; this equates to a difference in tax expense of less than $0.6 million. 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.

Our India-based investments contributed the majority of the income from joint ventures and affiliates in the first quarters of 2008 and 2007. Those investments also accounted for the current period decrease in the income from the prior period and resulted from decreased bauxite shipments.

Net income:

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

Diluted earnings per share:

Earnings per share decreased commensurately with the decrease in net income. Weighted average common and common equivalent shares outstanding remained relatively constant compared to the prior year period. The weighted average common and common shares outstanding increased by 0.1 million shares.

Segment analysis:

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

Minerals Segment

                                            Three Months Ended March 31,
        Minerals                  2008                 2007             2008 vs. 2007
                                               (Dollars in Thousands)
Net sales                  $ 99,344     100.0 % $ 85,813     100.0 % $  13,531      15.8 %
Cost of sales                82,667      83.2 %   69,014      80.4 %
Gross profit                 16,677      16.8 %   16,799      19.6 %      (122 )    -0.7 %
General, selling and
administrative expenses       8,990       9.0 %    7,542       8.8 %     1,448      19.2 %
Operating profit              7,687       7.8 %    9,257      10.8 %    (1,570 )   -17.0 %




                                   Three months ended Mar 31,
Minerals Product Line Sales      2008        2007       % change
                                     (Dollars in Thousands)
Metalcasting                  $  40,678    $ 36,586          11.2 %
Specialty materials              25,663      20,068          27.9 %
Pet products                     19,523      16,488          18.4 %
Basic minerals                   12,041      10,927          10.2 %
Other product lines               1,439       1,744             *

Total                            99,344      85,813

* Not meaningful.

Net sales from acquisitions and foreign currency accounted for 33% and 10%, respectively, of the increase in net sales. Our Turkish operations and Mexican joint-venture mainly comprised the increase in sales from acquisitions. The appreciation of the British Pound and certain Asia-Pacific currencies led to the increase in net sales attributable to foreign currency fluctuations.

Gross profit margin decreased mainly due to increased energy, production and mining costs in the United States. The decrease was also impacted by unfavorable product mix, as mentioned earlier with increased concentration of sales in lower priced products, and greater concentration of sales being derived from freight revenues, which do not generate profits.

The majority of the increase in GS&A expenses, approximately $0.8 million, is attributable to acquisitions. The remainder is attributable to greater expenditures on research and development activities within our specialty materials division and personnel costs in our Asia-Pacific businesses.

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

Environmental Segment

                                            Three Months Ended March 31,
     Environmental                2008                 2007             2008 vs. 2007
                                               (Dollars in Thousands)
Net sales                  $ 58,219     100.0 % $ 48,698     100.0 % $   9,521      19.6 %
Cost of sales                38,798      66.6 %   31,163      64.0 %
Gross profit                 19,421      33.4 %   17,535      36.0 %     1,886      10.8 %
General, selling and
administrative expenses      13,450      23.1 %   11,292      23.2 %     2,158      19.1 %
Operating profit              5,971      10.3 %    6,243      12.8 %      (272 )    -4.4 %




                           Environmental Product Line Sales
                             Three months ended Mar 31,
                         2008           2007         % change
                               (Dollars in Thousands)
Lining technologies   $   32,495    $    23,992           35.4 %
Building materials        19,995         19,583            2.1 %
Other product lines        5,729          5,123              *
Total                     58,219         48,698

Our Polish and other European businesses were also the main drivers of the increase in net sales attributable to foreign currency fluctuations, which comprised 31% of the environmental segment's net sales growth. Net sales growth from acquisitions was 14%.

Gross profit increased due to increased sales. However, gross profit margins decreased due to a greater concentration of sales occurring in less profitable product lines. In addition, increased production costs in the United States negatively impacted gross margins.

GS&A expenses increased mostly due to greater employee related costs and increased sales commissions at our Polish operations.

Operating profits decreased slightly due to the decline in gross profit margins and increases in GS&A expenses as discussed. Operating profit margins decreased due to the decrease in gross margin mentioned above.

Oilfield Services Segment

                                             Three Months Ended March 31,
   Oilfield Services              2008                   2007                2008 vs. 2007
                                                (Dollars in Thousands)
Net sales                   $ 24,143     100.0 %    $ 21,964     100.0 %    $ 2,179      9.9%
Cost of sales                 15,441      64.0 %      14,077      64.1 %
Gross profit                   8,702      36.0 %       7,887      35.9 %        815      10.3 %
General, selling and
administrative expenses        4,753      19.7 %       4,721      21.5 %         32       0.7 %
Operating profit               3,949      16.3 %       3,166      14.4 %        783      24.7 %

Base business, organic growth comprised nearly all of the net sales increase for our oilfield services segment. This growth was generated by greater demand for water treatment services in the Gulf of Mexico with additional improvement coming from emerging markets in Asia and Africa.

Gross profit margins and GS&A expenses remained relatively constant. Operating profit increased due to increased sales; operating profit margin increased due to a greater leveraging of sales without commensurate increases in GS&A expenses.

Transportation Segment

                                           Three Months Ended March 31,
    Transportation               2008                 2007             2008 vs. 2007
                                              (Dollars in Thousands)
Net sales                 $ 14,350     100.0 % $ 10,893     100.0 % $   3,457      31.7 %
Cost of sales               12,800      89.2 %    9,615      88.3 %
Gross profit                 1,550      10.8 %    1,278      11.7 %       272      21.3 %
General, selling and
administrative expenses        770       5.4 %      738       6.8 %        32       4.3 %
Operating profit               780       5.4 %      540       4.9 %       240      44.4 %

Traffic levels increased as compared to the prior year period due to greater demand from consumer products shippers, leading to the increase in net sales. Unrecovered fuel surcharges led to the decrease in gross profit margins. Operating profits and margins increased due to the increase in sales and stability of GS&A costs.

Corporate Segment

                                     Three Months Ended March 31,
         Corporate               2008       2007        2008 vs. 2007
                                        (Dollars in Thousands)
Intersegment shipping sales   $  (4,647 ) $ (3,640 )    (1,007 )
Intersegment shipping costs      (4,647 )   (3,640 )
Gross profit                          -          -           -
General, selling
and administrative expenses       5,675      4,512       1,163      25.8 %
Operating loss                    5,675      4,512       1,163      25.8 %

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

Corporate GS&A expenses increased due to greater employee benefit related expenses.

Liquidity and capital resources

Cash flows from operations, borrowings from a revolving credit facility and proceeds from the exercise of stock options by employees have been our sources of funds to purchase property, plant and equipment; acquire businesses; repurchase common stock; and pay dividends to shareholders. We believe cash flows from operations and borrowings from an unused and committed revolving credit facility will be adequate to support our current businesses for the foreseeable future. However, we will need additional credit facilities in order to pursue additional acquisitions, when and if these opportunities become available. If necessary, we believe we will be able to obtain such credit at terms substantially similar to our current facilities. Following is a discussion and analysis of our cash flow activities as presented in the Condensed Consolidated Statement of Cash Flows presented within Part 1 of this report.

                    Cash Flows                          Three Months Ended
                  ($ in millions)                           March 31,
                                                         2008         2007
Net cash provided by (used in) operating activities   $      4.3    $    6.3
Net cash provided by (used in) investing activities   $    (25.0 )  $  (41.0 )
Net cash provided by (used in) financing activities   $     27.4    $   40.4

Cash flows from operating activities decreased from the prior year period largely due to less net income being generated and fluctuations in working capital levels. Historically, cash flows from operations have increased over the course of the year and we anticipate this pattern will continue for the remainder of 2008.

Cash flows used in investing activities decreased in the 2008 period largely because the 2007 period included $26.1 million more of outflows for acquisitions, largely related to the Liquid Boot Technologies and MicrospongeŽ acquisitions. Excluding acquisitions, cash outflows for investing activities in the current period were $10.0 million greater than the prior year period primarily due to a $6 million loan made to a third party related to the agreement to invest in a chrome mine in South Africa and $4.9 million of increased capital expenditures, of which $2.8 million relates to the construction of a new corporate building. Capital expenditures for 2008 are estimated to be in the range of $45 million to $55 million.

Cash flows provided by financing activities decreased in the 2008 period as we required less external debt funding to support our operations. This mainly results from the decreased acquisition activity as mentioned above. Dividends declared increased to $0.16 per share from $0.14 per share in the prior-year quarter. We repurchased 80 thousand shares in the current year period at an average price of $25.45 per share; as of March 31, 2008, we have $6.6 million of . . .