According to estimates by British Sulphur Consultants, the North American specialty phosphates market generated approximately $1.4 billion in total sales in 2005. This specialty niche historically represents approximately 20% of the overall phosphate market, the rest of which is comprised of more commodity-like items such as fertilizers. Highly engineered Specialty Salts and Specialty Acids represented approximately $700 million, or 49%, of the total North American specialty phosphates market, Purified Phosphoric Acid represented approximately $400 million, or 28%, and STPP represented approximately $340 million, or 23%. Overall, specialty phosphate demand has grown approximately 2% per annum over the last five years, on a volume basis.

Over the past decade, fundamentals in the North American specialty phosphates market have improved. American specialty phosphates market, given high freight and logistical costs. Recently, import producers have been further disadvantaged by increasing costs of transportation and logistics and the depreciation of the U.S. dollar relative to other currencies.

The production of specialty phosphates begins with phosphate rock, which can be processed in two alternative ways to produce Purified Phosphoric Acid: the thermal acid method, in which elemental phosphorus is combusted in a furnace and subsequently hydrated to produce thermal acid; or the purified wet acid method, in which mined phosphate rock is treated with sulfuric acid to produce merchant green acid (agricultural grade), which is later purified through solvent-based extraction into purified wet acid. The conversion of merchant green acid into high purity wet acid (food grade) is a technically complex and capital-intensive process.

The thermal acid method of production is based on the electrolytic production of elemental phosphorus and is therefore highly energy-intensive, with production costs up to 50% higher (on a variable cost basis) than the costs for the production of purified phosphoric acid produced via the purified wet acid process. Purified phosphoric acid can be reacted with appropriate mineral salts or inorganic compounds to produce various specialty phosphate salts or STPP and Other Products as required.

Specialty Salts and Specialty Acids are the most highly engineered products in the Company’s portfolio. Specialty Salts are used in food, beverage and pharmaceutical applications, for example as flavor enhancers in beverages, electrolytes in sports drinks, texture additives in cheeses, leavening agents in baked goods, calcium and phosphorus sources for nutritional supplements, pharmaceutical excipients and cleaning agents in toothpaste. Specialty Acids are used in industrial applications such as asphalt modification and petrochemical catalysis.

Purified Phosphoric Acid is a higher-purity form of phosphoric acid, distinct from the agricultural-grade merchant green phosphoric acid used in fertilizer production. Purified Phosphoric Acid is used to manufacture specialty phosphate salts and acids, and is also used directly in beverage applications as a flavor enhancer and in water treatment applications. Purified Phosphoric Acid is used as an input to Specialty Salts and Specialty Acids and also in water and metal treatment applications.

Technical Sodium Tripolyphosphate (or STPP) is used in detergent applications such as auto-dishwashing and laundry detergents. STPP is a specialty phosphate derived from reacting phosphoric acid with a sodium alkali. STPP is a key ingredient in cleaning products including auto-dishwasher detergents, industrial and institutional cleaners and laundry detergents. In addition to its use in cleaning products, STPP is also used in water treatment, clay processing, and copper ore processing. Over 90% of the end use market is derived from consumer product applications.

Other Products primarily include phosphate fertilizers produced in Mexico as co-products of manufacturing Purified Phosphoric Acid.

Gross profit for the six month period ended June 30, 2006 was $45.3 million, a decrease of $3.0 million, or 6.2%, as compared to $48.3 million for the comparable period in 2005.

Operating expenses for the six month period ended June 30, 2006, were $22.0 million, a decrease of $6.8 million, or 23.6%, as compared to the six month period ended June 30, 2005.

Operating income for the six month period ended June 30, 2006 was $23.3 million, an increase of $3.8 million, or 19.5%, as compared to $19.5 million for the comparable period in 2005.

Net loss for the six month period ended June 30, 2006 was $3.1 million, an improvement of $1.6 million, compared to a loss of $4.7 million for the same period in 2005.