##### Table of Contents





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 30, 2008

OR



| ̈ | 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 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 30, 2008, the registrant had 1,000 shares of common stock outstanding









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TABLE OF CONTENTS



|           |  |                                                                                       |  |     
|---------- |  | ------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                       |  | Page
|PART I     |  |                                                                                      
|Item 1.    |  | Financial Statements                                                                  |  | 3   
|Item 2.    |  | Managements Discussion and Analysis of Results of Operations and Financial Condition |  | 31  
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risks                           |  | 40  
|Item 4T.   |  | Controls and Procedures                                                               |  | 41  
|           | 
|PART II    |  |                                                                                      
|Item 1.    |  | Legal Proceedings                                                                     |  | 42  
|Item 1A.   |  | Risk Factors                                                                          |  | 42  
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 44  
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  | 44  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 44  
|Item 5.    |  | Other Information                                                                     |  | 44  
|Item 6.    |  | Exhibits                                                                              |  | 44  
|           | 
|Signatures |  | 45                                                                                   



2



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PART I



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

INNOPHOS, INC. AND
SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)



|                                            |  |                   |         |                  |   |        
|------------------------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                                            |  | September 30,2008 |         | December 31,2007
|ASSETS                                      |  |                   |         |                  |   |        
|Current assets:                             |  |                   |         |                  |   |        
|Cash and cash equivalents                   |  | $                 | 122,707 |                  | $ | 15,568 
|Accounts receivable, net                    |  |                   | 104,098 |                  |   | 60,079 
|Inventories                                 |  |                   | 131,139 |                  |   | 78,728 
|Other current assets                        |  |                   | 18,483  |                  |   | 18,384 
|                                            |  |                   |         |                  |   |        
|Total current assets                        |  |                   | 376,427 |                  |   | 172,759
|Property, plant and equipment, net          |  |                   | 237,764 |                  |   | 260,563
|Goodwill                                    |  |                   | 47,268  |                  |   | 47,268 
|Intangibles and other assets, net           |  |                   | 56,236  |                  |   | 60,482 
|                                            |  |                   |         |                  |   |        
|Total assets                                |  | $                 | 717,695 |                  | $ | 541,072
|                                            |  |                   |         |                  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY        |  |                   |         |                  |   |        
|Current liabilities:                        |  |                   |         |                  |   |        
|Current portion of long-term debt           |  | $                 | 55,004  |                  | $ | 1,328  
|Accounts payable, trade and other           |  |                   | 45,052  |                  |   | 36,444 
|Other current liabilities                   |  |                   | 70,996  |                  |   | 40,524 
|                                            |  |                   |         |                  |   |        
|Total current liabilities                   |  |                   | 171,052 |                  |   | 78,296 
|Long-term debt                              |  |                   | 261,996 |                  |   | 317,172
|Other long-term liabilities                 |  |                   | 34,817  |                  |   | 31,656 
|                                            |  |                   |         |                  |   |        
|Total liabilities                           |  |                   | 467,865 |                  |   | 427,124
|                                            |  |                   |         |                  |   |        
|Commitments and contingencies (see note 11) |  |                   |         |                  |   |        
|Stockholders equity                        |  |                   | 249,830 |                  |   | 113,948
|                                            |  |                   |         |                  |   |        
|Total stockholders equity                  |  |                   | 249,830 |                  |   | 113,948
|                                            |  |                   |         |                  |   |        
|Total liabilities and stockholders equity  |  | $                 | 717,695 |                  | $ | 541,072
|                                            |  |                   |         |                  |   |        

See notes to condensed consolidated financial statements



3



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INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations (Unaudited)

(Dollars in
thousands)



|                                    |  |                                     |         |   |                                     |   |         |  
|----------------------------------- |  | ----------------------------------- | ------- | - | ----------------------------------- | - | ------- | -
|                                    |  | Three months endedSeptember 30,2008 |         |   | Three months endedSeptember 30,2007 |  
|Net sales                           |  | $                                   | 291,772 |   |                                     | $ | 146,451 |  
|Cost of goods sold                  |  |                                     | 165,189 |   |                                     |   | 116,714 |  
|                                    |  |                                     |         |   |                                     |   |         |  
|Gross profit                        |  |                                     | 126,583 |   |                                     |   | 29,737  |  
|                                    |  |                                     |         |   |                                     |   |         |  
|Operating expenses:                 |  |                                     |         |   |                                     |   |         |  
|Selling, general and administrative |  |                                     | 13,210  |   |                                     |   | 11,139  |  
|Research & development expenses     |  |                                     | 526     |   |                                     |   | 478     |  
|                                    |  |                                     |         |   |                                     |   |         |  
|Total operating expenses            |  |                                     | 13,736  |   |                                     |   | 11,617  |  
|                                    |  |                                     |         |   |                                     |   |         |  
|Operating income                    |  |                                     | 112,847 |   |                                     |   | 18,120  |  
|Interest expense, net               |  |                                     | 7,230   |   |                                     |   | 7,632   |  
|Foreign exchange (gain) loss        |  |                                     | (870    | ) |                                     |   | 41      |  
|Other income, net                   |  |                                     | (152    | ) |                                     |   | (158    | )
|                                    |  |                                     |         |   |                                     |   |         |  
|Income before income taxes          |  |                                     | 106,639 |   |                                     |   | 10,605  |  
|Provision for income taxes          |  |                                     | 33,044  |   |                                     |   | 3,204   |  
|                                    |  |                                     |         |   |                                     |   |         |  
|Net income                          |  | $                                   | 73,595  |   |                                     | $ | 7,401   |  
|                                    |  |                                     |         |   |                                     |   |         |  

See notes to condensed consolidated financial statements



4



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INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations (Unaudited)

(Dollars in
thousands)



|                                    |  |                                    |         |   |                                    |   |         |  
|----------------------------------- |  | ---------------------------------- | ------- | - | ---------------------------------- | - | ------- | -
|                                    |  | Nine months endedSeptember 30,2008 |         |   | Nine months endedSeptember 30,2007 |  
|Net sales                           |  | $                                  | 718,310 |   |                                    | $ | 435,043 |  
|Cost of goods sold                  |  |                                    | 443,155 |   |                                    |   | 352,381 |  
|                                    |  |                                    |         |   |                                    |   |         |  
|Gross profit                        |  |                                    | 275,155 |   |                                    |   | 82,662  |  
|                                    |  |                                    |         |   |                                    |   |         |  
|Operating expenses:                 |  |                                    |         |   |                                    |   |         |  
|Selling, general and administrative |  |                                    | 47,051  |   |                                    |   | 39,497  |  
|Research & development expenses     |  |                                    | 1,587   |   |                                    |   | 1,564   |  
|                                    |  |                                    |         |   |                                    |   |         |  
|Total operating expenses            |  |                                    | 48,638  |   |                                    |   | 41,061  |  
|                                    |  |                                    |         |   |                                    |   |         |  
|Operating income                    |  |                                    | 226,517 |   |                                    |   | 41,601  |  
|Interest expense, net               |  |                                    | 20,980  |   |                                    |   | 23,544  |  
|Foreign exchange (gain) loss        |  |                                    | (874    | ) |                                    |   | 16      |  
|Other income, net                   |  |                                    | (390    | ) |                                    |   | (256    | )
|                                    |  |                                    |         |   |                                    |   |         |  
|Income before income taxes          |  |                                    | 206,801 |   |                                    |   | 18,297  |  
|Provision for income taxes          |  |                                    | 61,059  |   |                                    |   | 10,547  |  
|                                    |  |                                    |         |   |                                    |   |         |  
|Net income                          |  | $                                  | 145,742 |   |                                    | $ | 7,750   |  
|                                    |  |                                    |         |   |                                    |   |         |  

See notes to condensed consolidated financial statements



5



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INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in
thousands)



|                                                                                  |  |                                    |         |   |                                    |   |         |  
|--------------------------------------------------------------------------------- |  | ---------------------------------- | ------- | - | ---------------------------------- | - | ------- | -
|                                                                                  |  | Nine months endedSeptember 30,2008 |         |   | Nine months endedSeptember 30,2007 |  
|Cash flows from operating activities                                              |  |                                    |         |   |                                    |   |         |  
|Net income                                                                        |  | $                                  | 145,742 |   |                                    | $ | 7,750   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                    |         |   |                                    |   |         |  
|Depreciation and amortization                                                     |  |                                    | 40,371  |   |                                    |   | 34,477  |  
|Amortization of deferred financing charges                                        |  |                                    | 1,774   |   |                                    |   | 2,131   |  
|Deferred income tax benefit                                                       |  |                                    | 2,917   |   |                                    |   | (1,517  | )
|Deferred profit sharing                                                           |  |                                    | 410     |   |                                    |   | 488     |  
|Share-based compensation                                                          |  |                                    | 2,340   |   |                                    |   | 694     |  
|Changes in assets and liabilities:                                                |  |                                    |         |   |                                    |   |         |  
|Increase in accounts receivable                                                   |  |                                    | (44,019 | ) |                                    |   | (3,244  | )
|Increase in inventories                                                           |  |                                    | (52,411 | ) |                                    |   | (8,752  | )
|Increase in other current assets                                                  |  |                                    | (99     | ) |                                    |   | (4,567  | )
|Increase in accounts payable                                                      |  |                                    | 8,608   |   |                                    |   | 8,433   |  
|Increase (decrease) in other current liabilities                                  |  |                                    | 30,472  |   |                                    |   | (2,007  | )
|Changes in other long-term assets and liabilities                                 |  |                                    | (1,698  | ) |                                    |   | 2,578   |  
|                                                                                  |  |                                    |         |   |                                    |   |         |  
|Net cash provided from operating activities                                       |  |                                    | 134,407 |   |                                    |   | 36,464  |  
|                                                                                  |  |                                    |         |   |                                    |   |         |  
|Cash flows from investing activities:                                             |  |                                    |         |   |                                    |   |         |  
|Capital expenditures                                                              |  |                                    | (13,238 | ) |                                    |   | (23,012 | )
|Purchase of assets                                                                |  |                                    |        |   |                                    |   | (2,120  | )
|                                                                                  |  |                                    |         |   |                                    |   |         |  
|Net cash used for investing activities                                            |  |                                    | (13,238 | ) |                                    |   | (25,132 | )
|                                                                                  |  |                                    |         |   |                                    |   |         |  
|Cash flows from financing activities:                                             |  |                                    |         |   |                                    |   |         |  
|Return of capital to parent                                                       |  |                                    | (13,950 | ) |                                    |   | (9,328  | )
|Excess tax benefits from exercise of stock options                                |  |                                    | 1,420   |   |                                    |   |        |  
|Principal payments of term-loan                                                   |  |                                    | (1,500  | ) |                                    |   | (16,500 | )
|                                                                                  |  |                                    |         |   |                                    |   |         |  
|Net cash used for financing activities                                            |  |                                    | (14,030 | ) |                                    |   | (25,828 | )
|                                                                                  |  |                                    |         |   |                                    |   |         |  
|Net change in cash                                                                |  |                                    | 107,139 |   |                                    |   | (14,496 | )
|Cash and cash equivalents at beginning of period                                  |  |                                    | 15,568  |   |                                    |   | 29,618  |  
|                                                                                  |  |                                    |         |   |                                    |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                                  | 122,707 |   |                                    | $ | 15,122  |  
|                                                                                  |  |                                    |         |   |                                    |   |         |  

See notes to condensed consolidated financial statements



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INNOPHOS, INC. AND SUBSIDIARIES

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

(Dollars in thousands)



|                                                                |  |                             |         |   |                |   |         |                                            |  |   |                          |   |  |   |         |  
|--------------------------------------------------------------- |  | --------------------------- | ------- | - | -------------- | - | ------- | ------------------------------------------ |  | - | ------------------------ | - |  | - | ------- | -
|                                                                |  | RetainedEarnings /(Deficit) |         |   | Paid-inCapital |   |         | AccumulatedOtherComprehensiveIncome/(Loss) |  |   | TotalShareholdersEquity |  
|Balance, January 1, 2007                                        |  | $                           | (8,416  | ) |                | $ | 133,421 |                                            |  | $ | (3,816                   | ) |  | $ | 121,189 |  
|Net income                                                      |  |                             | 5,504   |   |                |   |         |                                            |  |   |                          |   |  |   | 5,504   |  
|Change in pension and post-retirement plans, (net of tax $243)  |  |                             |         |   |                |   |         |                                            |  |   | 1,545                    |   |  |   | 1,545   |  
|                                                                |  |                             |         |   |                |   |         |                                            |  |   |                          |   |  |   |         |  
|Other comprehensive income, net of tax                          |  |                             |         |   |                |   |         |                                            |  |   |                          |   |  |   | 7,049   |  
|Share-based compensation                                        |  |                             |         |   |                |   | 1,077   |                                            |  |   |                          |   |  |   | 1,077   |  
|Return of capital                                               |  |                             |         |   |                |   | (15,367 | )                                          |  |   |                          |   |  |   | (15,367 | )
|                                                                |  |                             |         |   |                |   |         |                                            |  |   |                          |   |  |   |         |  
|Balance, December 31, 2007                                      |  | $                           | (2,912  | ) |                | $ | 119,131 |                                            |  | $ | (2,271                   | ) |  | $ | 113,948 |  
|                                                                |  |                             |         |   |                |   |         |                                            |  |   |                          |   |  |   |         |  
|Net income                                                      |  |                             | 145,742 |   |                |   |         |                                            |  |   |                          |   |  |   | 145,742 |  
|Change in pension and post-retirement plans, (net of tax ($33)) |  |                             |         |   |                |   |         |                                            |  |   | 330                      |   |  |   | 330     |  
|                                                                |  |                             |         |   |                |   |         |                                            |  |   |                          |   |  |   |         |  
|Other comprehensive loss, net of tax                            |  |                             |         |   |                |   |         |                                            |  |   |                          |   |  |   | 146,072 |  
|Share-based compensation                                        |  |                             |         |   |                |   | 2,340   |                                            |  |   |                          |   |  |   | 2,340   |  
|Excess tax benefits from exercise of stock options              |  |                             |         |   |                |   | 1,420   |                                            |  |   |                          |   |  |   | 1,420   |  
|Return of capital                                               |  |                             |         |   |                |   | (13,950 | )                                          |  |   |                          |   |  |   | (13,950 | )
|                                                                |  |                             |         |   |                |   |         |                                            |  |   |                          |   |  |   |         |  
|Balance, September 30, 2008                                     |  | $                           | 142,830 |   |                | $ | 108,941 |                                            |  | $ | (1,941                   | ) |  | $ | 249,830 |  
|                                                                |  |                             |         |   |                |   |         |                                            |  |   |                          |   |  |   |         |  

See notes to condensed consolidated financial statements



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed 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) On
June 10, 2004, Innophos entered into a definitive purchase and sale agreement with affiliates of Rhodia to acquire certain assets and equity interests related to Rhodias North American specialty phosphates business, referred to herein as
the Phosphates Business. The acquisition of the Phosphates Business from Rhodia, referred to herein as the Acquisition, was consummated on August 13, 2004, at a closing purchase price of $473.4 million. A working capital dispute
relating to the August 13, 2004 closing balance sheet was settled in June 2007 with no further adjustment to the closing purchase price.

Certain prior year amounts have been reclassed to conform to current year presentation.

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements of Innophos, Inc. and Subsidiaries, or Company, have been 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 with the audited
consolidated and combined financial statements of the Company at December 31, 2007 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, 2007 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.

Recently Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements (SFAS No. 157). This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements.
SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, which for the Company is January 1, 2008. In February 2008, the FASB issued Staff Positions No. 157-1 and
No. 157-2 which partially defer the effective date of SFAS No. 157 for one year for certain non-financial assets and liabilities and remove certain leasing transactions from its scope.

SFAS No. 157 indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability
occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. SFAS 157 defines fair value based upon an exit price model. SFAS 157 establishes a valuation
hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term
of the financial instrument. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liabilitys classification within the hierarchy is determined based on
the lowest level input that is significant to the fair value measurement.

The implementation of SFAS No. 157 for financial assets and
financial liabilities, effective January 1, 2008, did not have a material impact on our consolidated financial position or results of operations. The Company is currently assessing the impact of SFAS No. 157 for non-financial assets and
non-financial liabilities on its consolidated financial position and results of operations.

In March 2008, the FASB issued SFAS
No. 161, Disclosures About Derivative Instruments and Hedging Activities  an amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 expands quarterly disclosure requirements in SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities about an entitys derivative instruments and hedging activities. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008, which for the
Company is January 1, 2009. The Company will comply with the additional disclosures upon adoption of SFAS No. 161.

In April
2008, the FASB issued FASB Staff Position (FSP) No. SFAS 142-3, Determination of the Useful Life of Intangible Assets (FSP SFAS 142-3). FSP SFAS 142-3 amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



Assets (SFAS No. 142). The intent of FSP SFAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under
SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R, Business Combinations (SFAS No. 141R) and other applicable accounting literature. FSP SFAS 142-3 is
effective for financial statements issued for fiscal years beginning after December 15, 2008 and must be applied prospectively to intangible assets acquired after the effective date. FSP SFAS 142-3 is effective for business combinations and
adjustments to an acquired entitys deferred tax asset and liability balances occurring after December 31, 2008.

In June 2008,
the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment
transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method described in paragraphs 60 and 61 of SFAS No. 128,
Earnings per Share. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented shall be adjusted
retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the provisions of FSP EITF 03-6-1. Early application is not permitted. The Company will comply with the provisions of FSP
EITF 03-6-1 upon adoption.

In September 2008, the FASB issued FSP 133-1 and FIN 45-4, Disclosures about Credit Derivatives and
Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161 (FSP 133-1 and FIN 45-4). FSP 133-1 and FIN 45-4 amends and enhances
disclosure requirements for sellers of credit derivatives and financial guarantees. It also clarifies that the disclosure requirements of SFAS No. 161 are effective for quarterly periods beginning after November 15, 2008, and fiscal years
that include those periods. FSP 133-1 and FIN 45-4 is effective for reporting periods (annual or interim) ending after November 15, 2008. The implementation of this standard will not have a material impact on our consolidated financial position
and results of operations.

In October 2008, the FASB issued FSP 157-3 Determining Fair Value of a Financial Asset in a Market That
Is Not Active (FSP 157-3). FSP 157-3 clarified the application of SFAS No. 157 in an inactive market. It demonstrated how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP 157-3
was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this standard did not have a material impact on our consolidated financial position and results of operations.

2. Holdings Dividends:

Dividends Paid

In the nine months ended September 30, 2008 dividends paid per share included:



| |  |  | A cash dividend of $0.17 per share ($3,549 in the aggregate) declared on December 21, 2007 and paid on January 31, 2008 to holders of record on
January 14, 2008.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A cash dividend of $0.17 per share ($3,551 in the aggregate) declared on March 25, 2008 and paid on April 30, 2008 to holders of record on April 15,
2008.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A cash dividend of $0.17 per share ($3,563 in the aggregate) declared on June 9, 2008 and paid on July 31, 2008 to holders of record on July 15,
2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

In the nine months ended September 30, 2007 dividends paid per share included:



| |  |  | A cash dividend of $0.11 per share ($2,275 in the aggregate) declared on December 18, 2006 and paid on January 30, 2007 to holders of record on
January 15, 2007.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A cash dividend of $0.17 per share ($3,533 in the aggregate) declared on March 29, 2007 and paid on April 30, 2007 to holders of record on April 13,
2007.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A cash dividend of $0.17 per share ($3,544 in the aggregate) declared on June 29, 2007 and paid on July 31, 2007 to holders of record on July 13,
2007.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

Dividends Declared

In the nine months ended September 30, 2008 dividends declared per share included:



| |  |  | A cash dividend of $0.17 per share ($3,551 in the aggregate) declared on March 25, 2008 and paid on April 30, 2008 to holders of record on April 15,
2008.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



| |  |  | A cash dividend of $0.17 per share ($3,563 in the aggregate) declared on June 9, 2008 and paid on July 31, 2008 to holders of record on July 15,
2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

In the nine months ended September 30, 2007 dividends declared per share included:



| |  |  | A cash dividend of $0.17 per share ($3,533 in the aggregate) declared on March 29, 2007 and paid on April 30, 2007 to holders of record on April 13,
2007.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A cash dividend of $0.17 per share ($3,544 in the aggregate) declared on June 29, 2007 and paid on July 31, 2007 to holders of record on July 13,
2007.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A cash dividend of $0.17 per share ($3,547 in the aggregate) declared on September 28, 2007 and paid on October 31, 2007 to holders of record on
October 12, 2007.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 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 share awards which entitle the holder to receive, at the end of a vesting term, a number of shares of Holdings common stock, within a range of shares
from zero to a specified maximum, calculated using a three year future average return on invested capital (i.e. the three year period 2008-2010 for a 2008 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.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed 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
|                                       | September 30,2008 |                    | September 30,2007
|Stock options                          |                   | $                  | 176               |                   | $ |   
|Restricted stock                       |                   |                    | 232               |                   |   | 232
|Performance shares                     |                   |                    | 479               |                   |   |   
|                                       |                   |                    |                   |                   |   |    
|Total share-based compensation expense |                   | $                  | 887               |                   | $ | 232
|                                       |                   |                    |                   |                   |   |    
|                                       |                  
|                                       |                   | Nine Months Ended 
|                                       |                   | September 30,2008  |                   | September 30,2007
|Stock options                          |                   | $                  | 471               |                   | $ |   
|Restricted stock                       |                   |                    | 695               |                   |   | 695
|Performance shares                     |                   |                    | 1,174             |                   |   |   
|                                       |                   |                    |                   |                   |   |    
|Total share-based compensation expense |                   | $                  | 2,340             |                   | $ | 695
|                                       |                   |                    |                   |                   |   |    

The following table summarizes information about stock option activity for the nine months ended
September 30, 2008:



|                                  |  |                  |   |  |                              |      
|--------------------------------- |  | ---------------- | - |  | ---------------------------- | -----
|                                  |  | Number ofOptions |   |  | WeightedAverageExercisePrice
|Outstanding at January 1, 2008    |  | 922,058          |   |  | $                            | 6.58 
|Granted                           |  | 248,550          |   |  |                              | 18.38
|Forfeited                         |  |                 |   |  |                              |     
|Exercised                         |  | (153,854         | ) |  |                              | 2.55 
|                                  |  |                  |   |  |                              |      
|Outstanding at September 30, 2008 |  | 1,016,754        |   |  | $                            | 10.07
|                                  |  |                  |   |  |                              |      
|Exercisable at September 30, 2008 |  | 393,518          |   |  | $                            | 3.17 
|                                  |  |                  |   |  |                              |      

The fair value of the options granted during 2008 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                                     |  |   | 36.8    | %
|Dividend yield                                          |  |   | 4.6     | %
|Risk-free interest rate                                 |  |   | 3.4     | %
|Expected term                                           |  |   | 6 years |  
|Weighted average grant date fair value of stock options |  | $ | 4.52    |  

Since Innophos Holdings, Inc. is a newly public entity and has limited historical data on the
price of its publicly traded shares, the expected volatility for the valuation of its stock options and performance shares was based on peer group historical volatility data equaling the expected term. The expected term for the stock options is
based on the simplified method as prescribed by SAB 110 since Holdings has limited data on the exercises of stock options. These stock options qualify as plain vanilla stock options as outlined in SAB 107 / 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. Holdings 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.



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



The following table summarizes information about performance share activity for the nine months ended
September 30, 2008:



|                                                 |  |                 |  |                                     |      
|------------------------------------------------ |  | --------------- |  | ----------------------------------- | -----
|                                                 |  | Numberof Shares |  | WeightedAverageGrant DateFair Value
|Outstanding at January 1, 2008                   |  | 75,250          |  | $                                   | 13.28
|Granted (at targeted return on invested capital) |  | 82,340          |  |                                     | 18.38
|Forfeited                                        |  |                |  |                                     |     
|Vested                                           |  |                |  |                                     |     
|Adjustment to estimate of shares to be earned    |  | 157,590         |  |                                     | 15.95
|                                                 |  |                 |  |                                     |      
|Outstanding at September 30, 2008                |  | 315,180         |  | $                                   | 15.95
|                                                 |  |                 |  |                                     |      

In the second quarter of 2008, Holdings revised its estimate of the number of performance shares
expected to be earned at the end of the performance periods as a result of revising its estimate of projected performance and increased the number of performance shares by 157,590. The Company also recorded additional compensation expense of $0.4
million related to the adjustment to estimate of performance shares to be earned. There were 82,340 performance shares granted, assuming achieving targeted return on invested capital, in the second quarter of 2008 with a fair value of $18.38 per
common share. The 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 total intrinsic value of options exercised during the nine months ended September 30, 2008 was $3.2 million. The aggregate intrinsic value of
stock options and performance shares outstanding and exercisable at September 30, 2008 was $17.2 million and $8.3 million, respectively. The total remaining unrecognized compensation expense related to stock options is as follows:



|                                        |  |                                   |           |              |   |                  |  |   |          
|--------------------------------------- |  | --------------------------------- | --------- | ------------ | - | ---------------- |  | - | ---------
|                                        |  | Unrecognized Compensation Expense
|                                        |  | RestrictedStock                   |           | StockOptions |   | PerformanceBased
|Amount                                  |  | $                                 | 231       |              | $ | 1,727            |  | $ | 3,401    
|Weighted-average years to be recognized |  |                                   | 0.3 years |              |   | 2.5 years        |  |   | 2.5 years

4. Inventories:

Inventories consist of the following:



|                  |  |                   |         |                  |   |       
|----------------- |  | ----------------- | ------- | ---------------- | - | ------
|                  |  | September 30,2008 |         | December 31,2007
|Finished products |  | $                 | 95,697  |                  | $ | 54,929
|Raw materials     |  |                   | 27,524  |                  |   | 16,231
|Spare parts       |  |                   | 7,918   |                  |   | 7,568 
|                  |  |                   |         |                  |   |       
|                  |  | $                 | 131,139 |                  | $ | 78,728
|                  |  |                   |         |                  |   |       

Inventory reserves as of September 30, 2008 and December 31, 2007 were $7,437 and
$8,754, respectively.



12



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



5. Other Current Assets:

Other current assets consist of the following:



|                                     |  |                   |        |                  |   |       
|------------------------------------ |  | ----------------- | ------ | ---------------- | - | ------
|                                     |  | September 30,2008 |        | December 31,2007
|Creditable taxes (value added taxes) |  | $                 | 7,132  |                  | $ | 4,647 
|Prepaid income taxes                 |  |                   |       |                  |   | 548   
|Deferred taxes                       |  |                   | 2,087  |                  |   | 2,087 
|Prepaids                             |  |                   | 8,551  |                  |   | 10,478
|Other                                |  |                   | 713    |                  |   | 624   
|                                     |  |                   |        |                  |   |       
|                                     |  | $                 | 18,483 |                  | $ | 18,384
|                                     |  |                   |        |                  |   |       



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



6. Intangibles and Other Assets, net:

Intangibles and other assets consist of the following:



|                                                                                                                     |  |                    |  |                   |        |                  |   |       
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------ |  | ----------------- | ------ | ---------------- | - | ------
|                                                                                                                     |  | Useful life(years) |  | September 30,2008 |        | December 31,2007
|Developed technology and application patents, net of accumulated amortization of $7,806 for 2008 and $6,389 for 2007 |  | 10-20              |  | $                 | 28,794 |                  | $ | 30,211
|Customer relationships, net of accumulated amortization of $2,775 for 2008 and $2,064 for 2007                       |  | 5-15               |  |                   | 8,555  |                  |   | 9,266 
|Tradenames and license agreements, net of accumulated amortization of $2,676 for 2008 and $2,185 for 2007            |  | 5-20               |  |                   | 6,684  |                  |   | 7,175 
|Capitalized software, net of accumulated amortization of $2,303 for 2008 and $1,814 for 2007                         |  | 3-5                |  |                   | 1,233  |                  |   | 1,933 
|Non-compete agreement, net of accumulated amortization of $158 for 2008 and $63 for 2007                             |  | 5                  |  |                   | 472    |                  |   | 567   
|                                                                                                                     |  |                    |  |                   |        |                  |   |       
|Total Intangibles                                                                                                    |  |                    |  | $                 | 45,738 |                  | $ | 49,152
|                                                                                                                     |  |                    |  |                   |        |                  |   |       
|Deferred financing costs, net of accumulated amortization of $13,085 for 2008 and $11,311 for 2007                   |  |                    |  | $                 | 8,419  |                  | $ | 10,193
|Deferred income taxes                                                                                                |  |                    |  |                   | 537    |                  |   | 542   
|Other assets                                                                                                         |  |                    |  |                   | 1,542  |                  |   | 595   
|                                                                                                                     |  |                    |  |                   |        |                  |   |       
|Total other assets                                                                                                   |  |                    |  | $                 | 10,498 |                  | $ | 11,330
|                                                                                                                     |  |                    |  |                   |        |                  |   |       
|                                                                                                                     |  |                    |  | $                 | 56,236 |                  | $ | 60,482
|                                                                                                                     |  |                    |  |                   |        |                  |   |       

7. Other Current Liabilities:

Other current liabilities consist of the following:



|                      |  |                   |        |                  |   |       
|--------------------- |  | ----------------- | ------ | ---------------- | - | ------
|                      |  | September 30,2008 |        | December 31,2007
|Taxes                 |  | $                 | 39,253 |                  | $ | 8,331 
|Payroll related       |  |                   | 11,421 |                  |   | 9,746 
|Freight and rebates   |  |                   | 6,725  |                  |   | 5,757 
|Benefits and pensions |  |                   | 5,501  |                  |   | 4,468 
|Interest              |  |                   | 2,267  |                  |   | 6,478 
|Legal                 |  |                   | 321    |                  |   | 1,351 
|Other                 |  |                   | 5,508  |                  |   | 4,393 
|                      |  |                   |        |                  |   |       
|                      |  | $                 | 70,996 |                  | $ | 40,524
|                      |  |                   |        |                  |   |       

8. Debt and Interest:

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



|                          |  |                   |         |                  |   |        
|------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                          |  | September 30,2008 |         | December 31,2007
|Senior credit facility    |  | $                 | 127,000 |                  | $ | 128,500
|Senior subordinated notes |  |                   | 190,000 |                  |   | 190,000
|                          |  |                   |         |                  |   |        
|                          |  | $                 | 317,000 |                  | $ | 318,500
|Less current portion      |  |                   | 55,004  |                  |   | 1,328  
|                          |  |                   |         |                  |   |        
|                          |  | $                 | 261,996 |                  | $ | 317,172
|                          |  |                   |         |                  |   |        

The senior credit facility (Credit Agreement) provides for interest based upon a fixed spread
above the banks prime lending rate or the LIBOR lending rate. The borrowings under the term loan portion of the Credit Agreement bear interest at September 30, 2008 at 6.8%. The amount outstanding on the term loan facility as of
September 30, 2008 was $127.0 million.



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



There was no amount outstanding on the revolving portion of the Credit Agreement at
September 30, 2008. The Company has also issued approximately $2.4 million of letters of credit under the sub-facility as of September 30, 2008.

The Company is required within five days from the issuance of the 2008 annual financial statements to make a prepayment of the term loan in an amount equal to 50% of the excess cash flow (as defined in the Credit
Agreement) in addition to the quarterly principal payments. Management estimates the excess cash flow payment and the short-term required quarterly principal payments to be $55.0 million as of September 30, 2008.

On August 14, 2008 the Company entered into a Fourth Amendment to the Credit Agreement. Among other things, it removes from Section 9(j) of the
Credit Agreement (concerning defaults) an Event of Default arising from any reduction of beneficial ownership in the Companys capital stock by Permitted Investors (as defined in the Credit Agreement) below the level of 25% calculated on a
fully diluted basis. Under the Credit Agreement, the term Permitted Investors includes Bain Capital Partners LLC, or Bain Capital, and certain of its control-related affiliates.

In addition, the Fourth Amendment adds to Section 9(j) new Events of Default including the: (i) direct or indirect ownership by any person
or group of persons other than the Permitted Investors of more than 35% of the Companys capital stock on a fully diluted basis; and (ii) consummation of any transaction (including any merger or consolidation), the result of which is the
acquisition directly or indirectly by any person or group of persons other than the Principals and Related Parties (both as defined in the Companys 2004 Senior Subordinated Notes) of more than 35% of the voting stock of the Company. Under the
Senior Subordinated Notes, the term Principals means Bain Capital, and the term Related Parties include controlling stockholders and certain types of entities related to the Principals.

The Fourth Amendment also makes changes of an administrative nature to portions of the Credit Agreement relating to letters of credit, among other
things, allowing an additional lender to serve as an issuer thereof, and provides for an increase of 1.0% per annum in the rate of interest to be accrued on obligations outstanding under the Credit Agreement.

On April 16, 2007, Holdings issued $66.0 million aggregate principal amount of Senior Unsecured Notes. Holdings issued the Senior Unsecured Notes in
transactions exempt from or not subject to registration under the Securities Act, pursuant to Rule 144A and Regulation S under the Securities Act. These Senior Unsecured Notes are not included in the consolidated results of Innophos, Inc. However,
all operations of Holdings and Investments Holdings are conducted through Innophos, Inc. and therefore Holdings and Investments Holdings are dependent on us for debt servicing and dividend payments through our operations.

The Senior Unsecured Notes 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, commencing October 15, 2007. Innophos Holdings, Inc. is dependent on the earnings and distributions from Innophos, Inc. and subsidiaries to fund this obligation.

The proceeds from the sale of the Senior Unsecured notes, together with $0.5 million of cash on hand, were applied to pay expenses and redeem the entire
remaining outstanding amount of Investments Holdings Floating Rate Senior Notes due 2015 (including the payment of principal, premium and accrued interest) issued by our parent, Innophos Investments Holdings, Inc. Fees and expenses related to the
Senior Unsecured Notes offering were approximately $1.8 million. This amount was recorded as deferred financing costs and is being amortized over the life of the Senior Unsecured Notes using the effective interest method.

On April 16, 2007, Innophos Investments Holdings, Inc. called for the redemption of the remaining $60.8 million in principal of its Floating Rate
Senior Notes due 2015 effective May 17, 2007. The redemption of the Floating Rate Senior Notes resulted in an approximate $1.5 million charge to earnings for the acceleration of deferred financing charges and a $1.8 million charge to earnings
for the call premium. The $3.3 million charge was recorded in interest expense for the three months ended June 30, 2007. These floating rate senior notes were not included in the consolidated results of Innophos, Inc. However, all operations of
Holdings and Investments Holdings are conducted through Innophos, Inc. and therefore Holdings and Investments Holdings are dependent on us for debt servicing and dividend payments through our operations.

In connection with the redemption of the Floating Rate Senior Notes, the Company and its lenders amended the senior credit facility to permit the Company
to, among other things, (i) incur up to $120.0 million in unsecured indebtedness of Innophos Holdings, Inc. or Innophos Investments Holdings, Inc., including the notes offered in the refinancing and any other future debt issuances,
(ii) redeem the entire outstanding amount of Investments Holdings Floating Rate Senior Notes, as well as any premiums and penalties resulting from such redemption, (iii) service the interest on the notes offered hereby through Innophos,
Inc. making payments of such amounts to Innophos Investments Holdings, Inc. and Innophos Holdings, Inc. and (iv) to permit Innophos, Inc. to make payments to Innophos Investments Holdings, Inc. and Innophos Holdings, Inc. for the payment by
Innophos Holdings, Inc. of dividends on its



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



common stock of $0.75 per share (adjusted pro-rata for any future stock splits) up to a maximum of $17.5 million per year. 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.

As of September 30, 2008, 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, 2008 and September 30, 2007 was
$23,572 and $26,700, respectively. Interest related to our parents debt, the floating rate senior notes and the senior unsecured notes described above, is not included in our interest expense.

Interest expense, net consists of the following:



|                                              |  |                    |       |   |                   |   |       |                   |  |   |                   |   |  |   |        |  
|--------------------------------------------- |  | ------------------ | ----- | - | ----------------- | - | ----- | ----------------- |  | - | ----------------- | - |  | - | ------ | -
|                                              |  | Three months ended |       |   | Nine months ended |  
|                                              |  | September 30,2008  |       |   | September 30,2007 |   |       | September 30,2008 |  |   | September 30,2007 |  
|Interest expense                              |  | $                  | 7,002 |   |                   |   | 7,438 |                   |  | $ | 20,159            |   |  |   | 22,457 |  
|Deferred financing cost                       |  |                    | 590   |   |                   |   | 747   |                   |  |   | 1,774             |   |  |   | 2,131  |  
|Interest income                               |  |                    | (359  | ) |                   |   | (178  | )                 |  |   | (639              | ) |  |   | (669   | )
|Less: amount capitalized for capital projects |  |                    | (3    | ) |                   |   | (375  | )                 |  |   | (314              | ) |  |   | (375   | )
|                                              |  |                    |       |   |                   |   |       |                   |  |   |                   |   |  |   |        |  
|Total interest expense, net                   |  | $                  | 7,230 |   |                   | $ | 7,632 |                   |  | $ | 20,980            |   |  | $ | 23,544 |  
|                                              |  |                    |       |   |                   |   |       |                   |  |   |                   |   |  |   |        |  

9. Other Long-term liabilities:

Other long-term liabilities consist of the following:



|                                                               |  |                   |        |                  |   |       
|-------------------------------------------------------------- |  | ----------------- | ------ | ---------------- | - | ------
|                                                               |  | September 30,2008 |        | December 31,2007
|Environmental liabilities                                      |  | $                 | 1,100  |                  |   | 1,100 
|Profit sharing liabilities                                     |  |                   | 2,336  |                  |   | 1,926 
|Deferred income taxes                                          |  |                   | 21,107 |                  |   | 19,310
|Pension and post retirement liabilities (U.S. and Canada only) |  |                   | 4,569  |                  |   | 4,213 
|Other Liabilities                                              |  |                   | 5,705  |                  |   | 5,107 
|                                                               |  |                   |        |                  |   |       
|                                                               |  | $                 | 34,817 |                  | $ | 31,656
|                                                               |  |                   |        |                  |   |       



16



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



10. Income Taxes:

The provision for income taxes consisted of:



|                            |  |                                    |         |                                    |   |                                 |  |   |                             |   |  |   |        |  
|--------------------------- |  | ---------------------------------- | ------- | ---------------------------------- | - | ------------------------------- |  | - | --------------------------- | - |  | - | ------ | -
|                            |  | Nine months endedSeptember 30,2008 |         | Nine months endedSeptember 30,2007 |  
|                            |  | Incomebeforeincome taxes           |         | Income taxexpense/(benefit)        |   | Income(loss) beforeincome taxes |  |   | Income taxexpense/(benefit) |  
|U.S                         |  | $                                  | 46,650  |                                    |   | 12,161                          |  | $ | (14,291                     | ) |  |   | 210    |  
|Canada/Mexico               |  |                                    | 160,151 |                                    |   | 48,898                          |  |   | 32,588                      |   |  |   | 10,337 |  
|                            |  |                                    |         |                                    |   |                                 |  |   |                             |   |  |   |        |  
|Total                       |  | $                                  | 206,801 |                                    |   | 61,059                          |  |   | 18,297                      |   |  |   | 10,547 |  
|                            |  |                                    |         |                                    |   |                                 |  |   |                             |   |  |   |        |  
|Current income taxes        |  |                                    |         |                                    |   | 58,142                          |  |   |                             |   |  | $ | 12,064 |  
|Deferred income tax benefit |  |                                    |         |                                    |   | 2,917                           |  |   |                             |   |  |   | (1,517 | )
|                            |  |                                    |         |                                    |   |                                 |  |   |                             |   |  |   |        |  
|Total                       |  |                                    |         |                                    | $ | 61,059                          |  |   |                             |   |  | $ | 10,547 |  
|                            |  |                                    |         |                                    |   |                                 |  |   |                             |   |  |   |        |  

The U.S. statutory federal income tax is reconciled to our effective income tax as follows:



|                                               |  |                                    |        |   |                                    |   |        |  
|---------------------------------------------- |  | ---------------------------------- | ------ | - | ---------------------------------- | - | ------ | -
|                                               |  | Nine months endedSeptember 30,2008 |        |   | Nine months endedSeptember 30,2007 |  
|Income tax expense at the U.S. statutory rate  |  | $                                  | 72,380 |   |                                    | $ | 6,404  |  
|State income taxes (net of federal tax effect) |  |                                    | 893    |   |                                    |   | 64     |  
|Foreign tax rate differential                  |  |                                    | (6,902 | ) |                                    |   | (827   | )
|Change in valuation allowance                  |  |                                    | (4,777 | ) |                                    |   | 5,094  |  
|Non-deductible permanent items                 |  |                                    | (267   | ) |                                    |   | 69     |  
|Other                                          |  |                                    | (268   | ) |                                    |   | (257   | )
|                                               |  |                                    |        |   |                                    |   |        |  
|Provision for income taxes                     |  | $                                  | 61,059 |   |                                    | $ | 10,547 |  
|                                               |  |                                    |        |   |                                    |   |        |  

Income taxes paid were $22,408 and $6,338 for the nine months ended September 30, 2008 and
September 30, 2007, respectively.

The income tax provision has been prepared on a separate return basis. Certain of the Mexican and
Canadian subsidiaries file separate tax returns and current income taxes receivable or payable are reflected on the accompanying consolidated balance sheets. The U.S. operations reflect a payable to its parent, Investments Holdings, and its ultimate
parent, Holdings, of $2,040 and $1,820, respectively for use of their net operating losses.

The U.S. operations had income for the nine
months ended September 30, 2008 which results in the utilization of net operating loss carryforwards to offset the current period tax expense. However, the Company still maintains a full valuation allowance on its remaining U.S. net deferred
tax assets and net operating loss carryforwards as realization of the U.S. net deferred tax asset is not more likely than not.

Pursuant to
Section 382 of the Internal Revenue Code, as amended, the annual utilization of the Companys U.S. net operating loss carryforwards may be limited, if the Company experiences a change in ownership of more than 50% within a three year
period. The Company believes it has experienced an ownership change on April 4, 2007 that limits the utilization of net operating losses to offset future taxable income.

Although the U.S. operations have been profitable for two consecutive quarters beginning in the second quarter of 2008, the U.S. operations have had
significant cumulative losses in recent years. As of September 30, 2008, the Company continues to have a full valuation allowance for all U.S. net deferred tax assets as it believes cumulative losses outweigh available positive evidence at this
time. If recent operating results continue, we will no longer be in a cumulative loss position during the fourth quarter of 2008. If this occurs, we will evaluate to what extent we can rely on our income forecasts to support the realization of our
net U.S. deferred tax assets. These income forecasts will be used in conjunction with other positive and negative evidence including but not limited to, market conditions, reversal of temporary differences, and other factors, in evaluating the need
for a full or partial valuation allowance. If we conclude that that it is more likely than not that some, or all, of the net deferred tax assets in the U.S. are realizable, the resulting reversal of the existing valuation allowance will favorably
impact our results of operations in the period of reversal.



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



11. 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 discussed 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 accrued may be necessary. 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.

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 a fertilizer and pesticide manufacturing facility. We have an estimated liability with a range of $0.9-$1.2 million. The remedial action plan for that site 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 at September 30, 2008.

Maintaining compliance with health and safety and environmental laws and regulations has resulted in ongoing costs for us at all our operating facilities. We could incur significant expenses pursuant to new laws,
regulations or governmental policies, or new interpretations of existing laws, regulations or governmental policies, or as a result of the development or discovery of new facts, events, circumstances or conditions at any of our facilities.
Currently, we are involved in several compliance and remediation efforts and agency inspection matters concerning health and safety and environmental matters. Refer to EPA Civil Enforcement  Geismar, LA Plant section in
Litigation below.

Under the Rhodia Agreement, we are indemnified by the sellers for their breaches of representations,
warranties, covenants and other matters under that contract. Our indemnification rights covering undisclosed environmental matters, however, are subject to substantial limitations and exclusions.

Litigation

Mexican CNA Water Tax Claims

Nature and Extent.In November 2004, our Mexican subsidiary, Innophos Fosfatados, received notice from the Mexican National
Waters Commission, or CNA, of the Fresh Water Claims at our Coatzacoalcos, Veracruz, Mexico plant from 1998-2002. As initially assessed by the CNA, those claims totaled approximately $25.5 million at current exchange rates as of October 21,
2008, including basic charges of $8.8 million and $16.7 million for interest, inflation and penalties. Innophos Fosfatados has challenged the Fresh Water Claims as explained below.

A separate series of claims against Innophos Fosfatados by the CNA concerning salt water extraction and use at Coatzacoalcos for 1998 and 1999, and
totaling approximately $107 million (including interest, inflation and penalties), was nullified by a final, non-appealable order of the Mexican Court of Fiscal and Administrative Justice, or Mexican Tax Court, in July 2007.

Indemnity Proceedings Against Rhodia.As a result of the CNA claims, we brought suit in the New York state courts against Rhodia, S.A. and its
affiliates, or the New York Litigation, to enforce our indemnification rights on those claims under the Rhodia Agreement. In February 2008, the New York Court of Appeals affirmed lower court rulings that we are fully indemnified against the Fresh
Water Claims, as well as any like claims pertaining to periods prior to the August 13, 2004 closing date of the Transaction, were liabilities from similar claims to be sustained. Depending on the development of future claims, further action may
be necessary in the New York Litigation to enforce our indemnification rights.



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



Further CNA Claims Proceedings.Innophos Fosfatados appealed the Fresh Water Claims to the
Mexican Tax Court and on August 8, 2008 that court unanimously overturned the Fresh Water Claims with prejudice. CNA appealed the Mexican Tax Court decision to a Mexican Federal appeals court where that proceeding is currently pending. A final
determination of that matter may require further appeals in the Mexican Federal Court system or 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 indemnification as required by our New York Litigation, Innophos Fosfatados could be required to pay a judgment for the entire amount awarded.

Possible Post-2002 Claims.If the CNA Fresh Water Claims are sustained for the period 1998-2002, it is possible that the CNA would seek to claim
similar higher duties, fees and other charges for fresh water extraction and usage for 2003 on into the future, or the Post-2002 Fresh Water Claims. Management estimates that Post-2002 Fresh Water Claims would be approximately $9 million of
additional basic charges, excluding interest, inflation, and penalties, and, under current operating conditions, approximately $1.4 million of additional basic charges per year at current exchange rates as of October 21, 2008. Based on the New
York Litigation, we believe Rhodia would be responsible to indemnify us fully for Post-2002 Fresh Water Claims arising on or before the August 2004 closing, representing approximately $4 million of basic charges. Moreover, although not yet decided,
we also believe Rhodia would be required to indemnify us in whole or in part for post-closing losses caused by breaches of covenants, which could represent the remainder of the exposure referenced above, or $5 million or other measure of damages for
such breaches. Rhodia has denied indemnification responsibility for those breaches. As indemnification for post-closing Fresh Water Claims remains unresolved thus far in the New York Litigation, our case may have to proceed to trial to resolve that
and other issues. A motion by Rhodia for partial summary judgment to dismiss post-closing claims for indemnification was submitted May 28, 2008 has been briefed and is pending with the trial court. No date has yet been set for disposing of the
motion.

Based on our ongoing review process, we have determined that liability for the CNA Fresh Water Claims and the Post-2002 Fresh
Water Claims is reasonably possible, but is neither probable nor reasonably estimable. Accordingly, we did not establish a liability on the balance sheet for those claims at September 30, 2008. As additional information is gained, we 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 any amounts due from Rhodia under our indemnification rights, even if confirmed by court judgments.

Mexican Water
Recycling System  PAMCAR Agreement

Innophos Fosfatados is the successor to the PAMCAR Agreement which required specified
improvements at the Coatzacoalcos plant to be completed by December 31, 2004. Under the terms of the PAMCAR Agreement and subject to its compliance, the CNA temporarily exempted Innophos Fosfatados from the payment of certain waste water
discharge duties, taxes and related charges that normally would have been payable. On January 10, 2005, after bringing on line newly installed water recycling equipment, Innophos Fosfatados notified the CNA of its position that it complied with
the applicable requirements of the PAMCAR Agreement as of December 31, 2004.

Innophos Fosfatados waste water discharges had
been the subject of an earlier study by the National University of Mexico, which concluded in October 2004 that the discharges did not adversely affect the receiving water bodies or the environment. In addition to a previous request by Innophos
Fosfatados to update the relevant waste water discharge permit with new operating information, in October 2004, Innophos Fosfatados filed a petition with the CNA to reflect the results of the university study and to revise upward the discharge
limits which its operations (including as improved by the water recycling installation) could satisfy. In 2005, Innophos Fosfatados received a new Concession Title (containing a waste water discharge permit and limits) granting the requested relief
as to all discharge limits.

Although there has been no formal action, the CNA may take the position that compliance with the PAMCAR
Agreement was to be determined by the previous Concession Title which contained a permit with stricter discharge limits. Consequently, while Mexican counsel has advised us that, as a matter of applicable law, compliance should be determined upon the
new, revised, discharge limits, the CNA could find that Innophos Fosfatados was not in compliance for the duration of the PAMCAR Agreement. In that event, the exempted taxes, duties and related charges through December 31, 2004, could be
reinstated. We estimate that the amount of exempted duties and related charges through December 31, 2004 may range up to $8.7 million at current exchange rates as of October 21, 2008 (including inflation and interest). In addition, we have
been advised it is possible under applicable law that a penalty could be imposed of up to an additional $9.3 million at current exchange rates. We believe that the above amounts represent the upper range of possible liability based on a finding of
noncompliance involving pH levels rather than phosphorus, and, accordingly, could be significantly reduced. We are unable to predict whether the CNA will make a finding of noncompliance as to any aspect of the PAMCAR Agreement or what discharge
limits would constitute the basis for a finding of noncompliance as to water quality requirements.



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



In March 2008, Innophos Fosfatados received an audit notice and a request for documents from the CNA
concerning wastewater discharges and payment of related duties, fees and other charges under the applicable Concession Title from 2002 through 2005. We provided all requested documents to the CNA within the time requested and notified Rhodia of its
indemnification obligations under our 2004 agreement. Rhodia thus far has declined to accept indemnification responsibility.

Based upon
advice of counsel, we would take appropriate steps to challenge any claim stemming from an alleged violation of the PAMCAR Agreement before the CNA and/or Mexican courts, and if any such claim were presented, evaluate fully potential indemnification
rights against Rhodia. Based on our ongoing review process, we have determined that liability is reasonably possible, but is neither probable nor reasonably estimable. Accordingly, we did not establish a liability for this matter on the balance
sheet at September 30, 2008.

SCT Concession Title

In March 2007, Innophos Fosfatados received a follow up to an earlier request for information from the Mexican Secretariat of Communications and Transportation, or SCT, related to our Concession Title to use national
port facilities for our Coatzacoalcos plant. Innophos Fosfatados had been granted a 20 year Concession Title in 1993 covering land, pier and water areas, and the SCT is the agency with authority to oversee compliance with that Concession Title,
including the payment of required taxes and fees, and to take enforcement action, including revocation or refusal to renew a Concession Title. In our review of the matter, we determined that there was a probable liability and complied with the SCT
demand that we undertake a regularization (that is, paying all amounts required by law) of omitted or insufficient payments of taxes and fees under the Concession Title. By July 2007 we had completed an updated appraisal of the
pier-related facilities, made required filings and paid approximately $2.0 million which was included in cost of goods sold for the second fiscal quarter of 2007. The payments consisted of approximately $1.7 million for the periods November 1996
through August 13, 2004 and approximately $0.3 million for the periods August 14, 2004 through May 2007. By completing the regularization process, management was informed by the agency that no penalties would be imposed. Although the
appraisal we obtained which established values for the taxes and fees due may be accepted by the SCT for settlement purposes, the SCT is entitled, and we believe likely, to order a new appraisal of the port facilities, which could result in a
further adjustment of amounts due on our account, which management believes would not be material.

We have also been notified by the SCT
that our regularization is not considered complete, and that in their view we owe additional sums due to a difference between the square meter areas for the Companys pier as-built versus the larger square meter area under the Concession Title.
Management has revised its estimated liability upward by approximately $0.7 million. Accordingly, we paid the required amounts to SCT, and are finalizing discussions with the SCT concerning the proper filing formats and otherwise the completion of
regularization.

We believe the liability arising from the SCT regularization, to the extent applicable to periods prior to the August 2004
closing of the acquisition, is fully indemnified by Rhodia. We have put Rhodia on notice and made a demand for indemnification amounting to a total of $2.4 million of pre-acquisition claims. We also believe we are indemnified under other provisions
of our 2004 agreement, subject to applicable deductibles, for the remaining amounts of the regularization payments for periods after the closing and likewise have made a claim for those amounts. Thus far, Rhodia has maintained that the SCT charges
are not fully indemnifiable. Therefore, although we intend to pursue indemnification from Rhodia vigorously, it is possible that we will not prevail in any required legal action or that Rhodia will not be able to pay us if we do. The indemnification
of the SCT related claims are considered a gain contingency and, therefore, no receivable had been recorded at September 30, 2008.

EPA Civil
Enforcement  Geismar, LA Plant

Following inspections of our Geismar, LA plant in 2004 and follow-up in August 2006, we received
an EPA report identifying certain areas of concern under the Resource, Conservation and Recovery Act, or RCRA. We believe that we operate our Geismar facility in material compliance with all applicable environmental laws and regulations, including
RCRA, and responded to those concerns and EPAs follow up questions by explaining how our operations meet applicable regulations or exemptions. It appears that issues being raised by EPA are part of a national enforcement priority extending to
facilities in the phosphates industry. In connection with that effort, EPA has sought civil penalties from manufacturers for claimed RCRA violations, and, from time to time, has referred matters to the DOJ for possible litigation.

In March 2008, we received a letter from the DOJ indicating that EPA had referred our case for civil enforcement, contending that our Geismar operations
do not qualify for the exemptions we have claimed, and alleging that we violate RCRA by failing to manage two materials appropriately, and related administrative violations. Although the letter stated that EPA/DOJ intends to seek unspecified
penalties and corrective action, it proposed discussions to explore possible resolution. Since receiving the letter, we have held discussions with EPA/DOJ concerning the matters raised by the agencies. At this time, we do not know whether past or
future discussions will result in an agreed resolution, a consent decree, or litigation.



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



Based on our ongoing review process, we have 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, 2008. In the event of civil liability, we have determined that we would probably not have a claim for indemnity
from Rhodia.

U.S. Department of Justice STPP Investigation

In September 2007, we received a letter from the DOJ disclosing that it was conducting an investigation of potential antitrust violations in the STPP (sodium tripolyphosphate) industry. The letter
transmitted a grand jury subpoena issued by the United States District Court for the Northern District of California to produce documents and other materials relating to our STPP business focusing on the period from January 1, 2002
through December 31, 2005. We believe that the DOJ investigation is in its early phases and understand that other STPP producers received similar subpoenas.

We are cooperating fully with the DOJ investigation and have complied with the subpoena by producing what we believe to be substantially all the responsive materials.

Based on all available information responsive to the subpoena, management believes there is no contingent liability. Accordingly, we have not established
a liability on the balance sheet at September 30, 2008.

We acquired our STPP business in August 2004 as part of the transactions
under the Rhodia Agreement. In the event there were to be a claim resulting in liability, we would evaluate potential indemnification rights based upon the facts and circumstances giving rise to the claim.

Other Legal Matters

In June 2005, our Canadian
subsidiary, Innophos Canada, Inc. was contacted by representatives of The Mosaic Company, or Mosaic, seeking a meeting to discuss the status of an ongoing remedial investigation and clean-up Mosaic is conducting at its closed fertilizer
manufacturing site located north of our subsidiarys Port Maitland, Ontario Canada plant site. The remediation is being overseen by the Provincial Ministry of Environment. Mosaic stated that, in its view, we and Rhodia (our predecessor in
interest) were responsible for some phosphorus compound contamination at a rail yard between the two 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 under the Rhodia Agreement, and we will seek all appropriate indemnification.

In March 2008, Sudamfos S.A., an Argentine phosphate producer, or Sudamfos, filed a request for arbitration before the ICC International Court of Arbitration, Paris, France, or ICC, of a commercial dispute with our
Mexican affiliate, Innophos Mexicana, or Mexicana. Sudamfos claimed Mexicana agreed to sell Sudamfos phosphoric acid for delivery in 2007 and 2008 and seeks an order requiring Mexicana to sell and deliver approximately 12,500 metric tons during 2008
in accordance with the claimed agreement. We believe Mexicana has meritorious defenses, including lack of any binding obligation to sell additional products to Sudamfos. Further, Mexicana maintained that it did not agree to arbitrate any dispute
with Sudamfos, and it contested ICC jurisdiction. Sudamfos subsequently withdrew its ICC filings without prejudice. Management has determined that a contingent liability to Sudamfos is not probable, and is at most reasonably possible. Accordingly,
we have not accrued any liability for this matter on our balance sheet at September 30, 2008. In addition, Mexicana believes Sudamfos has wrongfully refused payment of approximately $1.2 million, which Sudamfos owes Mexicana for prior
transactions. Mexicana considers this receivable fully collectible and on October 17, 2008 Mexicana filed a lawsuit in the Mexican courts to collect such receivable.

In addition, we are party to legal proceedings that arise in the ordinary course of our business. Except as to the matters specifically discussed, we do not believe that these legal proceedings represent probable or
reasonably possible 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

Holdings is a party to a 2004 Registration Rights Agreement with Bain Capital and others. In compliance with that agreement, on April 17, 2008, Holdings filed a registration statement on Form S-3 with the SEC
covering 10,088,039 shares of its common stock owned by selling stockholders affiliated with, and donees of, Bain Capital. That registration statement became effective, and, on June 4, 2008, the selling stockholders sold through underwriters a
total of 4,600,000 of the shares registered. Subsequently, on August 14,



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



2008 the selling stockholders disposed of an additional 2,000,000 of the shares registered. Since the registration statement is a shelf allowing
for delayed or continuous offerings, the selling stockholders may, from time to time, sell their remaining registered shares in one or more future offerings. Under the Registration Rights Agreement, Holdings will continue to bear the costs of
effecting and maintaining the registration, except for underwriting discounts and commissions, although Holdings does not receive proceeds from it.

12.
Pension:

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



|                                            |  |                 |     |   |               |   |     |       |  |   |     |  
|------------------------------------------- |  | --------------- | --- | - | ------------- | - | --- | ----- |  | - | --- | -
|                                            |  | 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 three months ended
September 30, 2007:



|                                            |  |                 |     |   |               |   |     |       |  |   |     |  
|------------------------------------------- |  | --------------- | --- | - | ------------- | - | --- | ----- |  | - | --- | -
|                                            |  | 2007            |    
|                                            |  | Pensionbenefits |     |   | Otherbenefits |   |     | Total | 
|Service cost                                |  | $               | 40  |   |               | $ | 84  |       |  | $ | 124 |  
|Interest cost                               |  |                 | 41  |   |               |   | 34  |       |  |   | 75  |  
|Expected return on assets                   |  |                 | (24 | ) |               |   |    |       |  |   | (24 | )
|Amortization of prior service cost          |  |                 | (6  | ) |               |   | 72  |       |  |   | 66  |  
|Amortization of unrecognized (gains)/losses |  |                 | 1   |   |               |   | (27 | )     |  |   | (26 | )
|                                            |  |                 |     |   |               |   |     |       |  |   |     |  
|Net periodic benefit expense                |  | $               | 52  |   |               | $ | 163 |       |  | $ | 215 |  
|                                            |  |                 |     |   |               |   |     |       |  |   |     |  

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 |  
|                                            |  |                 |     |   |               |   |     |       |  |   |     |  

Net periodic benefit expense for the United States plans for the nine months ended
September 30, 2007:



|                                            |  |                 |     |   |               |   |     |       |  |   |     |  
|------------------------------------------- |  | --------------- | --- | - | ------------- | - | --- | ----- |  | - | --- | -
|                                            |  | 2007            |    
|                                            |  | Pensionbenefits |     |   | Otherbenefits |   |     | Total | 
|Service cost                                |  | $               | 165 |   |               | $ | 252 |       |  | $ | 417 |  
|Interest cost                               |  |                 | 102 |   |               |   | 104 |       |  |   | 206 |  
|Expected return on assets                   |  |                 | (44 | ) |               |   |    |       |  |   | (44 | )
|Amortization of prior service cost          |  |                 | 43  |   |               |   | 216 |       |  |   | 259 |  
|Amortization of unrecognized (gains)/losses |  |                 | 1   |   |               |   | (81 | )     |  |   | (80 | )
|Curtailment expense for plan amendment      |  |                 | 203 |   |               |   |    |       |  |   | 203 |  
|                                            |  |                 |     |   |               |   |     |       |  |   |     |  
|Net periodic benefit expense                |  | $               | 470 |   |               | $ | 491 |       |  | $ | 961 |  
|                                            |  |                 |     |   |               |   |     |       |  |   |     |  

In 2007, the Company and the Union for the hourly employees at our Nashville facility agreed that
it would freeze its defined benefit pension plan (the Plan) as of August 1, 2007. The accrual of additional benefits or increase in the current level of benefits under the Plan ceased as of August 1, 2007, after which the
Nashville union employees now participate in the Companys existing non contributory defined contribution benefit plan.



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



We made our entire cash contributions of $2.2 million for our U.S. defined contribution plan during
the first quarter of 2008 for the plan year 2007. The U.S. defined benefit cash contributions were approximately $0.1 million for 2008.

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   |  
|                                              |  |                 |      |   |               |   |       |  |   |      |  
|Net periodic benefit expense                  |  | $               | 22   |   |               | $ | 39    |  | $ | 61   |  
|                                              |  |                 |      |   |               |   |       |  |   |      |  

Net periodic benefit expense for the Canadian plans for the three months ended September 30,
2007:



|                                              |  |                 |      |   |               |   |       |  |   |      |  
|--------------------------------------------- |  | --------------- | ---- | - | ------------- | - | ----- |  | - | ---- | -
|                                              |  | 2007            |     
|                                              |  | Pensionbenefits |      |   | Otherbenefits |   | Total | 
|Service cost                                  |  | $               | 79   |   |               |   | 20    |  | $ | 99   |  
|Interest cost                                 |  |                 | 144  |   |               |   | 17    |  |   | 161  |  
|Expected return on assets                     |  |                 | (193 | ) |               |   |      |  |   | (193 | )
|Amortization of initial transition obligation |  |                 |     |   |               |   | 11    |  |   | 11   |  
|Amortization of unrecognized (gains)/losses   |  |                 | 16   |   |               |   | 4     |  |   | 20   |  
|                                              |  |                 |      |   |               |   |       |  |   |      |  
|Net periodic benefit expense                  |  | $               | 46   |   |               | $ | 52    |  | $ | 98   |  
|                                              |  |                 |      |   |               |   |       |  |   |      |  

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   |  
|                                              |  |                 |      |   |               |   |       |  |   |      |  
|Net periodic benefit expense                  |  | $               | 67   |   |               | $ | 118   |  | $ | 185  |  
|                                              |  |                 |      |   |               |   |       |  |   |      |  

Net periodic benefit expense for the Canadian plans for the nine months ended September 30,
2007:



|                                              |  |                 |      |   |               |   |       |  |   |      |  
|--------------------------------------------- |  | --------------- | ---- | - | ------------- | - | ----- |  | - | ---- | -
|                                              |  | 2007            |     
|                                              |  | Pensionbenefits |      |   | Otherbenefits |   | Total | 
|Service cost                                  |  | $               | 185  |   |               |   | 46    |  | $ | 231  |  
|Interest cost                                 |  |                 | 338  |   |               |   | 39    |  |   | 377  |  
|Expected return on assets                     |  |                 | (453 | ) |               |   |      |  |   | (453 | )
|Amortization of initial transition obligation |  |                 |     |   |               |   | 25    |  |   | 25   |  
|Amortization of unrecognized (gains)/losses   |  |                 | 38   |   |               |   | 10    |  |   | 48   |  
|                                              |  |                 |      |   |               |   |       |  |   |      |  
|Net periodic benefit expense                  |  | $               | 108  |   |               | $ | 120   |  | $ | 228  |  
|                                              |  |                 |      |   |               |   |       |  |   |      |  

We made cash contributions to our Canadian defined benefit plan of $1.0 million during the
nine months ended September 30, 2008. We expect to make cash contributions to our Canadian defined benefit plans of $0.3 million during the remainder of 2008.



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INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)



13. 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, 2008 |  | United States |         | Mexico |   | Canada  |  | Eliminations |        |  | Total
|Sales                                         |  | $             | 146,154 |        | $ | 133,732 |  | $            | 11,886 |  | $     |         |   |  | $ | 291,772
|Intersegment sales                            |  |               | 7,687   |        |   | 11,307  |  |              | 16,568 |  |       | (35,562 | ) |  |   |       
|                                              |  |               |         |        |   |         |  |              |        |  |       |         |   |  |   |        
|Total sales                                   |  | $             | 153,841 |        | $ | 145,039 |  | $            | 28,454 |  | $     | (35,562 | ) |  | $ | 291,772
|                                              |  |               |         |        |   |         |  |              |        |  |       |         |   |  |   |        
|Operating income                              |  | $             | 45,342  |        | $ | 62,357  |  | $            | 5,148  |  | $     |        |   |  | $ | 112,847
|                                              |  |               |         |        |   |         |  |              |        |  |       |         |   |  |   |        
|                                              |  |               |         |        |  
|For the three months ended September 30, 2007 |  | United States |         | Mexico |   | Canada  |  | Eliminations |        |  | Total
|Sales                                         |  | $             | 82,768  |        | $ | 56,659  |  | $            | 7,024  |  | $     |        |   |  | $ | 146,451
|Intersegment sales                            |  |               | 5,588   |        |   | 7,969   |  |              | 12,705 |  |       | (26,262 | ) |  |   |       
|                                              |  |               |         |        |   |         |  |              |        |  |       |         |   |  |   |        
|Total sales                                   |  | $             | 88,356  |        | $ | 64,628  |  | $            | 19,729 |  | $     | (26,262 | ) |  | $ | 146,451
|                                              |  |               |         |        |   |         |  |              |        |  |       |         |   |  |   |        
|Operating income                              |  | $             | 4,448   |        | $ | 13,318  |  | $            | 354    |  | $     |        |   |  | $ | 18,120 
|                                              |  |               |         |        |   |         |  |              |        |  |       |         |   |  |   |        
|                                              |  |               |         |        |  
|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
|                                              |  |               |         |        |   |         |  |              |        |  |       |         |   |  |   |        
|                                              |  |               |         |        |  
|For the nine months ended September 30, 2007  |  | United States |         | Mexico |   | Canada  |  | Eliminations |        |  | Total
|Sales                                         |  | $             | 242,946 |        | $ | 170,072 |  | $            | 22,025 |  | $     |        |   |  | $ | 435,043
|Intersegment sales                            |  |               | 19,722  |        |   | 21,158  |  |              | 42,034 |  |       | (82,914 | ) |  |   |       
|                                              |  |               |         |        |   |         |  |              |        |  |       |         |   |  |   |        
|Total sales                                   |  | $             | 262,668 |        | $ | 191,230 |  | $            | 64,059 |  | $     | (82,914 | ) |  | $ | 435,043
|                                              |  |               |         |        |   |         |  |              |        |  |       |         |   |  |   |        
|Operating income                              |  | $             | 2,051   |        | $ | 36,465  |  | $            | 3,085  |  | $     |        |   |  | $ | 41,601 
|                                              |  |               |         |        |   |         |  |              |        |  |       |         |   |  |   |        



|                        |  |                    |         |                   |   |                   |  |                   |         |  |   |        
|----------------------- |  | ------------------ | ------- | ----------------- | - | ----------------- |  | ----------------- | ------- |  | - | -------
|                        |  | Three months ended |         | Nine months ended
|Geographic Revenues (1) |  | September 30,2008  |         | September 30,2007 |   | September 30,2008 |  | September 30,2007
|U.S.                    |  | $                  | 134,942 |                   | $ | 75,232            |  | $                 | 335,923 |  | $ | 220,381
|Mexico                  |  |                    | 77,746  |                   |   | 31,092            |  |                   | 184,520 |  |   | 98,477 
|Canada                  |  |                    | 12,123  |                   |   | 7,462             |  |                   | 29,225  |  |   | 23,528 
|Chile                   |  |                    | 19,047  |                   |   | 13,407            |  |                   | 60,430  |  |   | 27,798 
|Other foreign countries |  |                    | 47,914  |                   |   | 19,258            |  |                   | 108,212 |  |   | 64,859 
|                        |  |                    |         |                   |   |                   |  |                   |         |  |   |        
|Total                   |  | $                  | 291,772 |                   | $ | 146,451           |  | $                 | 718,310 |  | $ | 435,043
|                        |  |                    |         |                   |   |                   |  |                   |         |  |   |        



|(1) | based on destination of sale.
|--- | -----------------------------

14. 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 credit facility and Innophos, Inc.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.



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet

As of September 30, 2008

(In thousands)



|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|----------------------------------------------------------- |  | -------------- | ------- | ------------------- | - | ----------------------- |  | -------------------------- | ------- |  | ----- | -------- | - |  | - | -------
|                                                            |  | Innophos, Inc. |         | GuarantorSubsidiary |   | Non-GuarantorSubsidiary |  | AdjustmentsandEliminations |         |  | Total
|ASSETS                                                      |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Current assets:                                             |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Cash and cash equivalents                                   |  | $              | 28,552  |                     | $ | 6                       |  | $                          | 94,149  |  | $     |         |   |  | $ | 122,707
|Accounts receivable, net                                    |  |                | 206,018 |                     |   |                        |  |                            | 200,941 |  |       | (302,861 | ) |  |   | 104,098
|Inventories                                                 |  |                | 59,135  |                     |   |                        |  |                            | 72,004  |  |       |         |   |  |   | 131,139
|Other current assets                                        |  |                | 10,426  |                     |   |                        |  |                            | 8,477   |  |       | (420     | ) |  |   | 18,483 
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total current assets                                        |  |                | 304,131 |                     |   | 6                       |  |                            | 375,571 |  |       | (303,281 | ) |  |   | 376,427
|Property, plant and equipment, net                          |  |                | 114,134 |                     |   |                        |  |                            | 123,630 |  |       |         |   |  |   | 237,764
|Goodwill                                                    |  |                | 7,237   |                     |   |                        |  |                            | 40,031  |  |       |         |   |  |   | 47,268 
|Investment in subsidiaries                                  |  |                | 212,083 |                     |   | 171,946                 |  |                            |        |  |       | (384,029 | ) |  |   |       
|Intercompany notes                                          |  |                | 104,928 |                     |   |                        |  |                            |        |  |       | (104,928 | ) |  |   |       
|Intangibles and other assets, net                           |  |                | 44,712  |                     |   |                        |  |                            | 11,524  |  |       |          |   |  |   | 56,236 
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total assets                                                |  | $              | 787,225 |                     | $ | 171,952                 |  | $                          | 550,756 |  | $     | (792,238 | ) |  | $ | 717,695
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                        |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Current liabilities:                                        |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Short term borrowings and current portion of long-term debt |  | $              | 55,004  |                     | $ |                        |  | $                          |        |  | $     |         |   |  | $ | 55,004 
|Accounts payable, trade and other                           |  |                | 183,452 |                     |   |                        |  |                            | 164,461 |  |       | (302,861 | ) |  |   | 45,052 
|Other current liabilities                                   |  |                | 26,200  |                     |   |                        |  |                            | 45,216  |  |       | (420     | ) |  |   | 70,996 
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total current liabilities                                   |  |                | 264,656 |                     |   |                        |  |                            | 209,677 |  |       | (303,281 | ) |  |   | 171,052
|Long-term debt                                              |  |                | 261,996 |                     |   |                        |  |                            | 104,928 |  |       | (104,928 | ) |  |   | 261,996
|Other long-term liabilities                                 |  |                | 10,743  |                     |   |                        |  |                            | 24,074  |  |       |          |   |  |   | 34,817 
|Total stockholders equity                                  |  |                | 249,830 |                     |   | 171,952                 |  |                            | 212,077 |  |       | (384,029 | ) |  |   | 249,830
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total liabilities and stockholders equity                  |  | $              | 787,225 |                     | $ | 171,952                 |  | $                          | 550,756 |  | $     | (792,238 | ) |  | $ | 717,695
|                                                            |  |                |         |                     |   |                         |  |                            |         |  |       |          |   |  |   |        



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet

As of December 31, 2007

(In thousands)



|                                                            |  |                |         |                       |   |                         |  |                            |         |  |       |          |   |  |   |        
|----------------------------------------------------------- |  | -------------- | ------- | --------------------- | - | ----------------------- |  | -------------------------- | ------- |  | ----- | -------- | - |  | - | -------
|                                                            |  | Innophos, Inc. |         | GuarantorSubsidiary * |   | Non-GuarantorSubsidiary |  | AdjustmentsandEliminations |         |  | Total
|ASSETS                                                      |  |                |         |                       |   |                         |  |                            |         |  |       |          |   |  |   |        
|Current assets:                                             |  |                |         |                       |   |                         |  |                            |         |  |       |          |   |  |   |        
|Cash and cash equivalents                                   |  | $              | 3,657   |                       | $ | 6                       |  | $                          | 11,905  |  | $     |         |   |  | $ | 15,568 
|Accounts receivable, net                                    |  |                | 135,348 |                       |   |                        |  |                            | 125,041 |  |       | (200,310 | ) |  |   | 60,079 
|Inventories                                                 |  |                | 47,868  |                       |   |                        |  |                            | 30,860  |  |       |         |   |  |   | 78,728 
|Other current assets                                        |  |                | 11,685  |                       |   |                        |  |                            | 7,366   |  |       | (667     | ) |  |   | 18,384 
|                                                            |  |                |         |                       |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total current assets                                        |  |                | 198,558 |                       |   | 6                       |  |                            | 175,172 |  |       | (200,977 | ) |  |   | 172,759
|Property, plant and equipment, net                          |  |                | 125,914 |                       |   |                        |  |                            | 134,649 |  |       |         |   |  |   | 260,563
|Goodwill                                                    |  |                | 7,237   |                       |   |                        |  |                            | 40,031  |  |       |         |   |  |   | 47,268 
|Investment in subsidiaries                                  |  |                | 100,617 |                       |   | 65,850                  |  |                            |        |  |       | (166,467 | ) |  |   |       
|Intercompany notes                                          |  |                | 104,351 |                       |   |                        |  |                            |        |  |       | (104,351 | ) |  |   |       
|Intangibles and other assets, net                           |  |                | 49,717  |                       |   |                        |  |                            | 10,765  |  |       |         |   |  |   | 60,482 
|                                                            |  |                |         |                       |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total assets                                                |  | $              | 586,394 |                       | $ | 65,856                  |  | $                          | 360,617 |  | $     | (471,795 | ) |  | $ | 541,072
|                                                            |  |                |         |                       |   |                         |  |                            |         |  |       |          |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                        |  |                |         |                       |   |                         |  |                            |         |  |       |          |   |  |   |        
|Current liabilities:                                        |  |                |         |                       |   |                         |  |                            |         |  |       |          |   |  |   |        
|Short term borrowings and current portion of long-term debt |  | $              | 1,328   |                       | $ |                        |  | $                          |        |  | $     |         |   |  | $ | 1,328  
|Accounts payable, trade and other                           |  |                | 120,426 |                       |   |                        |  |                            | 116,328 |  |       | (200,310 | ) |  |   | 36,444 
|Other current liabilities                                   |  |                | 27,135  |                       |   |                        |  |                            | 14,056  |  |       | (667     | ) |  |   | 40,524 
|                                                            |  |                |         |                       |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total current liabilities                                   |  |                | 148,889 |                       |   |                        |  |                            | 130,384 |  |       | (200,977 | ) |  |   | 78,296 
|Long-term debt                                              |  |                | 317,172 |                       |   |                        |  |                            | 104,351 |  |       | (104,351 | ) |  |   | 317,172
|Other long-term liabilities                                 |  |                | 6,385   |                       |   |                        |  |                            | 25,271  |  |       |         |   |  |   | 31,656 
|Total stockholders equity                                  |  |                | 113,948 |                       |   | 65,856                  |  |                            | 100,611 |  |       | (166,467 | ) |  |   | 113,948
|                                                            |  |                |         |                       |   |                         |  |                            |         |  |       |          |   |  |   |        
|Total liabilities and stockholders equity                  |  | $              | 586,394 |                       | $ | 65,856                  |  | $                          | 360,617 |  | $     | (471,795 | ) |  | $ | 541,072
|                                                            |  |                |         |                       |   |                         |  |                            |         |  |       |          |   |  |   |        



26



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed 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 income                                     |  |                | 45,343  |   |                     |   |        |                         |  |   | 67,504                     |   |  |       |        |   |  |   | 112,847 |  
|Interest expense, net                                |  |                | 6,009   |   |                     |   |        |                         |  |   | 1,221                      |   |  |       |        |   |  |   | 7,230   |  
|Foreign exchange gains                               |  |                | 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 income                                     |  |                | 63,255   |   |                     |   |         |                         |  |   | 163,262                    |   |  |       |         |   |  |   | 226,517 |  
|Interest expense, net                                |  |                | 16,483   |   |                     |   |         |                         |  |   | 4,497                      |   |  |       |         |   |  |   | 20,980  |  
|Foreign exchange (gains) losses                      |  |                | 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 |  
|                                                     |  |                |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  



27



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed 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, 2007

(In thousands)



|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|---------------------------------------------------- |  | -------------- | ------ | - | ------------------- | - | ------ | ----------------------- |  | - | -------------------------- | - |  | ----- | ------- | - |  | - | ------- | -
|                                                     |  | Innophos, Inc. |        |   | GuarantorSubsidiary |   |        | Non-GuarantorSubsidiary |  |   | AdjustmentsandEliminations |   |  | Total |        
|Net Sales                                            |  | $              | 88,355 |   |                     | $ |       |                         |  | $ | 84,356                     |   |  | $     | (26,260 | ) |  | $ | 146,451 |  
|Cost of goods sold                                   |  |                | 75,388 |   |                     |   |       |                         |  |   | 67,586                     |   |  |       | (26,260 | ) |  |   | 116,714 |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Gross Profit                                         |  |                | 12,967 |   |                     |   |       |                         |  |   | 16,770                     |   |  |       |        |   |  |   | 29,737  |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Operating expenses:                                  |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Selling, general and administrative expenses and R&D |  |                | 8,519  |   |                     |   |       |                         |  |   | 3,098                      |   |  |       |        |   |  |   | 11,617  |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Total operating expenses                             |  |                | 8,519  |   |                     |   |       |                         |  |   | 3,098                      |   |  |       |        |   |  |   | 11,617  |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Operating (loss) income                              |  |                | 4,448  |   |                     |   |       |                         |  |   | 13,672                     |   |  |       |        |   |  |   | 18,120  |  
|Interest expense, net                                |  |                | 5,502  |   |                     |   |       |                         |  |   | 2,130                      |   |  |       |        |   |  |   | 7,632   |  
|Foreign exchange losses                              |  |                | (5     | ) |                     |   |       |                         |  |   | 46                         |   |  |       |        |   |  |   | 41      |  
|Other income                                         |  |                |       |   |                     |   |       |                         |  |   | (158                       | ) |  |       |        |   |  |   | (158    | )
|Equity (income) loss                                 |  |                | (8,520 | ) |                     |   | (8,158 | )                       |  |   |                           |   |  |       | 16,678  |   |  |   |        |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Income (loss) before income tax                      |  |                | 7,471  |   |                     |   | 8,158  |                         |  |   | 11,654                     |   |  |       | (16,678 | ) |  |   | 10,605  |  
|Provision for income taxes                           |  |                | 70     |   |                     |   |       |                         |  |   | 3,134                      |   |  |       |        |   |  |   | 3,204   |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net income (loss)                                    |  | $              | 7,401  |   |                     | $ | 8,158  |                         |  | $ | 8,520                      |   |  | $     | (16,678 | ) |  | $ | 7,401   |  
|                                                     |  |                |        |   |                     |   |        |                         |  |   |                            |   |  |       |         |   |  |   |         |  

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations

For the nine months ended
September 30, 2007

(In thousands)



|                                                     |  |                |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|---------------------------------------------------- |  | -------------- | ------- | - | ------------------- | - | ------- | ----------------------- |  | - | -------------------------- | - |  | ----- | ------- | - |  | - | ------- | -
|                                                     |  | Innophos, Inc. |         |   | GuarantorSubsidiary |   |         | Non-GuarantorSubsidiary |  |   | AdjustmentsandEliminations |   |  | Total |        
|Net Sales                                            |  | $              | 262,668 |   |                     | $ |        |                         |  | $ | 255,288                    |   |  | $     | (82,913 | ) |  | $ | 435,043 |  
|Cost of goods sold                                   |  |                | 228,495 |   |                     |   |        |                         |  |   | 206,799                    |   |  |       | (82,913 | ) |  |   | 352,381 |  
|                                                     |  |                |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Gross Profit                                         |  |                | 34,173  |   |                     |   |        |                         |  |   | 48,489                     |   |  |       |        |   |  |   | 82,662  |  
|                                                     |  |                |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Operating expenses:                                  |  |                |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Selling, general and administrative expenses and R&D |  |                | 32,122  |   |                     |   |        |                         |  |   | 8,939                      |   |  |       |        |   |  |   | 41,061  |  
|                                                     |  |                |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Total operating expenses                             |  |                | 32,122  |   |                     |   |        |                         |  |   | 8,939                      |   |  |       |        |   |  |   | 41,061  |  
|                                                     |  |                |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Operating (loss) income                              |  |                | 2,051   |   |                     |   |        |                         |  |   | 39,550                     |   |  |       |        |   |  |   | 41,601  |  
|Interest expense, net                                |  |                | 16,316  |   |                     |   |        |                         |  |   | 7,228                      |   |  |       |        |   |  |   | 23,544  |  
|Foreign exchange losses (gains)                      |  |                | 25      |   |                     |   |        |                         |  |   | (9                         | ) |  |       |        |   |  |   | 16      |  
|Other income                                         |  |                |        |   |                     |   |        |                         |  |   | (256                       | ) |  |       |        |   |  |   | (256    | )
|Equity (income) loss                                 |  |                | (22,250 | ) |                     |   | (19,982 | )                       |  |   |                           |   |  |       | 42,232  |   |  |   |        |  
|                                                     |  |                |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Income (loss) before income tax                      |  |                | 7,960   |   |                     |   | 19,982  |                         |  |   | 32,587                     |   |  |       | (42,232 | ) |  |   | 18,297  |  
|Provision for income taxes                           |  |                | 210     |   |                     |   |        |                         |  |   | 10,337                     |   |  |       |        |   |  |   | 10,547  |  
|                                                     |  |                |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net income (loss)                                    |  | $              | 7,750   |   |                     | $ | 19,982  |                         |  | $ | 22,250                     |   |  | $     | (42,232 | ) |  | $ | 7,750   |  
|                                                     |  |                |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  



28



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the nine months ended
September 30, 2008

(In thousands)



|                                                                                         |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | ------------- | -------- | - | ------------------- | - | -------- | ----------------------- |  | - | -------------------------- | - |  | ----- | -------- | - |  | - | ------- | -
|                                                                                         |  | Innophos, Inc |          |   | GuarantorSubsidiary |   |          | Non-guarantorSubsidiary |  |   | AdjustmentsandEliminations |   |  | Total |         
|Cash Flows from operating activities                                                     |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  
|Net income (loss)                                                                        |  | $             | 145,742  |   |                     | $ | 106,097  |                         |  | $ | 111,253                    |   |  | $     | (217,350 | ) |  | $ | 145,742 |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  
|Depreciation and amortization                                                            |  |               | 24,124   |   |                     |   |         |                         |  |   | 16,247                     |   |  |       |         |   |  |   | 40,371  |  
|Amortization of deferred financing charges                                               |  |               | 1,774    |   |                     |   |         |                         |  |   |                           |   |  |       |         |   |  |   | 1,774   |  
|Deferred income taxes (benefits)                                                         |  |               | 3,890    |   |                     |   |         |                         |  |   | (973                       | ) |  |       |         |   |  |   | 2,917   |  
|Deferred profit sharing                                                                  |  |               |         |   |                     |   |         |                         |  |   | 410                        |   |  |       |         |   |  |   | 410     |  
|Share-based compensation                                                                 |  |               | 2,340    |   |                     |   |         |                         |  |   |                           |   |  |       |         |   |  |   | 2,340   |  
|Equity (income) loss in non-guarantor subsidiaries                                       |  |               | (111,253 | ) |                     |   | (106,097 | )                       |  |   |                           |   |  |       | 217,350  |   |  |   |        |  
|                                                                                         |  |               |          |   |                    
|Changes in assets and liabilities:                                                       |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  
|(Increase) decrease in accounts receivable                                               |  |               | (70,670  | ) |                     |   |         |                         |  |   | (75,900                    | ) |  |       | 102,551  |   |  |   | (44,019 | )
|Increase in inventories                                                                  |  |               | (11,267  | ) |                     |   |         |                         |  |   | (41,144                    | ) |  |       |         |   |  |   | (52,411 | )
|(Increase) decrease in other current assets                                              |  |               | 1,259    |   |                     |   |         |                         |  |   | (1,111                     | ) |  |       | (247     | ) |  |   | (99     | )
|Increase (decrease) in accounts payable                                                  |  |               | 63,026   |   |                     |   |         |                         |  |   | 48,133                     |   |  |       | (102,551 | ) |  |   | 8,608   |  
|Increase in other current liabilities                                                    |  |               | (935     | ) |                     |   |         |                         |  |   | 31,160                     |   |  |       | 247      |   |  |   | 30,472  |  
|Changes in other long-term assets and liabilities                                        |  |               | (4,925   | ) |                     |   |         |                         |  |   | 3,227                      |   |  |       |         |   |  |   | (1,698  | )
|                                                                                         |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  
|Net cash provided from operating activities                                              |  |               | 43,105   |   |                     |   |         |                         |  |   | 91,302                     |   |  |       |         |   |  |   | 134,407 |  
|                                                                                         |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  
|Cash flows from investing activities:                                                    |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  
|Capital expenditures                                                                     |  |               | (8,180   | ) |                     |   |         |                         |  |   | (5,058                     | ) |  |       |         |   |  |   | (13,238 | )
|Purchase of assets                                                                       |  |               |         |   |                     |   |         |                         |  |   |                           |   |  |       |         |   |  |   |        |  
|                                                                                         |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  
|Net cash used for investing activities                                                   |  |               | (8,180   | ) |                     |   |         |                         |  |   | (5,058                     | ) |  |       |         |   |  |   | (13,238 | )
|                                                                                         |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  
|Cash flows from financing activities:                                                    |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  
|Repayment from subsidiaries                                                              |  |               | 4,000    |   |                     |   |         |                         |  |   |                           |   |  |       | (4,000   | ) |  |   |        |  
|Net change in borrowing with Innophos, Inc                                               |  |               |         |   |                     |   |         |                         |  |   | (4,000                     | ) |  |       | 4,000    |   |  |   |        |  
|Return of capital to parent                                                              |  |               | (13,950  | ) |                     |   |         |                         |  |   |                           |   |  |       |         |   |  |   | (13,950 | )
|Excess tax benefits from exercise of stock options                                       |  |               | 1,420    |   |                     |   |          |                         |  |   |                           |   |  |       |         |   |  |   | 1,420   |  
|Principal payment of term loans                                                          |  |               | (1,500   | ) |                     |   |         |                         |  |   |                           |   |  |       |         |   |  |   | (1,500  | )
|                                                                                         |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  
|Net cash provided from (used for) financing activities                                   |  |               | (10,030  | ) |                     |   |         |                         |  |   | (4,000                     | ) |  |       |         |   |  |   | (14,030 | )
|                                                                                         |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  
|Net change in cash                                                                       |  |               | 24,895   |   |                     |   |         |                         |  |   | 82,244                     |   |  |       |         |   |  |   | 107,139 |  
|Cash and cash equivalents at beginning of period                                         |  |               | 3,657    |   |                     |   | 6        |                         |  |   | 11,905                     |   |  |       |         |   |  |   | 15,568  |  
|                                                                                         |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  
|Cash and cash equivalents at end of period                                               |  | $             | 28,552   |   |                     | $ | 6        |                         |  | $ | 94,149                     |   |  | $     |         |   |  | $ | 122,707 |  
|                                                                                         |  |               |          |   |                     |   |          |                         |  |   |                            |   |  |       |          |   |  |   |         |  



29



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##### Table of Contents

INNOPHOS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in
thousands, except where noted)

INNOPHOS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the nine months ended
September 30, 2007

(In thousands)



|                                                                                         |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------------- | - | ------- | ----------------------- |  | - | -------------------------- | - |  | ----- | ------- | - |  | - | ------- | -
|                                                                                         |  | Innophos, Inc |         |   | GuarantorSubsidiary |   |         | Non-guarantorSubsidiary |  |   | AdjustmentsandEliminations |   |  | Total |        
|Cash Flows from operating activities                                                     |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net income (loss)                                                                        |  | $             | 7,750   |   |                     | $ | 19,982  |                         |  | $ | 22,250                     |   |  | $     | (42,232 | ) |  | $ | 7,750   |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Depreciation and amortization                                                            |  |               | 20,209  |   |                     |   |        |                         |  |   | 14,268                     |   |  |       |        |   |  |   | 34,477  |  
|Amortization of deferred financing charges                                               |  |               | 2,131   |   |                     |   |        |                         |  |   |                           |   |  |       |        |   |  |   | 2,131   |  
|Deferred income taxes (benefits)                                                         |  |               | 135     |   |                     |   |        |                         |  |   | (1,652                     | ) |  |       |        |   |  |   | (1,517  | )
|Deferred profit sharing                                                                  |  |               |        |   |                     |   |        |                         |  |   | 488                        |   |  |       |        |   |  |   | 488     |  
|Share-based compensation                                                                 |  |               | 694     |   |                     |   |        |                         |  |   |                           |   |  |       |        |   |  |   | 694     |  
|Equity (income) loss in non-guarantor subsidiaries                                       |  |               | (22,250 | ) |                     |   | (19,982 | )                       |  |   |                           |   |  |       | 42,232  |   |  |   |        |  
|Changes in assets and liabilities:                                                       |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|(Increase) decrease in accounts receivable                                               |  |               | (16,756 | ) |                     |   |        |                         |  |   | (23,603                    | ) |  |       | 37,115  |   |  |   | (3,244  | )
|Increase in inventories                                                                  |  |               | (3,938  | ) |                     |   |        |                         |  |   | (4,814                     | ) |  |       |        |   |  |   | (8,752  | )
|Decrease (increase) in other current assets                                              |  |               | 190     |   |                     |   |        |                         |  |   | (4,693                     | ) |  |       | (64     | ) |  |   | (4,567  | )
|Increase (decrease) in accounts payable                                                  |  |               | 25,737  |   |                     |   |        |                         |  |   | 19,811                     |   |  |       | (37,115 | ) |  |   | 8,433   |  
|(Decrease) increase in other current liabilities                                         |  |               | (5,340  | ) |                     |   |        |                         |  |   | 3,269                      |   |  |       | 64      |   |  |   | (2,007  | )
|Changes in other long-term assets and liabilities                                        |  |               | (5,102  | ) |                     |   |        |                         |  |   | 7,680                      |   |  |       |        |   |  |   | 2,578   |  
|                                                                                         |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net cash provided from operating activities                                              |  |               | 3,460   |   |                     |   |        |                         |  |   | 33,004                     |   |  |       |        |   |  |   | 36,464  |  
|                                                                                         |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Cash flows from investing activities:                                                    |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Capital expenditures                                                                     |  |               | (5,262  | ) |                     |   |        |                         |  |   | (17,750                    | ) |  |       |        |   |  |   | (23,012 | )
|Purchase of assets                                                                       |  |               | (2,120  | ) |                     |   |        |                         |  |   |                           |   |  |       |        |   |  |   | (2,120  | )
|                                                                                         |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net cash used for investing activities                                                   |  |               | (7,382  | ) |                     |   |        |                         |  |   | (17,750                    | ) |  |       |        |   |  |   | (25,132 | )
|                                                                                         |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Cash flows from financing activities:                                                    |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net change in borrowing with Innophos, Inc                                               |  |               |        |   |                     |   |        |                         |  |   | (20,185                    | ) |  |       | 20,185  |   |  |   |        |  
|Repayments from subsidiaries                                                             |  |               | 20,185  |   |                     |   |        |                         |  |   |                           |   |  |       | (20,185 | ) |  |   |        |  
|Return of capital to parent                                                              |  |               | (9,328  | ) |                     |   |        |                         |  |   |                           |   |  |       |        |   |  |   | (9,328  | )
|Principal payment of term loans                                                          |  |               | (16,500 | ) |                     |   |        |                         |  |   |                           |   |  |       |        |   |  |   | (16,500 | )
|                                                                                         |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net cash used for financing activities                                                   |  |               | (5,643  | ) |                     |   |        |                         |  |   | (20,185                    | ) |  |       |        |   |  |   | (25,828 | )
|                                                                                         |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Net change in cash                                                                       |  |               | (9,565  | ) |                     |   |        |                         |  |   | (4,931                     | ) |  |       |        |   |  |   | (14,496 | )
|Cash and cash equivalents at beginning of period                                         |  |               | 14,687  |   |                     |   | 6       |                         |  |   | 14,925                     |   |  |       |        |   |  |   | 29,618  |  
|                                                                                         |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  
|Cash and cash equivalents at end of period                                               |  | $             | 5,122   |   |                     | $ | 6       |                         |  | $ | 9,994                      |   |  | $     |        |   |  | $ | 15,122  |  
|                                                                                         |  |               |         |   |                     |   |         |                         |  |   |                            |   |  |       |         |   |  |   |         |  



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|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 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 in our 2007
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.

LOGO



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##### Table of Contents

Recent Trends and Outlook

Market prices of phosphate rock, sulfur and sulfuric acid, the primary raw materials used in the production of specialty phosphates, have increased
substantially over the last several quarters, although the market price of sulfur began to decrease rapidly in the fourth quarter of 2008. Innophos purchases phosphate rock, sulfur, and sulfuric acid directly and has other long term raw material
supply contracts whose pricing is determined in part by phosphate rock and sulfur market prices. If current raw material market price levels for phosphate rock and sulfur are sustained throughout 2008 into 2009, Innophos currently estimates that its
annual raw material costs will increase on an annualized basis by an amount equivalent to approximately 55% to 65% of 2007 annual sales, or by approximately $320 to $375 million, by the third quarter of 2009 as compared to Innophos year-end
2007 cost structure. Approximately 35% of this dollar cost increase, or approximately $115 to $135 million, is expected to occur during 2008, with the balance expected to occur in the first and second quarters of 2009.

Historically, Innophos has successfully recovered raw material, energy and other cost increases through price increases. In addition to offsetting raw
material cost increases, managements current pricing strategy targets pricing Innophos products at full value. During the fourth quarter of 2007, the Company implemented price increases in all its product lines, most of which became effective
January 1, 2008. Innophos also implemented broad price increases in February, April, June and August 2008, and recently announced additional price increases across most products in the U.S. and Canada effective October 15, 2008. Due to
oversupply and reduced demand conditions in phosphate fertilizer markets, Innophos expects the price received for its granular triple superphosphate (GTSP) fertilizer co-product to decrease by over 45% from its peak third quarter 2008 levels.
Innophos expects its price increases, net of anticipated GTSP price decreases, will result in a revenue increase of 95% to 105% of 2007 annual sales, or approximately $550 to $605 million, on an annualized basis by year-end 2008.

While Innophos cannot guarantee that its pricing actions will succeed, to date marketplace acceptance rates for price increases have been high. Finally,
as Innophos raises prices, it is possible that demand for the Companys products may decline to the extent its customers reformulate their products or otherwise reduce purchases.

In the first three quarters of 2008, Innophos experienced negative volume impacts on revenues for STPP and Other Products, which primarily affected the
Mexico segment. The underlying causes for this decline are reduced fertilizer demand and oversupply impacting the sale of GTSP, limited reformulation in detergents using STPP, and an increase of competition from China in South America. In addition,
Innophos expects to ship minimal amounts of GTSP fertilizer in the fourth quarter due to rapidly decreasing fertilizer market demand and pricing levels disrupting Latin American fertilizer markets. Management anticipates this will result in a
shipment volume decline of approximately 30% on a pure tonnage basis for STPP and Other Products for the full year 2008 versus full year 2007. However, Innophos sees continued strong demand in its other product lines as it realizes growth for
Specialty Salts & Specialty Acids and stable demand for Purified Phosphoric Acid in both the United States and Mexico.

During
2008 price increases have been achieved ahead of realized cost increases by a material amount. Management currently estimates that the favorable impact of net selling price increases exceeding raw material cost increases, net of the anticipated
impact from lower sales volumes in STPP and Other Products, will result in at least a $65 million year over year improvement in operating income during the fourth quarter of 2008. Management believes the buffering provided by the Companys long
term raw material contracts will continue in 2009, albeit at a lesser rate than experienced in 2008, and that the trend of net selling price increases exceeding net raw material cost increases by a material amount relative to fourth quarter 2007
levels will continue through 2009.



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##### Table of Contents

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 30,2008 |       |   | Three months endedSeptember 30,2007 |      
|                                                        |  | Amount                              |       |   | %                                   |       |   | Amount |   |       | % | 
|Net sales                                               |  | $                                   | 291.8 |   |                                     | 100.0 |   |        | $ | 146.4 |   |  | 100.0 |  
|Cost of goods sold                                      |  |                                     | 165.2 |   |                                     | 56.6  |   |        |   | 116.7 |   |  | 79.7  |  
|                                                        |  |                                     |       |   |                                     |       |   |        |   |       |   |  |       |  
|Gross profit                                            |  |                                     | 126.6 |   |                                     | 43.4  |   |        |   | 29.7  |   |  | 20.3  |  
|Operating expenses: Selling, general and administrative |  |                                     | 13.3  |   |                                     | 4.6   |   |        |   | 11.1  |   |  | 7.6   |  
|Research & Development Expenses                         |  |                                     | 0.5   |   |                                     | 0.2   |   |        |   | 0.5   |   |  | 0.3   |  
|                                                        |  |                                     |       |   |                                     |       |   |        |   |       |   |  |       |  
|Operating income                                        |  |                                     | 112.8 |   |                                     | 38.7  |   |        |   | 18.1  |   |  | 12.4  |  
|Interest expense, net                                   |  |                                     | 7.2   |   |                                     | 2.5   |   |        |   | 7.6   |   |  | 5.2   |  
|Foreign exchange (gains) losses, net                    |  |                                     | (0.9  | ) |                                     | (0.3  | ) |        |   | 0.1   |   |  | 0.1   |  
|Other expense (income)                                  |  |                                     | (0.1  | ) |                                     | (0.0  | ) |        |   | (0.2  | ) |  | (0.1  | )
|Provision for income taxes                              |  |                                     | 33.0  |   |                                     | 11.3  |   |        |   | 3.2   |   |  | 2.2   |  
|                                                        |  |                                     |       |   |                                     |       |   |        |   |       |   |  |       |  
|Net income                                              |  | $                                   | 73.6  |   |                                     | 25.2  |   |        | $ | 7.4   |   |  | 5.1   |  
|                                                        |  |                                     |       |   |                                     |       |   |        |   |       |   |  |       |  
|                                                        |  |                                    
|                                                        |  | Nine months endedSeptember 30,2008  |       |   | Nine months endedSeptember 30,2007  |      
|                                                        |  | Amount                              |       |   | %                                   |       |   | Amount |   |       | % | 
|Net sales                                               |  | $                                   | 718.3 |   |                                     | 100.0 |   |        | $ | 435.0 |   |  | 100.0 |  
|Cost of goods sold                                      |  |                                     | 443.1 |   |                                     | 61.7  |   |        |   | 352.3 |   |  | 81.0  |  
|                                                        |  |                                     |       |   |                                     |       |   |        |   |       |   |  |       |  
|Gross profit                                            |  |                                     | 275.2 |   |                                     | 38.3  |   |        |   | 82.7  |   |  | 19.0  |  
|Operating expenses: Selling, general and administrative |  |                                     | 47.1  |   |                                     | 6.6   |   |        |   | 39.5  |   |  | 9.1   |  
|Research & Development Expenses                         |  |                                     | 1.6   |   |                                     | 0.2   |   |        |   | 1.6   |   |  | 0.4   |  
|                                                        |  |                                     |       |   |                                     |       |   |        |   |       |   |  |       |  
|Operating income                                        |  |                                     | 226.5 |   |                                     | 31.5  |   |        |   | 41.6  |   |  | 9.6   |  
|Interest expense, net                                   |  |                                     | 21.0  |   |                                     | 2.9   |   |        |   | 23.5  |   |  | 5.4   |  
|Foreign exchange (gains) losses, net                    |  |                                     | (0.9  | ) |                                     | (0.1  | ) |        |   |      |   |  |      |  
|Other expense (income)                                  |  |                                     | (0.4  | ) |                                     | (0.1  | ) |        |   | (0.2  | ) |  | (0.0  | )
|Provision for income taxes                              |  |                                     | 61.1  |   |                                     | 8.5   |   |        |   | 10.5  |   |  | 2.4   |  
|                                                        |  |                                     |       |   |                                     |       |   |        |   |       |   |  |       |  
|Net income (loss)                                       |  | $                                   | 145.7 |   |                                     | 20.3  |   |        | $ | 7.8   |   |  | 1.8   |  
|                                                        |  |                                     |       |   |                                     |       |   |        |   |       |   |  |       |  

Three months ended September 30, 2008 compared to the three months ended September 30, 2007

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 30, 2008 were $291.8 million, an increase of $145.4
million, or 99.3%, as compared to $146.4 million for the same period in 2007. Selling price increases had a positive impact on revenue of 112.6% or $164.9 million that occurred across all product lines. Volume and mix impacts upon revenue had a
negative impact of 13.3% or $19.5 million that occurred primarily in STPP & Other Products due to reduced demand for our fertilizer co-product in oversupplied fertilizer markets and limited reformulation in detergents using STPP. Demand was
favorable for Specialty Salts and Specialty Acids and stable for Purified Phosphoric Acid in both the United States and Mexico, but U. S. Purified Phosphoric Acid sales volumes declined due to a hurricane-related outage affecting the Geismar, LA
plant and the need to rebuild inventories depleted during our second quarter maintenance outage at this facility. On a unit basis, the average selling price for all Innophos products increased by 110.5% year-over-year for the quarter, and the total
volume shipped decreased by 5.3%.



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##### Table of Contents

The following table illustrates for the three months ended September 30, 2008 the percentage changes
in net sales by reportable segment compared with the same period in 2007, including the effect of price and volume/mix impacts upon revenue:



|              |  |       |   |  |            |    |  |       |  
|------------- |  | ----- | - |  | ---------- | -- |  | ----- | -
|              |  | Price |   |  | Volume/Mix |    |  | Total |  
|United States |  | 73.4  | % |  | 3.2        | %  |  | 76.6  | %
|Canada        |  | 88.4  | % |  | (19.2      | %) |  | 69.2  | %
|Mexico        |  | 173.0 | % |  | (37.0      | %) |  | 136.0 | %

The following table illustrates for the three months ended September 30, 2008 the percentage
changes for net sales by major product lines compared with the same period in 2007, including the effect of price and volume/mix impacts upon revenue:



|                                    |  |       |   |  |            |    |  |       |  
|----------------------------------- |  | ----- | - |  | ---------- | -- |  | ----- | -
|                                    |  | Price |   |  | Volume/Mix |    |  | Total |  
|Purified Phosphoric Acid            |  | 174.7 | % |  | (20.6      | %) |  | 154.1 | %
|Specialty Salts and Specialty Acids |  | 68.0  | % |  | 15.4       | %  |  | 83.4  | %
|STPP & Other Products               |  | 146.3 | % |  | (62.1      | %) |  | 84.2  | %

Shipped volume for the three months ended September 30, 2008 declined approximately 20% on a
pure tonnage basis for STPP & Other Products compared with the same period in 2007.

Gross Profit

Gross profit represents net sales less cost of goods sold. Gross profit for the three months ended September 30, 2008 was $126.6 million, an increase
of $96.9 million, or 326.3%, as compared to $29.7 million for the same period in 2007. Gross profit percentage increased to 43.4% for the three months ended September 30, 2008 versus 20.3% for the same period in 2007. The change in gross profit
was primarily due to higher selling prices which had a favorable impact of $164.9 million. This was partially offset by unfavorable sales volume and mix impacts upon revenue and higher raw material, energy, freight and manufacturing expenses which
had a combined unfavorable impact of $68.0 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, 2008,
these costs were $13.8 million, an increase of $2.2 million, or 19.0%, as compared to $11.6 million for the same period in 2007. Operating expenses were negatively affected by $1.0 million for increased commercial efforts, and $0.7 million non-cash
share based compensation, and an increase of $0.5 million of all other costs.

Operating Income

Operating income for the three months ended September 30, 2008 was $112.8 million, an increase of $94.7 million, or 523.2%, as compared to $18.1
million for the same period in 2007. Operating income as a percentage of net sales increased to 38.7% versus 12.4% for the same period in 2007.

Interest Expense, net

Net interest expense, including deferred financing amortization expense, for the three months ended
September 30, 2008 was $7.2 million, a decrease of $0.4 million, compared to $7.6 million for the same period in 2007. This decrease is primarily due to the lower balance of our Term Loan from 2007 prepayments and lower interest rates. This was
partially offset by fees associated with the fourth amendment to our credit facility.

Foreign Exchange

Foreign exchange gain for the three months ended September 30, 2008 was $0.9 million compared to a loss of $0.1 million for the same period in 2007.
The U.S. dollar is the functional currency of our Mexican and Canadian operations. Consequently, foreign exchange gain or loss is recorded on re-measurement 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.



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Provision for Income Taxes

Provision for income tax expense for the three months ended September 30, 2008 was $33.0 million compared to $3.2 million for the comparable
period of 2007. Income earned by our subsidiaries in Mexico and Canada are fully taxable, so increases in their earnings, as we had in the third quarter of 2008, would normally be expected to result in increased income tax expense. Although the U.S.
operations has taxable income for the three month period ended September 30, 2008, the income tax provision reflects the use of net operating loss carryforwards and the corresponding decrease in the valuation allowance related to those net
operating loss carryforwards. However, the U.S. operations continue to carry a full valuation allowance for its net deferred tax assets.

Although the U.S. operations have been profitable for two consecutive quarters beginning in the second quarter of 2008, the U.S. operations have had significant cumulative losses in recent years. As of September 30, 2008, the Company
continues to have a full valuation allowance for all U.S. net deferred tax assets as it believes cumulative losses outweigh available positive evidence at this time. If recent operating results continue, we will no longer be in a cumulative loss
position during the fourth quarter of 2008. If this occurs, we will reconsider to what extent we can rely on our income forecasts to support the realization of our net U.S. deferred tax assets. These income forecasts will be used in conjunction with
other positive and negative evidence including but not limited to, market conditions, reversal of temporary differences, and other factors, in evaluating the need for a full or partial valuation allowance. If we conclude that that it is more likely
than not that some, or all, of the net deferred tax assets in the U.S. are realizable, the resulting reversal of the existing valuation allowance will favorably impact our results of operations in the period of reversal.

Net Income

Net income for the three
months ended September 30, 2008 was $73.6 million, an increase of $66.2 million, compared to $7.4 million for the same period in 2007, due to the factors described above.

Nine months ended September 30, 2008 compared to the nine months ended September 30, 2007

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, 2008 were $718.3 million, an increase of $283.3 million, or 65.1%, as compared to $435.0 million for the same period in 2007. Selling price increases had a
positive impact on revenue of 77.9% or $338.9 million that occurred across all product lines. Volume and mix impacts upon revenue had a negative impact of 12.8% or $55.6 million that occurred primarily in STPP & Other Products due to
reduced demand for our GTSP fertilizer co-product in oversupplied fertilizer markets and limited reformulation in detergents using STPP. Purified Phosphoric Acid experienced a decrease that was partially attributable to the planned outage at the
Geismar, LA acid plant in the second quarter of 2008 and a hurricane-related outage in the third quarter of 2008. Specialty Salts and Specialty Acids volumes increased due to our focus on these products. On a unit basis, the average selling price
for all Innophos products increased by 82.0% year-over-year for the first nine months, and the total volume shipped decreased by 9.3%.

The
following table illustrates for the nine months ended September 30, 2008 the percentage changes in net sales by reportable segment compared with the same period in 2007, including the effect of price and volume/mix impacts upon revenue:



|              |  |       |   |  |            |    |  |       |  
|------------- |  | ----- | - |  | ---------- | -- |  | ----- | -
|              |  | Price |   |  | Volume/Mix |    |  | Total |  
|United States |  | 41.9  | % |  | 4.8        | %  |  | 46.7  | %
|Canada        |  | 44.9  | % |  | (14.4      | %) |  | 30.5  | %
|Mexico        |  | 133.5 | % |  | (37.6      | %) |  | 95.9  | %

The following table illustrates for the nine months ended September 30, 2008 the percentage
changes for net sales by major product lines compared with the same period in 2007, including the effect of price and volume/mix impacts upon revenue:



|                                    |  |       |   |  |            |    |  |       |  
|----------------------------------- |  | ----- | - |  | ---------- | -- |  | ----- | -
|                                    |  | Price |   |  | Volume/Mix |    |  | Total |  
|Purified Phosphoric Acid            |  | 111.3 | % |  | (17.2      | %) |  | 94.1  | %
|Specialty Salts and Specialty Acids |  | 38.2  | % |  | 13.5       | %  |  | 51.7  | %
|STPP & Other Products               |  | 122.8 | % |  | (57.0      | %) |  | 65.8  | %

Shipped volume for the nine months ended September 30, 2008 declined approximately 25% on a
pure tonnage basis for STPP & Other Products compared with the same period in 2007.

Gross Profit

Gross profit represents net sales less cost of goods sold. Gross profit for the nine months ended September 30, 2008 was $275.2 million, an increase
of $192.5 million, or 232.8%, as compared to $82.7 million for the same period in 2007. Gross profit percentage increased to 38.3% for the nine months ended September 30, 2008 versus 19.0% for the same period in 2007. The change in gross profit
was due to higher selling prices which had a favorable impact of $338.9 million, partially offset by unfavorable sales volume and mix impacts upon revenue and higher raw material, energy, freight and manufacturing expenses which had a combined



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##### Table of Contents

unfavorable impact of $147.3 million. Gross profit was unfavorable by $1.3 million for a scheduled Geismar, LA plant maintenance outage in the second quarter
of 2008, which was lower than anticipated. Gross profit was unfavorable by $1.3 million for the asset impairment expense for two obsolete production units in the second quarter of 2008. Gross profit was favorable by 2007 expenses incurred for $1.5
million of Mexican workforce reorganization costs and $2.0 million for the regularization of Mexican port facilities taxes covering the periods 1996 to 2006.

Operating Expenses and Research and Development

Operating expenses consist primarily of selling,
general and administrative, and R&D expenses. For the nine months ended September 30, 2008, these costs were $48.7 million, an increase of $7.6 million, or 18.5%, as compared to $41.1 million for the same period in 2007. Operating expenses
increased by $2.0 million for legal and other fees to comply with the DOJ STPP document request subpoena, $3.1 million for professional fees to support growth and other corporate initiatives such as assessing our IT systems, $2.6 million for higher
short-term incentive program accruals, $2.1 million for increased commercial efforts, $1.7 million for non-cash share based compensation and $2.9 million for all other costs. The overall increases over prior year were partially offset by $6.8
million for unusual expenses incurred in 2007 primarily in connection with the early cancellation of the companys pharma sales agency arrangement with Rhodia, Inc. and the transfer of related assets to Innophos.

Operating Income

Operating income
for the nine months ended September 30, 2008 was $226.5 million, an increase of $184.9 million, or 444.5%, as compared to $41.6 million for the same period in 2007. Operating income as a percentage of net sales increased to 31.5% versus 9.6%
for the same period in 2007.

Interest Expense, net

Net interest expense, including deferred financing amortization expense, for the nine months ended September 30, 2008 was $21.0 million, a decrease of $2.5 million, compared to $23.5 million for the same period
in 2007. This decrease is primarily due to the lower balance of our Term Loan from prepayments made in 2007 along with lower interest rates. This was partially offset by fees associated with the fourth amendment to our credit facility.

Foreign Exchange

Foreign exchange
gain for the nine months ended September 30, 2008 was $0.9 million compared to a minimal amount for the same period in 2007. The U.S. dollar is the functional currency of our Mexican and Canadian operations. Consequently, foreign exchange gain
or loss is recorded on re-measurement 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

Provision for income tax expense for the nine months ended September 30, 2008 was $61.1 million compared to $10.5 million for the comparable
period of 2007. Income earned by our subsidiaries in Mexico and Canada are fully taxable, so increases in their earnings, as we had for the nine months ended September 30, 2008, would normally be expected to result in increased income tax
expense. Although the U.S. operations have taxable income in 2008, the income tax provision reflects the use of net operating loss carryforwards and the corresponding decrease in the valuation allowance related to those net operating loss
carryforwards. However, the U.S. operations continue to carry a full valuation allowance for its net deferred tax assets. The Company anticipates making a significant estimated tax payment in Mexico in the fourth quarter due to the high Mexican
income for 2008 as well as an estimated tax payment in the U.S. in the fourth quarter.

Although the U.S. operations have been profitable
for two consecutive quarters beginning in the second quarter of 2008, the U.S. operations have had significant cumulative losses in recent years. As of September 30, 2008, the Company continues to have a full valuation allowance for all U.S.
net deferred tax assets as it believes cumulative losses outweigh available positive evidence at this time. If recent operating results continue, we will no longer be in a cumulative loss position during the fourth quarter of 2008. If this occurs,
we will reconsider to what extent we can rely on our income forecasts to support the realization of our net U.S. deferred tax assets. These income forecasts will be used in conjunction with other positive and negative evidence including but not
limited to, market conditions, reversal of temporary differences, and other factors, in evaluating the need for a full or partial valuation allowance. If we conclude that that it is more likely than not that some, or all, of the net deferred tax
assets in the U.S. are realizable, the resulting reversal of the existing valuation allowance will favorably impact our results of operations in the period of reversal.

Net Income (Loss)

Net income for the nine months ended September 30, 2008 was $145.7 million,
an increase of $137.9 million, compared to $7.8 million for the same period in 2007, due to the factors described above.



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##### Table of Contents

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 30,2008 |         |   | Three months endedSeptember 30,2007 |   |         | Net Sales % Change | 
|Segment Net Sales                       |  |                                     |         |   |                                     |   |         |                    |  |       |  
|United States                           |  | $                                   | 146,154 |   |                                     | $ | 82,768  |                    |  | 76.6  | %
|Mexico                                  |  |                                     | 133,732 |   |                                     |   | 56,659  |                    |  | 136.0 | %
|Canada                                  |  |                                     | 11,886  |   |                                     |   | 7,024   |                    |  | 69.2  | %
|                                        |  |                                     |         |   |                                     |   |         |                    |  |       |  
|Total                                   |  | $                                   | 291,772 |   |                                     | $ | 146,451 |                    |  | 99.2  | %
|                                        |  |                                     |         |   |                                     |   |         |                    |  |       |  
|Segment Operating Income                |  |                                     |         |   |                                     |   |         |                    |  |       |  
|United States                           |  | $                                   | 45,342  |   |                                     | $ | 4,448   |                    |  |       |  
|Mexico                                  |  |                                     | 62,357  |   |                                     |   | 13,318  |                    |  |       |  
|Canada                                  |  |                                     | 5,148   |   |                                     |   | 354     |                    |  |       |  
|                                        |  |                                     |         |   |                                     |   |         |                    |  |       |  
|Total                                   |  | $                                   | 112,847 |   |                                     | $ | 18,120  |                    |  |       |  
|                                        |  |                                     |         |   |                                     |   |         |                    |  |       |  
|Segment Operating Income % of net sales |  |                                     |         |   |                                     |   |         |                    |  |       |  
|United States                           |  |                                     | 31.0    | % |                                     |   | 5.4     | %                  |  |       |  
|Mexico                                  |  |                                     | 46.6    | % |                                     |   | 23.5    | %                  |  |       |  
|Canada                                  |  |                                     | 43.3    | % |                                     |   | 5.0     | %                  |  |       |  
|                                        |  |                                     |        
|                                        |  | Nine months endedSeptember 30,2008  |         |   | Nine months endedSeptember 30,2007  |   |         | Net Sales % Change | 
|Segment Net Sales                       |  |                                     |         |   |                                     |   |         |                    |  |       |  
|United States                           |  | $                                   | 356,431 |   |                                     | $ | 242,946 |                    |  | 46.7  | %
|Mexico                                  |  |                                     | 333,143 |   |                                     |   | 170,072 |                    |  | 95.9  | %
|Canada                                  |  |                                     | 28,736  |   |                                     |   | 22,025  |                    |  | 30.5  | %
|                                        |  |                                     |         |   |                                     |   |         |                    |  |       |  
|Total                                   |  | $                                   | 718,310 |   |                                     | $ | 435,043 |                    |  | 65.1  | %
|                                        |  |                                     |         |   |                                     |   |         |                    |  |       |  
|Segment Operating Income                |  |                                     |         |   |                                     |   |         |                    |  |       |  
|United States                           |  | $                                   | 63,254  |   |                                     | $ | 2,051   |                    |  |       |  
|Mexico                                  |  |                                     | 155,393 |   |                                     |   | 36,465  |                    |  |       |  
|Canada                                  |  |                                     | 7,870   |   |                                     |   | 3,085   |                    |  |       |  
|                                        |  |                                     |         |   |                                     |   |         |                    |  |       |  
|Total                                   |  | $                                   | 226,517 |   |                                     | $ | 41,601  |                    |  |       |  
|                                        |  |                                     |         |   |                                     |   |         |                    |  |       |  
|Segment Operating Income % of net sales |  |                                     |         |   |                                     |   |         |                    |  |       |  
|United States                           |  |                                     | 17.7    | % |                                     |   | 0.8     | %                  |  |       |  
|Mexico                                  |  |                                     | 46.6    | % |                                     |   | 21.4    | %                  |  |       |  
|Canada                                  |  |                                     | 27.4    | % |                                     |   | 14.0    | %                  |  |       |  

Three months ended September 30, 2008 compared to the three months ended September 30, 2007

Segment Net Sales:

In
the United States net sales increased 76.6% for the three months ended September 30, 2008 when compared with the same period in 2007, primarily due to higher selling prices across all product lines which increased sales by 73.4% on average.
Volumes were favorable in Specialty Salts and Specialty Acids. Phosphoric acid volumes declined due to a hurricane-related outage affecting the Geismar, LA plant and the need to rebuild inventories depleted during our second quarter maintenance
outage at this facility.



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In Mexico net sales increased 136.0% for the three months ended September 30, 2008 when compared
with the same period in 2007. Selling prices increased sales 173.0%, with significant improvement seen across all product lines. Volume and mix impact upon revenue was a decrease of 37.0%, mainly in STPP & Other Products due to reduced
demand for our GTSP fertilizer co-product in oversupplied fertilizer markets and limited reformulation in detergents using STPP.

In Canada
net sales increased 69.2% for the three months ended September 30, 2008 when compared with the same period in 2007. Selling price increased sales 88.4% with increases across all product lines. Volume and mix impact upon revenue was a decrease
of 19.2% across all product lines.

Segment Operating Income % of Net Sales:

The 25.6% increase in the United States for the three months ended September 30, 2008 compared with the same period in 2007 is mainly due to
favorable selling prices and a favorable volume and mix impact on revenue. This was partially offset by higher raw material and energy costs, higher manufacturing costs, and higher operating expenses. Operating expenses were higher mainly due to
higher short-term incentive program accruals, increased commercial activities and higher non-cash share based compensation.

The 23.1%
increase in Mexico for the three months ended September 30, 2008 compared with the same period in 2007 is due to favorable selling prices across all product lines. These were partially offset by decreased volume and mix impacts on revenue,
increased raw material and energy costs, higher manufacturing costs and higher operating expenses.

The 38.3% increase in Canada for the
three months ended September 30, 2008 compared with the same period in 2007 is due to increased selling prices. These were partially offset by unfavorable volume and mix impacts on revenue, higher raw material and energy costs and increased
manufacturing expenses.

During the three month period ending September 30, 2008 depreciation and amortization expense was $7.5
million in the United States, $0.7 million in Canada, and $5.0 million in Mexico.

Nine months ended September 30, 2008 compared to the nine
months ended September 30, 2007

Segment Net Sales:

In the United States net sales increased 46.7% for the nine months ended September 30, 2008 when compared with the same period in 2007. Selling prices increased sales by 41.9% with increases across all product
lines. Volume and mix impact upon revenue was an increase of 4.8%, primarily in Specialty Salts and Specialty Acids due to our focus on these products. Phosphoric acid volumes declined due to a hurricane-related outage and the need to rebuild
inventories depleted during our second quarter maintenance outage at Geismar.

In Mexico net sales increased 95.9% for the nine months
ended September 30, 2008 when compared with the same period in 2007. Selling prices increased sales 133.5% with significant increases across all product lines. Volume and mix impact upon revenue was a decrease of 37.6%, mainly in
STPP & Other Products due to reduced demand for our GTSP fertilizer co-product in oversupplied fertilizer markets and limited reformulation in detergents using STPP, but also seen in Purified Phosphoric Acid.

In Canada net sales increased 30.5% for the nine months ended September 30, 2008 when compared with the same period in 2007. Selling price increased
sales 44.9% with increases across all product lines. Volume and mix impact upon revenue was a decrease of 14.4% across all product lines.

Segment
Operating Income % of Net Sales:

The 16.9% increase in the United States for the nine months ended September 30, 2008 compared
with the same period in 2007 is mainly due to favorable selling prices and a favorable volume and mix impact on revenue. This was partially offset by higher raw material and energy costs, increased manufacturing cost including cost for a scheduled
Geismar, LA plant maintenance outage, the asset impairment expense for two obsolete production units, and increased operating expenses. Operating expenses increased mainly due to legal fees to comply with the DOJ STPP document request subpoena,
professional fees to support growth and other corporate initiatives such as assessing our IT systems, higher short-term incentive program accruals, higher non-cash share based compensation, and increased commercial efforts, partially offset by
expense incurred in 2007 in connection with the early cancellation of the companys pharma sales agency arrangement with Rhodia, Inc.

The 25.2% increase in Mexico for the nine months ended September 30, 2008 compared with the same period in 2007 is due to favorable selling prices, which were partially offset by decreased volume and mix impacts
upon revenue, increased raw material and energy costs, increased manufacturing costs, and increased operating expenses. The operating income percent increase is also due to expenses incurred in 2007 for the Mexican workforce reorganization and the
regularization of Mexican port facilities taxes covering the periods 1996 to 2006.



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The 13.4% increase in Canada for the nine months ended September 30, 2008 compared with the same
period in 2007 is due to increased selling prices partially offset by unfavorable volume and mix impact on revenue, higher raw material and energy costs, and increased manufacturing costs.

During the nine month period ending September 30, 2008 depreciation and amortization expense was $24.1 million in the United States, $1.6 million in
Canada, and $14.7 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 30,2008 |       |   | Nine months endedSeptember 30,2007 |  
|Operating Activities |  | $                                  | 134.4 |   |                                    | $ | 36.5  |  
|Investing Activities |  |                                    | (13.2 | ) |                                    |   | (25.1 | )
|Financing Activities |  |                                    | (14.0 | ) |                                    |   | (25.8 | )

Nine months ended September 30, 2008 compared to nine months ended September 30, 2007

Net cash provided by operating activities was $134.4 million for the nine months ended September 30, 2008 as compared to $36.5 million
for the same period in 2007, an increase in cash of $97.9 million. The increase in operating activities cash resulted from a favorable change of $137.9 million in net income, mostly price improvement as described earlier, and $11.6 million in
non-cash items affecting net income, partially offset by unfavorable changes of $47.3 million in net working capital and $4.3 million in non-current accounts.

Non-cash items affecting net income increased by $11.6 million primarily due to increased depreciation expense, partially due to the cogeneration unit in Mexico and asset impairment expense for two obsolete production
units in the United States, decreased benefit from deferred taxes, and increased share based compensation.

The change in net working
capital is a use of cash of $57.4 million in 2008 compared to a use in 2007 of $10.1 million, an increase in the use of cash of $47.3 million. The increased use of cash is due to higher selling prices which increased accounts receivable balances and
higher raw material costs increasing inventory values without any compensating increase in accounts payable due primarily to advance payments with raw material suppliers to ensure timely deliveries. Inventory on hand during the third quarter of 2008
has increased in GTSP as a result of reduced demand in the fertilizer market. This was partially offset by increased current liabilities for the accrual of income taxes resulting from the increased earnings in Mexico. Working capital is expected to
continue to increase as we continue to raise prices and incur higher raw material costs.

Net cash used for investing activities was $13.2
million for the nine months ended September 30, 2008, compared to $25.1 million for the same period in 2007, a decrease in the use of cash of $11.9 million. This was due to $12.4 million lower capital spending related to the 2007 cogeneration
project in Coatzacoalcos, Mexico, and $2.1 million lower spending for the purchase in 2007 of certain assets from Rhodia related to the early cancellation of our 2004 ten-year pharma sales agency agreement. This was partially offset by
an increase in capital spending of $2.6 million in all other projects.

Net cash from financing activities for the nine months ended
September 30, 2008 was a use of $14.0 million, compared to a use of $25.8 million for the same period in 2007, an increase in cash of $11.8 million. This is due to $15.0 million lower Term Loan principal payments and $1.4 million tax benefits
from stock option exercises, partially offset by $4.6 million increased capital returned to parent.

The Company is required within five
days from the issuance of the 2008 annual financial statements to make a prepayment of the term loan in an amount equal to 50% of the excess cash flow (as defined in our credit agreement) in addition to the quarterly principal payments. As of
September 30, 2008 management estimates the first quarter 2009 excess cash flow payment and the short-term required quarterly principal payments to be $55.0 million. This excess cash flow payment is below last quarters expectation due to
higher Mexican and U.S. tax payments required in the fourth quarter 2008.

In addition to the estimated excess cash flow payment of $55.0
million described above, the Company will have increased working capital needs during the first half of 2009 when raw material prices reset. Similar to 2008, the Company will draw on cash in the first half and build cash in the second half of 2009.
We believe that the cash generated from operations and availability under our revolving credit facility will be sufficient to meet our debt service, tax payments, capital expenditures and working capital requirements for at least the next twelve
months. The Companys revolving credit facility expires on August 31, 2009 and renewal or extension of our revolving credit facility is uncertain given the state of the current credit market.



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|                                            |  |                           |           |      |   |        |  |      |         |      |   |         |  |            |        |  |   |        |  |   |        
|------------------------------------------- |  | ------------------------- | --------- | ---- | - | ------ |  | ---- | ------- | ---- | - | ------- |  | ---------- | ------ |  | - | ------ |  | - | -------
|                                            |  | Years ending December 31,
|Contractual Obligations                     |  | Total                     |           | 2008 |   | 2009   |  | 2010 |         | 2011 |   | 2012    |  | Thereafter
|Senior credit facility (1)                  |  | $                         | 127,000   |      | $ | 332    |  | $    | 32,497  |      | $ | 94,171  |  | $          |       |  | $ |       |  | $ |       
|2004 Senior Subordinated Notes Due 2014 (2) |  |                           | 293,283   |      |   | 8,432  |  |      | 16,862  |      |   | 16,863  |  |            | 16,862 |  |   | 16,863 |  |   | 217,401
|Future service pension benefits             |  |                           | 8,265     |      |   | 475    |  |      | 562     |      |   | 623     |  |            | 682    |  |   | 774    |  |   | 5,149  
|Other (3)                                   |  |                           | 566,041   |      |   | 62,675 |  |      | 63,460  |      |   | 51,299  |  |            | 51,299 |  |   | 51,299 |  |   | 286,009
|Operating leases                            |  |                           | 19,964    |      |   | 4,444  |  |      | 4,063   |      |   | 3,334   |  |            | 2,646  |  |   | 1,914  |  |   | 3,563  
|                                            |  |                           |           |      |   |        |  |      |         |      |   |         |  |            |        |  |   |        |  |   |        
|Total contractual cash obligations (4)      |  | $                         | 1,014,552 |      | $ | 76,358 |  | $    | 117,444 |      | $ | 166,290 |  | $          | 71,489 |  | $ | 70,850 |  | $ | 512,122
|                                            |  |                           |           |      |   |        |  |      |         |      |   |         |  |            |        |  |   |        |  |   |        



|(1) | Amounts do not include variable rate interest payments, any voluntary principal prepayments, and excess cash flow requirements as defined by the credit agreement. Estimated annual
interest payments would be approximately $8.8 million assuming a 6.8% interest rate. The Company made principal payments of $0.5 million on March 29, 2008, June 30, 2008 and September 30, 2008, respectively, on the Term Loan.
Amounts exclude the $50.0 million revolving portion of the senior credit facility which has issued approximately $2.4 million of letters of credit under the sub-facility which reduces the available credit to $47.6 million as of September 30,
2008. As of September 30, 2008 management estimates the first quarter 2009 excess cash flow payment and the short-term required quarterly principal payments to be $55.0 million.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amounts include fixed rate interest payments at 8.875% for years 2008 and thereafter.
|--- | -------------------------------------------------------------------------------------

|(3) | Represents minimum annual purchase commitments to buy raw materials based on current prices and 2008 and 2009 energy commitments from suppliers.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Does not reflect the $66.0 million 9.5% Senior Unsecured Notes due 2012 which were issued by our ultimate parent, Innophos Holdings, Inc. on April 16, 2007. Annual cash
interest payments would be approximately $6.3 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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 senior credit 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. For fixed-rate debt, interest rate changes do not affect earnings or cash flows.
Conversely, for floating-rate debt, interest rate changes generally impact our earnings and cash flows, assuming other factors are held constant.

At September 30, 2008, we had $190.0 million principal amount of fixed-rate debt and $177.0 million of available floating-rate debt, including $50.0 million under our revolving credit facility. The Companys revolving credit
facility expires on August 31, 2009 and renewal or extension of our revolving credit facility is uncertain given the state of the current credit market. Based on $127.0 million outstanding as floating rate debt as borrowings under our senior
credit facility, an immediate increase of one percentage point would cause an increase to cash interest expense of approximately $1.3 million per year. In addition, Innophos Holdings, Inc. has $66.0 million of senior unsecured notes. 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 other operating expenses and reducing
our 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. However, there can be no assurance that hedges will achieve the desired effect. 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 hedge our commodity or currency rate risks. In April
2006, we entered into an interest rate cap derivative instrument with a notional amount of $100 million with a rate cap of 7%, with a referenced index based on a three month LIBOR expiring in April 2009.

We have purchased forward natural gas contracts which require us to purchase approximately 50% 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.

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 represented 10.5% of our 2008 sales
through September 30, 2008 otherwise no other customer accounted for more than 10% of our sales in the last 3 years.



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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, 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 4(T). | 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 30, 2008, 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.

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 quarter of 2008 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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PART II



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

The information set forth in
Note 11 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 2007 Annual Report on Form 10-K and Quarterly Report on Form 10-Q dated August 7, 2008 other than as mentioned below.

Increased Costs and Pricing May Accelerate Substitution of Competing Products

The prices we
are paying for raw materials, particularly phosphate rock and sulfur, necessary to manufacture our products have risen dramatically since 2007 and are expected to do so for the foreseeable future although we are seeing some signs of falling demand
and prices for all of such raw materials. We can only recover anticipated cost escalation of this magnitude through pricing actions on our part. Although there can be no assurance we will be successful in maintaining our margins through future price
increases, thus far in 2008, we have been successful in doing so. See Item 2, Managements Discussion and Analysis of Results of Operations and Financial Condition Recent Trends and Outlook.

However, as the costs and prices of our products correspondingly rise, certain of those products, particularly those directed at end use markets such as
the detergent and oral care markets (where their portion of the end product cost is often larger), face an increasing threat of substitution from cost factors alone. Under circumstances where the costs of known and acceptable substitute
non-phosphate chemistries become economically viable for a significant portion of our end use markets, our customers may decide to utilize the substitute chemistries to control their costs. If higher costs and prices result in such substitutions for
major products and markets and we are not able to shift our manufacturing capabilities to alternate products we can sell profitably, we could face a loss of volumes, revenues and/or profits from this kind of cost-driven substitution. Although we
cannot estimate the pricing levels at which cost substitution will affect us (since it depends on variables such as the duration of recent price escalation, the availability and costs of our products relative to the substitutes, and future marketing
and pricing decisions made by our customers), we believe based on our understanding of where substitutions become feasible at least 40% of our current end use markets could be exposed to some level of potential cost substitution. We cannot be sure
that actions we take to reduce the effects of cost driven substitution will be effective, nor that those effects ultimately will not be material to our results of operations or financial position.

Raw Materials Availability and Pricing

Our
principal raw materials consist of phosphate rock, sulfur and sulfuric acid, merchant grade (green) acid, purified phosphoric acid and energy (principally natural gas and electricity). Our raw materials are generally purchased under long-term supply
contracts typically priced according to predetermined formulae dependent on price indices or market prices. The prices we pay under these contracts generally lag the market prices of the underlying raw material. In rapidly increasing price
environments, these long-term supply contracts tend to be favorable to the Company, possibly by material amounts. Conversely, in rapidly decreasing price environments, these long-term supply contracts could be unfavorable to the Company, possibly by
material amounts. We do not typically engage in futures or other derivatives contracts to hedge against fluctuations in future prices. These effects may also be amplified in the case of supply contracts that have multiple-year durations. The Company
may enter into sales contracts where the selling prices for our products are fixed for a period of one year, exposing us to volatility in raw materials prices that we acquire on a spot market basis.

Various market conditions can affect the price and supply of our raw materials. Because phosphate rock is also used globally for fertilizer production,
the cost of that material is mainly driven by demand conditions in the fertilizer market and freight costs, which traditionally have been volatile, and both of which escalated rapidly during 2007 and into 2008. We obtain phosphate rock from OCP
S.A., or OCP, a state-owned mining company in Morocco under a long term supply agreement. Our supply of that material could be affected by capacity constraints, political unrest, or weather conditions in the areas where our supplier operates. That
agreement renews automatically for successive five year periods beginning with September 10, 2010, but either party has an opportunity to terminate it by giving not less than one years written notice prior to any periodic renewal date.
Neither party thus far has given any such notice. Since renewal of this contract after 2010 is uncertain, Innophos has been exploring alternatives for phosphate rock supplies around the world and is in active discussions with respect to several
sites and suppliers. If our agreement with OCP were not renewed we cannot guarantee that all our production needs in Mexico could be met from alternative rock sources or downstream intermediate products, such as merchant green acid, or, if they
could be met from those sources, that we could do so without significant purchases at spot market prices at least until new arrangements are finalized. However, based on conditions known thus far, management believes that alternative phosphate rock
sources alone could provide a significant portion of those needs on, or shortly after, the expiration of our OCP contract and that at least some alternative sources could be secured on other than spot market prices.



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As previously disclosed, we were in negotiation with OCP over the application of our agreements
rock pricing formulas and other issues for 2008 and beyond. Pending completion of negotiations, we reached agreement with OCP on interim price, volume and commitments for 2008. As we indicated, the final price for 2008 might differ materially from
the agreed interim pricing we are currently paying. At this time management believes that binding arbitration before the International Chamber of Commerce, International Court of Arbitration, or ICC, in Paris, France probably will be necessary to
resolve disputes as to interpretation of the pricing provisions in our agreement with OCP and the resulting pricing for phosphate rock for 2008 and 2009. If an ICC proceeding commences, we cannot predict the timing of the arbitral process or
its outcome, but expect it will take more than eight months to obtain an award. However, based on the parties respective positions prior to arbitration, management believes no accrual beyond agreed interim pricing now being incurred will be
warranted for 2008 and that 2009 pricing is likely to be in line with, or lower than, that included in the Recent Trends and Outlook discussion under Managements Discussion and Analysis of Results of Operations and Financial
Condition in this Report on Form 10-Q.

Natural gas prices have experienced significant volatility in the past several years. Wide
fluctuations in natural gas prices may result from relatively minor changes in the supply and demand, market uncertainty, and other factors, both domestic and foreign, that are beyond our control. In addition, natural gas is often a substitute for
petroleum-based energy supplies and natural gas prices are positively correlated with petroleum prices. Future increases in the price of petroleum (resulting from increased demand, political instability or other factors) may result in significant
additional increases in the price of natural gas. We typically purchase natural gas at spot market prices for use at our facilities which exposes us to that price volatility, except in those instances where, from time to time, we enter into longer
term, fixed-price natural gas contracts.

Most of our raw materials are supplied to us by either one or a small number of suppliers. Some
of those suppliers rely, in turn, on sole or limited sources of supply for raw materials included in their products. Failure of our suppliers to maintain sufficient capability to meet changes in demand or to overcome unanticipated interruptions in
their own sources of supply from force majeure conditions, such as disaster or political unrest, may prevent them from continuing to supply raw materials as we require them, or at all. Our inability to obtain sufficient quantities of sole or
limited source raw materials or to develop alternative sources on a timely basis if required could result in increased costs in our operations or our inability to properly maintain our existing level of operations. A planned outage at our
Coatzacoalcos, Mexico facility in the fourth quarter of 2007, for example, had to be extended as a result of incidents disrupting our suppliers petroleum distribution network that, in turn, reduced sulfur extraction activities and
delivery to local sulfuric acid producers at a time when we were unable to make up the shortfall from other sources. See Managements Discussion and Analysis of Financial Condition and Results of OperationsYear Ended
December 31, 2007 compared to the Year Ended December 31, 2006 in our Form 10-K.

Environmental, Safety, and Production and Product
Regulations or Concerns

Our operations involve the use, handling, processing, storage, transportation and disposal of hazardous
materials and some of our products are ingredients in foods, nutritional supplements or pharmaceutical excipients that are used in finished products consumed or used by humans or animals. As a result, we are subject to extensive and frequently
changing environmental and other regulatory requirements and periodic inspection by federal, state, and local authorities, including the U.S. Environmental Protection Agency, or EPA, the FDA, and the USDA, as well as other regulatory authorities and
those with jurisdiction over our foreign operations. Our operations also expose us to the risk of claims for environmental remediation and restoration or for exposure to hazardous materials. Our production facilities require various operating
permits that are subject to renewal or modification. Violations of environmental laws, regulations, or permits may result in restrictions being imposed on operating activities, substantial fines, penalties, damages, the rescission of operating
permits, third-party claims for property damage or personal injury, or other costs.

Maintaining compliance with health and safety and
environmental laws and regulations has resulted in ongoing costs for us. Currently, we are involved in several compliance and remediation efforts and agency inspections concerning health, safety and environmental matters.

EPA has indicated that compliance at facilities in the phosphate industry is a high enforcement priority. In 2004, it conducted a multi-media inspection
and in 2005 it followed up on issues regarding compliance with air, water and hazardous waste regulations at our Geismar, Louisiana plant. In August 2006, we received a report in connection with that inspection identifying certain areas of concern
raised by EPA under its hazardous waste regulations. In March 2007, we received a further EPA request for additional information concerning hazardous waste, air pollution controls and materials handling at the Geismar plant. In response, we provided
requested information in a timely manner and explained why we maintain that our Geismar facility continues to meet applicable regulations or exclusions. In March 2008, we received a letter from the DOJ indicating that EPA had referred our case for
civil



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enforcement, contending that our Geismar operations do not qualify for the exemptions we have claimed, and alleging that we violate RCRA by failing to manage
two materials appropriately, and related administrative violations. Although the letter stated that EPA/DOJ intends to seek unspecified penalties and corrective action, it proposed discussions to explore possible resolution. Since receiving the
letter, we have held discussions with EPA/DOJ concerning the matters raised by the agencies. At this time, we do not know whether past or future discussions will result in an agreed resolution, a consent decree, or litigation. We understand that
similar action has been taken by EPA with regard to PCSs interconnected plant at Geismar from which we obtain acid raw material. It is possible that in the event of further enforcement PCSs operations could be interrupted for an extended
time while it sought to achieve compliance, the impact of which could also be material to our operations, as our Geismar facility cannot operate economically under current market conditions without raw materials from this suppliers
interconnected plant. Depending upon the facts and circumstances of, and developments arising from any non-compliance, our long-term raw materials supply contract at Geismar may be adversely affected. That contract provides in the event PCS were to
meet the criteria of economic force majeure, the parties must engage good faith discussions allowing Innophos to make proposals (including purchases of comparable purified phosphoric acid from other facilities of PCS at Innophos
cash cost of production at Geismar) that would provide some relief to PCS without Innophos suffering adverse financial or operational consequences. PCS is required to implement Innophos proposals or continue to operate under the existing
contract. Nevertheless, we cannot guarantee that the contract provides full protection against losses we may suffer, or that our operating costs would not increase by a material amount, as a result of the provision.

Some existing environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities and
sites for contamination at those locations without regard to causation or knowledge of contamination. Many of our sites have an extended history of industrial use. Soil and groundwater contamination have been detected at some of our sites, and
additional contamination might occur or be discovered at these sites or other sites (including sites to which we may have sent hazardous waste) in the future. We continue to investigate, monitor or clean-up contamination at most of these sites. Due
to the uncertainties associated with environmental investigations and clean-ups and the ongoing nature of the investigations and clean-ups at our sites, we cannot predict precisely the nature, cost, and timing of our future remedial obligations with
respect to our sites.

Additional laws or regulations focused on phosphate-based products may be implemented in the future. For example, a
number of states within the U.S. and Canada are moving to effectively ban the use of phosphate-based products in consumer automatic dishwashing detergents. In 2006, Washington State enacted legislation of that type, to be effective in several
counties in 2008 and state-wide in 2010. Additional states have enacted similar legislation effective in 2010, and comparable bills are being considered by the legislatures of other states. In 2006, the trade association that includes major
manufacturers of consumer automatic dishwashing detergents began actively to support these efforts in the U.S. and Canada, increasing the likelihood they will become widespread. This trend and related changes in consumer preferences could have a
significant impact on our business to the extent we are not able to react in a timely and adequate manner to our customers reformulations of automatic dishwashing detergent products and resulting market changes, including whether the rest of
the industry adjusts accordingly, by adjusting our sales and manufacturing plans. Furthermore, although already banned in home laundry detergents in many U.S. States, phosphates are still permitted for those applications in many Latin American
regions.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

None.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

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, 2008 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|            | 
|31.2        |  | Certification of Principal Financial Officer dated November 4, 2008 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|            | 
|32.1*       |  | Certification of Principal Executive Officer dated November 4, 2008 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|            | 
|32.2*       |  | Certification of Principal Financial Officer dated November 4, 2008 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 GressBy:

Randolph GressIts:

Chief Executive Officer and Director(Principal Executive Officer)Dated: November 4, 2008INNOPHOS, INC./s/ Richard HeyseBy:

Richard HeyseIts:

Vice President and Chief Financial Officer(Principal Financial Officer)Dated: November 4, 2008




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EXHIBIT INDEX



|            |  |                                                                                                                              
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                  
|31.1        |  | Certification of Principal Executive Officer dated November 4, 2008 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|            | 
|31.2        |  | Certification of Principal Financial Officer dated November 4, 2008 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|            | 
|32.1        |  | Certification of Principal Executive Officer dated November 4, 2008 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|            | 
|32.2        |  | Certification of Principal Financial Officer dated November 4, 2008 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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