UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September~~March 3031, ~~2009~~2010

¨	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 333-129951

INNOPHOS, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware		20-1380712
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

259 Prospect Plains Road Cranbury, New Jersey		08512
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (609) 495-2495

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ¨ Accelerated Filer ¨ Non-accelerated filer x Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of ~~September~~March 3031, ~~2009~~2010, the registrant had 1,000 shares of common stock outstanding

TABLE OF CONTENTS

		Page
PART I
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2823
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3828
Item 4.	Controls and Procedures	39
Item 4T.	Controls and Procedures	29
PART II
Item 1.	Legal Proceedings	3930
Item 1A.	Risk Factors	3930
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4030
Item 3.	Defaults Upon Senior Securities	4030
Item 4.	~~Submission~~(Removed ofand ~~Matters to a Vote of Security Holders~~Reserved)	4030
Item 5.	Other Information	4030
Item 6.	Exhibits	4030
Signatures		4131

PART I

ITEM 1.

FINANCIAL STATEMENTS

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(~~Dollars~~In in thousands, except per share amounts, share amounts or where otherwise noted)

	September 30,2009		December 31,2008
	March 31,2010		December 31,2009
ASSETS
Current assets:
Cash and cash equivalents	$	~~122~~115,~~556~~034	$	~~124~~132,~~623~~222
Restricted cash		~~1,748~~—		—1,749
Accounts receivable, net		6671,~~537~~342		7956,~~532~~345
Inventories		~~104~~114,~~270~~711		~~145~~113,~~310~~636
Other current assets		3543,~~697~~875		3345,~~993~~638
Total current assets		~~330~~344,~~808~~962		~~383~~349,~~458~~590
Property, plant and equipment, net		~~209~~200,~~758~~131		~~230~~204,~~422~~527
Goodwill		51,706		51,706
Intangibles and other assets, net		5149,~~808~~686		5451,~~518~~483
Total assets	$	~~644~~646,~~080~~485	$	~~720~~657,~~104~~306
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	—	$	~~72,613~~—
Accounts payable, trade and other		3536,~~131~~877		3632,~~676~~580
Other current liabilities		4032,~~910~~114		3954,~~232~~603
Total current liabilities		7668,~~041~~991		~~148~~87,~~521~~183
Long-term debt		190,000		~~243~~190,~~887~~000
Other long-term liabilities		3536,~~507~~756		3537,~~865~~920
Total liabilities		~~301~~295,~~548~~747		~~428~~315,~~273~~103
Commitments and contingencies (see note 12)
Commitments and contingencies (see note 11)
Stockholders’ equity		~~342~~350,~~532~~738		~~291~~342,~~831~~203
Total stockholders’ equity		~~342~~350,~~532~~738		~~291~~342,~~831~~203
Total liabilities and stockholders’ equity	$	~~644~~646,~~080~~485	$	~~720~~657,~~104~~306

See notes to condensed consolidated financial statements

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations (Unaudited)

(~~Dollars~~In in thousands, except per share amounts, share amounts or where otherwise noted)

	Three months endedSeptember 30,2009			Three months endedSeptember 30,2008
	Three months endedMarch 31,2010			Three months endedMarch 31,2009
Net sales	$	~~161~~169,~~934~~007		$	~~291~~190,~~772~~817
Cost of goods sold		~~114~~132,~~204~~301			~~165~~121,~~189~~024
Gross profit		4736,~~730~~706			~~126~~69,~~583~~793
Operating expenses:
Selling, general and administrative		1814,~~775~~518			13,~~210~~976
Research & development expenses		~~462~~563			~~526~~529
Total operating expenses		1915,~~237~~081			1314,~~736~~505
Operating income		2821,~~493~~625			~~112~~55,~~847~~288
Interest expense, net		4,~~607~~420			76,~~230~~065
Foreign exchange gain		(243	)		(870	)
Foreign exchange (gain) loss		(230	)		415
Other income, net		—			(~~152~~208	)
Income before income taxes		2417,~~129~~435			~~106~~49,~~639~~016
Provision for income taxes		86,~~083~~091			3317,~~044~~656
Net income	$	1611,~~046~~344		$	7331,~~595~~360

See notes to condensed consolidated financial statements

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations (Unaudited)

(Dollars in thousands)

	Nine months endedSeptember 30,2009			Nine months endedSeptember 30,2008
Net sales	$	519,517		$	718,310
Cost of goods sold		352,599			443,155
Gross profit		166,918			275,155
Operating expenses:
Selling, general and administrative		50,175			47,051
Research & development expenses		1,524			1,587
Total operating expenses		51,699			48,638
Operating income		115,219			226,517
Interest expense, net		16,148			20,980
Foreign exchange gain		(518	)		(874	)
Other income, net		—			(390	)
Income before income taxes		99,589			206,801
Provision for income taxes		35,685			61,059
Net income	$	63,904		$	145,742

See notes to condensed consolidated financial statements

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

	Nine months endedSeptember 30,2009			Nine months endedSeptember 30,2008
	Three months endedMarch 31,2010			Three months endedMarch 31,2009
Cash flows from operating activities
Net income	$	6311,~~904~~344		$	~~145~~31,~~742~~360
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash (used for) provided from operating activities:
Depreciation and amortization		3812,~~214~~655			4011,~~371~~597
Amortization of deferred financing charges		~~2,288~~354			~~1,774~~964
Deferred income tax (benefit) provision		(2,414	)		2,917
Deferred income tax benefit		(557	)		(1,020	)
Deferred profit sharing		(~~470~~205	)		~~410~~(189	)
Share-based compensation		~~2,470~~721			~~2,340~~542
Changes in assets and liabilities:
Increase in restricted cash		(1,748	)		—
Decrease in restricted cash		1,749			—
Decrease (increase) in accounts receivable		12,995			(44,019	)
(Increase) decrease in accounts receivable		(14,997	)		5,286
Decrease (increase) in inventories		41,040			(52,411	)
(Increase) decrease in inventories		(1,075	)		13,788
Increase in other current assets		(1,704	)		(99	)
Decrease in other current assets		1,763			3,183
(Decrease) increase in accounts payable		(1,545	)		8,608
Increase in accounts payable		4,297			2,395
Increase in other current liabilities		1,678			30,472
(Decrease) increase in other current liabilities		(22,489	)		3,076
Changes in other long-term assets and liabilities		~~9,657~~(10	)		~~(1,698~~836	)
Net cash provided from operating activities		164,365			134,407
Net cash (used for) provided from operating activities		(6,450	)		71,818
Cash flows from investing activities:
Capital expenditures		(127,~~723~~249	)		(133,~~238~~051	)
Net cash used for investing activities		(127,~~723~~249	)		(133,~~238~~051	)
Cash flows from financing activities:
Return of capital to parent		(263,~~161~~633	)		(133,~~950~~704	)
Revolver borrowing		—			—
Excess tax benefits from exercise of stock options		144			—
Excess tax benefits from exercise of stock options		2			1,420
Principal payments of term-loan		—			(54,000	)
Deferred financing costs		(1,050	)		—
Net cash used for financing activities		(3,489	)		(57,704	)
Principal payments of term-loan		(126,500	)		(1,500	)
Net change in cash		(17,188	)		11,063
Net cash used for financing activities		(153,709	)		(14,030	)
Cash and cash equivalents at beginning of period		132,222			124,623
Net change in cash		(2,067	)		107,139
Cash and cash equivalents at end of period	$	115,034		$	135,686
Cash and cash equivalents at beginning of period		124,623			15,568
Cash and cash equivalents at end of period	$	122,556		$	122,707

See notes to condensed consolidated financial statements

INNOPHOS, INC. AND SUBSIDIARIES

Statements of Stockholders’ Equity and Other Comprehensive Income (Loss) (Unaudited)

(Dollars and shares in thousands)

	RetainedEarnings/(Deficit)				Paid-inCapital				AccumulatedOtherComprehensiveIncome/(Loss)				TotalShareholders’Equity
	RetainedEarnings			Paid-inCapital				AccumulatedOtherComprehensiveIncome/(Loss)				TotalShareholders’Equity
Balance, January 1, 2008	$	(2,912	)		$	119,131			$	(2,271	)		$	113,948
Balance, January 1, 2009	$	194,197		$	99,658			$	(2,024	)		$	291,831
Net income		~~197~~65,~~109~~427											65,427	~~197,109~~
Change in pension and post-retirement plans, net of tax									(226	~~247~~)			(226	~~247~~)
Other comprehensive income, net of tax														197,356
Net income and other comprehensive income, net of tax													65,201
Share-based compensation						3,467								3,467
Stock-based compensation					3,367								3,367
Return of capital					(18,196	~~(22,940~~)	)						(18,196	~~(22,940~~)	)
Balance, December 31, 2008	$	194,197			$	99,658			$	(2,024	)		$	291,831
Balance, December 31, 2009	$	259,624		$	84,829			$	(2,250	)		$	342,203
Net income		6311,~~904~~344											11,344	~~63,904~~
Change in pension and post-retirement plans, net of tax									55	25			55	25
Other comprehensive loss, net of tax														63,929
Net income and other comprehensive income, net of tax													11,399
Share-based compensation						2,470								2,470
Stock-based compensation					721								721
Return of capital					(3,585	~~(15,698~~)	)						(3,585	~~(15,698~~)	)
Balance, September 30, 2009	$	258,101			$	86,430			$	(1,999	)		$	342,532
Balance, March 31, 2010	$	270,968		$	81,965			$	(2,195	)		$	350,738

See notes to condensed consolidated financial statements

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

1. Basis of Statement Presentation:

Summary of Significant Accounting Policies

Innophos, Inc. is a wholly-owned subsidiary of Innophos Investments Holdings, Inc. (“Investments Holdings”), incorporated under the laws of the State of Delaware. Innophos Investments Holdings, Inc. is a wholly-owned subsidiary of Innophos Holdings, Inc. (“Holdings”).

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements of Innophos ~~Holdings~~, Inc. and Subsidiaries, or Company, have been ~~prepared~~ prepared in accordance with generally accepted accounting principles for interim financial reporting and do not include all disclosures required by generally accepted accounting principles for annual financial reporting, and should be read in ~~conjunction~~ conjunction with the audited consolidated and combined financial statements of the Company at December 31, ~~2008~~2009 and for the three years then ended.

The accompanying unaudited condensed consolidated financial statements of the Company reflect all adjustments, consisting only of normal recurring accruals, which management considers necessary for a fair statement of the results of operations for the interim periods and is subject to year end adjustments. The results of operations for the interim periods are not necessarily indicative of the results for the full year. The December 31, ~~2008~~ 2009 condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Material subsequent events are evaluated and disclosed through the report issuance date, November 4, 2009.

Recently Issued Accounting Standards

~~The~~In ~~Company~~June ~~adopted~~2009, the ~~provisions~~FASB ofissued ~~ASC~~an ~~820-10,~~amendment ~~Fair~~to ~~Value~~ASC ~~Measurements~~topic 860 Transfers and ~~Disclosures~~Servicing. ~~(formerly~~Among ~~Statement~~other items the provision removes the concept of ~~Financial~~a ~~Standards~~qualifying ~~(SFAS)~~special-purpose ~~No. 157,~~entity ~~Fair~~and ~~Value~~clarifies ~~Measurements),~~that ~~with~~the ~~respect~~objective ~~to non~~of paragraph ASC 860-~~financial~~10-40-4 ~~assets~~is to determine whether a transferor and ~~liabilities~~all ~~effective~~of ~~January 1,~~the ~~2009.~~entities ~~This~~included ~~pronouncement~~in ~~defines~~the ~~fair~~transferor’s ~~value,~~financial ~~establishes~~statements abeing ~~framework~~presented ~~for~~have ~~measuring~~surrendered control ~~fair~~over ~~value~~transferred ~~and~~financial ~~expands~~assets. ~~disclosures~~This ~~about~~pronouncement ~~fair~~is ~~value~~effective ~~measurements~~January 1, 2010. The ~~adoption~~implementation of ~~ASC~~this ~~820-10~~standard did not have a material impact on the Company’s consolidated financial position and results of operations.

~~The~~In ~~Company~~June ~~adopted ASC 805 (formerly SFAS No. 141(R)~~2009, ~~Business~~the ~~Combinations),~~FASB ~~for~~issued ~~business~~an ~~combinations~~amendment onto orASC ~~after~~topic ~~January 1,~~810 ~~2009~~Consolidation. ~~This~~The ~~requires~~provisions ~~recognition~~ of ~~assets~~ASC ~~acquired,~~810 ~~liabilities~~provide ~~assumed,~~guidance ~~and any non-controlling interest~~ in determining ~~the~~whether ~~acquiree~~an atenterprise ~~the acquisition~~has ~~date,~~a ~~measured~~controlling atfinancial ~~their~~interest ~~fair~~in ~~values~~a asvariable ofinterest ~~that date~~entity. InThis adetermination ~~business~~identifies ~~combination~~the ~~achieved~~primary inbeneficiary ~~stages,~~of ~~this~~a ~~pronouncement~~variable ~~requires~~interest ~~recognition~~entity ~~of identifiable~~as ~~assets~~the ~~and~~enterprise ~~liabilities,~~that ashas ~~well~~both as the ~~non-controlling~~power ~~interest~~to indirect the ~~acquiree,~~activities atof ~~the~~a ~~full~~variable ~~amounts~~interest ofentity ~~their~~that ~~fair~~most ~~values.~~significantly ~~This~~impacts ~~pronouncement~~the ~~also~~entity’s ~~requires~~economic ~~the~~performance, ~~fair~~and ~~value~~the ofobligation ~~acquired~~to ~~in-process~~absorb ~~research~~losses ~~and~~or ~~development~~the ~~(IPRD)~~right to bereceive ~~recorded~~benefits asof ~~indefinite~~the ~~lived~~entity ~~intangibles,~~that ~~contingent~~could ~~consideration~~potentially to be ~~recorded~~significant onto the variable ~~acquisition~~interest ~~date,~~entity. ~~and~~This ~~restructuring~~pronouncement ~~and~~also ~~acquisition-related~~requires ~~deal~~ongoing ~~costs~~reassessments toof bewhether ~~expensed~~an asenterprise ~~incurred.~~is Inthe ~~addition,~~primary ~~any~~beneficiary ~~excess~~and ofeliminates the ~~fair~~quantitative ~~value~~approach ofpreviously ~~net~~required ~~assets~~for ~~acquired~~determining ~~over~~the ~~purchase~~primary ~~price~~beneficiary. ~~and~~New ~~any~~provisions ~~subsequent~~of ~~changes~~this pronouncement ~~in estimated contingencies~~ are toeffective ~~be recorded~~January 1, ~~in earnings~~2010. The implementation of this standard did not have a material impact on the Company’s consolidated financial position and results of operations.

~~The~~In ~~Company~~October ~~adopted~~2009, ~~ASC~~the ~~855~~FASB asissued ofAccounting ~~June 30,~~Standards ~~2009~~Update (~~formerly~~ASU) ~~SFAS~~ No. ~~165~~2009-13, ~~Subsequent~~Multiple-Deliverable ~~Events~~Revenue Arrangements – a consensus of the FASB Emerging Issues Task Force (EITF)., ~~ASC~~which ~~855~~provides ~~should~~principles ~~not~~for ~~result~~allocation inof ~~significant~~consideration ~~changes~~among its multiple-elements, allowing more flexibility in ~~the~~identifying ~~subsequent~~and ~~events~~accounting ~~that~~for anseparate ~~entity~~deliverables ~~reports~~under an arrangement. ~~Rather,~~The ~~ASC~~EITF ~~855~~ introduces an estimated selling price method for valuing the ~~concept~~elements of ~~financial~~a ~~statements~~bundled ~~being~~arrangement if vendor-specific objective evidence or third-party evidence of selling price is not available, toand besignificantly ~~issued~~expands related disclosure requirements. ~~Financial~~This ~~statements~~standard ~~are~~is ~~considered~~effective ~~available~~on toa beprospective ~~issued~~basis ~~when~~for ~~they~~revenue ~~are~~arrangements ~~complete~~entered into or materially modified in afiscal ~~form~~years ~~and~~beginning ~~format~~on ~~that~~or ~~complies~~after ~~with~~June 15, ~~generally~~2010. ~~accepted~~Alternatively, ~~accounting principles~~adoption ~~(GAAP)~~may be on a retrospective basis, and ~~all~~early application ~~approvals~~is ~~necessary~~permitted. ~~for~~The ~~issuance~~implementation of this standard will not have ~~been~~a ~~obtained~~material impact on the Company’s consolidated financial position and results of operations.

In June 2009, the FASB finalized SFAS No. 166, Accounting for Transfers of Financial Asset, an amendment of FASB Statement No. 140, which was later superseded by the FASB Codification and included in ASC topic 860. Among other items the provision removes the concept of a qualifying special-purpose entity and clarifies that the objective of paragraph ASC 860-10-40-4 is to determine whether a transferor and all of the entities included in the transferor’s financial statements being presented have surrendered control over transferred financial assets. This pronouncement is effective January 1, 2010. The implementation of this standard will not have a material impact on the Company’s consolidated financial position and results of operations.

In June 2009, the FASB finalized SFAS No. 167, Amending FASB interpretation No. 46(R), which was later superseded by the FASB Codification and included in ASC topic 810. The provisions of ASC 810 provide guidance in determining whether an enterprise has a controlling financial interest in a variable interest entity. This determination identifies the primary beneficiary of a variable interest entity as the enterprise that has both the power to direct the activities of a variable interest entity that most significantly impacts the entity’s economic performance, and the obligation to absorb losses or the right to receive benefits of the entity that could

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

potentially be significant to the variable interest entity. This pronouncement also requires ongoing reassessments of whether an enterprise is the primary beneficiary and eliminates the quantitative approach previously required for determining the primary beneficiary. New provisions of this pronouncement are effective January 1, 2010. The implementation of this standard will not have a material impact on the Company’s consolidated financial position and results of operations.

In July 2009, the FASB issued ASC topic 105 (formerly SFAS No. 168, The Hierarchy of Generally Accepted Accounting Principles). ASC 105 contains guidance which reduces the U.S. GAAP hierarchy to two levels, one that is authoritative and one that is not. This pronouncement is effective September 15, 2009. The adoption of this pronouncement did not have an effect on the consolidated financial statements.

In October 2009, the FASB approved for issuance Emerging Issues Task Force (EITF) issue 08-01, Revenue Arrangements with Multiple Deliverables (currently within the scope of FASB Accounting Standards Codification (ASC) Subtopic 605-25). This statement provides principles for allocation of consideration among its multiple-elements, allowing more flexibility in identifying and accounting for separate deliverables under an arrangement. The EITF introduces an estimated selling price method for valuing the elements of a bundled arrangement if vendor-specific objective evidence or third-party evidence of selling price is not available, and significantly expands related disclosure requirements. This standard is effective on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Alternatively, adoption may be on a retrospective basis, and early application is permitted. The implementation of this standard will not have a material impact on the Company’s consolidated financial position and results of operations.

2. Dividends:

The following is the dividend activity for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2009~~ 2010 and ~~2008~~2009:

	Three Months Ended September 30				Nine Months Ended September 30
	Quarters ended March 31
	2009		2008		2009		2008
	2010		2009
Dividends declared - per share	$	0.17	$	—0.17	$	~~0.51~~	$	~~0.34~~
Dividends declared - aggregate		3,~~622~~640		—3,611		~~10,852~~		~~7,114~~
Dividends paid - per share		0.17		0.17		~~0.51~~		~~0.51~~
Dividends paid - aggregate		3,~~622~~633		3,~~564~~590		~~10,823~~		~~10,664~~

As all of the business for Holdings and Innophos Investments Holdings, Inc. are transacted through Innophos, Inc. and Subsidiaries, Holdings and Innophos Investments Holdings, Inc. are dependent on earnings and distribution of funds from Innophos, Inc. and Subsidiaries.

3. Share-Based Compensation:

Holdings compensation programs include share-based payments. The primary share-based awards and their general terms and conditions currently in effect are as follows:

• Stock options, which entitle the holder to purchase, after the end of a vesting term, a specified number of shares of Holdings common stock at an exercise price per share set equal to the market price of the Company’s common stock on the date of grant.

•

Restricted stock grants, which entitle the holder to receive, at the end of each vesting term, a specified number of shares of Holdings common stock, and which also entitle the holder to receive dividends paid on such grants throughout the vesting period.

• ~~Performance~~Stock ~~share~~options, ~~awards~~ which entitle the holder to ~~receive~~purchase, atafter the end of a vesting term, a specified number of shares of Holdings common stock, ~~within~~at aan ~~range~~exercise ofprice ~~shares~~per ~~from~~share ~~zero~~set equal to ~~a specified maximum, calculated using a three year future average return on invested capital (i.e.~~ the ~~three~~market ~~year~~price ~~period~~of ~~2008-2010 for a 2008 award) as defined solely by reference to Holdings own activities. Dividends will accrue over~~ the ~~vesting~~Company’s ~~period~~common ~~and~~stock ~~are paid~~ on ~~performance~~the ~~share~~date ~~awards~~of ~~when fully vested~~grant.

• ~~Annual~~Performance ~~Board~~share ofawards ~~Directors~~which ~~stock~~entitle ~~retainer~~the ~~grants,~~holder ~~which~~to ~~entitle~~receive, ~~external~~at ~~members~~the end of ~~the~~a ~~Board~~vesting toterm, ~~receive~~ a number of shares of Holdings common stock, ~~equal~~within a range of shares from zero to a ~~stipulated~~specified ~~annual~~maximum ~~retainer~~(generally ~~value~~200%), calculated using a three year future average return on invested capital (i.e. the three year period 2010-2012 for a 2010 award) as defined solely by reference to Holdings own activities. Dividends will accrue over the vesting period and are paid on performance share awards when fully vested.

•

Annual stock retainer grants, which entitle independent members of the Board of Directors to receive a number of shares of Holdings common stock equal to a fixed retainer value.

Since these programs benefit the employees of Innophos, Inc. all amounts have been recorded in our consolidated results.

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

The following table summarizes the components of share-based compensation expense, all of which has been classified as selling, general and administrative expense:

	Three Months Ended				Nine Months Ended
	Three Months EndedMarch 31, 2010		Three Months EndedMarch 31, 2009
	September 30,2009		September 30,2008		September 30,2009		September 30,2008
Stock options	$	211	$	167
Stock options	$	586	$	176	$	957	$	471
Restricted stock		4		1
Restricted stock		7		232		14		695
Performance shares		506		374
Performance shares		658		479		1,499		1,174
Total share-based compensation expense	$	721	$	542
Total share-based compensation expense	$	1,251	$	887	$	2,470	$	2,340

~~There~~The ~~were 5,500 restricted shares granted with a~~ fair value of ~~$45 in~~ the ~~first quarter~~options ofgranted ~~2009.~~during ~~These~~2010 ~~awards~~was determined ~~are~~using ~~classified~~the asBlack-Scholes ~~equity~~option-pricing ~~awards and vest through no later than January 31, 2011~~model. The ~~related~~assumptions ~~compensation~~used ~~expense~~in ~~is based on~~ the ~~date~~Black-Scholes ~~of grant share price of $8.24. The compensation expense is amortized on a straight~~option-~~line~~pricing ~~basis~~model ~~over~~were ~~the~~as ~~requisite~~follows: ~~vesting period.~~

The fair value of the options granted during 2009 was determined using the Black-Scholes option-pricing model. The assumptions used in the Black-Scholes option-pricing model were as follows:


Non-qualified stock options
Expected volatility		57.5	%
Dividend yield		3.6	%
Risk-free interest rate		2.8	%
Expected term		6 years
Weighted average grant date fair value of stock options	$	10.46

	2009 Grants
Non-qualified stock options	May 7th			June 2nd
Expected volatility		61.4	%		61.4	%
Dividend yield		5.0	%		4.9	%
Risk-free interest rate		2.5	%		2.9	%
Expected term		6 years			6 years
Weighted average grant date fair value of stock options	$	5.54		$	6.59

There were 169,150 options granted with a fair value of $1.7 million on March 11, 2010. These awards are classified as equity awards and vest equally through March 11, 2013. The related compensation expense is based on the date of grant fair value of $25.68 per common share. The compensation expense is amortized on a straight-line basis over the requisite vesting period. For these grants, the Company had chosen a blended volatility which consists of 50% historical volatility average of the peer group and 50% historical volatility of Innophos. The expected term for the stock options is based on the simplified method since the Company has limited data on the exercises of stock options. These stock options qualify as “plain vanilla” stock options in accordance with SAB 110. The dividend yield is the expected annual dividend payments divided by the average stock price up to the date of grant. The risk-free interest rates are derived from the U.S. Treasury securities in effect on the date of grant whose maturity period equals the options expected term. The Company applies an expected forfeiture rate to stock-based compensation expense. The estimate of the forfeiture rate is based primarily upon historical experience of employee turnover. As actual forfeitures become known, stock-based compensation expense is adjusted accordingly.

There were 8479,~~651~~500 performance ~~and~~shares ~~136~~granted,~~849~~ ~~options~~assuming ~~granted~~achieving ~~with~~targeted areturn ~~fair value of $469 and $902~~ on ~~May 7,~~ ~~2009~~invested ~~and June 2~~capital, ~~2009,~~on ~~respectively. These awards are classified as equity awards and vest through no later than May~~March 711, ~~2012.~~2010 ~~The~~with ~~related~~a ~~compensation expense is based on the date of grant~~ fair value of $525.5468 ~~and $6.59~~ per common share, ~~respectively.~~or ~~The compensation expense is amortized on a straight-line basis over the requisite vesting period~~$1.8 ~~For~~million ~~these~~in ~~grants,~~ the ~~Company~~aggregate ~~had chosen a blended volatility~~ which ~~consists~~reflects offorfeiture ~~50% average of the peer group and 50% of Innophos’~~assumptions. The expected term for the ~~stock~~performance ~~options~~shares is ~~based~~a on3 ~~the~~year ~~simplified~~cliff ~~method since the Company has limited data on the exercises of stock options~~vesting. ~~These~~Declared ~~stock~~dividends ~~options~~will ~~qualify~~accrue as “plain vanilla” stock options. The dividend yield is the expected annual dividend payments divided by the average stock price up to the date of grant. The risk-free interest rates are derived from the U.S. Treasury securities in effect on the ~~date~~performance ofshares ~~grant~~and ~~whose~~will ~~maturity~~vest ~~period~~over ~~equals~~ the ~~options~~ ~~expected~~same ~~term~~period. The ~~Company applies an expected forfeiture rate to stock-based~~ compensation expense. ~~The estimate of the forfeiture rate~~ is ~~based~~amortized ~~primarily~~on ~~upon~~a ~~historical experience of employee turnover. As actual forfeitures become known, stock~~straight-~~based~~line ~~compensation~~basis ~~expense~~over isthe ~~adjusted~~requisite ~~accordingly.~~vesting period.

~~There were 94,150 performance shares granted, assuming achieving targeted return on invested capital, in the second quarter of 2009 with a fair value of $14.57 per common share, or $1.~~4 ~~million in the aggregate~~. ~~The~~Inventories: expected term for the performance shares is a 3 year cliff vesting. Declared dividends will accrue on the performance shares and will vest over the same period. The compensation expense is amortized on a straight-line basis over the requisite vesting period.

Inventories consist of the following:


	March 31, 2010		December 31, 2009
Finished products	$	77,260	$	73,924
Raw materials		30,237		31,770
Spare parts		7,214		7,942

	$	114,711	$	113,636

Inventory reserves as of March 31, 2010 and December 31, 2009 were $9,227 and $13,189, respectively.

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

45. ~~Restricted~~Other ~~Cash~~Current Assets:

Restricted cash consists of escrow funds agreed to be deposited in connection with a dispute between the Company and a third party. The escrow funds will be disbursed in accordance with the agreed terms upon the satisfaction of the dispute.

5. Inventories:

Inventories consist of the following:

	September 30,2009		December 31,2008
Finished products	$	67,818	$	111,031
Raw materials		28,465		26,183
Spare parts		7,987		8,096
	$	104,270	$	145,310

Inventory reserves as of September 30, 2009 and December 31, 2008 were $11,605 and $8,863, respectively.

6. Other Current Assets:

Other current assets consist of the following:

	September 30,2009		December 31,2008
	March 31,2010		December 31,2009
Creditable taxes (value added taxes)	$	26,~~517~~770	$	54,~~444~~028
Prepaid income taxes		1410,~~234~~681		110,~~492~~435
Deferred taxes		611,~~580~~792		611,~~580~~792
Prepaids		812,~~693~~034		1613,~~220~~110
Other		32,~~673~~598		46,~~257~~273
	$	3543,~~697~~875	$	3345,~~993~~638

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

76. Intangibles and Other Assets, net:

Intangibles and other assets consist of the following:

	Useful life(years)	~~September~~March 3031,~~2009~~2010		December 31,~~2008~~2009
Developed technology and application patents, net of accumulated amortization of $9,696 for 2009 and $8,279 for 2008	10-20	$	26,904	$	28,321
Developed technology and application patents, net of accumulated amortization of $10,640 for 2010 and $10,168 for 2009	10-20	$	25,960	$	26,432
Customer relationships, net of accumulated amortization of $3,724 for 2009 and $3,012 for 2008	5-15		7,606		8,318
Customer relationships, net of accumulated amortization of $4,198 for 2010 and $3,961 for 2009	5-15		7,132		7,369
Tradenames and license agreements, net of accumulated amortization of $3,297 for 2009 and $2,839 for 2008	5-20		6,063		6,521
Tradenames and license agreements, net of accumulated amortization of $3,504 for 2010 and $3,401 for 2009	5-20		5,856		5,959
Capitalized software, net of accumulated amortization of $2,929 for 2009 and $2,496 for 2008	3-5		767		1,293
Capitalized software, net of accumulated amortization of $2,441 for 2010 and $2,279 for 2009	3-5		424		700
Non-compete agreement, net of accumulated amortization of $283 for 2009 and $189 for 2008	5		347		441
Non-compete agreement, net of accumulated amortization of $346 for 2010 and $315 for 2009	5		284		315
Total Intangibles		$	4139,~~687~~656	$	4440,~~894~~775
Deferred financing costs, net of accumulated amortization of $6,010 for 2009 and $13,643 for 2008		$	6,569	$	7,806
Deferred financing costs, net of accumulated amortization of $6,718 for 2010 and $6,364 for 2009		$	5,861	$	6,215
Deferred income taxes			~~700~~783		~~512~~1,409
Other assets			23,~~852~~386		13,~~306~~084
Total other assets		$	10,~~121~~030	$	910,~~624~~708
		$	5149,~~808~~686	$	5451,~~518~~483

87. Other Current Liabilities:

Other current liabilities consist of the following:

	September 30,2009		December 31,2008
	March 31,2010		December 31,2009
Taxes	$	87,~~912~~097	$	913,~~318~~480
Payroll related		127,~~164~~819		6,~~507~~396
Freight and rebates		3,~~004~~163		43,~~942~~794
Benefits and pensions		43,~~717~~758		5,~~688~~104
Interest		2,~~164~~193		98,~~284~~626
Legal		1,~~246~~107		~~828~~2,820
Other		86,~~703~~977		214,~~665~~383
	$	4032,~~910~~114	$	3954,~~232~~603

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

98. Debt and Interest:

Short-term borrowings and long-term debt consist of the following:

	September 30,2009		December 31,2008
	March 31,2010		December 31,2009
Senior credit facility	$	—	$	126,500
Senior subordinated notes		190,000		190,000
	$	190,000	$	~~316~~190,~~500~~000
Less current portion		—		~~72,613~~—
	$	190,000	$	~~243~~190,~~887~~000

OnIn ~~May 22,~~the second quarter of 2009, the Company and its wholly owned subsidiary, Innophos Canada, Inc. (the “Borrowers”) entered into a Loan and Security Agreement (the “Loan Agreement”) with certain lenders (collectively, the “Lenders”) including Wachovia Bank, National Association, as agent.

~~The~~As ~~Loan~~of ~~Agreement~~March 31, ~~provides~~2010, the Borrowers ~~with~~had ~~a revolving line of credit from the Lenders of up to~~ $6553.0 million inexcess ~~the~~availability ~~aggregate,~~above ~~with~~the aminimum ~~$20~~excess ~~million~~availability ~~letter of credit sub-facility~~requirements, terminating on May 22, 2013. The amount actually available to the Borrowers may be less than the maximum credit and will vary from time to time depending on, among other factors, the amount of its net eligible inventory and accounts receivable as calculated ~~for~~in ~~purposes~~accordance ofwith the Loan Agreement., ~~The~~and ~~obligations~~there ofwas ~~the~~no ~~Borrowers~~amount ~~under~~outstanding ~~the~~on ~~Loan Agreement are secured by~~ the ~~accounts~~revolving ~~receivable,~~credit ~~inventory~~line. ~~and~~A ~~other~~total ~~assets~~ of ~~Innophos, Inc~~$1.7 ~~and~~million ~~Innophos Canada,~~in ~~Inc.,~~face ~~not~~amount ~~including~~of ~~equipment~~letters ~~or real property. Innophos Inc.’s Mexico-based subsidiaries are excluded from certain~~ of ~~the~~credit ~~covenants~~were issued under the ~~Loan~~sub-facility to ~~Agreement,~~support doinstruments ~~not~~outstanding ~~guaranty the indebtedness of Innophos, Inc. and Innophos Canada, Inc. incurred~~ under ~~it,~~a ~~and~~prior docredit ~~not~~facility ~~furnish~~terminated ~~collateral~~on inthat ~~connection with it~~date.

~~The~~In ~~Loan~~connection ~~Agreement~~with ~~includes~~the ~~affirmative as well as~~termination ~~negative~~of ~~covenants~~the ~~that~~2004 ~~prohibit~~Credit orFacility ~~restrict~~dated aas ~~variety~~ of ~~actions~~August 13, ~~without~~2004 in the ~~Lenders’~~second ~~approval,~~quarter ~~including~~of ~~covenants~~2009, ~~that affect~~ the ~~ability~~Company ofpaid the ~~Borrowers~~$72.7 ~~and~~million ~~its~~of ~~subsidiaries~~outstanding ~~among~~term ~~other~~loan ~~things~~balance to (~~a) incur~~principal orand ~~guarantee~~accrued ~~debt, (b~~interest) ~~create~~ ~~liens,~~from ~~(c) enter~~cash ~~into~~on ~~mergers,~~hand. ~~recapitalizations~~This orpayment ~~similar~~resulted ~~transactions~~in oran approximate ~~purchase~~$0.4 ~~all~~million orcharge ~~substantially~~to ~~all~~earnings offor the ~~assets~~acceleration ~~or stock~~ of ~~another~~deferred ~~party,~~financing ~~(d) sell~~charges. ~~assets,~~Prior ~~(e) change~~to ~~names,~~the ~~(f) make~~termination ~~certain~~of ~~changes~~the ~~to their~~term ~~business~~loan, ~~(g) optionally~~the ~~prepay,~~Company ~~amend,~~made ~~acquire~~a or$53.6 ~~refinance~~million ~~indebtedness,~~excess ~~(h) pay~~cash ~~dividends~~flow ~~on,~~payment orin ~~purchase,~~the ~~acquire~~first orquarter ~~redeem~~of ~~shares~~2009 ~~of,~~which ~~capital~~resulted ~~stock,~~in ~~(i) change~~an approximate ~~accounting~~$0.4 ~~methods,~~million ~~(j) make~~charge ~~investments,~~to ~~or (k) enter~~earnings ~~into~~for ~~transactions~~the ~~with~~acceleration ~~affiliates~~of deferred financing charges.

InThe ~~addition,~~Senior ~~the~~Subordinated ~~Loan~~Notes accrue ~~Agreement~~interest ~~requires~~from the ~~Borrowers~~issue todate ~~maintain~~at a ~~fixed charge~~rate ~~coverage ratio (on a consolidated basis)~~ of ~~at least 1~~8.00875% per toannum, ~~1.00~~payable assemi-annually ofin ~~the~~arrears ~~last day of each calendar month for the preceding twelve consecutive fiscal months during any “Compliance Period.” Compliance Period is defined as any period beginning~~ on ~~a day on which (i)~~February an15 ~~event of default under the Loan Agreement has occurred~~ and ~~is continuing or (ii)~~August ~~the~~15 ~~excess~~of ~~availability under the revolving credit facility is less than $16.0 million through and including the first day when excess availability has exceeded $16.0 million for 60 consecutive days during~~ each ~~of which no event of default has occurred~~year. ~~The~~Innophos ~~Loan~~Holdings, ~~Agreement also requires the Borrowers to maintain at all times excess availability under the revolving credit facility of at least $6~~Inc.5 ~~million.~~is ~~The~~dependent ~~Loan~~on ~~Agreement allows~~ the ~~Borrowers~~earnings ~~to pay or declare~~ and ~~pay dividends or make other~~ distributions tofrom ~~stockholders~~Innophos, inInc. and ansubsidiaries ~~aggregate amount not~~ to ~~exceed~~fund ~~$5.0~~this ~~million in any calendar quarter~~obligation.

AsHoldings ofSenior ~~September 30,~~Unsecured ~~2009,~~Notes ~~the~~accrued ~~Borrowers~~interest ~~had~~from ~~$51.8~~the ~~million~~issue ~~excess~~date ~~availability,~~at ~~above~~a ~~the~~rate ~~minimum excess availability~~of ~~requirements~~9.5% per annum, aspayable ~~calculated~~semi-annually in ~~accordance~~arrears ~~with~~on ~~the~~April 15 ~~Loan Agreement~~ and ~~there~~October 15 ~~was no amount outstanding on the revolving credit line. A total~~ of ~~$1.8~~each ~~million in face amount of letters of credit were issued under the sub-facility to support instruments outstanding under a prior credit facility terminated on that date~~year.

~~The~~Holdings ~~Company~~redeemed for ~~was~~cash ~~party~~all toremaining a$56.0 ~~Credit~~million ~~Agreement dated as~~ of ~~August 13,~~ ~~2004, as subsequently amended (~~the ~~“2004~~Senior ~~Credit~~Unsecured ~~Facility”).~~Notes Onon ~~May~~April 2215, ~~2009~~2010, the ~~Company~~Redemption ~~entered into a Termination Agreement with the agent and J P Morgan Chase Bank, N~~Date.A. ~~and~~The ~~National~~redemption ~~City~~price ~~Bank,~~for the ~~latter~~Notes ~~two~~was ~~as issuing~~100% ~~banks relating to letters~~ of ~~credit, pursuant to which, among other things,~~ the ~~2004~~principal ~~Credit~~amount ~~Facility~~plus ~~was~~accrued ~~terminated, the Company paid the $72.7 million of outstanding term loan balance (principal~~ and ~~accrued~~unpaid interest) ~~from~~to ~~cash on hand, and security held by~~ the ~~lenders~~Redemption ~~on substantially all the Company’s property was released~~Date. ~~In the second quarter of 2009 this payment resulted in an approximate $0.4 million charge to earnings for the acceleration of~~ Accelerated deferred financing charges~~. Letters~~ of ~~credit aggregating~~ $10.86 million ~~previously~~will ~~issued~~be recorded in ~~favor of third parties were left outstanding supported by~~ the ~~letters~~second quarter of ~~credit newly issued under the sub-facility described above~~2010.

As of March 31, 2010, the Company was in full compliance with all debt covenant requirements.

Total interest cash payments by the Company for all indebtedness for the three months ended March 31, 2010 and March 31, 2009 was $8,560 and $9,764, respectively.

The carrying value of our Senior Subordinated Notes and Holdings Senior Unsecured Notes are $190.0 million and $56.0 million, respectively. The fair values at March 31, 2010 (excluding accrued interest) are approximately $195.7 million and $56.0 million, respectively.

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

Prior to the termination of the term loan the Company made a $53.6 million excess cash flow payment of the term loan on March 16, 2009. In the first quarter of 2009 this payment resulted in an approximate $0.4 million charge to earnings for the acceleration of deferred financing charges.

The Senior Subordinated Notes due 2014 accrue interest from the issue date at a rate of 8.875% per annum, payable semi-annually in arrears on February 15th and August 15th of each year.

Holdings Senior Unsecured Notes due 2012 accrue interest from the issue date at a rate of 9.5% per annum, payable semi-annually in arrears on April 15 and October 15 of each year. Innophos Holdings, Inc. is dependent on the earnings and distributions from Innophos, Inc. and subsidiaries to fund this obligation. On April 13, 2009 the Company purchased $10.0 million of the 9.5% Senior Unsecured Notes due April 2012 for $6.5 million. The $3.5 million retirement gain was reflected in interest expense, net in Holdings Consolidated Statement of Operations in the second quarter of 2009. Holdings also recorded accelerated deferred financing costs of approximately $0.2 million in the second quarter of 2009.

As of September 30, 2009, the Company was in full compliance with all debt covenant requirements.

Total interest cash payments by the Company for all indebtedness for the nine months ended September 30, 2009 and September 30, 2008 was $17,399 and $23,572, respectively.

The carrying value of our Senior Subordinated Notes and Holdings Senior Unsecured Notes are $190.0 million and $56.0 million, respectively. The fair values at September 30, 2009 (excluding accrued interest) are approximately $191.9 million and $56.0 million, respectively.

Interest expense, net consists of the following:

Three months ended

~~Nine months ended~~

September 30,2009

September 30,2008

September 30,2009

September 30,2008

March 31,2010

March 31,2009

Interest expense

4,~~366~~357

75,~~002~~395

~~14,499~~

~~20,159~~

Deferred financing cost

354

~~590~~964

~~2,288~~

~~1,774~~

Interest income

(54126

)

(~~359~~277

)

~~(491~~

)

~~(639~~

)

Less: amount capitalized for capital projects

(59165

)

(317

)

~~(148~~

)

~~(314~~

)

Total interest expense, net

4,~~607~~420

76,~~230~~065

~~16,148~~

~~20,980~~

139. Other Long-term liabilities:

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

10. Other Long-term liabilities:

Other long-term liabilities consist of the following:

	September 30,2009		December 31,2008
	March 31,2010		December 31,2009
Environmental liabilities	$	1,100		1,100
Profit sharing liabilities		2,~~637~~145		32,~~106~~350
Deferred income taxes		1920,~~480~~860		2122,~~707~~043
Pension and post retirement liabilities (U.S. and Canada only)		5,151		4,647
Pension and post retirement liabilities (US and Canada only)		5,513		5,240
Other liabilities		7,139		5,305
Other Liabilities		7,138		7,187
	$	3536,~~507~~756	$	3537,~~865~~920

1110. Income Taxes:

The effective income tax rate on income before taxes was ~~33%~~approximately ~~and 36~~35% for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2009~~2010 compared to ~~31%~~approximately ~~and 30~~36% for the ~~three~~comparable ~~and~~period ~~nine~~in ~~months ended September 30, 2008~~2009. The change in the effective tax rate is a result of ~~increased~~a ~~earnings~~shift inof ~~higher~~earnings before tax ~~jurisdictions~~combined ~~such~~with ~~as the United States versus Mexico and~~ a ~~full~~change ~~valuation~~in ~~allowance~~tax onrates for our ~~net~~ ~~deferred~~operations ~~tax assets~~ in ~~the~~multiple ~~U.S.~~tax ~~as of September 30, 2008~~jurisdictions. Currently, the Company is under examination, ~~or has been contacted for examination,~~ by certain foreign jurisdictions for its income tax returns for the years 2004 through 2008. As of ~~September~~ March 3031, ~~2009~~2010, no significant adjustments have been proposed to the Company’s tax positions and the Company currently does not anticipate any adjustments that would result in a material change to its financial position.

The Company is included in a consolidated U.S. tax return of Innophos Holdings, Inc., however the income tax provision has been prepared on a separate return basis. The Mexican subsidiaries file separate tax returns and current income taxes receivable or payable are reflected on the accompanying combined balance sheets.

Income taxes paid were $466,~~277~~800 and $227,~~408~~037 for the ~~nine~~three months ended ~~September~~ March 3031, ~~2009~~2010 and ~~September~~March 3031, ~~2008~~2009, respectively.

1211. Commitments and Contingencies

Environmental

The Company’s operations are subject to extensive and changing federal and state environmental laws and regulations. The Company’s manufacturing sites have an extended history of industrial use, and soil and groundwater contamination have or may have occurred in the past and might occur or be discovered in the future.

Environmental efforts are difficult to assess for numerous reasons, including the discovery of new remedial sites, discovery of new information and scarcity of reliable information pertaining to certain sites, improvements in technology, changes in environmental laws and regulations, numerous possible remedial techniques and solutions, difficulty in assessing the involvement of and the financial capability of other potentially responsible parties and the extended time periods over which remediation occurs. Other than the items listed below, the Company is not aware of material environmental liabilities which are probable and estimable. As the Company’s environmental contingencies are more clearly determined, it is reasonably possible that amounts may need to be accrued. However, management does not believe, based on current information, that environmental remediation requirements will have a material impact on the Company’s results of operations, financial position or cash flows.

Under the agreements by which the Company acquired the Phosphates Business and related assets, the Company has certain rights of indemnification from the sellers for breach of representations, warranties, covenants and other agreements. The indemnification rights relating to undisclosed environmental matters are subject to certain substantial limitations and exclusions and expired as of August 13, ~~2009.~~

Future environmental spending is probable at our site in Nashville, TN, the eastern portion of which had been used historically as a landfill, and a western parcel previously acquired from a third party, which reportedly had housed, but no longer does, a fertilizer and pesticide manufacturing facility. We have an estimated liability with a range of $0.9-$1.2 million. The remedial action plan has yet to be finalized, and as such, the Company has recorded a liability, which represents the Company’s best estimate, of $1.1 million as of September 30, 2009.

The Environmental Protection Agency, or EPA, has indicated that compliance at facilities in the phosphate industry is a high enforcement priority. After several years of expressing various concerns (without issuing any notice of violation) about aspects of our

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

~~Geismar,~~Under ~~LA operations, in March 2008, we received a letter from~~ the ~~Department~~agreements of Justice, or DOJ, indicating that EPA had referred the case for civil enforcement, contending, among other things, that we do not qualify for certain exemptions we have claimed, and alleging that we violate RCRA at Geismar by failing to manage two materials appropriately. Although the letter stated that EPA/DOJ intended to seek unspecified penalties and corrective action, it proposed discussions to explore possible resolution, which ~~we undertook and are pursuing. During~~ the ~~fourth~~Company ~~quarter~~acquired ~~of 2008,~~ the ~~DOJ/EPA~~Phosphates ~~demanded~~Business ~~that Innophos~~ and ~~its neighboring interconnected supplier~~related assets, ~~PCS, undertake certain “interim measures” to address DOJ/EPA’s chief environmental concerns. We and PCS have initiated joint technical efforts to explore solutions to~~ the ~~government~~Company ~~concerns.~~has ~~Based~~certain onrights ~~our~~of ~~contact~~indemnification ~~with~~from the ~~agencies~~sellers tofor ~~date~~breach ~~in 2009, we have determined it is probable that one~~ of ~~the process modifications will need to be undertaken in the next several months~~representations, ~~and likewise probable that the capital expenditure and future operating expense of that modification will not be material~~warranties, ~~unless the~~covenants ~~DOJ adds terms~~ and ~~conditions~~other ~~that could result in the parties not reaching agreement~~agreements. ~~However, the second measure sought by DOJ/EPA has not yet been fully evaluated from a technological or cost standpoint.~~ The ~~companies~~indemnification ~~have~~rights ~~proposed~~relating to ~~DOJ/EPA a~~undisclosed ~~schedule~~environmental ~~for~~matters ~~such evaluation, and although the government has not approved the schedule, the companies~~ are ~~proceeding~~subject ~~as proposed. Based upon work so far, there appears~~ to ~~be at least one technically viable approach, but costs of a full scale~~certain ~~operation as compared to other approaches are not known at this time. Even though the companies have begun~~ substantial ~~technical~~limitations work in an attempt to develop a feasible approach to address DOJ/EPA’s concerns, we cannot guarantee that our technical efforts will be successful, whether either party would be willing to implement solutions or, depending on those factors and ~~the~~exclusions agencies’ position, whether this matter will be settled with DOJ/EPA or will require litigation. Should litigation become necessary to defend our operations at Geismar as compliant with environmental laws and ~~regulations,~~expired ~~no assurance can be given~~ as toof ~~its outcome. We have determined that a contingent liability is neither probable nor estimable at this time~~August 13, ~~but liability is reasonably possible~~2009.

The remedial action plan has yet to be finalized, and as such, the Company has recorded a liability, which represents the Company’s best estimate, of $1.1 million as of March 31, 2010.

The U.S. Environmental Protection Agency, or EPA, has indicated that compliance at facilities in the phosphate industry is a high enforcement priority. After several years of expressing various concerns (without issuing any notice of violation) about aspects of our Geismar, LA operations, in March 2008, we received a letter from the Department of Justice, or DOJ, indicating that EPA had referred the case for civil enforcement, contending, among other things, that we do not qualify for certain exemptions we have claimed, and alleging that we violate the Resource Conservation and Recovery Act (RCRA) at Geismar by failing to manage two materials appropriately. Although the letter stated that EPA/DOJ intended to seek unspecified penalties and corrective action, it proposed discussions to explore possible resolution, which we undertook and are pursuing. During the fourth quarter of 2008, the DOJ/EPA demanded that Innophos and its neighboring interconnected supplier, PCS, undertake certain “interim measures” to address DOJ/EPA’s chief environmental concerns. We and PCS have initiated joint technical efforts to explore solutions to the government concerns. Based on our contact with the agencies to date, we have determined it is probable that one of the process modifications will need to be undertaken in the near term, and likewise probable that the capital expenditure and future operating expense of that modification will not be material, unless the DOJ adds terms and conditions that could result in the parties not reaching agreement. However, the second measure sought by DOJ/EPA has not yet been fully evaluated from a technological or cost standpoint. The companies have proposed to DOJ/EPA a schedule for such evaluation, and although the government has not formally approved the schedule, the companies are proceeding as proposed. Based upon work so far, there appears to be at least one technically viable approach, but both detailed costing and other approaches need to be evaluated. Even though the companies have begun substantial technical work in an attempt to develop a feasible approach to address DOJ/EPA’s concerns, we cannot guarantee that our technical efforts will be successful, whether either party would be willing to implement solutions or, depending on those factors and the agencies’ position, whether this matter will be settled with DOJ/EPA or will require litigation. Should litigation become necessary to defend our operations at Geismar as compliant with environmental laws and regulations, no assurance can be given as to its outcome. We have determined that a contingent liability is neither probable nor estimable at this time, but liability is reasonably possible.

Litigation

OCP Arbitration

In December 2008, Innophos’ Mexican affiliate, Innophos Mexicana, or Mexicana, initiated binding arbitration with OCP, S.A., or OCP, its sole supplier of phosphate rock for Mexico, concerning pricing terms for 2008 and 2009 under Mexicana’s agreement with that supplier. Mexicana also claimed that OCP’s proposed pricing breached the agreement. A panel of three arbitrators sitting in Paris, France under auspices of the International Chamber of Commerce was selected to hear the case, interpret the pricing provisions of the contract, and derive the phosphate rock price for both years. Hearings on the 2008 and 2009 pricing issues are scheduled to begin on November 9, 2009.

The parties previously had reached agreement on 2008 interim prices, which the Company paid for shipments during that year. Management has determined that the contingent liability arising from the arbitration of having to pay more than the amounts paid as 2008 interim prices is not material.

The parties also agreed on interim prices for 2009, which the Company is paying for this year’s volumes. For inventory accounting purposes, the Company is recording its cash cost under the interim pricing agreement. Management has determined that there is both a contingent liability and a contingent asset that could result from 2009 phosphate rock prices determined by the arbitration to be higher or lower than the price being used for inventory purposes, respectively. Management has concluded that the contingent liability of having to pay amounts above the 2009 interim prices is neither remote nor probable, but is reasonably possible. While management believes the more likely outcome of the arbitration will be rock prices below the interim prices paid, in light of the positions of the parties reflected in the arbitration filings and the quantity of phosphate rock purchased by Mexicana, management has estimated the aggregate contingent liability of having to pay more than the 2009 interim prices ranges up to $7.5 million.

In July 2009, OCP added counterclaims to the arbitration, asserting that Mexicana breached the rock supply agreement by (i) purchasing MGA (merchant green acid) for processing in 2009 in violation of a phosphate rock exclusivity provision, (ii) failing in 2009 to buy historical quantities of rock in violation of a minimum purchase obligation OCP asserts is not stated, but is implied, in the rock requirements contract, and (iii) reducing its phosphate rock orders for 2009 without providing a one year notice under a French statute OCP claims is applicable. Mexicana intends to defend against the counterclaims vigorously and assert multiple defenses it believes will dispose of the claims.

On October 28, 2009, OCP requested the arbitral tribunal to order Mexicana to furnish interim security in the amount of $68.4 million pending the arbitration, which is now expected to conclude after counterclaim-related hearings scheduled for July 2010. Management believes the OCP request meets none of the applicable standards for this type of interim relief, is totally unwarranted by the facts and circumstances of the arbitration case, and the likelihood of the arbitral tribunal approving security for the OCP counterclaims in the nature and magnitude of OCP’s request is remote. Accordingly, Mexicana will vigorously oppose the request. The tribunal has yet to establish a schedule for briefing, and possibly hearings, on this issue. Thus far, the panel has indicated that decisions on both pricing issues and the counterclaims will be rendered after the conclusion of the July 2010 hearings.

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

Management has determined that any contingent liabilities associated with the counterclaims are neither probable nor estimable. These contingent liabilities are either remote or reasonably possible, and that the most likely outcome is a finding of no liability. Therefore, no accrual is necessary or has been made. OCP’s request for security has not altered management’s evaluation of the counterclaims or the arbitration case as a whole.

Although contingent liabilities from the OCP arbitration require no accrual at this time, if the counterclaims were determined adversely to Mexicana, it is possible they could have a material adverse effect on Innophos’ results of operations or financial condition, and/or cash flows.

Mexican CNA Water Tax Claims

Nature and Extent. In November 2004, our Mexican subsidiary, Innophos Fosfatados, or Fosfatados, received notice from the CNA of ~~the~~ the Fresh Water Claims relating to water usage at our Coatzacoalcos, Veracruz, Mexico plant. As initially assessed, the claims extended from 1998-2002, but subsequently the 1998 claim was determined to be beyond the applicable statute of limitations. As now assessed, the claims through 2002 total approximately $2325.24 million (at current exchange rates as of ~~October~~April 23, ~~2009~~2010), including basic charges of $7.15 million and $1617.19 million for interest, inflation and penalties. Management believes that Fosfatados has valid bases for challenging the Fresh Water Claims, and that matter is being defended vigorously.

Rhodia Indemnity Confirmed. As a result of favorably concluded litigation in New York state courts against Rhodia, S.A. and affiliates, or the New York Litigation, concerning their indemnification obligation for CNA claims as “taxes” under the agreement by which we purchased our business from those parties, Innophos is fully indemnified against the Fresh Water Claims, as well as any like claims pertaining to periods prior to the closing date of purchase, August 13, 2004, were such liabilities to be sustained.

Further Proceedings. The Fresh Water Claims are currently pending reconsideration from appeals in the Mexican fiscal court system. On October 2829, 2009, ~~Innophos learned informally that~~ the Tax Court ~~ruling~~ on remand ~~was~~ruled ~~likely to be decided~~ unfavorably as to ~~some or~~ all of ~~the~~Fosfatado’s remaining ~~issues~~defenses. ~~The~~On ~~written~~January 10, ~~decision is not expected to be served by the Court for a number of weeks~~2010, atFosfatados ~~which~~appealed ~~time we will evaluate~~ the ~~matter~~decision ~~in light~~ of the ~~basis upon which the~~ Tax Court ~~decided~~on ~~each issue~~remand. On January ~~Mexican~~27, ~~counsel~~2010, ~~has~~CNA ~~confirmed~~also ~~that~~filed an appeal ofchallenging ~~any~~the ~~adverse~~prior decision ~~will be filed in due course, and~~ that ~~counsel~~the ~~may~~CNA ~~recommend~~claim ~~instituting~~as ~~constitutional~~to ~~and~~1998 ~~other~~is ~~claims~~beyond ~~as part of~~ the ~~appeal~~applicable orstatute inof ~~separate proceedings~~limitations. ~~Therefore,~~ weThe ~~anticipate~~timing ~~this~~of ~~matter~~a todecision ~~continue~~on ~~for~~this ~~some~~round ~~time~~of inappeals ~~the~~is ~~appeal~~not ~~process~~known.

A14 final determination of the Fresh Water Claims may require further appeals to the Mexican Supreme Court and remands to the CNA or to lower courts, a process that might continue for several years. In the event that the appeals were to be decided against us and Rhodia were then unable to pay on its indemnification obligations, our subsidiary could be required to satisfy a judgment for the entire amount claimed.

Possible Post-2002 Claims. If the CNA Fresh Water Claims were sustained for the period now at issue, it is possible that the CNA would seek to claim similar higher duties, fees and other charges for fresh water extraction and usage from 2004 on into the future (2003 is believed to be beyond the statute of limitations), or the Post-2002 Fresh Water Claims. Management estimates that amounts involved would be approximately $7.2 million of additional basic charges to date at current exchange rates, $8.0 million relating to interest, inflation, and penalties, and, under current operating conditions, approximately $0.4 million of additional basic charges per year at current exchange rates. Based on the judgments in the New York Litigation, we believe Rhodia would be responsible to indemnify us fully (as additional taxes) for those Post-2002 Fresh Water Claims arising on or before the August 2004 closing, representing approximately $0.9 million of basic charges and $1.4 million relating to interest, inflation, and penalties at current exchange rates. Moreover, although not included in our court judgments, we believe Rhodia is required to indemnify us fully for post-closing “losses” caused by breaches of covenants set forth in the agreement, which could represent the remainder of the Post-2002 Fresh Water Claims exposure. Rhodia has contested indemnification responsibility for those breaches, but its motion for partial summary judgment to dismiss our claims was denied by the New York trial court in January 2009. It is possible that the New York Litigation will proceed to trial or further motions to resolve remaining issues.

Based upon advice of counsel and our review of the CNA Fresh Water Claims and the Post-2002 Fresh Water Claims, the facts and applicable law, management has determined that liability is reasonably possible, but is neither probable nor reasonably estimable. Accordingly, we did not establish a liability on the balance sheet as of September 30, 2009. As additional information is gained, management will reassess the potential liability and establish any loss reserve as appropriate. The ultimate liability amount could be material to our results of operations and financial condition. Furthermore, given Rhodia’s financial condition, we cannot be sure we will ultimately collect amounts due from Rhodia under our indemnification rights, even though they have been confirmed by court judgments.

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

~~Mexican~~A final determination of the Fresh Water ~~Discharge~~Claims ~~Duties~~may require further appeals to the Mexican Supreme Court and remands to the CNA or to lower courts, a process that might continue for several years. In the event that the appeals were to be decided against us and Rhodia were then unable to pay on its indemnification obligations, our subsidiary could be required to satisfy a judgment for the entire amount claimed.

OnPossible ~~August 18,~~Post-2002 ~~2009,~~Claims. ~~Fosfatados~~If ~~was~~the CNA ~~served~~Fresh ~~with~~Water ~~four~~Claims ~~resolutions~~were ~~from~~sustained for the period now at issue, it is possible that the CNA ~~seeking~~would ~~water~~seek ~~discharge~~to claim similar higher duties, fees and other charges for fresh water extraction and usage from 2005 on into the future (2003 and 2004 are ~~relating~~believed to be beyond the ~~Company’s~~statute ~~Coatzacoalcos~~of limitations), ~~Veracruz~~or the Post-2002 Fresh Water Claims. Management estimates that amounts involved would be approximately $6.4 million of additional basic charges to date at current exchange rates, ~~Mexico~~$6.8 ~~plant~~million relating ~~for~~to ~~the~~interest, ~~period~~inflation, ~~2002-2005~~and penalties, and, ~~amounting~~under tocurrent aoperating ~~total~~conditions, ofapproximately $21.52 million of additional basic charges per year at current exchange rates. ~~The~~Although ~~resolutions~~not ~~affirm~~included ~~that~~in our court judgments in the ~~plant~~New ~~has~~York Litigation ~~complied~~against ~~with~~Rhodia, ~~the~~we ~~relevant~~believe ~~parameters~~Rhodia is required to indemnify us fully for post-closing “losses” caused by breaches of covenants set forth in ~~its discharge~~the ~~permits~~agreement, orwhich ~~CPDs~~could represent the remainder of the Post-2002 Fresh Water Claims exposure. Rhodia has contested indemnification responsibility for those breaches, but ~~assert~~its ~~that~~motion ~~Fosfatados~~for ~~has~~partial ~~not~~summary ~~met~~judgment ato ~~different~~dismiss ~~set~~our ofclaims ~~discharge~~was ~~standards~~denied by the New York trial court in ~~general~~January ~~duties~~2009. ~~tables~~It ~~that~~is ~~limit~~possible that the ~~discharge~~New ofYork ~~various~~Litigation will ~~contaminants~~proceed ~~and~~to ~~set~~trial ~~fees~~or ~~payable~~involve ~~for~~further ~~exceeding~~motions ~~those~~to ~~limits~~resolve remaining issues.

~~Management~~Based ~~believes~~upon ~~that~~advice ~~the~~of ~~duties~~counsel ~~tables~~and ~~are~~our ~~not~~review ~~applicable~~of the ~~because~~CNA ~~they~~Fresh ~~were~~Water ~~superseded~~Claims byand the ~~CPDs,~~Post-2002 ~~which~~Fresh ~~were~~Water ~~specifically~~Claims, ~~designed~~the facts and ~~issued~~ ~~for~~applicable ~~the plant~~law, ~~and~~management ~~with~~has ~~which~~determined ~~the~~that ~~Company~~liability ~~complies.~~is Inreasonably ~~addition~~possible, ~~management~~but ~~believes~~is ~~there~~neither ~~are~~probable ~~other~~nor ~~meritorious~~reasonably ~~defenses~~estimable. Accordingly, ~~including~~we did not establish a liability on the ~~applicable~~balance ~~statute~~sheet as of ~~limitations~~March 31, to2010. ~~claims~~As ~~based~~additional oninformation is gained, management will reassess the ~~duties~~potential ~~tables.~~liability Onand ~~October 21,~~establish ~~2009, Fosfatados~~any ~~filed~~loss anreserve ~~annulment~~as ~~proceeding~~appropriate. inThe ~~the~~ultimate ~~Mexican~~liability ~~fiscal~~amount ~~court~~could ~~system~~be ~~seeking~~material to ~~void~~our results ~~the~~of ~~resolutions~~operations and financial condition.

~~Management believes~~Even ~~that~~though ~~any~~our ~~claim~~indemnification orrights ~~liability,~~have tobeen ~~the~~confirmed ~~extent~~by ~~relating~~court tojudgments, ultimately ~~periods~~we ~~prior~~are toalso ~~the~~dependent ~~2004~~on ~~acquisition~~Rhodia ofhaving ~~our~~sufficient ~~business~~financial ~~from~~capacity ~~affiliates~~to ofmeet ~~Rhodia,~~its ~~would~~obligations beshould ~~fully~~they ~~indemnified by Rhodia~~arise. ~~We put~~ Rhodia’s onfinancial ~~notice~~position ~~of an indemnification claim and, thus far, it~~ has ~~declined~~improved ~~responsibility~~significantly ~~for~~in ~~the~~recent ~~claim~~quarters and ~~the~~we ~~opportunity~~currently tosee ~~control~~no ~~the~~reason ~~defense.~~to ~~Therefore,~~suspect ~~Innophos~~they would ~~has~~be ~~undertaken~~unable ~~the~~to ~~defense~~meet oftheir ~~this matter, reserving its indemnity rights against Rhodia~~obligations.

Other Legal Matters

In June 2005, our subsidiary, Innophos Canada, Inc., was contacted by representatives of The Mosaic Company (a division of Cargill Corporation), or Mosaic, seeking a meeting to discuss the status of an ongoing remedial investigation and clean-up Mosaic is conducting at its former fertilizer manufacturing site located north of Innophos’ Pt. Maitland, Ontario, Canada plant site. The remediation is being overseen by the Provincial Ministry of Environment, or MOE. Mosaic stated that, in its view, we and Rhodia (our predecessor in interest prior to August 2004) were responsible for some phosphorus compound contamination at a rail yard between the Innophos and Mosaic sites, and will be asked to participate in the clean-up. We have determined that this contingent liability is neither probable nor estimable at this time, but liability is reasonably possible. We have notified Rhodia of the Mosaic claim, and we will seek all appropriate indemnification.

In March 2008, Sudamfos S.A., or Sudamfos, an Argentine phosphate producer, filed a request for arbitration before the ICC International Court of Arbitration, Paris, France, or ICC, of a commercial dispute with Mexicana. Sudamfos claimed Mexicana agreed to sell Sudamfos certain quantities of phosphoric acid for delivery in 2007 and 2008, and sought an order requiring Mexicana to sell approximately 12,500 metric tons during 2008 in accordance with the claimed agreement. Subsequently, Sudamfos withdrew the request for arbitration. In October 2008, Mexicana filed a lawsuit in Mexico against Sudamfos to collect approximately $1.2 million representing the contract price for prior deliveries of acid that Sudamfos had refused to pay. In October 2009, Sudamfos answered the suit and counterclaimed for $3.0 million based upon the agreement alleged in the arbitration request to sell additional acid, which agreement Mexicana denies. Management has determined that the outstanding receivable is fully collectible, and that the contingent liability from the Sudamfos counterclaim is remote, and therefore no accrual is required.

In addition, we are party to legal proceedings and contractual disputes that arise in the ordinary course of our business. Except as to the matters specifically discussed, management does not believe that these matters represent probable liabilities. However, these matters cannot be predicted with certainty and an unfavorable resolution of one or more of them could have a material adverse effect on our business, results of operations, financial condition, and/or cash flows.

~~Other contingencies~~15

Under ASC 360, “Property, Plant, and Equipment,” long-lived assets including property, plant and equipment and amortized intangible assets are evaluated and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the undiscounted future cash flows expected to be generated by the asset or asset group. When this comparison indicates that impairment must be recorded, the impairment recognized is the amount by which the carrying amount of the assets exceeds the fair value of the assets.

The determination whether or not assets are impaired and the corresponding useful lives of these long-lived assets requires significant judgment. The development of future cash flow projections requires management estimates related to forecasted sales and expected costs trends. To the extent that changes in business conditions occur or other management decisions are made that result in adjusted management projections or alternative use of the assets, impairment losses or accelerated depreciation may occur in future periods.

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

~~In our Mexican operations, we continue to monitor changes in circumstances where the undiscounted cash flows would indicate that the carrying amount of an asset or asset group may not be recoverable~~12. ~~The~~Pension: uncertainty in phosphate rock prices, volume decreases, sales price erosion, and the reduced operating rates for the Coatzacoalcos plant were included in management’s estimates and are consistent with management’s expectations. Despite worsening conditions in 2009, no changes in circumstances or events have thus far indicated the carrying amounts of the Company’s long-lived assets were not recoverable from undiscounted cash flows. Consequently, we did not perform any impairment test of our long-lived assets in 2009 as a follow up to the test performed for year end 2008. The carrying value of the Coatzacoalcos plant was approximately $86 million at September 30, 2009. The undiscounted cash flows of the STPP (Sodium Tripolyphosphate) asset group exceeded their carrying value by 31%, while the other asset groups exceeded their carrying values by significantly greater margins.

18Net periodic benefit expense for the United States plans for the three months ended March 31, 2010:


	2010
	Pension benefits			Other benefits			Total
Service cost	$	—		$	90		$	90
Interest cost		27			46			73
Expected return on assets		(21	)		—			(21	)
Amortization of prior service cost		(1	)		65			64
Amortization of unrecognized (gains)/losses		—			(19	)		(19	)

Net periodic benefit expense	$	5		$	182		$	187

Net periodic benefit expense for the United States plans for the three months ended March 31, 2009:


	2009
	Pension benefits			Other benefits			Total
Service cost	$	—		$	88		$	88
Interest cost		26			41			67
Expected return on assets		(24	)		—			(24	)
Amortization of prior service cost		—			65			65
Amortization of unrecognized (gains)/losses		—			(21	)		(21	)

Net periodic benefit expense	$	2		$	173		$	175

We made our entire cash contributions of $2.6 million for our U.S. defined contribution plan during the first quarter of 2010 for the plan year 2009. The U.S. defined benefit cash contributions will be, at a minimum, approximately $0.1 million for 2010.

Net periodic benefit expense for the Canadian plans for the three months ended March 31, 2010:


	2010
	Pension benefits			Other benefits		Total
Service cost	$	52		$	13	$	65
Interest cost		133			21		154
Expected return on assets		(212	)		—		(212	)
Amortization of transition obligation		—			7		7
Amortization of prior service cost		25			—		25
Amortization of unrecognized (gains)/losses		23			5		28
Exchange rate changes		(79	)		15		(64	)

Net periodic benefit expense	$	(58	)	$	61	$	3

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

~~13.~~Net ~~Pension~~periodic benefit expense for the Canadian plans for the three months ended March 31, 2009:

Net periodic benefit expense for the United States plans for the three months ended September 30, 2009:


	2009
	Pension benefits			Other benefits			Total
Service cost	$	37		$	9		$	46
Interest cost		110			17			127
Expected return on assets		(147	)		—			(147	)
Amortization of transition obligation		—			6			6
Amortization of prior service cost		4			—			4
Amortization of unrecognized (gains)/losses		19			1			20
Exchange rate changes		62			(20	)		42

Net periodic benefit expense	$	85		$	13		$	98

	2009
	Pensionbenefits			Otherbenefits			Total
Service cost	$	—		$	88		$	88
Interest cost		26			41			67
Expected return on assets		(24	)		—			(24	)
Amortization of prior service cost		—			65			65
Amortization of unrecognized (gains)/losses		—			(20	)		(20	)
Net periodic benefit expense	$	2		$	174		$	176

We made cash contributions to our Canadian defined benefit plan of $0.3 million during the three months ended March 31, 2010. We expect to make additional cash contributions to our Canadian defined benefit plans of $0.7 million during the remainder of 2010.

~~Net~~13. ~~periodic~~Segment ~~benefit expense for the United States plans for the three months ended September 30, 2008~~Reporting:

	2008
	Pensionbenefits			Otherbenefits			Total
Service cost	$	—		$	82		$	82
Interest cost		29			37			66
Expected return on assets		(27	)		—			(27	)
Amortization of prior service cost		—			65			65
Amortization of unrecognized (gains)/losses		(2	)		(26	)		(28	)
Net periodic benefit expense	$	—		$	158		$	158

Net periodic benefit expense for the United States plans for the nine months ended September 30, 2009:

	2009
	Pensionbenefits			Otherbenefits			Total
Service cost	$	—		$	264		$	264
Interest cost		78			122			200
Expected return on assets		(72	)		—			(72	)
Amortization of prior service cost		—			196			196
Amortization of unrecognized (gains)/losses		—			(62	)		(62	)
Net periodic benefit expense	$	6		$	520		$	526

Net periodic benefit expense for the United States plans for the nine months ended September 30, 2008:

	2008
	Pensionbenefits			Otherbenefits			Total
Service cost	$	—		$	245		$	245
Interest cost		86			110			196
Expected return on assets		(80	)		—			(80	)
Amortization of prior service cost		—			196			196
Amortization of unrecognized (gains)/losses		(6	)		(75	)		(81	)
Net periodic benefit expense	$	—		$	476		$	476

We made our entire cash contributions of $2.6 million for our U.S. defined contribution plan during the first quarter of 2009 for the plan year 2008. The U.S. defined benefit cash contributions will be, at a minimum, approximately $0.1 million for 2009 which payment was made in the second quarter of 2009.

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

Net periodic benefit expense for the Canadian plans for the three months ended September 30, 2009:

	2009
	Pensionbenefits			Otherbenefits		Total
Service cost	$	36		$	9	$	45
Interest cost		110			16		126
Expected return on assets		(147	)		—		(147	)
Amortization of transition obligation		—			7		7
Amortization of prior service cost		5			—		5
Amortization of unrecognized (gains)/losses		19			1		20
Exchange rate changes		(255	)		62		(193	)
Net periodic benefit expense	$	(232	)	$	95	$	(137	)

Net periodic benefit expense for the Canadian plans for the three months ended September 30, 2008:

	2008
	Pensionbenefits			Otherbenefits			Total
Service cost	$	57		$	15		$	72
Interest cost		118			14			132
Expected return on assets		(174	)		—			(174	)
Amortization of initial transition obligation		—			9			9
Amortization of unrecognized (gains)/losses		21			1			22
Exchange rate changes		161			(41	)		120
Net periodic benefit expense	$	183		$	(2	)	$	181

Net periodic benefit expense for the Canadian plans for the nine months ended September 30, 2009:

	2009
	Pensionbenefits			Otherbenefits		Total
Service cost	$	109		$	28	$	137
Interest cost		330			49		379
Expected return on assets		(441	)		—		(441	)
Amortization of transition obligation		—			19		19
Amortization of prior service cost		13			—		13
Amortization of unrecognized (gains)/losses		57			3		60
Exchange rate changes		(428	)		115		(313	)
Net periodic benefit expense	$	(360	)	$	214	$	(146	)

Net periodic benefit expense for the Canadian plans for the nine months ended September 30, 2008:

	2008
	Pensionbenefits			Otherbenefits			Total
Service cost	$	173		$	44		$	217
Interest cost		355			43			398
Expected return on assets		(524	)		—			(524	)
Amortization of initial transition obligation		—			26			26
Amortization of unrecognized (gains)/losses		63			5			68
Exchange rate changes		230			(60	)		170
Net periodic benefit expense	$	297		$	58		$	355

We made cash contributions to our Canadian defined benefit plan of $1.4 million during the nine months ended September 30, 2009. We expect to make additional cash contributions to our Canadian defined benefit plans of $0.3 million during the remainder of 2009.

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

14. Mexican Workforce Reductions:

For the nine months ended September 30, 2009, the Company recorded pre-tax charges of $1.8 million for severance benefits under ASC 712-10 (formerly SFAS No. 112) for the elimination of 38 positions. Approximately, $1.3 million of the severance benefits charge was recorded in the second quarter of 2009 and the Company recorded a $0.4 million severance benefits charge in the first quarter of 2009 which resulted in the elimination of 23 positions. In addition, the Mexican operations have in-effect a temporary workforce reduction program for the hourly personnel resulting in a $0.4 million charge of which $0.3 million was recorded in the second quarter of 2009. The combined $2.2 million pre-tax charge, $1.8 million was included in cost of goods sold and $0.4 million was included in selling, general and administrative costs. The estimated future cash expenditures are immaterial as most cash outlays have occurred as of September 30, 2009.

15. Segment Reporting:

The Company discloses certain financial and supplementary information about its reportable segments, revenue by products and revenues by geographic area. Operating segments are defined as components of an enterprise about which separate discrete financial information is evaluated regularly by the chief operating decision maker, in order to decide how to allocate resources and assess performance. The primary key performance indicators for the chief operating decision maker are Sales and Operating Income. The Company reports its operations in three reporting segments—United States, Mexico and Canada, each of which sells the entire portfolio of products.

For the three months ended September 30, 2009	United States		Mexico		Canada		Eliminations			Total
For the three months ended March 31, 2010	United States		Mexico		Canada		Eliminations			Total
Sales	$	~~119~~113,~~107~~613	$	3445,~~469~~607	$	89,~~358~~787	$			$	~~161~~169,~~934~~007
Intersegment sales		1510,~~810~~357		109,~~467~~230		17,~~840~~219		(4436,~~117~~806	)		—
Total sales	$	~~134~~123,~~917~~970	$	4454,~~936~~837	$	2627,~~198~~006	$	(4436,~~117~~806	)	$	~~161~~169,~~934~~007
Operating income	$	2418,~~638~~362	$	1,~~975~~536	$	1,~~880~~727	$	—		$	2821,~~493~~625
For the three months ended September 30, 2008	United States		Mexico		Canada		Eliminations			Total
Depreciation expense	$	6,932	$	5,229	$	494	$	—		$	12,655
Sales	$	146,154	$	133,732	$	11,886	$	—		$	291,772
For the three months ended March 31, 2009	United States		Mexico		Canada		Eliminations			Total
Intersegment sales		7,687		11,307		16,568		(35,562	)		—
Sales	$	122,185	$	58,427	$	10,205	$			$	190,817
Total sales	$	153,841	$	145,039	$	28,454	$	(35,562	)	$	291,772
Intersegment sales		14,237		703		20,066		(35,006	)		—
Operating income	$	45,342	$	62,357	$	5,148	$	—		$	112,847
Total sales	$	136,422	$	59,130	$	30,271	$	(35,006	)	$	190,817
For the nine months ended September 30, 2009	United States		Mexico		Canada		Eliminations			Total
Operating income	$	40,873	$	7,517	$	6,898	$	—		$	55,288
Sales	$	356,886	$	132,318	$	30,313	$	—		$	519,517
Depreciation and amortization expense	$	6,192	$	4,954	$	451	$	—		$	11,597
Intersegment sales		47,811		14,154		53,830		(115,795	)		—
Total sales	$	404,697	$	146,472	$	84,143	$	(115,795	)	$	519,517
Operating income	$	94,129	$	7,795	$	13,295	$	—		$	115,219
For the nine months ended September 30, 2008	United States		Mexico		Canada		Eliminations			Total
Sales	$	356,431	$	333,143	$	28,736	$	—		$	718,310
Intersegment sales		22,806		24,198		49,479		(96,483	)		—
Total sales	$	379,237	$	357,341	$	78,215	$	(96,483	)	$	718,310
Operating income	$	63,254	$	155,393	$	7,870	$	—		$	226,517

2117

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

1614. Condensed Combining Financial Statements:

The following condensed combined financial data is presented to segregate the assets, liabilities, and results of operations and cash flows of the US operations (the “Guarantors”) and the Canadian and Mexican operations (the “Non-guarantors”). Innophos Inc. has issued debt and the Guarantor subsidiary is a 100% wholly owned subsidiary of Innophos Inc. The Non-guarantors are 100% wholly-owned subsidiaries of the Guarantors. Innophos, Inc. and the Guarantor subsidiary will fully and unconditionally and jointly and severally, guarantee the Company’s obligations under the Company’s Senior Subordinated Notes due 2014. Investments in subsidiaries are accounted for by the guarantor using the equity method of accounting. The Non-guarantors are presented on a combined basis. The principal combining adjustments are to eliminate intercompany balances and transactions.

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet

As of ~~September~~March 3031, ~~2009~~2010

(In thousands)

	Innophos, Inc.		GuarantorSubsidiary		Non-GuarantorSubsidiary		AdjustmentsandEliminations			Total
ASSETS
Current assets:
Current Assets:
Cash and cash equivalents	$	5572,~~605~~556	$	32	$	6642,~~948~~476	$	—		$	~~122~~115,~~556~~034
Restricted cash		—		—		1,748		—			1,748
Accounts receivable, net		308,462		—		287,549		(524,669	)		71,342
Accounts receivable, net		270,676		—		243,306		(447,445	)		66,537
Inventories		57,363		—		57,348		—			114,711
Inventories		56,573		—		47,697		—			104,270
Other current assets		22,770		—		21,189		(84	)		43,875
Other current assets		21,885		—		13,893		(81	)		35,697
Total current assets		461,151		2		408,562		(524,753	)		344,962
Total current assets		404,739		3		373,592		(447,526	)		330,808
Property, plant and equipment, net		99,251		—		100,880		—			200,131
Property, plant and equipment, net		102,066		—		107,692		—			209,758
Goodwill		7,237		—		44,469		—			51,706
Investment in subsidiaries		~~245~~240,~~235~~263		~~197~~189,~~771~~599		—		(~~443~~429,~~006~~862	)		—
Intercompany notes		29,~~396~~885		—		—		(29,~~396~~885	)		—
Intangibles and other assets, net		3937,~~453~~028		—		12,~~355~~658		—			5149,~~808~~686
Total assets	$	828,126	$	197,774	$	538,108	$	(919,928	)	$	644,080
Total	$	874,815	$	189,601	$	566,569	$	(984,500	)	$	646,485
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current Liabilities:
Short term borrowings and current portion of long-term debt	$	—	$	—	$	—	$	—		$	—
Current portion of long-term debt	$	—	$	—	$	—	$	—		$	—
Accounts payable, trade and other		~~255~~294,~~360~~930		—		~~227~~266,~~216~~616		(~~447~~524,~~445~~669	)		3536,~~131~~877
Other current liabilities		2420,~~455~~784		—		1611,~~536~~414		(8184	)		4032,~~910~~114
Total current liabilities		~~279~~315,~~815~~714		—		~~243~~278,~~752~~030		(~~447~~524,~~526~~753	)		7668,~~041~~991
Long-term debt		190,000		—		29,~~396~~885		(29,~~396~~885	)		190,000
Other long-term liabilities		1518,~~779~~363		—		1918,~~728~~393		—			3536,~~507~~756
Total stockholders’ equity		~~342~~350,~~532~~738		~~197~~189,~~774~~601		~~245~~240,~~232~~261		(~~443~~429,~~006~~862	)		~~342~~350,~~532~~738
Total liabilities and stockholders’ equity	$	828,126	$	197,774	$	538,108	$	(919,928	)	$	644,080
Total	$	874,815	$	189,601	$	566,569	$	(984,500	)	$	646,485

2218

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet

As of December 31, ~~2008~~2009

(In thousands)

	Innophos, Inc.		GuarantorSubsidiary*		Non-GuarantorSubsidiary		AdjustmentsandEliminations			Total
ASSETS
Current assets:
Current Assets:
Cash and cash equivalents	$	6172,~~295~~079	$	52	$	6360,~~323~~141	$	—		$	~~124~~132,~~623~~222
Restricted cash		—		—		—1,749		—			—1,749
Accounts receivable, net		~~214~~285,~~941~~306		—		~~193~~264,~~432~~519		(~~328~~493,~~841~~480	)		7956,~~532~~345
Inventories		7162,~~146~~552		—		7451,~~164~~084		—			~~145~~113,~~310~~636
Other current assets		2227,~~312~~395		—		1218,~~144~~327		(~~463~~84	)		3345,~~993~~638
Total current assets		~~369~~447,~~694~~332		52		~~343~~395,~~063~~820		(~~329~~493,~~304~~564	)		~~383~~349,~~458~~590
Property, plant and equipment, net		~~111~~99,~~349~~844		—		~~119~~104,~~073~~683		—			~~230~~204,~~422~~527
Goodwill		7,237		—		44,469		—			51,706
Investment in subsidiaries		~~231~~238,~~709~~013		~~193~~188,~~120~~623		—		(~~424~~426,~~829~~636	)		—
Intercompany notes		7929,~~463~~642		—		—		(7929,~~463~~642	)		—
Intangibles and other assets, net		4338,~~427~~345		—		1113,~~091~~138		—			5451,~~518~~483
Total assets	$	842,879	$	193,125	$	517,696	$	(833,596	)	$	720,104
Total	$	860,413	$	188,625	$	558,110	$	(949,842	)	$	657,306
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	~~72,613~~—	$	—	$	—	$	—		$	~~72,613~~—
Accounts payable, trade and other		~~192~~276,~~470~~150		—		~~173~~249,~~047~~910		(~~328~~493,~~841~~480	)		3632,~~676~~580
Other current liabilities		2533,~~549~~149		—		1421,~~146~~538		(~~463~~84	)		3954,~~232~~603
Total current liabilities		~~290~~309,~~632~~299		—		~~187~~271,~~193~~448		(~~329~~493,~~304~~564	)		~~148~~87,~~521~~183
Long-term debt		~~243~~190,~~887~~000		—		7929,~~463~~642		(7929,~~463~~642	)		~~243~~190,~~887~~000
Other long-term liabilities		1618,~~529~~911		—		19,~~336~~009		—			3537,~~865~~920
Total stockholders’ equity		~~291~~342,~~831~~203		~~193~~188,~~125~~625		~~231~~238,~~704~~011		(~~424~~426,~~829~~636	)		~~291~~342,~~831~~203
Total liabilities and stockholders’ equity	$	842,879	$	193,125	$	517,696	$	(833,596	)	$	720,104
Total	$	860,413	$	188,625	$	558,110	$	(949,842	)	$	657,306

2319

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations

For the three months ended ~~September~~March 3031, ~~2009~~2010

(In thousands)

	Innophos, Inc.			GuarantorSubsidiary			Non-GuarantorSubsidiary			AdjustmentsandEliminations			Total
Net Sales	$	~~134~~123,~~915~~970		$	—		$	7181,~~134~~843		$	(4436,~~115~~806	)	$	~~161~~169,~~934~~007
Cost of goods sold		9694,~~015~~816			—			6274,~~304~~291			(4436,~~115~~806	)		~~114~~132,~~204~~301
Gross Profit		3829,~~900~~154			—			87,~~830~~552			—			4736,~~730~~706
Operating expenses:
Selling, general and administrative expenses and R&D		14,261			1			4,975			—			19,237
Selling, general and administrative		10,229			—			4,289			—			14,518
Total operating expenses		14,261			1			4,975			—			19,237
Research & development expenses		563			—			—			—			563
Operating income		24,639			(1	)		3,855			—			28,493
Total operating expenses		10,792			—			4,289			—			15,081
Interest expense, net		4,346			—			261			—			4,607
Operating income		18,362			—			3,263			—			21,625
Foreign exchange gains		(41	)		—			(202	)		—			(243	)
Interest expense, net		4,264			—			156			—			4,420
Other income		—			—			—			—			—
Foreign exchange (gains) losses		84			—			(314	)		—			(230	)
Equity (income) loss		(2,~~816~~241	)		(~~1,391~~975	)		—			43,~~207~~216			—
Income (loss) before income tax		2316,~~150~~255			~~1,390~~975			3,~~796~~421			(43,~~207~~216	)		2417,~~129~~435
Provision for income taxes		74,~~104~~911			—			~~979~~1,180			—			86,~~083~~091
Net income (loss)	$	1611,~~046~~344		$	~~1,390~~975		$	2,~~817~~241		$	(43,~~207~~216	)	$	1611,~~046~~344

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations

For the ~~nine~~three months ended ~~September~~March 3031, 2009

(In thousands)

	Innophos, Inc.			GuarantorSubsidiary			Non-GuarantorSubsidiary			AdjustmentsandEliminations			Total
Net Sales	$	404,696		$	—		$	230,615		$	(115,794	)	$	519,517
Net sales	$	136,422		$	—		$	89,402		$	(35,007	)	$	190,817
Cost of goods sold		~~271~~84,~~726~~522			—			~~196~~71,~~667~~509			(~~115~~35,~~794~~007	)		~~352~~121,~~599~~024
Gross Profit		132,970			—			33,948			—			166,918
Gross profit		51,900			—			17,893			—			69,793
Operating expenses:
Selling, general and administrative expenses and R&D		38,839			2			12,858			—			51,699
Selling, general and administrative		10,498			1			3,477			—			13,976
Total operating expenses		38,839			2			12,858			—			51,699
Research & development expenses		529			—			—			—			529
Operating income		94,131			(2	)		21,090			—			115,219
Total operating expenses		11,027			1			3,477			—			14,505
Interest expense, net		14,956			—			1,192			—			16,148
Operating income (loss)		40,873			(1	)		14,416			—			55,288
Foreign exchange (gains) losses		(14	)		—			(504	)		—			(518	)
Interest expense, net		5,498			—			567			—			6,065
Other income		—			—			—			—			—
Foreign exchange (gains) losses		(25	)		—			440			—			415
Equity (income) loss		(13,636	)		(4,651	)		—			18,287			—
Other income		—			—			(208	)		—			(208	)
Income (loss) before income tax		92,825			4,649			20,402			(18,287	)		99,589
Equity (income) loss		(9,072	)		(4,702	)		—			13,774			—
Provision for income taxes		28,921			—			6,764			—			35,685
Income (loss) before income tax		44,472			4,701			13,617			(13,774	)		49,016
Net income (loss)	$	63,904		$	4,649		$	13,638		$	(18,287	)	$	63,904
Provision for income taxes		13,112			—			4,544			—			17,656
Net income (loss)	$	31,360		$	4,701		$	9,073		$	(13,774	)	$	31,360

2420

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations

For the three months ended September 30, 2008

(In thousands)

	Innophos, Inc.			GuarantorSubsidiary			Non-GuarantorSubsidiary			AdjustmentsandEliminations			Total
Net Sales	$	153,841		$	—		$	173,492		$	(35,561	)	$	291,772
Cost of goods sold		98,616			—			102,134			(35,561	)		165,189
Gross Profit		55,225			—			71,358			—			126,583
Operating expenses:
Selling, general and administrative expenses and R&D		9,882			—			3,854			—			13,736
Total operating expenses		9,882			—			3,854			—			13,736
Operating (loss) income		45,343			—			67,504			—			112,847
Interest expense, net		6,009			—			1,221			—			7,230
Foreign exchange losses		260			—			(1,130	)		—			(870	)
Other income		—			—			(152	)		—			(152	)
Equity (income) loss		(46,522	)		(43,156	)		—			89,678			—
Income (loss) before income tax		85,596			43,156			67,565			(89,678	)		106,639
Provision for income taxes		12,001			—			21,043			—			33,044
Net income (loss)	$	73,595		$	43,156		$	46,522		$	(89,678	)	$	73,595

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations

For the nine months ended September 30, 2008

(In thousands)

	Innophos, Inc.			GuarantorSubsidiary			Non-GuarantorSubsidiary			AdjustmentsandEliminations			Total
Net Sales	$	379,237		$	—		$	435,555		$	(96,482	)	$	718,310
Cost of goods sold		278,393			—			261,244			(96,482	)		443,155
Gross Profit		100,844			—			174,311			—			275,155
Operating expenses:
Selling, general and administrative expenses and R&D		37,589			—			11,049			—			48,638
Total operating expenses		37,589			—			11,049			—			48,638
Operating (loss) income		63,255			—			163,262			—			226,517
Interest expense, net		16,483			—			4,497			—			20,980
Foreign exchange losses (gains)		122			—			(996	)		—			(874	)
Other income		—			—			(390	)		—			(390	)
Equity (income) loss		(111,253	)		(106,097	)		—			217,350			—
Income (loss) before income tax		157,903			106,097			160,151			(217,350	)		206,801
Provision for income taxes		12,161			—			48,898			—			61,059
Net income (loss)	$	145,742		$	106,097		$	111,253		$	(217,350	)	$	145,742

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010

(In thousands)

	Innophos, Inc			GuarantorSubsidiary			Non-guarantorSubsidiary			AdjustmentsandEliminations			Total
	Innophos, Inc.			GuarantorSubsidiary			Non-guarantorSubsidiary			AdjustmentsandEliminations			Total
Cash Flows from operating activities
Net income (loss)	$	6311,~~904~~344		$	~~4,649~~975		$	132,~~638~~241		$	(183,~~287~~216	)	$	6311,~~904~~344
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to net cash provided from (used for) operating activities:
Depreciation and amortization		216,~~223~~932			—			165,~~991~~723			—			3812,~~214~~655
Amortization of deferred financing charges		~~2,288~~354			—			—			—			~~2,288~~354
Deferred income taxes (benefits)		(1,249	)		—			(1,165	)		—			(2,414	)
Deferred income tax (benefit) provision		(721	)		—			164			—			(557	)
Deferred profit sharing		—			—			(~~470~~205	)		—			(~~470~~205	)
Share-based compensation		~~2,470~~721			—			—			—			~~2,470~~721
Equity (income) loss in non-guarantor subsidiaries		(132,~~636~~241	)		(~~4,651~~975	)		—			183,~~287~~216			—
Changes in assets and liabilities:
Increase in restricted cash		—			—			(1,748	)		—			(1,748	)
Decrease in restricted cash		—			—			1,749			—			1,749
(Increase) decrease in accounts receivable		(55,735	)		—			(49,874	)		118,604			12,995
(Increase)/decrease in accounts receivable		(23,156	)		—			(23,030	)		31,189			(14,997	)
Increase in inventories		14,573			—			26,467			—			41,040
Decrease/(increase) in inventories		5,189			—			(6,264	)		—			(1,075	)
(Increase) decrease in other current assets		427			—			(1,749	)		(382	)		(1,704	)
Decrease/(increase) in other current assets		4,625			—			(2,862	)		—			1,763
Increase (decrease) in accounts payable		62,890			—			54,169			(118,604	)		(1,545	)
Increase/(decrease) in accounts payable		18,780			—			16,706			(31,189	)		4,297
Increase in other current liabilities		(1,094	)		—			2,390			382			1,678
Decrease in other current liabilities		(12,365	)		—			(10,124	)		—			(22,489	)
Changes in other long-term assets and liabilities		~~9,429~~(154	)		—			~~228~~144			—			~~9,657~~(10	)
Net cash provided from operating activities		105,490			(2	)		58,877			—			164,365
Net cash provided from (used for) operating activities		9,308			—			(15,758	)		—			(6,450	)
Cash flows from investing activities:
Capital expenditures		(85,~~999~~342	)		—			(31,~~724~~907	)		—			(127,~~723~~249	)
Net cash used for investing activities		(8,999	)		—			(3,724	)		—			(12,723	)
Net Cash used for investing activities		(5,342	)		—			(1,907	)		—			(7,249	)
Cash flows from financing activities:
Repayment from subsidiaries		51,528			—			—			(51,528	)		—
Return of capital to parent		(3,633	)		—			—			—			(3,633	)
Net change in borrowing with Innophos, Inc		—			—			(51,528	)		51,528			—
Excess tax benefits from exercise of stock options		144			—			—						144
Return of capital to parent		(26,161	)		—			—			—			(26,161	)
Net cash used for financing activities		(3,489	)		—			—			—			(3,489	)
Excess tax benefits from exercise of stock options		2			—			—			—			2
Net change in cash		477			—			(17,665	)		—			(17,188	)
Deferred financing costs		(1,050	)		—			—			—			(1,050	)
Cash and cash equivalents at beginning of period		72,079			2			60,141			—			132,222
Principal payment of term loans		(126,500	)		—			—			—			(126,500	)
Cash and cash equivalents at end of period	$	72,556		$	2		$	42,476		$	—		$	115,034
Net cash provided from (used for) financing activities		(102,181	)		—			(51,528	)		—			(153,709	)
Net change in cash		(5,690	)		(2	)		3,625			—			(2,067	)
Cash and cash equivalents at beginning of period		61,295			5			63,323			—			124,623
Cash and cash equivalents at end of period	$	55,605		$	3		$	66,948		$	—		$	122,556

2621

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the ~~nine~~three months ended ~~September~~March 3031, ~~2008~~2009

(In thousands)

	Innophos, Inc			GuarantorSubsidiary			Non-guarantorSubsidiary			AdjustmentsandEliminations			Total
	Innophos, Inc.			GuarantorSubsidiary			Non-guarantorSubsidiary			AdjustmentsandEliminations			Total
Cash Flows from operating activities
Net income (loss)	$	~~145~~31,~~742~~360		$	~~106~~4,~~097~~701		$	~~111~~9,~~253~~073		$	(~~217~~13,~~350~~774	)	$	~~145~~31,~~742~~360
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to net cash provided from (used in) operating activities:
Depreciation and amortization		246,~~124~~192			—			165,~~247~~405			—			4011,~~371~~597
Amortization of deferred financing charges		~~1,774~~964			—			—			—			~~1,774~~964
Deferred income taxes (benefits)		3,890			—			(973	)		—			2,917
Deferred income tax benefit		493			—			(1,513	)		—			(1,020	)
Deferred profit sharing		—			—			~~410~~(189	)		—			~~410~~(189	)
Share-based compensation		2,340			—			—			—			2,340
Stock based compensation		542			—			—			—			542
Equity (income) loss in non-guarantor subsidiaries		(111,253	)		(106,097	)		—			217,350			—
Equity (income) loss in subsidiaries		(9,072	)		(4,702	)		—			13,774			—
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		(70,670	)		—			(75,900	)		102,551			(44,019	)
(Increase)/decrease in accounts receivable		(18,424	)		—			(15,933	)		39,643			5,286
Increase in inventories		(11,267	)		—			(41,144	)		—			(52,411	)
Decrease in inventories		492			—			13,296			—			13,788
Decrease (increase) in other current assets		1,259			—			(1,111	)		(247	)		(99	)
Increase in other current assets		2,499			—			1,030			(346	)		3,183
Increase (decrease) in accounts payable		63,026			—			48,133			(102,551	)		8,608
(Decrease)/increase in accounts payable		24,101			—			17,937			(39,643	)		2,395
(Decrease) increase in other current liabilities		(935	)		—			31,160			247			30,472
Increase in other current liabilities		451			—			2,279			346			3,076
Changes in other long-term assets and liabilities		~~(4,925~~59	)		—			~~3,227~~777			—			~~(1,698~~836	)
Net cash provided from operating activities		43,105			—			91,302			—			134,407
Net cash provided from (used in) operating activities		39,657			(1	)		32,162			—			71,818
Cash flows from investing activities:
Cash flows used for investing activities:
Capital expenditures		(81,~~180~~632	)		—			(51,~~058~~419	)		—			(133,~~238~~051	)
Net cash used for investing activities		(8,180	)		—			(5,058	)		—			(13,238	)
Net Cash used for investing activities		(1,632	)		—			(1,419	)		—			(3,051	)
Cash flows from financing activities:
Cash flows used for financing activities:
Repayment from subsidiaries		4,000			—			—			(4,000	)		—
Repayments from subsidiaries		50,000			—			—			(50,000	)		—
Net change in borrowing with Innophos, Inc		—			—			(450,000	)		450,000			—
Return of capital to parent		(133,~~950~~704	)		—			—			—			(133,~~950~~704	)
Excess tax benefits from exercise of stock options		1,420						—			—			1,420
Principal payment of term loans		(54,000	)		—			—			—			(54,000	)
Principal payment of term loans		(1,500	)		—			—			—			(1,500	)
Net cash used for financing activities		(7,704	)		—			(50,000	)		—			(57,704	)
Net cash used for financing activities		(10,030	)		—			(4,000	)		—			(14,030	)
Net change in cash		30,321			(1	)		(19,257	)		—			11,063
Net change in cash		24,895			—			82,244			—			107,139
Cash and cash equivalents at beginning of period		61,295			5			63,323			—			124,623
Cash and cash equivalents at beginning of period		3,657			6			11,905			—			15,568
Cash and cash equivalents at end of period	$	91,616		$	4		$	44,066		$	—		$	135,686
Cash and cash equivalents at end of period	$	28,552		$	6		$	94,149		$	—		$	122,707

2715. Subsequent Event:

The Company maintains finished goods, raw material and packaging inventories at an independently owned and operated warehouse in Nashville, Tennessee. As a result of major flooding in the greater Nashville area during the first few days of May 2010, the warehouse suffered extensive water damage and has been shut down indefinitely. While the full extent of damage to material in the warehouse is unknown at this time the Company believes the inventory value affected by the flood is less than $5.0 million. The Company has commenced the insurance claims process and currently estimates a net cost after insurance recovery in the range of $1.0 to $3.0 million with the more likely outcome considered to be the lower end of the range.

The Company’s Nashville manufacturing facility experienced no flood damage and retains normal operating capability. The loss of finished goods and packing inventory stored at the warehouse, as well as uncertainties regarding the timing and location of alternative storage and recovery of the area’s transportation infrastructure, will create additional supply chain challenges to meet customer demand. The Company is executing a contingency plan to meet customer requirements and currently anticipates it will be able to meet demand and avoid material loss of sales from the Nashville flooding. The Company maintains business interruption insurance, and at this time does not believe events in Nashville will bring that coverage into play.

ITEM 2.

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS

This discussion contains forward-looking statements about our markets, the demand for our products and services and our future results. We We based these statements on assumptions that we consider reasonable. Actual results may differ materially from those suggested by our forward-looking statements for various reasons including those discussed in the “Risk Factors” as ~~contained~~ contained in our ~~2008~~2009 Annual Report on Form 10-K and “Forward-Looking Statements” sections of that report.

Overview

Innophos is a leading North American producer of specialty phosphates. Most specialty phosphates are highly customized, application-specific compounds that are engineered to meet customer performance requirements. Specialty phosphates are often critical to the taste, texture and performance of foods, beverages, pharmaceuticals, oral care products and other applications. For example, specialty phosphates act 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.

Below is a summary chart of the corporate structure of our direct subsidiaries.

Recent Trends and Outlook

OnFirst aquarter ~~sequential~~2010 ~~basis,~~results ~~third~~confirmed ~~quarter~~the ~~2009~~encouraging ~~volumes~~volume ~~excluding~~trend ~~GTSP~~seen ~~fertilizer~~in ~~sales~~the ~~increased~~second byhalf ~~2.8%.~~of ~~The U~~2009.S. ~~and~~Specialty ~~Canada~~phosphates ~~business~~sequential ~~delivered a~~volumes ~~6.6~~were up 33% ~~increase~~in ~~and~~Canada, ~~Mexico~~11% ~~declined~~in bythe 4U.6%S. ~~Selling~~and ~~prices declined 8.9~~12% ~~sequentially,~~in aMexico ~~slowing~~as ~~rate~~that ofoperation ~~decline~~regained ~~compared~~market ~~to earlier quarters~~position. InOverall, the ~~third~~12% ~~quarter~~specialty ~~2009~~phosphate ~~approximately~~volume $1increase torepresented ~~$2 million of~~ the ~~expected~~fourth $5consecutive toquarter $7of ~~million~~sequential ~~raw~~volume ~~material~~improvement. ~~cost~~Selling prices ~~structure~~declined ~~increase~~4% ~~was~~sequentially ~~incurred~~overall onand afor ~~constant~~each ~~volume~~segment ~~and~~except ~~mix~~Canada ~~basis~~which declined 9%, ~~with~~and ~~the~~management ~~remainder~~expects ~~expected~~ to besee ~~incurred~~overall inaverage ~~the~~specialty ~~fourth~~phosphates ~~quarter.~~pricing ~~Mexico’s~~to ~~restructured~~improve ~~fixed~~slightly ~~costs~~from ~~were~~this ~~in line with expectations~~point.

~~Although~~Specialty itphosphate volume is ~~often~~expected ~~difficult~~ to ~~predict~~continue ~~due~~ to ~~holidays~~grow ~~and~~for ~~customers’~~the ~~year~~2010 ~~end~~second ~~inventory planning, management currently expects fourth~~ quarter ~~volumes, excluding GTSP fertilizer sales, to be similar to the third quarter 2009. Selling prices are expected to decline~~ at a rate ~~significantly~~of ~~lower than that experienced in the third quarter. As noted above, the Company expects its fourth quarter 2009 raw material cost structure to increase $4 to $~~5% ~~million primarily as a result of the anticipated phosphoric acid sourcing mix. Capital expenditures for 2009 are now expected~~ to ~~finish~~10% inversus the ~~$18~~first ~~to $20 million range; lower~~quarter ~~than previously indicated~~2010, ~~partly due to timing differences on project spending and partly a result of reprioritizing projects consistent~~ with ~~present~~Mexico ~~business~~expected ~~needs.~~to ~~Spending will~~ continue onshowing ~~the~~strong ~~food grade quality conversion of Mexico’s phosphoric acid that is still targeted for first quarter 2010 completion~~improvement.

28GTSP & Other volume increased significantly in the 2010 first quarter compared to the fourth quarter 2009 primarily as greater production of purified phosphoric acid resulted in higher co-product production. Selling prices rose consistent with market increases for phosphate fertilizers, leading to break-even operating income in the first quarter 2010 compared to a loss of $2 million in the same period 2009. Volume increases are expected to continue for the balance of the year, although timing of large orders will lead to variability in any individual quarter’s results. Prices are expected to moderate from levels at the end of the 2010 first quarter, though average pricing for the second quarter should be favorable versus the first.

A portion of U.S. raw material costs reset down in January 2010 as previously disclosed, reflecting market conditions at the beginning of the year. The $8 million per quarter benefit from this reset will affect gross profit from the second quarter onward. Since the beginning of the year, commodity fertilizer and related raw material prices such as sulfur and ammonia have increased, and Innophos has responded with price increases in March that are expected to offset these increased raw material costs.

The lagged nature of some of Innophos’ supply contracts means that a portion of Innophos costs towards the end of the first quarter and into the second quarter are advantaged versus current market raw material prices. Some moderation in market prices is expected to occur before Innophos’ contracts reset for 2011. Based on these expectations, management currently estimates that an approximate $5 million per quarter cost increase from higher contract raw material prices will phase in beginning with the fourth quarter 2010 and take full effect in the second quarter 2011.

Significant progress was made on arrangements for future multi-sourced rock supply to the Mexican facility with a contract signed with one new strategic supplier and a trial shipment received from a second new supplier. Discussions are continuing with other potential strategic suppliers.

Capital expenditures for 2010 are expected to be at the upper end of the of the previously announced $30 to $35 million range. Major items of expenditure are anticipated to include: the Mexican food grade acid expansion (completed during the first quarter); incremental improvements to existing Mexican food grade salts capability; completion of the ERP project; additional debottlenecking and expansion of food grade salts capability in Canada and various U.S. locations; and finally, investment to enhance Mexico’s capability to store, handle and process multiple grades of rock consistent with the Company’s supply chain diversification strategy as well as limited investment in evaluating our Mexican phosphate rock concessions.

~~Looking~~Although ~~beyond~~net debt increased in the ~~fourth~~first quarter on higher working capital requirements, ~~demand~~recent ~~and~~strong cashflow ~~pricing~~generation ~~outlooks~~is ~~are~~expected ~~still~~to ~~uncertain.~~continue ~~However, if~~overall for the ~~economic~~year. ~~outlook~~This ~~continues~~will allow management to ~~improve,~~continue ~~the~~with ~~Company~~its ~~should~~previously ~~see~~stated ~~some~~objectives ~~volume~~of ~~recovery.~~maintaining ~~Selling~~the ~~prices~~dividend, ~~will~~pursuing ~~remain~~several ~~under~~bolt-on ~~pressure,~~acquisition ~~though~~projects atand ~~expected~~continuing ~~reduced~~to ~~rates~~seek opportunities to optimize the cost and profile of ~~decline~~remaining debt facilities.

As previously disclosed, the phosphate rock supply agreement between OCP and Innophos’ Mexican subsidiary, Innophos Mexicana, will terminate after September 9, 2010. In that regard, Innophos will continue addressing developments in the OCP situation, analyzing the interrelationships between the Company’s sourcing strategies, their ongoing efforts and expected future supply outcomes and the resultant effects on the Company’s future results of operations and cash flows. Innophos is continuing its efforts to develop intermediate and long term supply arrangements for its Mexican operations from multiple sources, has conducted successful tests of alternate raw material samples and is in advanced discussions with several potential suppliers. Innophos is also evaluating for development the Company’s newly acquired Mexican phosphate rock mining concessions as a long term supply source. Management continues to believe that an orderly transition from OCP as a single source supplier of rock is in the best strategic interests of the Company. However, during the remainder of the current OCP contract, and while uncertainty remains as to the competitiveness of Innophos’ contract rock pricing, conditions will continue to be difficult for the Mexican operation.

As previously disclosed, Innophos Mexicana and OCP are arbitrating differences concerning 2008 and 2009 rock pricing under the supply agreement and counterclaims by OCP filed in July 2009 that Mexicana breached that agreement. Management believes such claims are without merit.

Recently, OCP requested that the arbitral tribunal in Paris order Innophos Mexicana to furnish interim security in the amount of $68.4 million pending the arbitration, which will conclude after further hearings in July 2010. Management believes the OCP request meets none of the applicable standards for this type of relief and is totally unwarranted by the facts and circumstances of the arbitration case. Accordingly, Innophos Mexicana will vigorously oppose the request. The tribunal has yet to establish a schedule for briefing, and possibly hearings, on the issue.

Management believes the likelihood of the arbitral tribunal approving security for the OCP counterclaims in the nature and magnitude of OCP’s request is remote.

OCP’s request for security has in no way altered management’s evaluation of the arbitration case or the counterclaims, or altered its determination that no accruals are warranted.

Historical Performance

Results of Operations

The following table sets forth a summary of the Company’s operations and their percentages of total revenue for the periods indicated.

	Three months endedSeptember 30,2009					Three months endedSeptember 30,2008
	Three months endedMarch 31,2010					Three months endedMarch 31,2009
	Amount			%		Amount			%
Net sales	$	~~161~~169.90		100.0		$	~~291~~190.8		100.0
Cost of goods sold		~~114~~132.23		7078.53			~~165~~121.20		5663.64
Gross profit		4736.7		2921.57			~~126~~69.68		4336.46
Operating expenses:
Selling, general and administrative		1814.85		118.6			1314.30		47.63
Research & Development Expenses		0.4		0.2			0.5		0.2
Research & development expenses		0.6		0.4			0.5		0.3
Operating income		2821.56		1712.68			~~112~~55.83		3829.70
Interest expense, net		4.64		2.86			76.21		23.52
Foreign exchange gains, net		(0.2	)	(0.1	)		(0.9	)	(0.3	)
Foreign exchange (gains)/losses, net		(0.2	)	(0.1	)		0.4		0.2
Other income		—		—			(0.12	)	(0.01	)
Provision for income taxes		86.1		53.06			3317.06		119.32
Net income	$	1611.03		96.97		$	7331.64		2516.25
	Nine months endedSeptember 30,2009					Nine months endedSeptember 30,2008
	Amount			%		Amount			%
Net sales	$	519.5		100.0		$	718.3		100.0
Cost of goods sold		352.6		67.9			443.1		61.7
Gross profit		166.9		32.1			275.2		38.3
Operating expenses:
Selling, general and administrative		50.2		9.7			47.1		6.6
Research & Development Expenses		1.5		0.3			1.6		0.2
Operating income		115.2		22.2			226.5		31.5
Interest expense, net		16.1		3.1			21.0		2.9
Foreign exchange gains, net		(0.5	)	(0.1	)		(0.9	)	(0.1	)
Other income		—		—			(0.4	)	(0.1	)
Provision for income taxes		35.7		6.9			61.1		8.5
Net income	$	63.9		12.3		$	145.7		20.3

29Three months ended March 31, 2010 compared to the three months ended March 31, 2009

Three months ended September 30, 2009 compared to the three months ended September 30, 2008

Net Sales

Net sales represent the selling price of the products, net of any customer-related rebates, plus freight and any other items invoiced to customers. Net sales for the three months ended ~~September~~March 3031, ~~2009~~ 2010 were $~~161~~169.90 million, a decrease of $~~129~~21.98 million, or 4411.54%, as compared to $~~291~~190.8 million for the same period in ~~2008~~2009. Selling price decreases had a negative ~~impact~~effect on revenue of 24 23.75% or $7244.08 million, ~~largely~~which inoccurred ~~Mexico~~across ~~and~~all ~~mostly~~product ~~in STPP &~~lines ~~Other Products~~ and ~~Purified Phosphoric Acid~~segments. Volume and mix effects upon revenue ~~had~~were apositive ~~negative effect of 19~~12.80% or $5723.90 million ~~which~~driven ~~occurred~~by ~~across~~U.S. ~~all product lines~~ and ~~all~~Canada ~~reporting~~Specialty ~~segments.~~Salts Onand aSpecialty ~~unit~~Acids ~~basis, the average selling price for all Innophos products decreased by 24.4% compared to 2008,~~ and ~~total~~Purified ~~volume~~Phosphoric ~~shipped decreased by 26~~Acid.~~6%.~~

The Company calculates pure selling price dollar variances as the selling price for the current period minus the selling price for the prior period, and then multiplies the resulting selling price difference by the prior period volume. The selling price dollar variance is then divided by the prior period sales dollars to calculate the percentage change. Volume/mix variance is calculated as the total sales variance minus the selling price variance. The following table illustrates for the three months ended ~~September~~ March 3031, ~~2009~~2010 the percentage changes in net sales by reportable segment compared with the same period in ~~2008~~2009, including the ~~effect~~effects of price and volume/mix ~~effects~~ upon revenue:

	Price		Volume/Mix		Total
United States	(027.26	%)	~~(18~~20.36	%)	(187.50	%)
Canada	(11.6	%)	(18.1	%)	(29.7	%)
Mexico	(14.5	%)	(7.4	%)	(21.9	%)
Mexico	(52.6	%)	(21.6	%)	(74.2	%)
Canada	(25.1	%)	21.0	%	(4.1	%)

The following table illustrates for the three months ended ~~September~~March 3031, ~~2009~~ 2010 the percentage changes for net sales by major product lines compared with the same period in ~~2008~~2009, including the effect of price and volume/mix effects upon revenue:

	Price		Volume/Mix		Total
Purified Phosphoric Acid	(2938.67	%)	~~(39~~11.02	%)	(6827.65	%)
Specialty Salts and Specialty Acids	(422.8	%)	~~(10~~21.50	%)	(151.38	%)
STPP & Other Products	(5610.85	%)	(1511.78	%)	(7222.53	%)

~~Gross~~Going ~~Profit~~forward Innophos will report sales variances under four product categories; Specialty Salts & Specialty Acids, Food & Technical Grade Acid, STPP & Detergent Grade Acid, and GTSP & Other. Specialty Salts & Specialty Acids will be unchanged. Detergent Grade Acid will be

~~Gross~~24 profit represents net sales less cost of goods sold. Gross profit for the three months ended September 30, 2009 was $47.7 million, a decrease of $78.9 million, or 62.3%, as compared to $126.6 million for the same period in 2008. Gross margin decreased to 29.5% for the three months ended September 30, 2009 versus 43.4% for the same period in 2008. The change in gross profit was primarily due to lower selling prices which had an unfavorable impact of $72.0 million. Unfavorable sales volume and mix impact upon revenue was mostly offset by favorable raw material costs, restructured manufacturing costs and favorable exchange rates which resulted in a net unfavorable impact of $6.9 million.

Operating Expenses and Research and Development

Operating expenses consist primarily of selling, general and administrative, and R&D expenses. For the three months ended September 30, 2009, these costs were $19.2 million, an increase of $5.4 million, or 39.1%, as compared to $13.8 million for the same period in 2008. The increase is primarily due to $3.3 million for our enterprise resource planning (ERP) system and business redesign project, $1.3 million increase in legal expenses related to our OCP arbitration, and $0.8 million increase in all other costs.

Operating Income

Operating income for the three months ended September 30, 2009 was $28.5 million, a decrease of $84.3 million, or 74.7%, as compared to $112.8 million for the same period in 2008. Operating income as a percentage of net sales decreased to 17.6% versus 38.7% for the same period in 2008.

Interest Expense, net

Net interest expense, including deferred financing amortization expense, for the three months ended September 30, 2009 was $4.6 million, a decrease of $2.6 million, compared to $7.2 million for the same period in 2008. This decrease is primarily due to the pay off of the remaining balance of the Term Loan in the first half of 2009 and fees incurred in 2008 associated with the fourth amendment to our credit facility.

Foreign Exchange

Foreign exchange gain for the three months ended September 30, 2009 was $0.2 million compared to a gain of $0.9 million for the same period in 2008. The U.S. dollar is the functional currency of our Mexican and Canadian operations. Consequently, foreign exchange gain or loss is recorded on remeasurement of non-U.S. dollar denominated monetary assets and liabilities. Such gains and losses fluctuate from period to period as the foreign currencies strengthen or weaken against the U.S. dollar and the amount of non-U.S. dollar denominated assets and liabilities increases or decreases.

~~Provision~~ removed from Purified Phosphoric Acid leaving Food & Technical Grade Acid. STPP will be removed from STPP & Other leaving GTSP & Other. STPP will be combined with Detergent Grade Acid forming the additional category STPP & Detergent Grade Acid. For the three months ended March 31, 2010 net sales for ~~Income~~GTSP & ~~Taxes~~Other was $12.4 million, a decrease of $5.3 million, or 29.9% as compared to $17.7 million for the same period in 2009.

The effective income tax rate on income before taxes was 33% for the three months ended September 30, 2009 compared to 31% for the same period in 2008. The change in the effective tax rate is a result of increased earnings in higher tax jurisdictions such as the United States versus Mexico and a full valuation allowance on our net deferred tax assets in the U.S. as of September 30, 2008.

Net Income

Net income for the three months ended September 30, 2009 was $16.0 million, a decrease of $57.6 million, compared to net income of $73.6 million for the same period in 2008, due to the factors described above.

Nine months ended September 30, 2009 compared to the nine months ended September 30, 2008

Net Sales

Net sales represent the selling price of the products, net of any customer-related rebates, plus freight and any other items invoiced to customers. Net sales for the nine months ended September 30, 2009 were $519.5 million, a decrease of $198.8 million, or 27.7%, as compared to $718.3 million for the same period in 2008. Selling price increases had a positive impact on revenue of 8.0% or $57.8 million that occurred primarily in Specialty Salts & Specialty Acids and to a lesser extent in Purified Phosphoric Acid. STPP & Other Products, which showed a net selling price decrease, was negatively affected by declines in granular triple super-phosphate (GTSP) fertilizer co-product prices. Volume and mix effects upon revenue had a negative effect of 35.7% or $256.6 million which occurred across all product lines and reporting segments. On a unit basis, the average selling price for all Innophos products increased by 2.1% compared to 2008, while total volume shipped decreased by 29.2%.

The following table illustrates for the nine months ended September 30, 2009 the percentage changes in net sales by reportable segment compared with the same period in 2008, including the effect of price and volume/mix effects upon revenue:

	Price		Volume/Mix		Total
United States	36.8	%	(36.7	%)	0.1	%
Canada	35.3	%	(29.8	%)	5.5	%
Mexico	(25.1	%)	(35.2	%)	(60.3	%)

The following table illustrates for the nine months ended September 30, 2009 the percentage changes for net sales by major product lines compared with the same period in 2008, including the effect of price and volume/mix effects upon revenue:

	Price		Volume/Mix		Total
Purified Phosphoric Acid	10.1	%	(60.0	%)	(49.9	%)
Specialty Salts and Specialty Acids	33.8	%	(31.3	%)	2.5	%
STPP & Other Products	(36.8	%)	(20.0	%)	(56.8	%)

Gross Profit

Gross profit represents net sales less cost of goods sold. Gross profit for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010 was $~~166~~36.97 million, a decrease of $~~108~~33.31 million, or 3947.4%, as compared to $~~275~~69.28 million for the same period in ~~2008~~2009. Gross margin decreased to 3221.17% for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010 versus 3836.36% for the same period in ~~2008~~2009. The change in gross profit was primarily due to ~~unfavorable~~lower ~~sales~~selling ~~volume~~prices ~~and mix impact upon revenue and higher raw material costs,~~ which had aan ~~combined~~ unfavorable ~~impact~~effect of $~~173~~44.78 million. ~~Gross~~This ~~profit~~ was ~~negatively~~partially ~~impacted~~offset by afavorable ~~$1.8~~sales ~~million~~volume ~~inventory~~and ~~write-down~~mix ~~for~~which ~~GTSP;~~resulted ~~the Company~~in ~~has~~a ~~$0.8~~net ~~million~~favorable ~~GTSP~~effect ~~inventory remaining as~~ of ~~September 30,~~$11.7 ~~2009~~million. AsCost ~~a result~~ of ~~reduced~~goods ~~operating~~sold ~~rates~~on ina ~~Mexico,~~replacement ~~the~~cost basis ~~company~~would ~~took~~have abeen ~~charge of~~ $1.8.3 million lower for ~~Mexican~~the ~~workforce~~first ~~reduction~~quarter ~~costs~~due ~~and~~to ~~a charge of $1~~U.1S. ~~million~~raw ~~for anticipated~~material ~~unfulfilled~~cost ~~contractual~~resets ~~natural~~effective ~~gas~~January 1, ~~purchase commitments~~2010, ~~including~~but ~~the~~this ~~unfavorable~~benefit ~~variance~~was todelayed ~~current~~until ~~market~~the ~~prices,~~second ~~expiring~~quarter indue ~~December~~to ~~2009.~~sale ~~These~~of ~~unfavorable~~existing ~~effects were partially offset by~~ higher ~~selling~~cost ~~prices~~inventory which ~~had a~~was ~~favorable~~depleted ~~impact of $57.8 million, $8.8 million favorable exchange rate impact mostly from our Mexican peso based costs, and $0.9 million lower depreciation expense. Included~~ in ~~2008~~the ~~results~~first ~~were~~quarter $12010.3 ~~million expense for a scheduled Geismar, LA plant maintenance outage, and $1.3 million asset impairment charge for two obsolete production units.~~

Operating Expenses and Research and Development

Operating expenses consist primarily of selling, general and administrative, and R&D expenses. For the ~~nine~~three months ended ~~September~~ March 3031, ~~2009~~2010, these costs were $5115.71 million, an increase of $3.0.6 million, or 64.21%, as compared to $4814.75 million for the same period in ~~2008~~2009. The increase is due to $5.7 million for our enterprise resource planning (ERP) system and business redesign project, $2.8 million increased legal expenses related to our OCP arbitration and $0.9 million increases in all other costs partially offset by $2.1 million lower legal and other fees which were incurred in 2008 to comply with the DOJ STPP document request subpoena, $2.3 million lower professional fees used to support growth and other corporate initiatives, and $2.0 million favorable exchange rate impact from our Mexican peso based costs.

Operating Income

Operating income for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010 was $~~115~~21.26 million, a decrease of $~~111~~33.37 million, or 4960.19%, as compared to $~~226~~55.53 million for the same period in ~~2008~~2009. ~~Operating~~Included in these results was break-even operating income for GTSP & Other for the three months ended March 31, 2010 compared to a $1.9 million loss for the same period in 2009. Operating income as a percentage of net sales for the Company decreased to 2212.28% versus 3129.50% for the same period in ~~2008~~2009.

Interest Expense, net

Net interest expense, including deferred financing amortization expense, for the ~~nine~~three months ended ~~September~~ March 3031, ~~2009~~2010 was $164.14 million, a decrease of $41.97 million, compared to $216.01 million for the same period in ~~2008~~2009. This decrease is primarily due ~~lower average interest rates and the lower average balance of our Term Loan resulting from the $54.0 million principal payments made in March 2009 mostly~~ to ~~satisfy~~ the ~~excess~~pay ~~cash~~off ~~flow requirement~~ of ~~our credit agreement and~~ the ~~$72.5~~remaining ~~million payment in May 2009 to pay off the~~ balance of the Term Loan, ~~and fees incurred~~ in ~~2008 associated with~~ the ~~fourth~~second ~~amendment~~quarter ~~to the credit facility. These decreases were partially offset by accelerated deferred financing related to the excess cash flow payment and the pay off~~ of ~~the Term Loan~~2009.

Foreign Exchange

Foreign exchange gain for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010 was $0.52 million compared to a loss of $0.94 million for the same period in ~~2008~~2009. The U.S. dollar is the functional currency of our Mexican and Canadian operations. Consequently, foreign exchange gain or loss is recorded on remeasurement of non-U.S. dollar denominated monetary assets and liabilities. Such gains and losses fluctuate from period to period as the foreign currencies strengthen or weaken against the U.S. dollar and the amount of non-U.S. dollar denominated assets and liabilities increases or decreases.

Provision for Income Taxes

The effective income tax rate on income before taxes was 3635% for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010 compared to 3036% for the same period in ~~2008~~2009. The change in the effective tax rate is a result of ~~increased~~a ~~earnings~~shift inof ~~higher~~earnings before tax ~~jurisdictions~~combined ~~such~~with asa ~~the~~change ~~United~~in ~~States~~tax ~~versus~~rates ~~Mexico~~for ~~and a full valuation allowance on~~ our ~~net~~operations ~~deferred tax assets~~ in ~~the~~multiple ~~U.S.~~tax ~~as of September 30, 2008~~jurisdictions.

Net Income

Net income for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010 was $6311.93 million, a decrease of $8120.81 million, compared to net income of $~~145~~31.74 million for the same period in ~~2008~~2009, due to the factors described above.

3225

Segment Reporting

The company reports its operations in three reporting segments—United States, Mexico and Canada, each of which sells the entire portfolio of products. The primary performance indicators for the chief operating decision maker are sales and operating income, with sales on a ship-from basis. The following table sets forth the historical results of these indicators by segment:

	Three months endedSeptember 30,2009			Three months endedSeptember 30,2008			Net Sales % Change
	Three months endedMarch 31,2010			Three months endedMarch 31,2009			Net Sales % Change
Segment Net Sales
United States	$	~~119~~113,~~107~~613		$	~~146~~122,~~154~~185		(187.50	%)
Mexico		3445,~~469~~607			~~133~~58,~~732~~427		(7421.29	%)
Canada		89,~~358~~787			1110,~~886~~205		(294.71	%)
Total	$	~~161~~169,~~934~~007		$	~~291~~190,~~772~~817		(4411.54	%)
Segment Operating Income
United States	$	2418,~~638~~362		$	4540,~~342~~873
Mexico		1,~~975~~536			627,~~357~~517
Canada		1,~~880~~727			56,~~148~~898
Total	$	2821,~~493~~625		$	~~112~~55,~~847~~288
Segment Operating Income % of net sales
United States		2016.72	%		3133.05	%
Mexico		53.74	%		4612.69	%
Canada		2217.56	%		4367.36	%
	Nine months endedSeptember 30,2009			Nine months endedSeptember 30,2008			Net Sales % Change
Segment Net Sales
United States	$	356,886		$	356,431		0.1	%
Mexico		132,318			333,143		(60.3	%)
Canada		30,313			28,736		5.5	%
Total	$	519,517		$	718,310		(27.7	%)
Segment Operating Income
United States	$	94,129		$	63,254
Mexico		7,795			155,393
Canada		13,295			7,870
Total	$	115,219		$	226,517
Segment Operating Income % of net sales
United States		26.4	%		17.7	%
Mexico		5.9	%		46.6	%
Canada		43.9	%		27.4	%

~~Three~~Beginning ~~months~~with ~~ended~~the ~~September~~quarterly period ending June 30, ~~2009~~2010, ~~compared~~the toCompany will report its operations on three new reporting segments – Specialty Phosphates U.S. & Canada, Specialty Phosphates Mexico and GTSP & Other. For the three months ended ~~September~~ March 3031, ~~2008~~2010 net sales and operating income for GTSP & Other was $12.4 million and break-even respectively compared to $17.7 million and a loss of $1.9 million respectively for the same period in 2009.

Three months ended March 31, 2010 compared to the three months ended March 31, 2009

Segment Net Sales:

In the United States net sales decreased 187.50% for the three months ended ~~September~~March 3031, ~~2009~~2010 when compared with the same period in ~~2008~~2009. Selling ~~due~~prices todecreased ~~lower~~27.6% ~~volume~~with decreases across all product lines. Volume and mix impact upon revenue was an increase of 20.6% with increases across all product lines asbut ~~selling prices~~most ~~were~~notably ~~flat~~ in ~~total~~Specialty Salts and Specialty Acids.

33In Mexico net sales decreased 21.9% for the three months ended March 31, 2010 when compared with the same period in 2009 primarily due to lower selling prices across all product lines.

~~Table~~In Canada net sales decreased 4.1% for the three months ended March 31, 2010 when compared with the same period in 2009. Selling prices decreased sales by 25.1% which occurred across all product lines. Volume and mix impact upon revenue was an increase of ~~Contents~~21.0% which occurred across all product lines.

In Mexico net sales decreased 74.2% for the three months ended September 30, 2009 when compared with the same period in 2008. Selling prices decreased sales by 52.6% which occurred across all product lines. Volume and mix impact upon revenue was a decrease of 21.6% which occurred primarily in Purified Phosphoric Acid and STPP & Other Products.

In Canada net sales decreased 29.7% for the three months ended September 30, 2009 when compared with the same period in 2008. Selling prices decreased sales by 11.6% which occurred primarily in Purified Phosphoric Acid. Volume and mix impact upon revenue was a decrease of 18.1% which occurred across all product lines.

Overall, the decreased volume and mix impact upon revenue seen in all segments is indicative of the reduced demand caused by the economic slowdown along with increased competitive pressure and some reformulation.

Segment Operating Income % of Net Sales:

The 1017.3% decrease in the United States for the three months ended ~~September~~March 3031, ~~2009~~2010 compared with the same period in ~~2008~~2009 is mainly ~~due~~ due to ~~unfavorable~~decreased selling prices, and increased manufacturing expenses, mainly inventory related, partially offset by increased volume and mix ~~impacts~~impact ~~upon~~on revenue, ~~higher~~and ~~manufacturing~~slightly ~~expenses~~lower ~~due~~raw tomaterial ~~inventory~~costs ~~reductions,~~which ~~and~~did ~~higher~~not ~~operating~~reflect ~~expenses~~lower ~~mainly~~raw ~~for~~material ~~our~~replacement costs ~~enterprise~~effective ~~resource~~January 1, ~~planning~~2010 ~~(ERP)~~due ~~system~~to ~~and~~the ~~business~~sale ~~redesign~~of ~~project~~existing higher cost inventories in the first quarter 2010.

The ~~40.~~9.5% decrease in Mexico for the three months ended ~~September~~March 3031, ~~2009~~2010 compared with the same period in ~~2008~~2009 is mainly due to decreased selling prices, ~~decreased~~partially ~~volume~~offset ~~and~~by ~~mix~~decreased ~~effects~~manufacturing ~~upon revenue~~expenses, ~~and higher operating expenses~~ mainly ~~for~~inventory ~~legal~~related. ~~expenses~~Mexico ~~related~~results todid not realize the ~~OCP~~full ~~arbitration~~benefit ~~case.~~of ~~This~~lower ~~was~~rock ~~partially~~costs ~~offset~~for by2010 ~~lower~~due ~~restructured~~to ~~manufacturing~~the ~~expenses~~sale ~~and~~of aexisting ~~favorable exchange~~higher ~~rate~~cost ~~impact~~inventories ~~from~~in ~~our~~the ~~Mexican~~first ~~peso~~quarter ~~based costs~~2010.

~~The~~26 20.8% decrease in Canada for the three months ended September 30, 2009 compared with the same period in 2008 is due to lower selling prices, unfavorable volume and mix impacts on revenue and higher raw material costs.

During the three month period ending September 30, 2009 depreciation and amortization expense was $8.5 million in the United States, $0.5 million in Canada and $5.4 million in Mexico.

Nine months ended September 30, 2009 compared to the nine months ended September 30, 2008

Segment Net Sales:

In the United States net sales increased 0.1% for the nine months ended September 30, 2009 when compared with the same period in 2008. Selling prices increased sales by 36.8% which occurred across all product lines. Volume and mix impact upon revenue was a decrease of 36.7% which occurred across all product lines.

In Mexico net sales decreased 60.3% for the nine months ended September 30, 2009 when compared with the same period in 2008. Selling prices decreased sales by 25.1%, mainly in STPP and Other Products. Volume and mix impact upon revenue was a decrease of 35.2% which occurred across all product lines.

In Canada net sales increased 5.5% for the nine months ended September 30, 2009 when compared with the same period in 2008. Selling price increased sales 35.3% with increases across all product lines. Volume and mix impact upon revenue was a decrease of 29.8% with decreases across all product lines.

Segment Operating Income % of Net Sales:

The 8.7% increase in the United States for the nine months ended September 30, 2009 compared with the same period in 2008 is mainly due to favorable selling prices partially offset by unfavorable volume and mix impacts upon revenue, higher raw material costs, and higher manufacturing expenses. Operating expenses increased due to the enterprise resource planning (ERP) system and business redesign project. Included in 2008 results were expenses for a scheduled Geismar, LA plant maintenance outage, an asset impairment charge for two obsolete production units, legal and other fees to comply with the DOJ STPP document request subpoena, and professional fees used to support growth and other corporate initiatives.

The 40.7% decrease in Mexico for the nine months ended September 30, 2009 compared with the same period in 2008 is due to unfavorable selling prices, unfavorable volume and mix impacts upon revenue, increased raw material costs and increased operating expenses mainly for legal expenses related to the OCP arbitration case. Gross profit was negatively impacted by a $1.8 million inventory write-down of GTSP. Also, as a result of reduced operating rates in Mexico, the Company took a charge of $2.2 million for Mexican workforce reorganization costs and a charge of $1.1 million for anticipated unfulfilled contractual natural gas purchase commitments, including the unfavorable variance to current market prices, expiring in December 2009. There was a $9.9 million favorable exchange rate impact from our Mexican peso based costs.

The 16.5% increase in Canada for the nine months ended September 30, 2009 compared with the same period in 2008 is due to increased selling prices partially offset by unfavorable volume and mix impact on revenue.

~~During~~The ~~the~~50.0% ~~nine~~decrease ~~month~~in ~~period~~Canada ~~ending~~for ~~September~~the three months ended March 3031, 2010 compared with the same period in 2009 ~~depreciation~~is ~~and~~primarily ~~amortization expense~~due ~~was~~to ~~$21.2~~lower ~~million~~selling inprices ~~the~~partially ~~United~~offset ~~States,~~by ~~$1.6~~favorable ~~million~~volume inand ~~Canada,~~mix impacts on revenue and ~~$15.4~~lower ~~million~~raw inmaterial ~~Mexico~~costs.

During the three month period ending March 31, 2010 depreciation and amortization expense was $6.9 million in the United States, $0.5 million in Canada, and $5.2 million in Mexico.

Liquidity and Capital Resources

The following table sets forth a summary of the Company’s cash flows for the periods indicated.

	Nine months endedSeptember 30,2009			Nine months endedSeptember 30,2008
	Three months endedMarch 31,2010			Three months endedMarch 31,2009
Operating Activities	$	~~164~~(6.45	)	$	~~134~~71.48
Investing Activities		(~~12.~~7.2	)		(133.21	)
Financing Activities		(~~153~~3.75	)		(1457.07	)

~~Nine~~Three months ended ~~September~~March 3031, 2010 ~~2009~~ compared to ~~nine~~three months ended ~~September~~March 3031, ~~2008~~ 2009

Net cash ~~provided~~ from operating activities was ~~$164.4~~a ~~million~~use ~~for the nine months ended September 30, 2009 as compared to $134.4 million for the same period in 2008, an increase in cash~~ of $306.05 million~~. The increase in operating activities cash resulted from favorable changes of $108.2 million in net working capital and $11.3 million in non-current~~ accounts, partially offset by unfavorable changes of $81.8 million in net income as described earlier and $7.7 million in non-cash items affecting net income. Net cash provided from operating activities for ~~our Mexican operations was $45.2 million for~~ the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010 as compared to source of $8671.28 million for the same period in ~~2008~~2009, a decrease in cash of $4178.03 million. The decrease in operating activities cash ~~for our Mexican operations~~ resulted ~~mainly~~primarily from unfavorable changes of $~~101~~58.4 5 million in ~~net~~working ~~income~~capital ~~partially~~and ~~offset by favorable changes of~~ $6320.31 million in net ~~working~~income ~~capital~~as described earlier.

The change in ~~net~~ working capital is a ~~source~~use of cash of $5030.78 million in ~~2009~~2010 compared to a ~~use~~source inof ~~2008~~cash of $5727.47 million in 2009, ana ~~increase~~decrease in cash of $~~108~~58.25 million. The ~~increase~~decrease in cash is mainly due to ~~decreases~~increases in accounts receivable ~~and~~(due ~~inventory,~~to ~~and increased~~sales ~~other~~increases ~~current~~on ~~liabilities,~~a ~~partially~~sequential ~~offset~~basis), by and decreased ~~accounts payable and increased~~ other current ~~assets.~~liabilities ~~The~~(mainly ~~change~~accrued inshort ~~net~~term ~~working~~incentive ~~capital~~and ~~for~~other ~~our Mexican operations is a source of cash of $25~~accruals).7 ~~million in 2009 compared to a use in 2008 of $37.6 million, an increase in cash of $63.3 million mainly due to decreases in inventory.~~

Net cash used for investing activities was $~~12.~~7.2 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010, compared to $133.21 million for the same period in ~~2008~~2009, aan ~~decrease~~increase in the use of cash of $04.51 million. ~~Net~~This ~~cash~~increase ~~used for investing activities for our Mexican operations~~ was ~~$3.2~~mainly ~~million~~due ~~for~~to the ~~nine~~Company’s ~~months~~enterprise ~~ended September 30~~resource planning, ~~2009,~~or ~~compared to $3.3 million for the same period in 2008~~ERP, asystem ~~decrease~~and inbusiness ~~the~~process ~~use~~redesign ~~of cash of $0~~project.1 ~~million.~~

In the second quarter of 2009 the Company launched an ~~enterprise resource planning, or~~ ERP~~, system and business process redesign~~ project to upgrade its systems technology and to improve its position as a reliable specialty phosphate supplier. ~~The~~To date the Company ~~had~~has spent approximately $715.93 million ason this project, of ~~September~~which approximately $8.7 million was capitalized as of March 3031, ~~2009~~2010, and future expenditures on the ERP project are expected to total approximately $148 to $1710 million by the end of 2010, with the majority of this spending anticipated as capital expenditures.

The Company is investing to grow its food, beverage and pharmaceutical phosphate business, especially geographically, and also to diversify its raw material supply long term. Projects are underway in the U.S. to debottleneck and increase production capabilities of various specialty salts. Additionally, in conjunction with the investment in the Coatzacoalcos facility to more than double its existing food grade purified phosphoric acid capacity bywhich was completed in the first quarter 2010, the site personnel have conducted successful production tests of several additional food grade salts to enable a shift in focus from detergency to the multiple food market segments served by salts and acid.

Innophos currently estimates that full exploration costs to a proven reserves standard for the Santo Domingo deposit could require expenditures of $10 to $15 million over a three year period, inclusive of expenditures to date. This estimate includes mineral rights payments, taxes, mineral resource measurement, beneficiation process design and completion of feasibility studies. Full expenditures would only occur if interim milestone goals were successfully attained. It is estimated that ~~2009 and~~ 2010 expenditures will be approximately $51 to $10 2 million, with efforts primarily focused on the Santo Domingo deposit. Innophos intends to seek one or more partners for these efforts, but anticipates no difficulties in completing the exploration phase without a partnership.

Management projects total ~~2009~~2010 capital expenditures to approximate $1830 to $2035 million.

Net cash from financing activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010 was a use of $~~153~~3.75 million, compared to ~~a use of~~ $1457.0 7 million for the same period in ~~2008~~2009, aan ~~decrease~~increase in cash of $~~139~~54.72 million. This is mainly due to a $~~125~~54.0 million ~~higher~~ Term Loan principal ~~payments~~payment toin ~~satisfy~~2009. ~~the excess cash flow requirement for 2008 and subsequently to pay off the remaining balance of the~~

35Holdings redeemed for cash all remaining $56.0 million of the Senior Unsecured Notes on April 15, 2010, the Redemption Date. The redemption price for the Notes was 100% of the principal amount plus accrued interest of $2.7 million to the Redemption Date.

We believe that on-hand cash combined with cash generated from operations, including our Mexican operations, will be sufficient to meet our obligations such as debt service, tax payments, capital expenditures and working capital requirements for at least

~~Term~~the ~~loan~~next astwelve ~~described below, $1~~months.1 ~~million~~We ~~deferred~~expect ~~financing~~to ~~charges~~fund onall ~~the~~these ~~new~~obligations ~~loan~~through ~~and~~our ~~security~~existing ~~agreement,~~cash ~~$1.4~~and ~~million~~our ~~lower~~future ~~excess~~operating ~~tax~~cash ~~benefit~~flows. ~~from exercise of stock options~~However, ~~and~~future ~~$12.2 million~~operating ~~increase~~performance infor ~~return~~the ofCompany ~~capital~~is subject to prevailing ~~parent.~~economic ~~Net~~and ~~cash~~competitive ~~from~~conditions ~~financing~~and ~~activities~~various ~~for~~other ~~our~~factors ~~Mexican~~that ~~operations~~are ~~for~~uncertain. If the ~~nine~~cash ~~months~~flows ~~ended~~and ~~September 30,~~other ~~2009~~capital ~~was~~resources aavailable ~~use~~to ofthe ~~$51.5~~Company ~~million,~~are ~~compared~~insufficient to afund ~~use~~our ofdebt ~~$4.0~~and ~~million~~other inliquidity ~~for~~needs, the ~~same~~Company ~~period~~may inhave to ~~2008,~~take aalternative ~~decrease~~actions inthat ~~cash~~differ offrom ~~$47.5~~the ~~million~~Company’s ~~for~~current ~~repayment~~operating ~~of intercompany debt obligations which are eliminated in consolidation~~plan.

We’re ~~believe~~subject ~~that on-hand cash combined with cash generated from operations will be sufficient~~ to ~~meet our obligations such as debt service, tax payments, capital expenditures and working capital requirements for at least the next twelve~~Rhodia’s ~~months.~~ability ~~We expect~~ to ~~fund~~perform ~~all~~its ~~these~~ obligations ~~through~~under our ~~existing~~2004 ~~cash~~acquisition ~~and our future operating cash flows. As noted in the recent trends and outlook section~~agreements, ~~management~~primarily isto ~~targeting~~indemnify aus ~~minimum~~(or ~~goal~~provide ofsecurity) ~~remaining~~against ~~profitable~~potential inliabilities ~~Mexico~~such ~~until~~as the ~~rock sourcing~~CNA ~~situation~~Fresh ~~improves~~Water ~~and~~Claims iscurrently ~~reprioritizing~~estimated ~~capital~~at ~~expenditure~~$25 ~~projects~~million ~~consistent~~for ~~with~~the ~~present~~periods ~~business needs~~through 2002. ~~These~~Even ~~actions~~though ~~are~~our ~~expected~~indemnification torights ~~result~~have inbeen ~~Mexico~~confirmed ~~maintaining~~by ~~adequate~~court ~~cash~~judgments, ~~balances~~ultimately ~~for~~we ~~its~~are ~~operating~~also ~~needs~~dependent ~~over~~on ~~the~~Rhodia ~~short-term until~~having ~~the~~sufficient ~~business~~financial ~~returns~~capacity to ameet ~~range~~its ofobligations ~~market~~should ~~prices~~they ~~for phosphate rock~~arise. ~~However,~~Rhodia’s ~~future~~financial ~~operating~~position ~~performance for the Company is subject to prevailing economic and competitive conditions and other factors, such as the ultimate resolution of our~~has ~~phosphate~~improved ~~rock~~significantly ~~arbitration,~~in ~~that~~recent ~~are~~quarters ~~uncertain. If the cash flows~~ and ~~other~~we ~~capital~~currently ~~resources~~see ~~available~~no toreason ~~the Company are insufficient~~ to ~~fund~~suspect ~~our~~they ~~debt~~would ~~and~~be ~~other~~unable ~~liquidity needs, the Company may have~~ to ~~take~~meet ~~alternative~~their ~~actions that differ from the Company’s current operating plan~~obligations.

OnIf ~~May 22,~~the ~~2009,~~CNA ~~our~~Fresh ~~wholly~~Water ~~owned~~Claims ~~subsidiary~~were ~~Innophos,~~sustained ~~Inc.~~for ~~and~~the ~~its~~periods ~~wholly~~through ~~owned subsidiary~~2002, ~~Innophos~~it ~~Canada,~~is ~~Inc.~~possible ~~entered~~that ~~into~~the aCNA ~~Loan~~would ~~and~~seek ~~Security~~to ~~Agreement~~claim ~~(the~~similar ~~“Loan~~higher duties, ~~Agreement”)~~fees ~~with~~and ~~certain~~other ~~lenders~~charges ~~(collectively,~~for ~~the~~fresh ~~“Lenders”)~~water ~~including~~extraction ~~Wachovia~~and ~~Bank,~~usage ~~National~~from ~~Association,~~2005 ason ~~agent.~~into ~~The Loan Agreement provides~~ the ~~Company~~future ~~with~~(2003 aand ~~revolving~~2004 ~~line~~are ofbelieved ~~credit~~to ~~from~~be beyond the ~~Lenders~~statute of uplimitations). toManagement ~~$65.0~~estimates ~~million~~that inamounts ~~the~~involved ~~aggregate,~~would ~~with~~be aapproximately $2013 million ~~letter~~ of additional ~~credit~~basic ~~sub-facility~~charges, ~~terminating~~interest, ~~on May 22~~inflation, ~~2013.~~and ~~The~~penalties, ~~amount~~and, ~~actually~~under ~~available~~current tooperating ~~the~~conditions, ~~Company~~approximately ~~may~~$1.2 ~~be less~~million ~~than~~of ~~the~~additional ~~maximum~~basic ~~credit~~charges ~~and~~per ~~will~~year. ~~vary~~Although ~~from~~not ~~time~~included toin ~~time~~our ~~depending~~court ~~on,~~judgments ~~among~~in ~~other~~the ~~factors,~~New ~~the~~York ~~amount~~Litigation ofagainst Rhodia, ~~its~~we ~~net~~believe ~~eligible~~Rhodia ~~inventory~~is ~~and~~required ~~accounts~~to ~~receivable~~indemnify asus ~~calculated~~fully for ~~purposes~~post-closing of“losses” ~~the~~caused ~~Loan~~by ~~Agreement.~~breaches ~~The obligations~~ of ~~the~~covenants ~~Company~~set ~~under the~~forth ~~Loan~~in ~~Agreement are secured by~~ the ~~accounts~~agreement. ~~receivable,~~Rhodia ~~inventory~~has ~~and~~contested ~~other~~indemnification ~~assets~~responsibility offor ~~Innophos,~~those ~~Inc. and Innophos Canada~~breaches, ~~Inc.,~~but ~~not~~its ~~including~~motion ~~equipment~~for partial orsummary ~~real~~judgment ~~property.~~to ~~Innophos~~dismiss ~~Inc.’s~~our ~~Mexico-based~~claims ~~subsidiaries~~was ~~are~~denied ~~excluded~~by ~~from certain of~~ the ~~covenants~~New ~~under~~York ~~the~~trial ~~Loan~~court ~~Agreement,~~in doJanuary ~~not~~2009. ~~guaranty~~It ~~the~~is ~~indebtedness~~possible ofthat ~~Innophos,~~the ~~Inc.~~New ~~and~~York ~~Innophos~~Litigation ~~Canada,~~will ~~Inc.~~proceed ~~incurred~~to ~~under~~trial ~~it,~~or ~~and~~involve dofurther ~~not~~motions ~~furnish~~to ~~collateral~~resolve inremaining ~~connection with it~~issues.

As of September 30, 2009, the Company had $51.8 million excess availability, above the minimum excess availability requirements, as calculated in accordance with the Loan Agreement and there was no amount outstanding on the revolving credit line. A total of $1.8 million in face amount of letters of credit were issued under the sub-facility to support instruments outstanding under a prior credit facility terminated on May 22, 2009.


	Years ending December 31,
Contractual Obligations	Total		2010		2011		2012		2013		2014		Thereafter
2004 Senior Subordinated Notes Due 2014 (1)		265,882		8,431		16,863		16,862		16,863		206,863		—
Future service pension benefits		9,632		537		642		735		825		902		5,991
Other (2)		459,249		89,845		48,764		48,764		48,764		48,764		174,348
Operating leases		18,538		4,111		3,688		2,824		2,690		2,246		2,979

Total contractual cash obligations (3)	$	753,301	$	102,924	$	69,957	$	69,185	$	69,142	$	258,775	$	183,318

~~The Company was party to a Credit Agreement dated as of August 13, 2004, as subsequently amended~~ (~~the “2004 Credit Facility”~~1). OnAmounts ~~May 22,~~include ~~2009,~~fixed ~~the~~rate ~~Company~~interest ~~entered~~payments ~~into~~at ~~a Termination Agreement with the agent and J P Morgan Chase Bank, N~~8.A.875% ~~and~~for ~~National~~years ~~City~~2010 Bank, the latter two as issuing banks relating to letters of credit, pursuant to which, among other things, the 2004 Credit Facility was terminated, the Company paid the $72.7 million of outstanding term loan balance (principal and ~~accrued interest) from cash on hand, and security held by the lenders on substantially all the Company’s property was released~~thereafter.

On(2) ~~April 13,~~Represents ~~2009~~minimum ~~the Company~~annual ~~purchased~~purchase ~~$10.0~~commitments ~~million~~to ofbuy ~~the~~raw ~~9.5%~~materials ~~Senior~~from ~~Unsecured Notes due April 2012 for $6~~suppliers.5 million. The $3.5 million retirement gain is reflected as interest income in our Consolidated Statement of Operations in the second quarter of 2009. The Company also recorded accelerated deferred financing costs of approximately $0.2 million in the second quarter of 2009.

~~Restricted~~(3) ~~cash~~Does ~~consists~~not ofreflect ~~escrow~~the ~~funds~~$56.0 ~~agreed~~million toSenior beUnsecured ~~deposited~~Notes inwhich ~~connection~~were ~~with~~issued aby ~~dispute~~our ~~between~~ultimate ~~the~~parent, ~~Company~~Innophos ~~and~~Holdings, aInc. ~~third~~on ~~party~~April 16, 2007. ~~The~~Holdings ~~escrow~~redeemed ~~funds~~for ~~will~~cash beall ~~disbursed~~remaining in$56.0 ~~accordance~~million ~~with~~of the ~~agreed~~Senior ~~terms~~Unsecured ~~upon~~Notes on April 15, 2010, the ~~satisfaction~~Redemption Date. The redemption price for the Notes was 100% of the ~~dispute~~principal amount plus accrued interest to the Redemption Date.

	Years ending December 31,
Contractual Obligations	Total		2009		2010		2011		2012		2013		Thereafter
2004 Senior Subordinated Notes
Due 2014 (1)		274,313		—		16,862		16,863		16,862		16,863		206,863
Future service pension benefits		7,748		444		526		581		657		730		4,810
Other (2)		800,630		84,246		83,540		83,540		83,540		83,540		382,224
Operating leases		16,947		4,260		3,678		3,028		2,096		1,450		2,435
Total contractual cash obligations (3)	$	1,099,638	$	88,950	$	104,606	$	104,012	$	103,155	$	102,583	$	596,332

(1) Amounts include fixed rate interest payments at 8.875% for years 2009 and thereafter.

(2) Represents minimum annual purchase commitments to buy raw materials and 2009 energy commitments from suppliers.

(3) Does not reflect the $56.0 million remaining balance of the Senior Unsecured Notes which were issued by our ultimate parent, Innophos Holdings, Inc. on April 16, 2007. Annual cash interest payments would be approximately $5.3 million.

Critical Accounting Estimates

There have been no material changes from the critical accounting estimates previously disclosed in our ~~2008~~2009 Annual Report on Form 10-K ~~other than described below~~.

Goodwill

Goodwill represents the excess of the acquisition cost over the fair value of net assets of the businesses acquired. ASC 350, “Intangibles—Goodwill and Other,” requires periodic tests of the impairment of goodwill. ASC 350 requires a comparison, at least annually, of the net book value of the assets and liabilities associated with a reporting unit, including goodwill, with the fair value of the reporting unit, which corresponds to the discounted cash flows of the reporting unit, in the absence of an active market. When this comparison indicates that impairment must be recorded, the impairment recognized is the amount by which the carrying amount of the assets exceeds the fair value of these assets. The annual goodwill impairment review is conducted during the fourth quarter of each year. We continue to monitor the estimates and circumstances included in our projections for the December 31, 2008 goodwill impairment analysis, and any significant changes in our estimates would require the Company to conduct an interim goodwill impairment test. Our monitoring of the year-to-date actual 2009 results indicates that, while market and business conditions have worsened, the cash flow estimates remain consistent with those made during the annual December 31, 2008 goodwill impairment analysis. Consequently, since that time, we did not perform an interim goodwill impairment test.

Fair values for goodwill testing are estimated using a discounted cash flow approach. Significant estimates in the discounted cash flow approach include the cash flow forecasts for each of our reporting units (Mexico, U.S. and Canada), the discount rate and the terminal value. The five year cash flow forecasts of the company’s reporting units is based upon management’s estimate at the date of the assessment, which incorporates managements long-term view of selling prices, sales volumes for Innophos’ products, key raw materials and energy costs, and our operating cost structure. The aggregated fair value of our reporting units was reconciled to our market capitalization at the date of the assessment, plus a suitable control premium. Our market capitalization during fourth quarter of 2008 exceeded the book value of our equity. The terminal value was determined by applying business growth factors for each reporting unit which are in-line with longer term historical growth rates, to the latest year for which a forecast exists.

Solely for the purpose of goodwill valuation for our Mexico reporting unit, the 2008 goodwill impairment analysis included estimates addressing changes in phosphate rock pricing, weakness in the markets served by those operations, loss of traditional business which in part is a result of the softness in the fertilizer markets, and operating the Coatzacoalcos, Mexico complex at substantially reduced levels. Our 2008 goodwill impairment analysis included: (i) phosphate rock price assumptions for 2009 based at the interim phosphate rock price currently being paid; (ii) for the first three quarters of 2010, assumed phosphate rock prices estimated to be below the 2009 interim price being paid, trending towards an estimated market price; and (iii) for late 2010 and thereafter, assumptions that Mexico operations would return to an estimated market price for phosphate rock. The December 31, 2008 goodwill impairment analysis also considered the termination of the 1992 phosphate rock supply contract with OCP as likely. As a result, management believes a triggering event for goodwill assessment did not occur upon OCP’s August 2009 notice of non-renewal of that contract in September 2010 and that the termination has no effect on our goodwill impairment analysis. The reporting unit’s cash flow model is estimated to be below pre-2008 levels (2008 reflected unusual market conditions as discussed in our previous reports and which are not expected to be replicated in the long-term), with improvement occurring as our phosphate rock price returns to market pricing in 2011. Revenue levels are estimated to have a slight recovery in 2011 and estimated to return to a historical growth rate of 3% per annum in 2012. We applied operating margin percentages slightly below our historical trends and used a 3% growth rate to calculate the terminal value for our Mexican reporting unit. We used a 12% discount rate, which is above our weighted average cost of capital and consistent with our prior year goodwill impairment test. Based on this valuation, we determined that the fair values of our reporting units exceeded their carrying values and no goodwill impairment charge was required.

As of December 31, 2008, the Mexican reporting unit had a carrying value, including goodwill, of $228 million. The fair value of the reporting unit exceeded its carrying value by approximately 10%. In addition, if we were to decrease the long-term growth rate or increase the discount rate used in the calculation by 1%, there would still be no goodwill impairment for the Mexican reporting unit.

Given the current economic environment and uncertainties surrounding the impact on our Mexican business of factors such as market conditions affecting our selling prices, sales volumes, and raw material costs, the ultimate resolution of our phosphate rock arbitration, and other factors not limited to those enumerated, we cannot be sure that the estimates and assumptions used in the goodwill impairment analysis will prove to be accurate predictions of the future. Significant changes in assumptions will influence the goodwill impairment analysis and may result in goodwill impairment charges in future periods.

Long-lived assets

In our Mexican operations, we continue to monitor changes in circumstances where the undiscounted cash flows would indicate that the carrying amount of an asset or asset group may not be recoverable. The uncertainty in phosphate rock prices, volume decreases, sales price erosion, and the reduced operating rates for the Coatzacoalcos plant were included in management’s estimates and are consistent with management’s expectations. Despite worsening conditions in 2009, no changes in circumstances or events have thus far indicated the carrying amounts of the Company’s long-lived assets were not recoverable from undiscounted cash flows. Consequently, we did not perform any impairment test of our long-lived assets in 2009 as a follow up to the test performed for year end 2008. The carrying value of the Coatzacoalcos plant was approximately $86 million at September 30, 2009. The undiscounted cash flows of the STPP (Sodium Tripolyphosphate) asset group exceeded their carrying value by 31%, while the other asset groups exceeded their carrying values by significantly greater margins.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks as part of our ongoing business operations. Primary exposures include changes in interest rates, as borrowings under our ~~revolving~~Loan ~~credit~~Agreement ~~facility~~ will bear interest at floating rates based on LIBOR ~~or the base rate, in each case~~ plus an applicable borrowing margin. We ~~will~~ manage our interest rate risk by balancing the amount of fixed-rate and floating-rate debt to the extent practicable consistent with our credit status. For fixed-rate debt, interest rate changes do not affect earnings or cash flows. Conversely, for floating-rate debt, interest rate changes generally ~~impact~~affect our earnings and cash flows, assuming other factors are held constant.

At ~~September~~March 3031, ~~2009~~2010, we had $190.0 million principal amount of fixed-rate debt and a $65.0 million revolving credit facility, of which we had $5153.8 0 million available above the minimum excess availability requirements, which has not been drawn upon. In addition, Innophos Holdings, Inc. ~~has~~had $56.0 million of senior unsecured notes. Holdings redeemed for cash all remaining $56.0 million of the Senior Unsecured Notes on April 15, 2010, the Redemption Date. As all of the business for Innophos Holdings, Inc. is transacted through Innophos, Inc. and its subsidiaries, Innophos Holdings, Inc. is dependent on the earnings and the distribution of funds from Innophos, Inc. and subsidiaries.

Changes in economic conditions could result in higher interest rates, thereby increasing our interest expense ~~and~~should ~~other~~we ~~operating~~need ~~expenses~~to ~~and~~draw ~~reducing~~on our ~~funds~~revolving ~~available~~line ~~for~~of ~~capital investment, operations or other purposes~~credit. InChanges ~~addition,~~in aeconomic ~~substantial~~conditions ~~portion~~may ofalso ~~our~~result ~~cash~~in ~~flow~~higher ~~must~~other beoperating ~~used to service debt~~expenses, ~~which~~reducing ~~may affect~~ our ~~ability to make future acquisitions or capital expenditures. We may from time to time use interest rate protection~~ agreements to minimize our exposure to interest rate fluctuation. Regardless of hedges, we may experience economic loss and a negative impact on earnings or net assets as a result of interest rate fluctuations.

We28 ~~do not currently hedge our commodity, interest rate or currency rate risks.~~

WeTable have purchased forward natural gas contracts which require us to purchase a portion of our monthly natural gas usage requirements at a fixed price. These contracts are for periods September 2008 through December 2009, and apply to our U.S., Canadian and Mexican facilities. As a result of lower operating rates in our Mexican operations, we have recorded a $2.5 million charge in the second quarter of 2009 for these anticipated unfulfilled contractual natural gas purchase commitments, including the unfavorable variance to current market prices, expiring in December 2009. Contents

funds available for capital investment, operations or other purposes. In addition, a substantial portion of our cash flow must be used to service debt, which may affect our ability to make future acquisitions or capital expenditures. We may from time to time use interest rate protection agreements to minimize our exposure to interest rate fluctuation. Regardless of hedges, we may experience economic loss and a negative impact on earnings or net assets as a result of interest rate fluctuations.

We do not currently, but may from time to time, hedge our commodity, interest rate or currency rate risks.

We believe that our concentration of credit risk related to trade accounts receivable is limited since these receivables are spread among a number of customers and are geographically dispersed. Our largest customer in 2008 represented 11% of that year’s sales, otherwise, no other customer accounted for more than 10% of our sales in the last 3 years.

Foreign Currency Exchange Rates

The U.S. dollar is the functional currency of the Canadian and Mexican operations. Accordingly, these operations’ monetary assets and liabilities are translated at current exchange rates, non-monetary assets and liabilities are translated at historical exchange rates, and revenue and expenses are translated at average exchange rates and at historical exchange rates for the related revenue and expenses of non-monetary assets and liabilities. All translation gains and losses are included in net income.

Our principal source of exchange rate exposure in our foreign operations consists of expenses, such as labor expenses, which are denominated in the foreign currency of the country in which we operate. A decline in the value of the U.S. dollar relative to the local currency would generally cause our operational expenses (particularly labor costs) to increase (conversely, a decline in the value of the foreign currency relative to the U.S. dollar would cause these expenses to decrease). We believe that normal exchange rate fluctuations consistent with recent historical trends would have a modest impact on our expenses, and would not materially affect our financial condition or results of operations. Nearly all of our sales are denominated in U.S. dollars and our exchange rate exposure in terms of sales revenues is minimal.

Inflation and changing prices

Our costs and expenses will be subject to inflation and price fluctuations. Significant price fluctuations in raw materials, freight, and energy costs, if not compensated for by cost savings from production efficiencies or price increases passed on to customers, could have a material effect on our financial condition and results of operations.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “structured finance or special purpose entities”, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

ITEM 44T. CONTROLS AND PROCEDURES

Disclosure Control and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) that are designed to provide reasonable assurance that information required to be reported in the Company’s consolidated financial statements and filings is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission, or SEC, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

As of ~~September~~March 3031, ~~2009~~2010, the Company completed an evaluation under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during or with respect to the ~~third~~first quarter of ~~2009~~2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

ITEM 1.

LEGAL PROCEEDINGS

The information set forth in Note 1211 to our consolidated condensed financial statements, “Commitments and Contingencies,” contained in this Quarterly Report on Form 10-Q is incorporated herein by reference.

ITEM 1A.

RISK FACTORS

There have been no material changes from the risk factors previously disclosed in our ~~2008~~2009 Annual Report on Form 10-K ~~other than as mentioned below~~.

International Operations

We have significant production operations in Mexico and Canada and believe that revenue from sales outside the U.S. will continue to account for a material portion of our total revenue for the foreseeable future. There are inherent risks in international operations, including currency fluctuations and devaluations, economic and business conditions that differ from US cycles, unsettled political conditions and communication and translation errors due to language barriers. Among those additional risks potentially affecting our Mexican operations are changes in local economic conditions, currency devaluations, disruption from political unrest and difficulty in enforcing agreements due to differences in the Mexican legal and regulatory regimes compared to those of the U.S. Risks that our Canadian operations may be subject to include changes in laws or regulations differing from trends in the U.S. and currency fluctuations and devaluations.

Our overall success as a multinational business depends, in part, upon our ability to succeed in differing economic, social and political conditions. Among other things, we are faced with potential difficulties in staffing and managing local operations, and we have to design local solutions to manage credit risks posed by local customers and distributors. We may not continue to succeed in

developing and implementing policies and strategies that are effective in each location where we do business. These risks are not limited to just those countries in which we operate facilities. For example, our Mexican operations and indirectly our Geismar operations, (where we recently exercised an option extending to July 2021 our long-term purchase agreement for merchant green acid converted from phosphate rock), are supplied with phosphate rock from Morocco, including territories under disputed Moroccan sovereignty claims, and both could be subject to the risk of adverse affects that may arise from local political unrest.

As a U.S. corporation, we are subject to the regulations imposed by the Foreign Corrupt Practices Act, or FCPA, which generally prohibit U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business. We sell many of our products in developing countries through sales agents and distributors that are not subject to our disciplinary procedures. While we and our subsidiaries are committed to conducting business in a legal and ethical manner and we communicate our policies to all who do business with us, we cannot be sure that all our third party distributors or agents remain in full compliance with the FCPA at all times.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. ~~SUBMISSION~~(REMOVED OFAND ~~MATTERS TO A VOTE OF SECURITY HOLDERS~~RESERVED)

None.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

(a) Exhibits. The following exhibits are filed or furnished as part of this report:

Exhibit No.		Description
31.1		Certification of Principal Executive Officer dated November 4, 2009 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
4.8		Forms of Exhibits to the Loan and Security Agreement dated May 22, 2009 by and among Innophos, Inc. and Innophos Canada, Inc., as Borrowers, and Wachovia Bank, National Association, TD Bank, N.A. and Israel Discount Bank, Wachovia Bank, National Association, as Administrative and Collateral Agent for Lenders, and Wachovia Capital Markets LLC, as Syndication Agent, Lead Arranger and Lead Bookrunner.
31.2		Certification of Principal Financial Officer dated November 4, 2009 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.1		Certification of Principal Executive Officer dated May 7, 2010 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Principal Executive Officer dated November 4, 2009 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer dated May 7, 2010 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Principal Financial Officer dated November 4, 2009 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Principal Executive Officer dated May 7, 2010 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Principal Financial Officer dated May 7, 2010 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*	Not to be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section, nor deemed to be incorporated by reference into any filing under that Act or the Securities Act of 1933.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

INNOPHOS, INC.
/s/ Randolph Gress
By:		Randolph Gress
Its:		Chief Executive Officer and Director
		(Principal Executive Officer)
Dated: November 4, 2009
Dated: May 7, 2010
INNOPHOS, INC.
/s/ Neil Salmon
/s/ Neil I. Salmon
By:		Neil I. Salmon
Its:		Vice President and Chief Financial Officer
		(Principal Financial Officer)
Dated: November 4, 2009
Dated: May 7, 2010

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EXHIBIT INDEX

Exhibit No.		Description
31.1		Certification of Principal Executive Officer dated November 4, 2009 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
4.8		Forms of Exhibits to the Loan and Security Agreement dated May 22, 2009 by and among Innophos, Inc. and Innophos Canada, Inc., as Borrowers, and Wachovia Bank, National Association, TD Bank, N.A. and Israel Discount Bank, Wachovia Bank, National Association, as Administrative and Collateral Agent for Lenders, and Wachovia Capital Markets LLC, as Syndication Agent, Lead Arranger and Lead Bookrunner.
31.2		Certification of Principal Financial Officer dated November 4, 2009 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.1		Certification of Principal Executive Officer dated May 7, 2010 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Principal Executive Officer dated November 4, 2009 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer dated May 7, 2010 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Principal Financial Officer dated November 4, 2009 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Principal Executive Officer dated May 7, 2010 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Principal Financial Officer dated May 7, 2010 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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Filing Compare · Innophos, Inc.