UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

Form 10-Q ~~Equivalent - Informational~~

(Mark One)

¨	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December~~ March 31, ~~2004~~2007

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: N/A

AMERICAN ROCK SALT COMPANY LLC

(Exact Name of Registrant as Specified in its Charter)

New York		16-1516458
(State or Other Jurisdiction of Incorporation or Organization)		(IRS ~~EmployerIdentification~~Employer Identification Number)


3846 Retsof Road, Retsof, New York		14539
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (585) 243-9510 ext. 1164

(Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report): N/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~YES~~Yes ¨ NONo ¨ NA x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, ~~(as~~or ~~defined~~a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act). ~~YES ¨ NO x~~ (Check one):

~~This~~Large ~~Form~~accelerated 10filer ¨ Accelerated filer ¨ Non-Qaccelerated ~~Equivalent~~filer x ~~is only being filed for informational purposes pursuant to the indenture~~

~~governing~~Indicate ~~American~~by ~~Rock~~check ~~Salt~~mark ~~Company~~whether ~~LLC’s~~the ~~9 1/2%~~registrant ~~Senior~~is ~~Secured~~a shell ~~Notes~~company ~~due~~(as ~~2014.~~defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

EXPLANATORY NOTE

American Rock Salt Company LLC (the “Company”) is not required to file reports under the Securities Exchange Act of 1934, as amended. This Form 10-Q is only being filed for informational purposes pursuant to the indenture governing the Company’s 9 ¹/2% Senior Secured Notes due 2014.

American Rock Salt Company LLC

INDEX

		PageNumber
Part I.	Financial Information
Item 1.	Financial Statements
	Balance SheetsDecember 31, 2004 (Unaudited) and September 30, 2004	2
	Balance Sheets (Unaudited) March 31, 2007 and September 30, 2006	2
	Statements of OperationsThree Months Ended December 31, 2004 and 2003 (Unaudited)	3
	Statements of Operations (Unaudited) Three and Six Months Ended March 31, 2007 and 2006	3
	Statement of Changes in Members’ DeficitThree Months Ended December 31, 2004 and 2003 (Unaudited)	3
	Statement of Changes in Members’ Surplus (Deficit) (Unaudited) Six Months Ended March 31, 2007 and 2006	3
	Statements of Cash FlowsThree Months Ended December 31, 2004 and 2003 (Unaudited)	4
	Statements of Cash Flows (Unaudited) Six Months Ended March 31, 2007 and 2006	4
	Notes to Interim Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	98
Item 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk	15
Item 4.	Controls and Procedures	15
Part II.	Other Information
Item 1.	Legal Proceedings	16
Item 1A.	Risk Factors	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults ~~upon~~Upon Senior Securities	16
Item 4.	Submission of Matters to a Vote of Security Holders	16
Item 5.	Other Information	16
Item 6.	Exhibits	17
Signatures		18
Exhibits		19

PART I. FINANCIAL INFORMATION

ITEM 1. ~~FINANCIAL STATEMENTS~~

FINANCIAL STATEMENTS

American Rock Salt Company LLC

Balance Sheets

(Dollars in Thousands)

	December 31, 2004			September 30, 2004
	(unaudited)
Assets
Current assets
Cash and equivalents	$	2,654		$	3,102
Restricted cash		1,992			1,328
Accounts receivable, net of reserve for doubtful accounts of approximately $64 at September 30, 2004 and December 31, 2004, respectively		15,129			3,632
Inventory		25,672			26,020
Prepaid expenses		577			718
Total current assets		46,024			34,800
Property and equipment, net		73,693			74,275
Other assets
Salt deposits and mineral rights, net		2,634			2,646
Mine acquisition costs, net		393			395
Financing costs, net of accumulated amortization		7,126			7,318
Total other assets		10,153			10,359
	$	129,870		$	119,434
Liabilities and Members’ Equity
Current liabilities
Revolving line of credit	$	17,170		$	12,750
Current portion of long-term debt		24			24
Accounts payable		3,449			3,459
Accrued expenses		7,437			4,063
Mine construction retention		4,160			4,160
Related party payables		697			437
Total current liabilities		32,937			24,893
Long-term debt, net of current portion		100,144			100,150
Total liabilities		133,081			125,043
Members’ deficit
Class A Units 6,250 units issued and outstanding at December 31, 2004 and September 30, 2004		(1,056	)		(1,845	)
Class F Units 12,750 units issued and outstanding at December 31, 2004 and September 30, 2004		(2,155	)		(3,764	)
		(3,211	)		(5,609	)
	$	129,870		$	119,434

(Unaudited)


	March 31, 2007		September 30, 2006
Assets
Current assets
Cash and equivalents	$	8,342	$	2,457
Accounts receivable, net of reserve for doubtful accounts of approximately $135 and $87 at March 31, 2007 and September 30, 2006, respectively		23,073		6,338
Inventory, net		16,288		42,933
Prepaid expenses		567		1,039

Total current assets		48,270		52,767
Property and equipment, net		81,466		83,363
Other assets
Salt deposits and mineral rights, net		2,561		2,578
Mine acquisition costs, net		380		382
Financing costs, net of accumulated amortization		5,044		5,600

Total other assets		7,985		8,560

	$	137,721	$	144,690


Liabilities and Members’ Equity
Current liabilities
Revolving line of credit	$	—	$	21,050
Current portion of long-term debt		2,005		1,959
Accounts payable		2,630		2,806
Accrued expenses		3,098		3,189
Related party payables		2,159		274

Total current liabilities		9,892		29,278
Long-term debt, net of current portion		114,698		118,713

Total liabilities		124,590		147,991

Members’ surplus (deficit)
Class A Units 6,250 units issued and outstanding at March 31, 2007 and September 30, 2006		4,319		(1,086	)
Class F Units 12,750 units issued and outstanding at March 31, 2007 and September 30, 2006		8,812		(2,215	)

		13,131		(3,301	)

	$	137,721	$	144,690

The accompanying notes are an integral part of these interim financial statements.

American Rock Salt Company LLC

~~Statements~~Statement of Operations

(Dollars in Thousands)

(Unaudited)

	For the three months ended						For the six months ended
	December 31, 2004			December 31, 2003
	March 31, 2007			March 31, 2006			March 31, 2007			March 31, 2006
Sales
Bulk	$	2680,~~438~~710		$	3238,~~267~~463		$	98,699		$	82,504
Packaged		1,~~169~~163			~~1,431~~262			2,159			1,813
Total sales		2781,~~607~~873			3338,~~698~~725			100,858			84,317
Cost of sales
Freight and handling		11,597			15,050
Freight, handling and other		40,870			15,916			49,816			36,839
Products		820,~~735~~742			9,~~751~~832			24,980			20,118
		20,332			24,801
		61,612			25,748			74,796			56,957
Gross income		720,~~275~~261			812,~~897~~977			26,062			27,360
Operating expenses		1,~~949~~873			1,~~767~~625			3,840			3,498
Income from operations		518,~~326~~388			711,~~130~~352			22,222			23,862
Other income (expense)
Interest expense		(2,~~924~~672	)		(12,~~022~~933	)		(5,946	)		(6,084	)
Interest income		—100			3837			146			37
Other financing charges		(71	)		(8254	)		(1	)		(65	)
Other, net		34			~~(17~~2,129	)		11			2,146
Total other expense, net		(2,~~928~~569	)		(~~1,083~~821	)		(5,790	)		(3,966	)
Net income	$	215,~~398~~819		$	610,~~047~~531		$	16,432		$	19,896

The accompanying notes are an integral part of these interim financial statements.

~~AMERICAN~~American ~~ROCK~~Rock ~~SALT~~Salt ~~COMPANY~~Company LLC

Statement of Changes in Members’ Surplus (Deficit)

For the ~~Three~~Six Months Ended ~~December~~ March 31, ~~2004~~2007

(Dollars in Thousands)

(Unaudited)

	Class A Units			Class F Units			Total
Members’ deficit - September 30, 2004	$	(1,845	)	$	(3,764	)	$	(5,609	)
Members’ deficit - September 30, 2006	$	(1,086	)	$	(2,215	)	$	(3,301	)
Net income		789			1,609			2,398
Net income…………………………………………………		5,405			11,027			16,432
Members’ deficit - December 31, 2004	$	(1,056	)	$	(2,155	)	$	(3,211	)
Members’ surplus - March 31, 2007	$	4,319		$	8,812		$	13,131

The accompanying notes are an integral part of these interim financial statements.

American Rock Salt Company LLC

Statements of Cash Flows

(Dollars in Thousands)

(Unaudited)

	For the three months ended
	For the six months ended
	December 31, 2004			December 31, 2003
	March 31, 2007			March 31, 2006
Cash flows from operating activities
Net income	$	216,~~398~~432		$	619,~~047~~896
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		12,~~585~~331			12,~~541~~417
Depletion		1317			1610
Amortization of mine acquisition and financing costs		~~194~~558			27389
Changes in
Accounts receivable		(1116,~~497~~735	)		~~(13,245~~174	)
Inventory		~~348~~26,645			37,~~676~~770
Prepaid expenses and other assets		~~140~~472			64132
Accounts payable		(10176	)		42(729	)
Accrued expenses		~~3,375~~(91	)		2(1,~~319~~918	)
Net cash (used in) provided by operating activities		(3,454	)		487
Borrowings of related party payables		1,885			708
Net cash provided by operating activities		31,338			28,849
Cash flows from investing activities
Purchase of property and equipment		(~~1,004~~434	)		(~~933~~2,951	)
Purchase of salt deposits and mineral rights		—			(420	)
Net cash used in investing activities		(434	)		(2,951	)
Net cash used in investing activities		(1,004	)		(1,353	)
Cash flows from financing activities
Repayments on long-term debt		(6969	)		(13,~~886~~253	)
Borrowings on revolving line of credit		4,420			5,430
Repayments on revolving line of credit		(21,050	)		(13,700	)
Increase in Restricted Cash		(664	)		(2,000	)
Distribution to Members		—			(2,111	)
Borrowings of related party payables		260			31
Increase in Bond Holding		(3,000	)		—
Net cash provided by financing activities		4,010			1,575
Net cash used in financing activities		(25,019	)		(19,064	)
Net (decrease)increase in cash and equivalents		(448	)		709
Net increase in cash and equivalents		5,885			6,834
Cash and equivalents - beginning of period		32,~~102~~457			92,~~097~~234
Cash and equivalents - end of period	$	28,~~654~~342		$	9,~~806~~068
Supplemental Disclosure of Cash Flow Activities
	For the three months ended
	For the six months ended
	December 31, 2004			December 31, 2003
	March 31, 2007			March 31, 2006
Cash paid for interest	$	~~524~~5,453		$	~~984~~6,118

The accompanying notes are an integral part of these interim financial statements.

AMERICAN ROCK SALT COMPANY LLC

NOTES TO FINANCIAL STATEMENTS

1. The Company

American Rock Salt Company LLC (the “Company”) primarily sells bulk rock salt for use in deicing roads. The Company bids on supply contracts for salt produced at the Hampton Corners Mine to be provided to state Departments of Transportation and local municipalities as well as industrial consumers throughout the Northeastern United States. The Company was formed on January 30, 1997. Construction of the Hampton Corners Mine began in November 1998 and it was substantially completed in December 2001. The Company steadily increased sales as production and distribution capacity came online during a ramp-up phase in fiscal 2001 and 2002. The Company attained full operating capacity during fiscal 2003.

2. Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These interim unaudited financial statements should be read in conjunction with the audited financial statements for the fiscal year ended September 30, ~~2004~~2006 included in the Company’s Annual Report on Form 10-K, ~~Equivalent~~filed with the Securities and Exchange Commission (the “SEC”) on December 28, 2006. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation, have been included. Operating results for the three- and six month ~~period~~periods ended ~~December~~ March 31, ~~2004~~2007 are not indicative of the results that may be expected for a full year due, in part, to seasonal fluctuations, which are normal for the Company’s business. Further, the Company has made a number of estimates and assumptions relating to the assets and liabilities, the disclosure of contingent assets and liabilities ~~and~~ and the reporting of revenues and expenses to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.

The balance sheet at September 30, ~~2004~~2006 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

No provision is made for income taxes in the accompanying financial statements as the Company is a limited liability company that elected partnership status. The taxable income or loss and any available credits of the Company are includable on the individual income tax returns of the members.

In connection with the Company’s filing of its Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, the Company made a change to the manner in which it presents cost of sales. The prior period information presented in this Form 10-Q (cost of sales data for the three- and six-month periods ended March 31, 2006) has been reclassified to conform to the current period presentation. The nature of the reclassification was a decrease to cost of sales - products and an increase to cost of sales - freight, handling, and other, in the amount of $470,000 and $845,000, for the three- and six month periods ended March 31, 2006, respectively. No other financial statement captions were impacted by this change.

3. Long-Term Debt

Long-term debt consisted of the following at:

	December 31,2004			September 30,2004
	March 31, 2007			September 30,2006
Senior Secured Notes
Senior Secured Notes at December 31, 2004 of $100,000,000, currently requiring semiannual interest payments through the final maturity date of March 15, 2014 at an annual rate of 9.50%. Prior to March 15, 2007, 35% of the aggregate principal amount of the principal amount of the notes at the established price plus accrued and unpaid interest may be redeemed at 109.5%. Some or all of the notes may be redeemed at any time prior to March 15, 2009 at a make-whole redemption price. After March 15, 2009, the notes are redeemable at a redemption price of 104.75%, to be adjusted annually to 100% by March 15, 2012		100,000			100,000
Senior Secured Notes at March 31, 2007 of $93,955,000 currently requiring semi annual interest payments through the final maturity date of March 15, 2014 at an annual rate of 9.50%. Prior to March 15, 2007, 35% of the aggregate principal amount of the notes at the established price plus accrued and unpaid interest may under certain circumstances be redeemed at 109.5%. Some or all of the notes may be redeemed at any time prior to March 15, 2009 at a make-whole redemption price. After March 15, 2009, the notes are redeemable at a redemption price of 104.75%, to be adjusted annually to 100% by March 15, 2012		93,955,000			96,955,000
Senior Term Loan
Senior Term Loan at March 31, 2007, currently requiring quarterly principal and interest payments through the final maturity date of March 16, 2012 at an annual rate equal to the LIBOR rate plus up to 3.5%, based on a pricing grid leverage ratio or a base rate (the higher of the Federal Funds Rate plus 0.5% or the prime rate plus the applicable margin for base rate loans), at the Company’s option. The interest rate is 6.125% as of March 31, 2007		22,635,245			23,592,428
Promissory note payable to the Empire State Development Corporation
Due April 1, 2011, interest at 4.0% per annum payable in 120 equal installments of principal and interest		~~168~~112,100			~~174~~124,895
		100,168			100,174
		116,702,345			120,672,323
Less: Current maturities of long-term debt		(242,004,582	)		(241,959,015	)
	$	~~100~~114,~~144~~697,763		$	~~100~~118,~~150~~713,308

AsThe ~~of December 31, 2004, the~~ Company’s had outstanding borrowings of $17.2 million under its working capital line of credit. On March 17, 2004, the Company repaid all of its existing indebtedness other than a $0.2 million subordinated note with the proceeds of its new financing which comprised: $100.0 million principal amount 9.5% senior secured notes with a maturity date of March 15, 2014, and a new bank facility in the aggregate principal amount of $6252.16 million, ~~consisting~~consists of: (a) a $3222.16 million term loan facility, and (b) a $30.0 million working capital facility. Both the term loan and the working capital facility ~~currently~~ bear interest at an annual rate equal to the LIBOR rate plus up to 3.5%, based on a pricing grid leverage ratio or a base rate (the higher of the Federal Funds Rate plus 0.50% or the prime rate plus the applicable margin for base rate loans), at the Company’s option. The term loan facility has a maturity of eight years commencing March 17, 2004. The working capital facility has an initial term of five years commencing March 17, 2004.

~~The~~At ~~term loan facility is currently used to support the ongoing litigation with the contractor of the mine facility. More specifically~~March 31, ~~the~~2007 a ~~lenders~~balance ~~under the new credit facility facilitated the issuance, at closing,~~ of a $3222.16 million ~~letter~~ ofwas ~~credit,~~outstanding ~~which~~under ~~may be drawn against for purposes of~~ the ~~litigation. Upon conclusion of the litigation, the letter of credit facility will convert to a~~ term loan. ~~As of December 31, 2004, no monies were drawn against the $32.1 million letter of credit. The letter of credit~~ facility ~~currently~~which bears an interest ~~rate~~at ofa ~~3.125%, and if the term loan facility were outstanding, it would bear an interest~~ rate of 56.50125%. Sinking fund payments totaling $0.7 million were made from October 31, 2004 through December 31, 2004 as required under our new credit facility for the un-drawn $32.1 million term loan. These payments are shown on the balance sheet as restricted cash.

The working capital facility permits the Company to borrow up to $30.0 million in revolving loans with a $7.0 million sub-limit available for the issuance of letters of credit. Availability of the working capital facility is subject to a borrowing base formula. As of ~~December~~ March 31, ~~2004~~2007, the Company had $170.20 million drawn and $32.50 million of standby letters of credit outstanding under the working capital facility, with approximately $528.50 million of remaining availability thereunder. The aggregate outstanding amount of revolving loans and letters of credit under the ~~new~~ financing arrangement cannot exceed $30.0 million and ~~bears~~when ~~interest~~outstanding atbears aan interest rate of 56.50125%.

4. Inventory

Inventory consists of the following at ~~December~~ March 31, 2007:

	December 31, 2004			September 30, 2004
	March 31, 2007			September 30, 2006
Supplies	$	~~781~~1,794		$	~~778~~1,191
Finished Goods, Salt		2414,~~929~~527			2541,~~279~~779
		25,709			26,057
		16,321			42,970
Less:
Reserve		(3733	)		(37	)
	$	2516,~~672~~288		$	2642,~~020~~933

5. Related Party Transactions

Legal Services

Certain legal costs were incurred from an organization affiliated with several of our members of approximately $ 0.20 million and $0.32 million during the three months ended, ~~December~~and $0.1 million and $0.3 million for the six months ended March 31, ~~2004~~2007 and ~~2003~~2006, respectively. All such fees were included in operating expenses.

Goods and Services

~~Certain~~Management ~~members,~~and orservice ~~their~~fees ~~affiliates,~~were ~~received~~incurred ~~management~~from ~~and~~certain ~~service~~members ~~fees~~or their affiliates of approximately $ 0.1 million and $0.1 million during the three months ended, ~~December~~and $0.2 million and $0.5 million for the six months ended March 31, ~~2004~~ 2007 and ~~2003~~2006, respectively. These amounts are included in operating expenses.

Additionally, ~~certain~~expenses ~~members,~~were orincurred ~~their~~to ~~affiliates,~~certain ~~received~~members ~~payments~~ for goods and services of approximately $0.35 million and $0.25 million during the three months ended, ~~December~~and ~~31,~~$0.9 ~~2004~~million and ~~2003, respectively~~$1.0 ~~For~~ million for the ~~three~~six months ended ~~December~~ March 31, ~~2004,~~2007 ~~approximately~~and $02006, respectively.2 ~~million~~Of ofthose amounts, the ~~total~~following ~~$0.3~~amounts ~~million is~~ were included in cost of sales – products,: ~~with~~for the ~~remaining~~three ~~balance~~months inended ~~operating~~March 31, ~~expenses~~2007, approximately $0.4 ~~For~~million; for the three months ended ~~December~~March 31, 2006, approximately $0.4 million; for the six months ended March 31, ~~2003~~2007, approximately $0.18 million; ofand for the ~~total~~six months ended March 31, 2006, approximately $0.29 million. isThe remaining amounts not included in cost of sales – products ~~with~~are ~~the~~included ~~remaining balance~~ in operating expenses.

Financing Costs

Certain costs were incurred from a member which was, until the refinancing, also a lender, for administrative fees of approximately $0 and $0.1 million, principal payments of approximately $0 and $1.0 million, and interest payments of approximately $0 and $0.5 million for the three months ended December 31, 2004 and 2003, respectively. This lender was paid off in full upon completion of the new financing agreement on March 17, 2004. All amounts, excluding interest, are included in operating expenses.

Certain costs were incurred from an affiliate of a member for financial advisory fees of approximately $0 and $0.2 million for the three months ended December 31, 2004 and 2003, respectively. This amount is recorded as an asset on the balance sheet in other assets – financing costs, and will be amortized to interest expense over the life of the related debt.

Non-operating Mineral Interests (“NOMIs”)

Certain members receive payments in respect of NOMIs related to the acquisition of mineral rights equal to 2.5% of the gross income from the mine as reported for purposes of computing percentage depletion for federal income tax purposes. NOMI expense was approximately $02.61 million and $01.63 million during the three months ended, ~~December~~and $2.5 million and $2.2 million for the six months ended March 31, ~~2004~~2007 and ~~2003~~2006, respectively. These amounts are accrued in related party payables and included in cost of sales – —products.

6. Subsequent Events

The Company may from time to time make distributions to its members subject to the terms of its bank facility and the indenture governing its senior secured notes, which contain certain covenants and financial ratios restricting the Company’s ability to make distributions to its members. On April 9, 2007, the Company made a permitted cash distribution to its members in the amount of $6.0 million from fiscal year end 2006 earnings.

6. Commitments and Contingencies

Engineering and Procurement Contract/Litigation

The Company is involved in litigation with Frontier-Kemper Constructors, Inc. and Flatiron Structures LLC (together, the “EPC Contractor” or “FKF”) whom the Company engaged to design and construct its mine facility. The contract required that acceptance of the mine occur by December 2000 and provided for liquidated damages and penalties to be paid to the Company in the event of unexcused delays. The facility was substantially completed in December 2001 and facility acceptance has not yet occurred. The Company estimates that liquidated damages due the Company under its contract and/or by reason of the contractor’s failure to obtain insurance for such damages total at least $7.0 million. The EPC Contractor has filed suit against the Company claiming a change in the scope of the contract and alleging breach of contract, fraud and mistake resulting in a void or voidable contract. The EPC Contractor sought $27.0 million in alleged compensatory damages and $10.0 million in punitive damages. The Company’s motion to dismiss portions of the EPC Contractor’s complaint was granted in September 2002 and the only claims that remain are the EPC Contractor’s claims for breach of contract and declaratory judgment (for which punitive damages do not apply). The Company also filed an action in December 2001 against the EPC Contractor, the insurers, the bonding company, and the brokers, claiming, among other things, liquidated damages, mismanagement, negligence, failure to provide required insurance and misrepresentation. The losses claimed against the EPC Contractor in this litigation may exceed $35.0 million. The two actions have been consolidated into a single action. The Company has moved for summary judgment on a number of major issues, which if successful would substantially limit the EPC Contractor’s remaining claims. The EPC Contractor has moved to dismiss or limit the damages recoverable by the Company in its countersuit. The third-party defendants have filed cross-motions for summary judgment seeking dismissal of the third-party claims. While the Company intends to vigorously defend the action commenced by the EPC Contractor and to prosecute its claims, no assurance can be given as to the outcome of this litigation. No accrual has been recorded related to these claims. In connection with this dispute, FKF had filed a $29.0 million mechanics lien against the Hampton Corners Mine property. The Company successfully discharged the lien via a surety bond posted for 110% of the lien amount, with the obligation for such surety bond secured by a $32.1 million letter of credit obtained as part of its new financing arrangement.

7. Accounting Pronouncements

In November 2004, the FASB issued SFAS No. 151, Inventory Costs — an amendment of ARB No. 43, Chapter 4 to clarify the accounting for idle facility expense, freight, handling costs, and wasted material (spoilage). This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for the Company beginning January 1, 2006. The Company is currently evaluating the impact of SFAS No. 151 on its financial statements.

The Securities and Exchange Commission (SEC) recently issued guidance on the ways in which its full-cost rules interact with the accounting requirements that the FASB established for asset retirement obligations (ARO) — specifically, how FASB Statement No. 143, Accounting for Asset Retirement Obligations (FAS 143), interacts with the full-cost requirements in Rule 4-10 of Regulation S-X (Rule 4-10). The SEC’s new guidance appears in Staff Accounting Bulletin No. 106 (SAB 106) issued in October 2004. SAB 106 is effective for the Company beginning January 1, 2005. The adoption did not have an impact on the Company’s financial statements.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

~~From~~This ~~time~~Form to10-Q ~~time,~~contains ~~the~~forward ~~Company~~looking statements. These statements relate to future events or ~~persons~~our ~~acting~~future onfinancial ~~behalf~~performance, ofand ~~the~~involve ~~Company~~known ~~may make~~and ~~oral~~unknown risks, uncertainties and ~~written~~other ~~statements~~factors that may ~~constitute~~cause “our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements, expressed or implied by these forward-looking statements”. asThese ~~defined~~risks inand ~~the~~other ~~Private~~factors ~~Securities~~include, ~~Litigation~~among ~~Reform~~other ~~Act~~things, ofthose ~~1995~~listed (in the section entitled “~~PSLRA~~Risk Factors”) orset byforth ~~the~~in ~~Securities~~Item 1A below and ~~Exchange~~elsewhere ~~Commission~~in ~~(“SEC”)~~our inAnnual Report on Form 10-K for the fiscal year ~~its~~ended ~~rules~~September 30, ~~regulations~~2006, ~~and~~filed ~~releases.~~with ~~The~~the ~~Company~~SEC ~~desires~~on toDecember 28, ~~take~~2006, ~~advantage~~and ofin ~~the~~other ~~“safe~~documents ~~harbor”~~we ~~provisions~~file inwith the ~~PSLRA~~SEC. ~~for~~In some cases, you can identify forward-looking statements ~~made~~by ~~from~~terminology ~~time~~such toas ~~time~~“may,” ~~including~~“should,” “expects,” ~~but~~“intends,” ~~not~~“plans,” ~~limited~~“anticipates,” to“believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined in “Risk Factors”. These factors may cause our actual results to differ materially from any forward-looking ~~information contained~~statement. inAlthough we believe that the ~~“Management’s~~expectations ~~Discussion~~reflected ~~and~~in ~~Analysis~~the offorward-looking ~~Financial~~statements ~~Condition~~are ~~and~~reasonable, ~~Results~~we ofcannot ~~Operations”~~guarantee ~~section~~future results, levels of activity, ~~this~~performance, ~~Form~~or ~~10-Q~~achievements. ~~Equivalent~~We ~~and~~are ~~other~~under ~~statements~~no ~~made~~duty into ~~this~~update ~~Form~~any 10of the forward-Qlooking ~~Equivalent~~statements ~~and~~after inthe ~~filings~~date ~~with~~of ~~the~~this ~~SEC~~Form 10-Q.

~~The~~ITEM Company cautions readers that any such forward-looking statements made by or on behalf of the Company are based on management’s current expectations and beliefs but are not guarantees of future performance2. ~~Actual results could differ materially from those expressed or implied in the forward-looking statements. Among the factors that could impact the Company includes:~~

•MANAGEMENT’S ~~return~~DISCUSSION ~~expectations~~AND ~~and~~ANALYSIS ~~related~~OF ~~allocation~~FINANCIAL CONDITION ofAND ~~resources;~~RESULTS OF OPERATIONS

• changing economic or competitive conditions; and

• negotiation of agreements with third parties.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Company Overview

We are a producer of highway deicing rock salt in North America. We own and operate a rock salt mine located approximately 35 miles south of Rochester, New York. Our mine is located in the heart of the western and central New York and Pennsylvania snow belt, with on-site access to truck and rail transportation.

Salt mines and mining operations are long-lived assets. Based solely on data extrapolated from areas within a one-mile radius of our drill holes, we believe that our mine currently has over 5652 years of remaining mineable reserves at the current production rate of 3.0 million tons per year.

While winter weather conditions in individual markets can vary from year to year, our target markets in New York and Pennsylvania are the most impacted by harsh winter snow and ice conditions and overall demand across the region is relatively stable. Our served markets in New York, Pennsylvania, Ohio and eight other states have an aggregate regional demand for over 9.3 million tons per year of rock salt, and Pennsylvania and New England currently have no operating rock salt mines.

Most of our sales are based on annual supply contracts with set pricing and reserved volume generally awarded on the basis of lowest price of bids tendered. This allows us to plan our production and staffing schedule and our inventory placement and sales distribution strategy for the upcoming season. We routinely adjust the size of our workforce, as well as the number of hours and days worked, to reflect seasonal demand.

~~From~~For ~~fiscal~~the ~~year~~quarter ~~2001~~ended toMarch 31, ~~2004~~2007, we ~~increased our sales volume from 1.0 million~~generated ~~tons~~revenues toof 3$81.19 million ~~tons~~, and ~~our~~net ~~revenues~~income ~~from~~of $2915.18 million ~~to $96~~.5 ~~million.~~We ~~This~~believe ~~increase~~that ~~in sales corresponds to the increase in the production capacity of~~ our ~~mine;~~cash asflows ~~capacity~~are ~~came~~not ~~online,~~materially ~~our~~impacted ~~market~~by ~~share~~economic ~~correspondingly~~cycles ~~increased.~~due ~~For~~to the ~~2003-2004~~ ~~season,~~stable weend ~~were~~use ~~awarded~~markets ~~contracts~~ for ~~over~~rock ~~31%~~salt ~~more~~and ~~volume as compared to~~ the ~~prior~~lack season’s contract awards. For the current 2004-2005 season, our awarded contracts are essentially flat as compared to the 2003-2004 season. Over the past seven winter seasons, we have on average sold approximately 102% of ~~our~~cost ~~awarded~~effective ~~volume~~alternatives.

~~For~~8 the quarter ended December 31, 2004, we generated revenues of $27.6 million, and net income of $2.4 million. We believe that our cash flows are not materially impacted by economic cycles due to the stable end use markets for rock salt and the lack of cost effective alternatives.

Critical Accounting Policies

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, we are required to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. We have identified the following as critical accounting policies that are most important to the portrayal of our financial condition and results of operation.

Salt Deposits, Mineral Rights and ~~Mineral~~Mine ~~Rights~~Development Costs

Salt deposits and mineral rights are underground reserves with respect to which the Company has extraction rights. Mine development costs are primarily underground assets used in the production of salt with amortization lives linked to the quantity of available production reserves. Depletion of salt deposits and mineral rights ~~occurs~~and amortization of mine development costs occur as the minerals are extracted based on units of production and engineering estimates of total reserves. As such, our mineral rights interests include estimates of probable mineral reserves. As such, the carrying values, depletion and amortization expense charges for these assets are dependent upon estimates of proven mineral reserves. The impact of revisions to our reserve estimates is recognized on a prospective basis.

Mine Reclamation Cost

We have calculated the estimated net future cost of dismantling, restoring, and reclaiming our mine in its related mine site in accordance with federal, state and local regulatory requirements, and in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 143, Accounting for Obligations Associated with the Retirement of Long-Lived Assets. SFAS No. 143 requires that we recognize the legal obligation of our mine reclamation costs at fair value as a liability when incurred and capitalize such costs by increasing the carrying amount of our mine assets.

Impairment of Long-Lived Assets

In the event that relevant facts and circumstances indicate that the carrying amounts of our long-lived assets may be impaired, an evaluation of recoverability is performed. If such an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down is required. If our review indicates that the assets will not be recoverable, the carrying value of the Company’s assets would be reduced to their estimated fair value.

Other Significant Accounting Policies

Other significant accounting policies not involving the same level of estimates and assumptions as those discussed above are important to an understanding of our financial statements. For example, our policies related to our inventory allowances, revenue recognition and legal contingencies require judgments and estimates.

Results of Operations

~~The following table sets forth certain historical financial information for the three months ended December 31, 2004 and 2003.~~ We record sales to customers based upon total billings including shipping and handling costs necessary to transport our products from the production or storage sites to the delivery point. In establishing our prices to our customers, we must take into account the estimated cost of transportation of our products, since we assume responsibility for such costs. We manage the profitability and attractiveness of existing and prospective customers and product lines by analyzing, among other factors, the customer billings net of related shipping and handling costs. This allows for a more comparable look at the relative profitability of our business as well as providing a more accurate analysis upon which to analyze trends in the business.

109

The following table and discussion should be read in conjunction with the information contained in our ~~financial~~ financial statements and the notes thereto included elsewhere in this Form 10-Q ~~Equivalent~~.

	Three Months Ended December 31,
	2004			2003
	(Dollars in Thousands)
Sales
Bulk	$	26,438		$	32,267
Packaged		1,169			1,431
Total sales		27,607			33,698
Cost of sales
Freight and handling		11,597			15,050
Products		8,735			9,751
		20,332			24,801
Gross income		7,275			8,897
Operating expenses		1,949			1,767
Income from operations		5,326			7,130
Other income (expense)
Interest expense		(2,924	)		(1,022	)
Interest income		—			38
Other financing charges		(7	)		(82	)
Other, net		3			(17	)
Total other expense, net		(2,928	)		(1,083	)
Net income	$	2,398		$	6,047

American Rock Salt Company LLC

Statement of Operations

(Dollars in Thousands)


	For the three months ended						For the six months ended
	March 31, 2007			March 31, 2006			March 31, 2007			March 31, 2006
Sales
Bulk	$	80,710		$	38,463		$	98,699		$	82,504
Packaged		1,163			262			2,159			1,813

Total sales		81,873			38,725			100,858			84,317

Cost of sales
Freight, handling and other		40,870			15,916			49,816			36,839
Products		20,742			9,832			24,980			20,118

		61,612			25,748			74,796			56,957

Gross income		20,261			12,977			26,062			27,360
Operating expenses		1,873			1,625			3,840			3,498

Income from operations		18,388			11,352			22,222			23,862

Other income (expense)
Interest expense		(2,672	)		(2,933	)		(5,946	)		(6,084	)
Interest income		100			37			146			37
Other financing charges		(1	)		(54	)		(1	)		(65	)
Other, net		4			2,129			11			2,146

Total other expense, net		(2,569	)		(821	)		(5,790	)		(3,966	)

Net income	$	15,819		$	10,531		$	16,432		$	19,896

The accompanying notes are an integral part of these interim financial statements.

Seasonality

We experience a substantial amount of seasonality in salt sales. The result of this seasonality is that sales and operating income are generally higher in the first and fourth calendar quarters and lower during the second and third quarters of each calendar year~~, resulting in large increases in the accounts receivable and accrued expenses lines on the balance sheet as of December 31, 2004 compared to September 30, 2004~~. Sales of highway and consumer deicing salt products are seasonal as they vary based on the severity of the winter conditions in areas where the product is used. Following industry practice, we and our customers stockpile significant quantities of deicing salt in the second, third and fourth calendar quarters. Our results of operations for the fiscal year ended September 30 are more representative of trends in our results.

~~Three~~Due ~~Months~~to the ~~Ended~~fact ~~December~~that 31weather conditions in the Company’s market areas had been much milder than normal during the first quarter of the fiscal year, the Company accumulated a substantial amount of inventory of salt available for distribution to its ~~2004~~customers. ~~Compared~~As a result, the Company elected to ~~Three~~temporarily ~~Months~~cease ~~Ended~~production ~~December~~of 31salt commencing December 26, ~~2003~~2006 for approximately five weeks. By mid-January vigorous winter weather patterns returned producing snowfall nearly every day through mid-March within the market areas served. This allowed for the return of the workforce in February and the resumption of mining operations which continued seven days a week to meet demand.

The six-month periods ended March 31, 2007 and March 31, 2006 presented unseasonably warm and dry winter weather patterns, when compared to historical averages. Our market area in spite of this continues to provide sufficient winter weather conditions to require salting of roadways which in turn allows us to experience satisfactory financial results. When each of the past two winter seasons are viewed as compared to an average winter season, our financial results were very strong. For the first time in our history we exceeded $100.0 million in gross sales for six months during the period ended March 31, 2007. We believe our ability to produce favorable financial results despite milder than normal weather for a prolonged period is a product of our physical location in the market which includes consistent “lake effect” snow.

Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006

Sales

Total sales for the quarter ended ~~December~~ March 31, ~~2004~~2007 of $2781.6 9 million ~~decreased~~increased $643.12 million, or ~~18.1~~112%, compared to $3338.7 million during the same period in fiscal ~~2004~~2006. Sales primarily consist of bulk salt sales, as well as packaged salt sales. The $643.12 million ~~decrease~~increase is primarily attributed to a ~~21.6~~94% ~~decrease~~increase in ~~sales~~tonnage ~~volume~~sold in the ~~first~~second quarter of fiscal ~~2005~~2007, asin ~~compared~~addition to ~~the~~a ~~first~~9% ~~quarter~~increase ofin ~~fiscal~~average ~~2004.~~sales ~~This~~price ~~decrease~~per inton, ~~sales~~as ~~volume~~compared isto the ~~direct~~second ~~result~~quarter of ~~current~~fiscal ~~seasonal~~2006. ~~weather~~The ~~patterns~~increase ~~that resulted~~ in ~~winter~~sales ~~weather~~volume ~~beginning~~is ~~later than~~attributable itto ~~had~~higher indemand ~~the~~related ~~quarter ended December 31, 2003. Although~~ to the ~~overall~~vigorous ~~net~~winter ~~effect~~weather ~~was~~during ~~a decrease in sales revenue,~~ the ~~average sales price per ton for the~~ quarter ended ~~December~~ March 31, ~~2004~~2007 ~~increased~~as ~~by 4.5%~~ compared to the same period in fiscal ~~2004.~~ ~~The~~2006, ~~increased~~during ~~average~~which ~~sales~~our ~~price~~primary ~~per~~market ~~ton~~areas ~~was~~experienced ~~primarily~~substantially ~~due~~milder tothan anormal ~~more~~winter ~~favorable~~weather ~~mix of shipments to customers with higher salt prices~~patterns.

Gross Income

Gross income for the second quarter of fiscal 2007 of $20.3 million increased by $7.3 million, or 56%, compared to $13.0 million for the same period in fiscal 2006. The increase in gross income was primarily attributable to the 94% increase in tonnage sold due to the vigorous winter weather during the quarter ended March 31, 2007, and was partially offset by a 24% increase in cost of sales on a per ton basis. The increase in cost of sales per ton is primarily due to our temporary cessation of salt production and inventory staging activities, which resulted in less efficient absorption of our production, freight and handling costs during the quarter ended March 31, 2007. Gross profit per ton for the second fiscal quarter decreased by 19% as compared to the same period in fiscal 2006 as a result of this increase in cost of sales price per ton. Combined total cost of sales for the second quarter of fiscal 2007 increased by $35.9 million, or 139%, as compared to the same period in fiscal 2006; while on a percentage of sales basis, total cost of sales increased by 9%.

Components of cost of sales changed as follows:

•

Cost of sales - freight, handling and other for the second quarter of fiscal 2007 increased by $25.0 million or 157% as compared to the same period in fiscal 2006. The increase is primarily the result of the significant increase in sales volume as compared to the same period in fiscal 2006. Cost of sales – freight, handling and other increased by 33% on a per ton basis due to higher shipping costs which include the increased cost of fuel as well as freight, and the less efficient absorption of embedded freight and handling costs caused by our temporary cessation of salt production and inventory staging activities.

•

Cost of sales - products for the second quarter of fiscal 2007 increased by approximately $10.9 million or 111% as compared to the same period in fiscal 2006. The increase is primarily the result of the increase in sales volume in the second quarter of fiscal 2007 as compared to the same period in 2006. Cost of sales—products increased by 9% on a per ton basis due to less efficient absorption of fixed production costs caused by our temporary cessation of salt production.

Operating Expenses

Operating expenses of $1.9 million for the second quarter of fiscal 2007 increased by $0.3 million or 19% compared to $1.6 million for the same period in fiscal 2006. The increase in operating expenses was primarily due to $0.4 million of idle rail car expense for the quarter offset by a decrease of $0.1 million in miscellaneous overhead expenses.

Other Income (Expense)

Other expense of $2.6 million for the second quarter of fiscal 2007 increased $1.8 million, or 225%, compared to $0.8 million for the same period in fiscal 2006. The increase in other expense is primarily due to $2.1 million received during the second quarter of fiscal 2006 in connection with the settlement of litigation with the mine contractor, offset by a decrease of $0.3 million in interest expense from the second quarter of fiscal 2006.

Six Months Ended March 31, 2007 Compared to Six Months Ended March 31, 2006

Sales

Total sales for the six months ended March 31, 2007 of $100.9 million increased $16.6 million, or 20%, compared to $84.3 million during the same period in fiscal 2006. Sales primarily consist of bulk salt sales, as well as packaged salt sales. The $16.6 million increase is primarily attributed to an 11% increase in tonnage sold for the six months of fiscal 2007, in addition to an 8% increase in average sales price per ton, as compared to the same six month period of fiscal 2006. The increase in sales volume is attributable to higher demand related to the vigorous winter weather during the quarter ended March 31, 2007, compared to the milder winter weather conditions which persisted during the six months ended March 31, 2006.

Gross Income

Gross income for the ~~first~~six ~~quarter~~months ofended ~~fiscal~~March 31, ~~2005~~2007 of $726.31 million decreased by $1.63 million, or ~~18.2~~5%, compared to $827.94 million for the same period in fiscal ~~2004~~2006. The decrease in gross income was primarily attributable to the ~~21.6%~~increase ~~decrease~~ in ~~tonnage~~average cost ~~sold~~of ~~due~~sales toper ~~the~~ton ~~late~~partially ~~onset~~offset ofby ~~winter~~the ~~weather~~increase ~~during~~in tonnage sold over the ~~quarter~~same ~~ended~~period ~~December~~in ~~31,~~fiscal ~~2004~~2006. Combined, total cost of sales ~~decreased~~for the first six months of fiscal 2007 increased by $417.58 million, or ~~18.0~~31%, as compared to the same period in fiscal ~~2004~~2006; while on a percentage of sales basis, total cost of sales ~~remained~~increased ~~essentially~~by ~~flat~~7%. ~~Components~~Gross profit per ton for the first six months of fiscal 2007 decreased by 14% as a result of the increase in cost of sales ~~changed~~price asper ~~follows:~~ton referred to above. As previously explained, the increase in cost of sales per ton is primarily due to our temporary cessation of salt production and inventory staging which resulted in less efficient absorption of our production, freight and handling costs during the six months ended March 31, 2007.

•Components ~~Cost~~ of ~~sales~~cost ~~– freight and handling for the first quarter~~ of ~~fiscal~~sales ~~2005~~changed ~~decreased by $3.5 million, or 22.9%~~ as ~~compared~~follows: ~~to the same period in fiscal 2004. The $3.5 million decrease is the result of a 21.6% decrease in sales volume in the first quarter of fiscal 2005 compared to the same period in fiscal 2004.~~

• Cost of sales –- ~~products~~freight, handling and other for the ~~first~~six ~~quarter~~months ofended ~~fiscal~~March ~~2005~~31, ~~decreased~~2007 increased by $113.0 million, or ~~10.4~~35% as compared to the same period in fiscal ~~2004~~2006. ~~The~~Cost $1of sales – freight, handling and other increased by 22% on a per ton basis.0 ~~million~~The ~~decrease~~increase is primarily the result of the ~~decrease~~significant increase in sales volume inas compared to the ~~first~~same ~~quarter~~period ofin fiscal ~~2005~~2006, ~~compared~~in addition to ~~the~~higher ~~same~~freight ~~period~~costs incurred due to a rise in fuel costs, an increase in average shipping distances when compared with the first six months of fiscal ~~2004~~2006 and the less efficient absorption of embedded freight and handling costs caused by our temporary cessation of salt production and inventory staging activities.

•

Cost of sales - products for the six months ended March 31, 2007 increased by approximately $4.9 million as compared to the same period in fiscal 2006. The increase is primarily the result of the increase in sales volume in the first six months of fiscal 2007 as compared to the same period in 2006. Cost of sales—products increased by 12% on a per ton basis due to decreased coverage of fixed production costs related to the temporary cessation of salt production.

Operating Expenses

Operating expenses of $13.98 million for the ~~first~~six ~~quarter~~months ofended ~~fiscal~~March 31, ~~2005~~2007 increased by $0.23 million, or ~~10.3~~9%, as compared to $13.75 million for the same period in fiscal ~~2004~~2006. Operating expenses primarily consist of selling, general and administrative expenses, miscellaneous overhead and non-production related depreciation and amortization expenses. The ~~$0.2 million~~ increase ~~for~~in ~~the~~operating ~~quarter~~expenses iswas primarily ~~attributable~~ due to an$0.4 million ~~increase~~of inidle ~~amortization~~rail car expense asfor ~~a result of~~ the ~~$7.7~~quarter ~~million~~ended ofMarch 31, ~~financing~~2007 ~~costs~~offset ~~related~~by toa ~~the~~decrease ~~issuance~~ of ~~the~~$0.1 ~~senior~~million ~~secured~~in ~~notes~~miscellaneous onoverhead ~~March 17, 2004~~expenses.

Other Income (Expense)

Other expense of $25.98 million for the first ~~quarter~~six months of fiscal ~~2005~~2007 increased by $1.8 million, or ~~170.5~~45%, compared to $14.10 million for the same period in fiscal ~~2004~~2006. ~~Other~~The increase in other expense is primarily ~~consists~~due ofto ~~interest~~$2.1 ~~expense~~million onreceived ~~our~~during ~~credit~~the ~~facilities~~second ~~and~~quarter ~~other~~of ~~related~~fiscal ~~financing~~2006 ~~charges.~~in ~~The~~connection ~~increase~~with ~~was~~the ~~due~~settlement toof ~~increased~~litigation ~~interest~~with ~~expense~~the asmine acontractor, ~~result~~offset by a of ~~the~~$0.1 ~~new~~million ~~financing~~decrease ~~that closed~~ in ~~March~~interest ~~2004. Interest~~ expense, ~~totaled~~a $20.91 million ~~for~~increase ~~the~~in ~~first~~interest ~~quarter~~income, ofand ~~fiscal~~a ~~2005,~~$0.1 ~~for~~million andecrease ~~increase~~in ofother ~~$1.9~~financing ~~million~~charges ~~over~~when compared with the ~~first~~second quarter of fiscal ~~2004~~2006.

Liquidity and Capital Resources

Historical Cash Flow

We have used the cash generated from operations, borrowings under revolving lines of credit, and borrowings under construction and post-construction financing facilities to meet our working capital needs and to fund capital expenditures. The Company’s strong operating results facilitated the closing of permanent long term financing on March 17, 2004. This financing consisted of $100.0 million in long-term Senior Secured Notes at 9.5%, a bank term loan financing in the amount of $32.1 million which was issued but not drawn as support of a $32.1 million letter of credit, as well as a $30.0 million working capital facility. These proceeds, along with cash on hand, were used to repay our construction debt and related fees at the time of closing, together totaling $71.3 million, to make a distribution to our members of $41.4 million, and to pay accrued NOMI liability of $3.2 million. Additional information regarding our cash flows for the ~~quarter~~six ~~ended~~month ~~December~~period ended March 31, ~~2004~~2007 is provided below.

Operating Activities. Net cash used in operating activities was $3.5 million for the first three months of fiscal 2005 compared to $0.5 million net cash provided during the same period in fiscal 2004. Net income for the three months ended December 31, 2004 decreased by $3.6 million as compared to the same period in fiscal 2004. The decrease in net income for the first three months of fiscal 2005 as compared to the same period in fiscal 2004 was primarily due to 21.6% fewer tons sold because of the late onset of winter weather and a $1.9 million increase in interest expense due to the new financing arrangement that closed on March 17, 2004. The decrease in net income was offset by slightly increased non-cash charges for depreciation, depletion and amortization. Net cash provided by operating activities during the beginning of the peak sales season is typically minimal as inventory is at its peak level and is only beginning to convert to receivables which will be collected in the second quarter of fiscal 2005.

Investing Activities. Net cash flow used in investing activities for the first three months of fiscal 2005 and 2004 was $1.0 million and $1.4 million, respectively. These cash flows primarily consisted of maintenance-related capital expenditures of $1.0 million and $0.9 million during the three months ended December 31, 2004 and 2003, respectively. We invested $0.4 million in the exercise of our options to purchase additional salt deposit rights in the first three months of fiscal 2004, and made no such expenditures during the first three months of fiscal 2005.

~~Financing~~Operating Activities. —Net cash provided by ~~financing~~operating activities was $431.03 million for the first ~~three~~ six months of fiscal ~~2005~~2007 as compared to $128.68 million ~~provided~~ during the same period in fiscal ~~2004~~2006. ~~During~~Net ~~the~~cash ~~three~~from ~~months~~operating ~~ended~~activities ~~December 31, 2004, $4.4 million of cash~~ was ~~provided~~primarily ~~via~~attributable ~~seasonal~~to ~~borrowing~~net ~~under~~income ~~our~~of ~~revolving~~$16.4 ~~line of credit~~million, ~~offset~~a bydecrease ~~the~~in ~~third~~inventory ~~required~~of $026.67 million ~~sinking~~related ~~fund~~to ~~payment due under~~ the ~~new~~increased sales ~~credit~~late ~~facility~~in on the ~~un-drawn~~quarter, ~~$32.1~~depreciation ~~million~~of ~~term loan~~$2.3 ~~Sinking fund payments made between June 30~~million, ~~2004~~amortization ~~and~~of ~~December~~$0.6 ~~31,~~million ~~2004~~a ~~under~~decrease ~~the~~in ~~new~~prepaid ~~credit~~of ~~facility totaled~~ $2.0.5 million and ~~are~~net ~~shown~~accrual onand ~~the~~payables ~~balance~~activity ~~sheet~~which assaw ~~restricted~~a ~~cash.~~increase ~~During~~of ~~the three months ended December 31, 2003, the net~~ $1.6 million. ofThis ~~cash~~positive ~~provided~~operating bycash ~~financing~~flow ~~activities~~activity was ~~the result of seasonal borrowings under our revolving line~~ ofpartially ~~credit,~~ offset by ~~scheduled~~a ~~repayments on our construction debt and~~ $216.07 million ofincrease ~~cash~~in ~~restricted~~accounts ~~for~~receivable ~~use~~related ~~as collateral for letters of credit issued~~ to ~~secure performance bonds required by certain municipal customers. No such cash was restricted for use as collateral on~~ the ~~letters~~increased ofsales ~~credit~~late ~~for the three months ended December 31, 2004. NOMI expense accruals are included~~ in ~~our statement of cash flows as borrowings and (repayments) of related party payables. No payments were made to~~ the ~~NOMI holders during the three months ended December 31, 2004 and 2003~~quarter.

13Investing Activities—Net cash flow used in investing activities for the first six months of fiscal 2007 and 2006 was $0.4 million and $2.9 million, respectively. The change is attributable to a decrease in the purchase of property and equipment in the first six months of fiscal 2007 as compared to the previous period.

Financing Activities—Net cash used in financing activities was $25.0 million for the first six months of fiscal 2007 as compared to $19.1 million used during the same period in fiscal 2006. During the six months ended March 31, 2007, repayments, net of borrowing, on our revolving credit facility totaled $21.0 million, and we used an additional $3.0 million to repurchase certain of our

9 1/2% Senior Secured Notes due 2014 and made a principal payment of $1.0 million under our term loan facility. Borrowings and subsequent repayments were increased during this period due to the milder than normal winter weather during the first quarter of fiscal 2007. Pay down of the revolving credit facility by the end of the second quarter of fiscal 2007 is consistent with prior years.

EBITDA

EBITDA represents net income before interest expense, depreciation, depletion, and amortization (the Company does not incur income taxes). EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by GAAP, and our calculations of EBITDA may not be comparable to those reported by other companies. Investors should carefully consider the specific items included in our computation of EBITDA. EBITDA is included herein because it is a basis upon which we assess our liquidity position and performance and because certain covenants in our borrowing arrangements are tied to similar measures. EBITDA is also included herein because we believe that it presents useful information to investors regarding a company’s ability to service and/or incur indebtedness. This belief is based on negotiations with lenders who have indicated that the amount of indebtedness we will be permitted to incur will be based, in part, on measures similar to our EBITDA. EBITDA does not take into account working capital requirements, capital expenditures, debt service requirements and other commitments, and accordingly, EBITDA is not necessarily indicative of amounts that may be available for discretionary use.

~~The~~13 ~~following table reconciles net income to EBITDA for the periods indicated (dollars in thousands):~~

The following table reconciles EBITDA to net income for the periods indicated (dollars in thousands):

American Rock Salt Company LLC

EBITDA Reconciliation to Net Income

	Three Months Ended December 31,
	Three Months Ended March 31,						Six Months Ended March 31,
	2004			2003
	2007			2006			2007			2006
Net Income to Members	$	215,~~398~~819		$	610,~~047~~531		$	16,432		$	19,896
Interest Expense		2,~~924~~672			12,~~022~~933			5,946			6,084
Depletion, Depreciation and Amortization		1,~~792~~386			1,~~583~~423			2,906			2,816
EBITDA	$	719,~~114~~877		$	814,~~652~~887		$	25,284		$	28,796
Add/Subtract
Interest Expense		(2,~~924~~672	)		(12,~~022~~933	)		(5,946	)		(6,084	)
Changes in working capital and other assets and liabilities		(714,~~644~~832	)		(712,~~143~~541	)		12,000			6,137
Net cash (used in) provided by operating activities	$	(3,454	)	$	487
Net cash provided by operating activities	$	32,037		$	24,495		$	31,338		$	28,849
Net cash used in investing activities	$	(~~1,004~~180	)	$	(~~1,353~~401	)	$	(434	)	$	(2,951	)
Net cash provided by financing activities	$	4,010		$	1,575
Net cash used in financing activities	$	(25,544	)	$	(20,366	)	$	(25,019	)	$	(19,064	)

Contractual Cash Obligations

There have been no material changes outside the ordinary course of the Company’s business to the Company’s contractual cash obligations as reported in its Annual Report on Form 10-K ~~Equivalent~~ for the fiscal year ended September 30, 2006, ~~2004~~filed with the SEC on December 28, 2006.

~~Recent~~Subsequent ~~Accounting~~Events ~~Pronouncements~~

InThe ~~November~~Company ~~2004,~~may ~~the~~from ~~FASB~~time ~~issued~~to ~~SFAS~~time ~~No.~~make ~~151,~~distributions ~~Inventory~~to ~~Costs~~its —members ansubject ~~amendment of ARB No. 43, Chapter 4~~ to ~~clarify~~ the ~~accounting~~terms ~~for~~of ~~idle~~its bank facility ~~expense, freight, handling costs,~~ and ~~wasted~~the ~~material~~indenture ~~(spoilage).~~governing ~~This~~its ~~Statement~~senior ~~requires~~secured ~~that~~notes, ~~those~~which ~~items~~contain becertain ~~recognized~~covenants asand ~~current-period~~financial ~~charges~~ratios restricting ~~regardless~~the ofCompany’s ~~whether~~ability ~~they~~to ~~meet~~make ~~the~~distributions ~~criterion~~to ofits ~~“so abnormal~~members.” InOn ~~addition~~April 9, ~~this~~2007, ~~Statement~~the ~~requires~~Company ~~that allocation~~made ofa ~~fixed~~permitted ~~production~~cash ~~overheads~~distribution to ~~the~~its ~~costs~~members ofin ~~conversion be based on~~ the ~~normal~~amount ~~capacity~~ of ~~the production facilities~~$6.0 ~~SFAS~~million ~~No.~~from ~~151~~fiscal isyear ~~effective~~end ~~for the Company beginning January 1,~~ 2006. ~~The Company is currently evaluating the impact of FASB No~~earnings. ~~151 on its financial statements.~~

~~The Securities and Exchange~~ Commission (SEC) recently issued guidance on the ways in which its full-cost rules interact with the accounting requirements that the FASB established for asset retirement obligations (ARO) — specifically, how FASB Statement NoITEM 3. 143, Accounting for Asset Retirement Obligations (FAS 143), interacts with the full-cost requirements in Rule 4-10 of Regulation S-X (Rule 4-10). The SEC’s new guidance appears in Staff Accounting Bulletin No. 106 (SAB 106) issued in October 2004. SAB 106 is effective for the Company beginning January 1, 2005. The adoption did not have an impact on the Company’s financial statements.

~~Item 3.~~ QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s business is subject to a variety of market risks, including but not limited to, interest rate risks and commodity pricing risks. Although the Company’s senior secured notes bear interest at a fixed rate of 9.5% per annum, borrowings under its ~~new~~ bank facility are subject to variable interest rates keyed to LIBOR. As of ~~December~~ March 31, ~~2004~~2007 the variable rate was 56.50125%. As of ~~December~~ of March 31, ~~2004~~2007, we had $~~100~~94.0 million of debt outstanding under our ~~new~~ senior secured notes, and $1722.26 million outstanding under our ~~new~~ bank facility. Our ~~new~~ bank facility, in the aggregate principal amount of $6252.16 million, consists of (a) a $3222.1 6 million term loan facility, and (b) a $30.0 million working capital facility. The term loan facility is currently used to support the ongoing litigation with the EPC Contractor. See Note 6 to our unaudited financial statements appearing elsewhere in this Form 10-Q Equivalent. More specifically, the lenders facilitated the issuance, at closing, of a $32.1 million letter of credit, which supports a $32.1 million bond to remove the EPC Contractor’s lien on the mine property. Upon conclusion of the litigation, the letter of credit facility will convert to a term loan. As of December 31, 2004, no monies were drawn against the $32.1 million letter of credit. The working capital facility permits us to borrow up to $30.0 million in revolving loans with a $7.0 million sub- limit available for the issuance of letters of credit. As of ~~December~~ March 31, ~~2004~~2007, there was $170.20 million drawn and $32.50 million of standby letters of credit outstanding under the working capital facility with approximately $28.0 million of remaining availability thereunder.

Our earnings and cash flows are affected by changes in interest rates applicable to our ~~new~~ bank facility. ~~Assuming~~Given our current debt structure, ~~plus a fully drawn $32.1 million term loan facility had been in place since October 1, 2004,~~ and assuming an average level of borrowings ~~from~~under our revolving credit facility at variable rates, and ~~assuming~~ a one hundred basis point increase in the average interest rate ~~under~~applicable to these borrowings, it is estimated that our interest expense for the quarter ended ~~December~~ March 31, ~~2004~~ 2007 would have increased by ~~approximately~~ $0.12 million.

~~Item~~ ITEM 4. ~~Controls and Procedures~~

~~The~~CONTROLS ~~Company’s~~AND ~~management,~~PROCEDURES with the participation of its Principal Executive Officers and Principal Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the Company’s Principal Executive and Principal Financial Officers concluded that the Company’s disclosure controls and procedures as of December 31, 2004 (the end of the period covered by this report) have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

~~There~~The ~~were~~Company’s nomanagement, ~~changes~~with tothe participation of its Co-Principal Executive Officers and Principal Financial Officer, evaluated the effectiveness of the design and operation of the Company’s ~~internal~~disclosure controls ~~control~~and ~~over~~procedures ~~financial reporting~~(as defined in Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that ~~occurred~~evaluation, ~~during~~the Company’s Co-Principal Executive Officers and its Principal Financial Officer concluded that the ~~fiscal~~Company’s ~~quarter~~disclosure ~~ended~~controls ~~December~~and procedures as of March 31, ~~2004~~2007 ~~that~~(the ~~materially~~end ~~affected~~of orthe period covered by this report) have been designed and are ~~reasonably~~functioning ~~likely~~effectively to ~~materially~~provide ~~affect~~reasonable assurance that the information required to be disclosed by the Company’s ~~internal~~in ~~control~~reports ~~over~~filed ~~financial~~or ~~reporting~~submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes to the Company’s internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2007 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

~~Part~~PART II. ~~Other~~OTHER ~~Information~~INFORMATION

~~Item~~ITEM 1. ~~Legal~~LEGAL ~~Proceedings~~ PROCEEDINGS

The Company is ainvolved ~~party~~in tovarious aroutine lawsuit with the EPC Contractor, a joint venture of Frontier-Kemper Contractors, Inc. and Flatiron Construction, LLC, which designed and constructed the Company’s mine facility. The contract required that the facility belegal ~~accepted~~proceedings byfrom ~~December~~time ~~2000~~to ~~and contained provisions for liquidated damages in favor of the Company~~time. ~~Construction~~These ~~commenced~~typically ininvolve ~~November~~commercial 1998 and was substantially completed in December 2001. Facility acceptance has not yet occurred. In April 2001 the EPC Contractor commenced a lawsuit in the Western District of New York alleging a change in the scope of the contractclaims, ~~breach~~personal ofinjury ~~contract~~claims, ~~fraud~~ and~~/or~~ ~~unilateral mistake. It requested a declaratory judgment and sought $27.0 million in compensatory damages and $10.0 million in punitive damages. The Company~~workers’s ~~motion~~compensation ~~to dismiss portions of the EPC Contractor’s amended complaint, including the punitive damages claim, was granted in September 2002 and the only~~ claims ~~remaining are for breach of contract and declaratory judgment~~. ~~The~~While ~~Company countersued in December 2001 against~~ the EPC Contractor, the insurers, the bonding company and the brokers, claiming among other things, liquidated damages, mismanagement, negligence, failure to provide required insurance, and misrepresentation. The losses the Company iscannot ~~claiming~~predict ~~against~~ the ~~EPC~~outcome ~~Contractor in this litigation may exceed $35.0 million. The Company has moved for summary judgment on a number~~ of ~~major~~such ~~issues~~proceedings, which if successful would substantially limit the EPC Contractor’s remaining claims. The EPC Contractor has moved to dismiss the Company’s countersuit. The Company has moved to dismiss the EPC Contractor’s remaining contractually-based claims to the extent it ~~failed~~does tonot ~~preserve~~believe ~~its~~that ~~claims~~these ~~in accordance with the contractually mandated process for doing so and also seeking partial summary judgment in the Company’s third-party claims with respect to liquidated damages insurance. The~~proceedings ~~third-party~~will ~~defendants~~ have ~~filed cross-motions for summary judgment seeking dismissal of these third-party claims. The two actions have been consolidated into~~ a ~~single~~material ~~action.~~adverse Ineffect ~~connection~~on ~~with~~its ~~this dispute, the EPC Contractor had filed a $29~~business.~~0 million~~ mechanics lien against the Hampton Corners mine property. The Company successfully discharged the lien via a surety bond posted for 110% of the lien amount, with the obligation for such surety bond secured by a $32.1 million letter of credit obtained as part of the Company’s new Bank Facility.

~~In addition,~~ITEM ~~the Company is involved in various routine legal proceedings from time to time~~1A. ~~These~~RISK typically involve commercial claims, personal injury claims, and workers’ compensation claims. While the Company cannot predict the outcome of such proceedings, it does not believe that these proceedings will have a material adverse effect on its business. FACTORS

There have been no material changes to the risk ~~Item~~factors 2.that ~~Unregistered~~the ~~Sales~~Company ofdisclosed ~~Equity~~in ~~Securities~~its ~~and~~Annual ~~Use~~Report ofon ~~Proceeds~~Form 10-K for the fiscal year ended September 30, 2006, filed with the SEC on December 28, 2006.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Nothing to report.

~~Item~~ITEM 3. ~~Defaults~~DEFAULTS ~~upon~~UPON ~~Senior~~SENIOR ~~Securities~~ SECURITIES

Nothing to report.

~~Item~~ITEM 4. ~~Submission~~SUBMISSION ofOF ~~Matters~~MATTERS toTO aA ~~Vote~~VOTE ofOF ~~Security~~SECURITY ~~Holders~~ HOLDERS

Nothing to report.

~~Item~~ITEM 5. ~~Other~~OTHER ~~Information~~ INFORMATION

Nothing to report.

~~Item~~ITEM 6. ~~Exhibits~~ EXHIBITS

The following exhibits are filed as part of this report on Form 10-Q ~~Equivalent~~:


Exhibit No.		Description of Exhibit
31.1		Certificate of the Co-Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)

31.2		Certificate of the Co-Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)

31.3		Certificate of the Co-Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)

31.4		Certificate of the Chief Financial Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)

SIGNATURES

The registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

~~February~~ May 10, ~~2005~~2007


AMERICAN ROCK SALT COMPANY LLC

By:		/s/ Raymond R. Martel
		Raymond R. Martel,
		Chief Financial Officer
		(Principal Financial Officer)

EXHIBIT INDEX


Exhibit No.		Description of Exhibit
31.1		Certificate of the Co-Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)

31.2		Certificate of the Co-Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)

31.3		Certificate of the Co-Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)

31.4		Certificate of the Chief Financial Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)

Filing Compare · AMERICAN ROCK SALT CO LLC