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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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Form 10-Q



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(Mark One)

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

For the quarterly period ended June 30, 2006

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: N/A



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AMERICAN ROCK SALT COMPANY LLC

(Exact Name of Registrant as Specified in its Charter)



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



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

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

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



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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 ̈NO ̈N/A  x

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

Large Accelerated Filer ̈Accelerated Filer ̈Non-Accelerated Filer  x

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



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##### Table of Contents

American Rock Salt Company LLC

EXPLANATORY NOTE

American Rock Salt Company LLC (the Company) is not required to file reports under the

Securities Exchange Act of 1934, as amended. This Form 10-Q is only being filed for informational

purposes pursuant to the indenture governing the Companys 91/2% Senior Secured Notes due 2014.

INDEX



|           |  |                                                                                       |  |            
|---------- |  | ------------------------------------------------------------------------------------- |  | -----------
|           |  |                                                                                       |  | Page Number
|Part I.    |  | Financial Information                                                                 |  |            
|           |  |                                                                                      
|Item 1.    |  | Financial Statements - Unaudited                                                      |  |            
|           |  |                                                                                      
|           |  | Balance SheetsJune 30, 2006 and September 30, 2005                                    |  | 2          
|           |  |                                                                                      
|           |  | Statements of OperationsThree and Nine Months Ended June 30, 2006 and 2005            |  | 3          
|           |  |                                                                                      
|           |  | Statement of Changes in Members DeficitNine Months Ended June 30, 2006 and 2005      |  | 3          
|           |  |                                                                                      
|           |  | Statements ofCash Flows Nine Months Ended June 30, 2006 and 2005                      |  | 4          
|           |  |                                                                                      
|           |  | Notes to Interim Financial Statements                                                 |  | 5          
|           |  |                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 9          
|           |  |                                                                                      
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 14         
|           |  |                                                                                      
|Item 4.    |  | Controls and Procedures                                                               |  | 14         
|           |  |                                                                                      
|Part II.   |  | Other Information                                                                     |  |            
|           |  |                                                                                      
|Item 1.    |  | Legal Proceedings                                                                     |  | 15         
|           |  |                                                                                      
|Item 1A.   |  | Risk Factors                                                                          |  | 15         
|           |  |                                                                                      
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 15         
|           |  |                                                                                      
|Item 3.    |  | Defaults upon Senior Securities                                                       |  | 15         
|           |  |                                                                                      
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 15         
|           |  |                                                                                      
|Item 5.    |  | Other Information                                                                     |  | 15         
|           |  |                                                                                      
|Item 6.    |  | Exhibits                                                                              |  | 16         
|           | 
|Signatures |  | 17                                                                                   
|           | 
|Exhibits   |  | 18                                                                                   



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##### Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

American Rock Salt Company LLC

Balance Sheets

(Dollars in Thousands)

(Unaudited)



|                                                                                                                                             |  |               |         |   |                          |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------------------ | - | ------- | -
|                                                                                                                                             |  | June 30, 2006 |         |   | September 30, 2005       |  
|                                                                                                                                             |  |               |         |   | As Adjusted (See Note 2) |  
|Assets                                                                                                                                       |  |               |         |   |                          |   |         |  
|Current assets                                                                                                                               |  |               |         |   |                          |   |         |  
|Cash and equivalents                                                                                                                         |  | $             | 588     |   |                          | $ | 2,234   |  
|Accounts receivable, net of reserve for doubtful accounts of approximately $87 and $72 at June 30, 2006 and September 30, 2005,
respectively |  |               | 975     |   |                          |   | 7,193   |  
|Inventory                                                                                                                                    |  |               | 33,957  |   |                          |   | 32,040  |  
|Prepaid expenses                                                                                                                             |  |               | 418     |   |                          |   | 687     |  
|                                                                                                                                             |  |               |         |   |                          |   |         |  
|Total current assets                                                                                                                         |  |               | 35,938  |   |                          |   | 42,154  |  
|Property and equipment, net                                                                                                                  |  |               | 84,053  |   |                          |   | 84,263  |  
|                                                                                                                                             |  |              
|Other assets                                                                                                                                 |  |               |         |   |                          |   |         |  
|                                                                                                                                             |  |              
|Salt deposits and mineral rights, net                                                                                                        |  |               | 2,585   |   |                          |   | 2,603   |  
|Mine acquisition costs, net                                                                                                                  |  |               | 383     |   |                          |   | 388     |  
|Financing costs, net of accumulated amortization                                                                                             |  |               | 5,969   |   |                          |   | 6,547   |  
|                                                                                                                                             |  |               |         |   |                          |   |         |  
|Total other assets                                                                                                                           |  |               | 8,937   |   |                          |   | 9,538   |  
|                                                                                                                                             |  |               |         |   |                          |   |         |  
|                                                                                                                                             |  | $             | 128,928 |   |                          | $ | 135,955 |  
|                                                                                                                                             |  |               |         |   |                          |   |         |  
|Liabilities and Members Equity                                                                                                              |  |               |         |   |                          |   |         |  
|Current liabilities                                                                                                                          |  |               |         |   |                          |   |         |  
|Revolving line of credit                                                                                                                     |  |               |        |   |                          |   | 13,700  |  
|Current portion of long-term debt                                                                                                            |  |               | 1,905   |   |                          |   | 2,849   |  
|Accounts payable                                                                                                                             |  |               | 2,768   |   |                          |   | 3,655   |  
|Accrued expenses                                                                                                                             |  |               | 3,074   |   |                          |   | 3,621   |  
|Related party payables                                                                                                                       |  |               | 209     |   |                          |   | 361     |  
|                                                                                                                                             |  |               |         |   |                          |   |         |  
|Total current liabilities                                                                                                                    |  |               | 7,956   |   |                          |   | 24,186  |  
|Long-term debt, net of current portion                                                                                                       |  |               | 122,253 |   |                          |   | 124,567 |  
|                                                                                                                                             |  |               |         |   |                          |   |         |  
|Total liabilities                                                                                                                            |  |               | 130,209 |   |                          |   | 148,753 |  
|Members equity                                                                                                                              |  |               |         |   |                          |   |         |  
|Class A Units 6,250 units issued and outstanding at June 30, 2006 and September 30, 2005                                                     |  |               | (422    | ) |                          |   | (4,210  | )
|Class F Units 12,750 units issued and outstanding at June 30, 2006 and September 30, 2005                                                    |  |               | (859    | ) |                          |   | (8,588  | )
|                                                                                                                                             |  |               |         |   |                          |   |         |  
|                                                                                                                                             |  |               | (1,281  | ) |                          |   | (12,798 | )
|                                                                                                                                             |  |               |         |   |                          |   |         |  
|                                                                                                                                             |  | $             | 128,928 |   |                          | $ | 135,955 |  
|                                                                                                                                             |  |               |         |   |                          |   |         |  

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



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##### Table of Contents

American Rock Salt Company LLC

Statements of Operations

(Dollars in Thousands)

(Unaudited)



|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|----------------------------- |  | -------------------------- | ------ | - | ------------------------- | - | ------ | ------------- |  | - | ------------------------ | - |  | - | ------ | -
|                              |  | For the three months ended |        |   | For the nine months ended |  
|                              |  | June 30, 2006              |        |   | June 30, 2005             |   |        | June 30, 2006 |  |   | June 30, 2005            |  
|                              |  |                            |        |   | As Adjusted (See Note 2)  |   |        |               |  |   | As Adjusted (See Note 2) |  
|Sales                         |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Bulk                          |  | $                          | 2,659  |   |                           | $ | 2,644  |               |  | $ | 85,163                   |   |  | $ | 93,014 |  
|Packaged                      |  |                            |       |   |                           |   | (2     | )             |  |   | 1,813                    |   |  |   | 1,864  |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Total sales                   |  |                            | 2,659  |   |                           |   | 2,642  |               |  |   | 86,976                   |   |  |   | 94,878 |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Cost of sales                 |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Freight and handling          |  |                            | 1,900  |   |                           |   | 1,476  |               |  |   | 39,584                   |   |  |   | 41,639 |  
|Products                      |  |                            | 150    |   |                           |   | 704    |               |  |   | 19,425                   |   |  |   | 26,057 |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|                              |  |                            | 2,050  |   |                           |   | 2,180  |               |  |   | 59,009                   |   |  |   | 67,696 |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Gross income                  |  |                            | 609    |   |                           |   | 462    |               |  |   | 27,967                   |   |  |   | 27,182 |  
|Operating expenses            |  |                            | 1,812  |   |                           |   | 1,870  |               |  |   | 5,311                    |   |  |   | 6,139  |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Income (loss) from operations |  |                            | (1,203 | ) |                           |   | (1,408 | )             |  |   | 22,656                   |   |  |   | 21,043 |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Other income (expense)        |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Interest expense              |  |                            | (2,622 | ) |                           |   | (2,695 | )             |  |   | (8,706                   | ) |  |   | (8,606 | )
|Interest income               |  |                            | 61     |   |                           |   | 65     |               |  |   | 97                       |   |  |   | 71     |  
|Other financing charges       |  |                            | (5     | ) |                           |   |       |               |  |   | (70                      | ) |  |   | (7     | )
|Other, net                    |  |                            | 4      |   |                           |   | 4      |               |  |   | 2,151                    |   |  |   | 6      |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Total other expense, net      |  |                            | (2,562 | ) |                           |   | (2,626 | )             |  |   | (6,528                   | ) |  |   | (8,536 | )
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Net income (loss)             |  | $                          | (3,765 | ) |                           | $ | (4,034 | )             |  | $ | 16,128                   |   |  | $ | 12,507 |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  

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

American Rock Salt Company LLC

Statement of Changes in Members (Deficit)

For the Nine Months Ended June 30, 2006

(Dollars in Thousands)

(Unaudited)



|                                     |  |               |        |   |               |   |        |       |  |   |         |  
|------------------------------------ |  | ------------- | ------ | - | ------------- | - | ------ | ----- |  | - | ------- | -
|                                     |  | Class A Units |        |   | Class F Units |   |        | Total | 
|Members equity - September 30, 2005 |  | $             | (4,210 | ) |               | $ | (8,588 | )     |  | $ | (12,798 | )
|Net income                           |  |               | 5,305  |   |               |   | 10,823 |       |  |   | 16,128  |  
|Distribution to members              |  |               | (1,517 | ) |               |   | (3,094 | )     |  |   | (4,611  | )
|                                     |  |               |        |   |               |   |        |       |  |   |         |  
|Members equity - June 30, 2006      |  | $             | (422   | ) |               | $ | (859   | )     |  | $ | (1,281  | )
|                                     |  |               |        |   |               |   |        |       |  |   |         |  

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



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##### Table of Contents

American Rock Salt Company LLC

Statements of Cash Flows

(Dollars in Thousands)

(Unaudited)



|                                                                                 |  |                           |         |   |                          |   |         |  
|-------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ------------------------ | - | ------- | -
|                                                                                 |  | For the nine months ended |        
|                                                                                 |  | June 30, 2006             |         |   | June 30, 2005            |  
|                                                                                 |  |                           |         |   | As Adjusted (See Note 2) |  
|Cash flows from operating activities                                             |  |                           |         |   |                          |   |         |  
|Net income                                                                       |  | $                         | 16,128  |   |                          | $ | 12,507  |  
|Adjustments to reconcile net income to net cash provided by operating activities |  |                           |         |   |                          |   |         |  
|Depreciation                                                                     |  |                           | 3,525   |   |                          |   | 3,147   |  
|Depletion                                                                        |  |                           | 23      |   |                          |   | 34      |  
|Provision for bad debts                                                          |  |                           | 15      |   |                          |   | 10      |  
|Amortization of mine acquisition and financing costs                             |  |                           | 578     |   |                          |   | 582     |  
|Changes in                                                                       |  |                           |         |   |                          |   |         |  
|Accounts receivable                                                              |  |                           | 6,203   |   |                          |   | 2,808   |  
|Inventory                                                                        |  |                           | (1,917  | ) |                          |   | 5,314   |  
|Prepaid expenses and other assets                                                |  |                           | 269     |   |                          |   | 69      |  
|Accounts payable                                                                 |  |                           | (887    | ) |                          |   | (1,073  | )
|Accrued expenses                                                                 |  |                           | (547    | ) |                          |   | 1,382   |  
|(Repayments) of related party payables                                           |  |                           | (152    | ) |                          |   | (301    | )
|                                                                                 |  |                           |         |   |                          |   |         |  
|Net cash provided by operating activities                                        |  |                           | 23,238  |   |                          |   | 24,479  |  
|                                                                                 |  |                           |         |   |                          |   |         |  
|Cash flows from investing activities                                             |  |                           |         |   |                          |   |         |  
|Purchase of property and equipment                                               |  |                           | (3,315  | ) |                          |   | (1,634  | )
|Mine Development Expenditures                                                    |  |                           |        |   |                          |   | (10,000 | )
|                                                                                 |  |                           |         |   |                          |   |         |  
|Net cash used in investing activities                                            |  |                           | (3,315  | ) |                          |   | (11,634 | )
|                                                                                 |  |                           |         |   |                          |   |         |  
|Cash flows from financing activities                                             |  |                           |         |   |                          |   |         |  
|Repayments on long-term debt                                                     |  |                           | (3,258  | ) |                          |   | (18     | )
|Borrowings (repayments) on revolving line of credit                              |  |                           | (13,700 | ) |                          |   | 4,420   |  
|Repayments on revolving line of credit                                           |  |                           |        |   |                          |   | (17,170 | )
|Financed Payables                                                                |  |                           |        |   |                          |   | 2,012   |  
|Distribution to Members                                                          |  |                           | (4,611  | ) |                          |   | (1,923  | )
|Decrease in Restricted Cash                                                      |  |                           |        |   |                          |   | (2,853  | )
|                                                                                 |  |                           |         |   |                          |   |         |  
|Net cash used in financing activities                                            |  |                           | (21,569 | ) |                          |   | (15,532 | )
|                                                                                 |  |                           |         |   |                          |   |         |  
|Net decrease in cash and equivalents                                             |  |                           | (1,646  | ) |                          |   | (2,687  | )
|Cash and equivalents - beginning of period                                       |  |                           | 2,234   |   |                          |   | 3,102   |  
|                                                                                 |  |                           |         |   |                          |   |         |  
|Cash and equivalents - end of period                                             |  | $                         | 588     |   |                          | $ | 415     |  
|                                                                                 |  |                           |         |   |                          |   |         |  
|                                                                                 |  |                          
|Supplemental Disclosure of Cash Flow Activities                                  |  |                           |         |   |                          |   |         |  
|                                                                                 | 
|                                                                                 |  | For the nine months ended |        
|                                                                                 |  | June 30, 2006             |         |   | June 30, 2005            |  
|                                                                                 |  |                           |         |   | As Adjusted (See Note 2) |  
|Cash paid for interest                                                           |  | $                         | 5,940   |   |                          | $ | 6,192   |  
|                                                                                 |  |                           |         |   |                          |   |         |  

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



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##### Table of Contents

AMERICAN ROCK SALT COMPANY LLC

NOTES TO FINANCIAL STATEMENTS



|1. | The Company
|-- | -----------

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



|2. | Basis of Presentation and Accounting Change
|-- | -------------------------------------------

The
accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These interim unaudited financial statements should be read in conjunction with the audited financial statements for
the fiscal year ended September 30, 2005 included in the Companys Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation, have been included.
Operating results for the three and nine month periods ended June 30, 2006 are not indicative of the results that may be expected for a full year due, in part, to seasonal fluctuations, which are normal for the Companys business. Further,
the Company has made a number of estimates and assumptions relating to the assets and liabilities, the disclosure of contingent assets and liabilities and the reporting of revenues and expenses to prepare these financial statements in conformity
with generally accepted accounting principles. Actual results could differ from those estimates. The balance sheet at September 30, 2005 has been derived from the audited financial statements at that date, but does not include all the
information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

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

The Company concluded in September 2006 to change its method of amortization of its mine
development costs from the straight line method to the units-of-production method. In accordance with Statement of Financial Accounting Standards (SFAS) No. 154, Accounting Changes and Error Corrections, the Company retrospectively
adjusted its financial statements for all periods to reflect such change.

Mine development costs, primarily underground assets used in the
production of salt, had a gross total of $69.8 million as of June 30, 2006 and are included on the Companys balance sheet in property and equipment, net. Under the prior accounting method, these assets had been amortized over a 20 year
life on a straight line basis. Under the units-of-production method, the assets are amortized based on the tons of salt extracted compared to the total tons of proven salt reserves. The new accounting method is preferable because it better reflects
the usage patterns of these assets, links their estimated useful lives to the life of the Companys proven salt reserves, and is the industry predominant accounting practice for similar assets.

The Company believes it had approximately 8,120 acres of proven salt reserves with approximately 176,000,000 tons of proven salt reserves prior to mining
activity. The financial impact of this accounting change is a reduction of annual amortization expense as the mine development assets are effectively amortized over a longer useful life. Under SFAS 154, the financial statement impact is applied
retrospectively to all periods presented. The following table presents the Companys net income and certain balance sheet data as previously reported using the 20-year amortization life and as adjusted using the units-of-production method.



|                                               |  |                                 |        |   |                                |   |       
|---------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------
|                                               |  | Three months endedJune 30, 2006 |        |   | Nine months endedJune 30, 2006
|Net income (loss), as previously reported      |  | $                               | (4,068 | ) |                                | $ | 10,826
|Reduced amortization impact                    |  | $                               | 34     |   |                                | $ | 1,681 
|                                               |  |                                 |        |   |                                |   |       
|Net income (loss), as adjusted                 |  | $                               | (4,034 | ) |                                | $ | 12,507
|                                               |  |                                 |        |   |                                |   |       
|                                               |  |                                
|                                               |  | September 30, 2005              |        |   |                               
|Inventory, as previously reported              |  | $                               | 33,053 |   |                                |   |       
|Reduced amortization impact                    |  |                                 | (1,013 | ) |                                |   |       
|                                               |  |                                 |        |   |                                |   |       
|Inventory, as adjusted                         |  | $                               | 32,040 |   |                                |   |       
|                                               |  |                                 |        |   |                                |   |       
|Property and equipment, as previously reported |  | $                               | 75,457 |   |                                |   |       
|Reduced amortization impact                    |  |                                 | 8,806  |   |                                |   |       
|                                               |  |                                 |        |   |                                |   |       
|Property and equipment, as adjusted            |  | $                               | 84,263 |   |                                |   |       
|                                               |  |                                 |        |   |                                |   |       



5



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##### Table of Contents

|3. | Long-Term Debt
|-- | --------------

Long-term debt consisted of the
following at:



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |               |         |   |                    |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------------ | - | ------- | -
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | June 30, 2006 |         |   | September 30, 2005 |  
|Senior Secured Notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |               |         |   |                    |   |         |  
|Senior Secured Notes at June 30, 2006 of $100,000,000, currently requiring semi annual interest payments through the final maturity date
of March 15, 2014 at an annual rate of 9.50%. Prior to March 15, 2007, 35% of the aggregate principal amount of the principal amount of the notes at the established price plus accrued and unpaid interest may be redeemed at 109.5%. Some or
all of the notes may be redeemed at any time prior to March 15, 2009 at a make-whole redemption price. After March 15, 2009, the notes are redeemable at a redemption price of 104.75%, to be adjusted annually to 100% by March 15,
2012 |  |               | 100,000 |   |                    |   | 100,000 |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |              
|Senior Term Loan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |               |         |   |                    |   |         |  
|Senior Term Loan at June 30, 2006, currently requiring quarterly principal and interest payments through the final maturity date of
March 16, 2012 at an annual rate equal to the LIBOR rate plus up to 3.5%, based on a pricing grid leverage ratio or a base rate (the higher of the Federal Funds Rate plus 0.5% or the prime rate plus the applicable margin for base rate loans),
at the Companys option. The interest rate is 5.85% as of June 30, 2006                                                                                                                                                                    |  |               | 24,027  |   |                    |   | 27,266  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |              
|Promissory note payable to the Empire State Development Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |               |         |   |                    |   |         |  
|Due April 1, 2011, interest at 4.0% per annum payable in 120 equal installments of principal and interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |               | 131     |   |                    |   | 150     |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |               |         |   |                    |   |         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |               | 124,158 |   |                    |   | 127,416 |  
|Less: Current maturities of long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |               | (1,905  | ) |                    |   | (2,849  | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |               |         |   |                    |   |         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | $             | 122,253 |   |                    | $ | 124,567 |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |               |         |   |                    |   |         |  

On March 7, 2006, the Company amended its bank facility primarily in order to reduce the
pricing grid leverage ratio and to eliminate certain financial covenants, as previously reported in the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission (the SEC) on March 8, 2006. At
June 30, 2006, the Companys bank facility in the aggregate principal amount of $51.0 million consisted of: (a) a $24.0 million term loan facility, and (b) a $27.0 million working capital facility. Both the term loan and the
working capital facility bear interest at an annual rate equal to the LIBOR rate plus up to 1.375%, based on a pricing grid leverage ratio or a base rate (the higher of the Federal Funds Rate plus 0.5% or the prime rate plus the applicable margin
for base rate loans), at the Companys option. The term loan facility has a maturity of eight years commencing March 7, 2006. The working capital facility has an initial term of five years commencing March 7, 2006.

The term loan facility was drawn at the conclusion of litigation with the mine contractor and other parties (see Note 6). At June 30, 2006, a balance
of $24.0 million was outstanding under this facility bearing interest at a rate of 5.845%.

The working capital facility permits the Company
to borrow up to $27.0 million in revolving loans with a $7.0 million sub-limit available for the issuance of letters of credit. Availability of the working capital facility is subject to a borrowing base formula. As of June 30, 2006, the
Company had $0.0 million drawn and $2.0 million of standby letters of credit outstanding under the working capital facility, with approximately $24.4 million of remaining availability thereunder. The aggregate outstanding amount of revolving loans
and letters of credit under the financing arrangement cannot exceed $27.0 million and when outstanding would bear an interest rate of 5.845% (assuming the rate in effect at June 30, 2006 would apply).



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##### Table of Contents

|4. | Inventory
|-- | ---------

Inventory consists of the following:



|                     |  |               |        |   |                          |   |        |  
|-------------------- |  | ------------- | ------ | - | ------------------------ | - | ------ | -
|                     |  | June 30, 2006 |        |   | September 30, 2005       |  
|                     |  |               |        |   | As Adjusted (See Note 2) |  
|Supplies             |  | $             | 1,013  |   |                          | $ | 1,056  |  
|Finished Goods, Salt |  |               | 32,086 |   |                          |   | 31,022 |  
|                     |  |               |        |   |                          |   |        |  
|                     |  |               | 33,099 |   |                          |   | 32,078 |  
|Less:                |  |               |        |   |                          |   |        |  
|Reserve              |  |               | (38    | ) |                          |   | (37    | )
|                     |  |               |        |   |                          |   |        |  
|                     |  | $             | 33,061 |   |                          | $ | 32,040 |  
|                     |  |               |        |   |                          |   |        |  



|5. | Related Party Transactions
|-- | --------------------------

Legal Services

Certain legal costs were incurred from an organization affiliated with several of our members of approximately $0.1 million and $0.2
million during the three months ended, and $0.4 million and $0.8 million for the nine months ended June 30, 2006 and 2005, respectively. All such fees are included in operating expenses.

Goods and Services

Certain members,
or their affiliates, received management and service fees of approximately $0.1 million and $0.1 million during the three months ended, and $0.2 million and $0.2 million for the nine months ended June 30, 2006 and 2005, respectively. These
amounts are included in operating expenses.

Additionally, certain members, or their affiliates, received payments for goods and services of
approximately $0.4 million and $0.4 million during the three months ended, and $1.4 million and $1.1 million for the nine months ended June 30, 2006 and 2005, respectively. Of those amounts, the following amounts were included in cost of sales
- products: for the three months ended June 30, 2006, approximately $0.2 million; for the three months ended June 30, 2005, approximately $0.2 million; for the nine months ended June 30, 2006, approximately $1.1 million; and for the
nine months ended June 30, 2005, approximately $0.8 million. The remaining amounts not included in cost of sales - products are included in operating expenses.

Financing Costs

Certain costs were incurred from an affiliate of a member for financial advisory
fees of approximately $0.1 million for the three months ended, and $0.2 million for the nine months ended June 30, 2005. All such amounts are included in operating expenses. No such costs were incurred during the three or nine-month periods
ended June 30, 2006.

Non-operating Mineral Interests (NOMIs)

Certain members receive payments in respect of NOMIs related to the acquisition of mineral rights equal to 2.5% of the gross income from the mine as
reported for purposes of computing percentage depletion for federal income tax purposes. NOMI expense was approximately $0.05 million and $0.05 million during the three months ended, and $2.3 million and $2.2 million for the nine months ended
June 30, 2006 and 2005, respectively. These amounts are included in cost of sales - products.



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##### Table of Contents

|6. | Commitments and Contingencies
|-- | -----------------------------

Engineering and
Procurement Contract/Litigation

The Company has been involved in litigation with Frontier-Kemper Constructors, Inc., Flatiron
Constructors, Inc. (formerly known as Flatiron Constructors, LLC, and also known as Flatiron Structures LLC), Jointly and Severally with Frontier-Kemper Constructors, Inc. and d/b/a Frontier-Kemper/Flatiron Joint Venture (together, the EPC
Contractor or FKF), whom the Company engaged to design and construct its mine facility, as well as the EPC Contractors bonding companies, Travelers Casualty and Surety Company of America and Liberty Mutual Insurance
Company (the Bonding Companies), and Willis Corroon Corporation of Missouri, Willis Limited, Willis Faber and Dumas (collectively Willis) and Lloyds U/W at London, Sponsoring Syndicates (Lloyds),
the insurance brokers and underwriters, respectively, of certain liquidated damages insurance purchased to insure the timely completion of the mine facility. On June 30, 2005, the Company, the EPC Contractor and the Bonding Companies reached a
settlement agreement with respect to the litigation, pursuant to which the parties agreed to dismiss all claims and counterclaims, subject to limited exceptions, with no findings or admissions of liability by any party. All of the settled claims
were dismissed with prejudice. In July 2005, the Company paid a total of $10 million to the EPC Contractor, including $4.2 million of mine construction retention previously withheld and owed to the EPC Contractor and the last invoice dated December
2001 totaling $1.0 million, both of which had been previously recorded as accrued liabilities on the Companys balance sheet. The remaining $4.8 million of the settlement payment was for additional mine construction expenditures and was also
recorded on June 30, 2005 as capitalized mine development costs. The Company agreed to share with the EPC Contractor one-half of any payment received by the Company in connection with its claims against Willis Corroon Corporation of Missouri,
Willis Limited, Willis Faber and Dumas and Lloyds U/W at London, Sponsoring Syndicates, third party defendants in the action (the Willis parties). Other terms of the settlement are confidential by agreement of the parties. The
settlement also freed the Company from any further obligation under a $32.1 million bond the Company posted as security to discharge a mechanics lien the EPC Contractor had filed against the Hampton Corners Salt Mine arising out of the dispute
between the parties. The settlement did not include the settling parties claims against Willis and Lloyds, which claims remained pending.

On October 18, 2005, the court in which the remaining litigation against Willis and Lloyds was pending granted summary judgment to the Company on its claims against Willis for breach of its obligations to
the Company as insurance brokers in connection with the above-mentioned liquidated damages insurance, and the Company and the EPC Contractor subsequently agreed to a settlement of their claims against Willis and Lloyds. The
claims against the Willis parties were settled on February 27, 2006 for $4.2 million, one-half of which was retained by the Company and one-half of which was paid over to the EPC Contractor, both net of litigation expenses, pursuant to the
terms of the original settlement. The Companys amount ($2.1 million) has been included as Other Income in the Statement of Operations for the nine month period ended June 30, 2006.



|7. | Subsequent Event
|-- | ----------------

The Company on September 18,
2006 purchased $3,045,000 of Senior Secured Notes at 104.25%. The Company plans on retiring these notes.



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##### Table of Contents

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

From time to time, the Company or persons acting on behalf of the Company may make oral and written statements that may constitute forward-looking statements
as defined in the Private Securities Litigation Reform Act of 1995 (the PSLRA) or by the Securities and Exchange Commission (SEC) in its rules, regulations, and releases. The Company desires to take advantage of the
safe harbor provisions in the PSLRA for forward-looking statements made from time to time, including, but not limited to, the forward-looking information contained in the Managements Discussion and Analysis of Financial
Condition and Results of Operations section of this Form 10-Q and other statements made in this Form 10-Q and in filings with the SEC.

The Company
cautions readers that any such forward-looking statements made by or on behalf of the Company are based on managements current expectations and beliefs but are not guarantees of future performance. Actual results could differ materially from
those expressed or implied in the forward-looking statements. The factors that could impact the Company include, without limitation:



| |  | return expectations and related allocation of resources;
|- |  | --------------------------------------------------------



| |  | changing economic or competitive conditions; and
|- |  | ------------------------------------------------



| |  | negotiation of agreements with third parties.
|- |  | ---------------------------------------------

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

Company Overview

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

Salt mines and mining operations are long-lived assets. Based solely on data extrapolated from areas within a one-mile radius of our drill holes, we believe that our mine currently has over 55 years of remaining mineable reserves at the
current production rate of 3.0 million tons per year.

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

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

For the fiscal year ended September 30, 2005 and for the nine months ended June 30, 2006, we generated revenues of $104.6 million and $87.0 million,
respectively, and net income of $11.0 million and $16.1 million, respectively. We believe that our cash flows are not materially impacted by economic cycles due to the stable end use markets for rock salt and the lack of cost effective alternatives.

Critical Accounting Policies

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

Salt Deposits, Mineral Rights and Mine Development Costs

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



9



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##### Table of Contents

Mine Reclamation Cost

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

Impairment of Long-Lived Assets

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

Other Significant
Accounting Policies

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

Results of Operations

The following table sets forth certain
historical financial information for the three and nine month periods ended June 30, 2006 and 2005 which have been adjusted as discussed in footnote 2 to the accompanying unaudited financial statements. We record sales to customers based upon
total billings including shipping and handling costs necessary to transport our products from the production or storage sites to the delivery point. In establishing our prices to our customers, we must take into account the estimated cost of
transportation of our products, since we assume responsibility for such costs. We manage the profitability and attractiveness of existing and prospective customers and product lines by analyzing, among other factors, the customer billings net of
related shipping and handling costs. This allows for a more comparable look at the relative profitability of our business as well as providing a more accurate analysis upon which to analyze trends in the business.

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



|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|----------------------------- |  | -------------------------- | ------ | - | ------------------------- | - | ------ | ------------- |  | - | ------------------------ | - |  | - | ------ | -
|                              |  | For the three months ended |        |   | For the nine months ended |  
|                              |  | June 30, 2006              |        |   | June 30, 2005             |   |        | June 30, 2006 |  |   | June 30, 2005            |  
|                              |  |                            |        |   | As Adjusted (See Note 2)  |   |        |               |  |   | As Adjusted (See Note 2) |  
|Sales                         |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Bulk                          |  | $                          | 2,659  |   |                           | $ | 2,644  |               |  | $ | 85,163                   |   |  | $ | 93,014 |  
|Packaged                      |  |                            |       |   |                           |   | (2     | )             |  |   | 1,813                    |   |  |   | 1,864  |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Total sales                   |  |                            | 2,659  |   |                           |   | 2,642  |               |  |   | 86,976                   |   |  |   | 94,878 |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Cost of sales                 |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Freight and handling          |  |                            | 1,900  |   |                           |   | 1,476  |               |  |   | 39,584                   |   |  |   | 41,639 |  
|Products                      |  |                            | 150    |   |                           |   | 704    |               |  |   | 19,425                   |   |  |   | 26,057 |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|                              |  |                            | 2,050  |   |                           |   | 2,180  |               |  |   | 59,009                   |   |  |   | 67,696 |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Gross income                  |  |                            | 609    |   |                           |   | 462    |               |  |   | 27,967                   |   |  |   | 27,182 |  
|Operating expenses            |  |                            | 1,812  |   |                           |   | 1,870  |               |  |   | 5,311                    |   |  |   | 6,139  |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Income (loss) from operations |  |                            | (1,203 | ) |                           |   | (1,408 | )             |  |   | 22,656                   |   |  |   | 21,043 |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Other income (expense)        |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Interest expense              |  |                            | (2,622 | ) |                           |   | (2,695 | )             |  |   | (8,706                   | ) |  |   | (8,606 | )
|Interest income               |  |                            | 61     |   |                           |   | 65     |               |  |   | 97                       |   |  |   | 71     |  
|Other financing charges       |  |                            | (5     | ) |                           |   |       |               |  |   | (70                      | ) |  |   | (7     | )
|Other, net                    |  |                            | 4      |   |                           |   | 4      |               |  |   | 2,151                    |   |  |   | 6      |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Total other expense, net      |  |                            | (2,562 | ) |                           |   | (2,626 | )             |  |   | (6,528                   | ) |  |   | (8,536 | )
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  
|Net income (loss)             |  | $                          | (3,765 | ) |                           | $ | (4,034 | )             |  | $ | 16,128                   |   |  | $ | 12,507 |  
|                              |  |                            |        |   |                           |   |        |               |  |   |                          |   |  |   |        |  

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



10



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##### Table of Contents

Seasonality

The
Company experiences a substantial amount of seasonality in salt sales. The result of this seasonality is that sales and operating income are generally higher in the first and fourth calendar quarters and lower during the second and third calendar
quarters of each year. Sales of highway and consumer deicing salt products are also seasonal as they vary based on the severity of the winter conditions in areas where the product is used. Following industry practice, we and our customers stockpile
significant quantities of deicing salt in the second, third and fourth calendar quarters. The quarter ended June 30 is historically the lowest volume quarter of our fiscal year, with average tons sold approximating only approximately 6% of the
volumes for the quarter ended March 31. As a result of the low volume base for the quarter ended June 30, we can experience large percentage fluctuations in financial data for quarter-to-quarter comparisons, which often do not equate to
significant swings on a whole dollar basis. Our results of operations for the fiscal year ended September 30 and the nine months ended June 30 are more representative of trends in our results.

Three Months Ended June 30, 2006 Compared to Three Months Ended June 30, 2005

Sales

Total sales for the quarter ended June 30, 2006 of $2.7 million increased by $0.02 million, or 0.7%,
compared to total sales of $2.6 million during the same period in fiscal 2005. Sales primarily consist of bulk salt sales, as well as packaged salt sales. Sales volume increased 4.9% offset by an average decrease in the sales price per ton of
approximately 4.0% due to the sales mix between local and remote stockpiles for the quarter ended June 30, 2006 as compared to the quarter ended June 30, 2005. For this reason, the nine month results provided in this Form 10-Q are a better
illustration of the impact on sales of the full 2006 and 2005 winter seasons.

Gross Income

Gross income of $0.6 million for the third quarter of fiscal 2006 increased by $0.1 million compared to $0.5 million for the same period in fiscal 2005. The increase in
gross income was primarily attributable to the inventory adjustment to standard cost as noted below in Cost of sales-products partially offset by an increase in freight and handling.

Components of cost of sales changed as follows:



| |  | Cost of sales - freight and handling for the three months ended June 30, 2006 increased by $0.4 million or 28.7% as a result of a 4.9% increase in tonnage sold and
continued increases in freight costs.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Cost of sales products - For the three months ended June 30, 2006, decreased by $0.6 million as compared to the same period in fiscal 2005 primarily due to a $0.5 million
adjustment to reduce cost of sales  products resulting from increased absorption of costs during the current quarter due to reduced production and increased tonnage in ending inventory.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating Expenses

Operating expenses of $1.8 million for the third
quarter of fiscal 2006 decreased by $0.1 million, or 3%, as compared to $1.9 million for the same period in fiscal 2005. Operating expenses primarily consist of selling, general and administrative expenses, miscellaneous overhead and non-production
related depreciation and amortization expenses.

Other Income (Expense)

Other expense of $2.6 million for the third quarter of fiscal 2006 was comparable to the $2.6 million of other expense for the same period in fiscal 2005. Other expense consists primarily of interest expense of $2.6
million on our credit facility and other related financing charges, which were unchanged from the same period in fiscal 2005.

Nine Months Ended
June 30, 2006 Compared to Nine Months Ended June 30, 2005

Sales

Total sales for the nine months ended June 30, 2006 of $87.0 million decreased $7.9 million, or 8.3%, as compared to $94.9 million during for the same period in fiscal 2005. Sales primarily consist of bulk salt
sales, as well as packaged salt sales. The $7.9 million decrease was primarily attributable to a 16.1% decrease in tonnage sold partially offset by a 9.2% increase in sales price per ton. The decrease in tonnage sold was due to significantly milder
and drier winter weather conditions in the nine months ended June 30, 2006, as compared to the same nine month period in 2005.



11



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##### Table of Contents

Gross Income

Gross
income for the nine months ended June 30, 2006 of $28.0 million increased by $0.8 million, or 2.9%, compared to $27.2 million for the same period in fiscal 2005. Gross income increased despite significantly lower sales volume and increased
freight and handling costs due primarily to the increase in sales price per ton.

Components of cost of sales changed as
follows:



| |  | Cost of sales - freight and handling for the nine months ended June 30, 2006 decreased by $2.0 million or 4.9% corresponding to the 16.1% decrease in tons sold offset by
a 13.3% increase in the cost per ton due to increased fuel prices.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Cost of sales - products for the nine months ended June 30, 2006 decreased $6.6 million or 25.5%. The decrease is primarily attributable to the 16.1% decrease in tonnage sold.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating Expenses

Operating expenses
of $5.3 million for the nine months ended June 30, 2006 decreased $0.8 million, or 13.5%, as compared to $6.1 million for the same period in fiscal 2005. Operating expenses primarily consist of selling, general and administrative expenses,
miscellaneous overhead and non-production related depreciation and amortization expenses. The decrease in operating expenses for the nine months ended June 30, 2006 is primarily attributable to a decrease in legal and consulting fees as a
result of the settlement of the litigation with the EPC Contractor, as discussed in Note 6 to our unaudited financial statements included elsewhere in this Form 10-Q.

Other Income (Expense)

Other expense of $6.5 million for the first nine months of fiscal 2006 decreased $2.0
million, or 23.5%, as compared to $8.5 million for the same period in fiscal 2005. Other expense consists primarily of interest expense of $8.7 million on our credit facility and other related financing charges, which increased by $0.1 million, or
1.2%, offset by the $2.1 million received in connection with the settlement of the litigation with the EPC Contractor, as discussed in Note 6 to our unaudited financial statements included elsewhere in this Form 10-Q.

Liquidity and Capital Resources

Historical Cash Flow

We have used the cash generated from operations, borrowings under revolving lines of credit, and borrowings under construction and post-construction
financing facilities to meet our working capital needs and to fund capital expenditures. Additional information regarding our cash flows for the nine month period ended June 30, 2006 is provided below.

Operating Activities - Net cash provided by operating activities was $23.2 million for the first nine months of fiscal 2006 compared to $24.5 million in
net cash provided during the same period in fiscal 2005. Despite the $3.6 million increase to net income, net cash provided by operating activities during the nine months ended June 30, 2006 decreased as compared to the prior equivalent period
due to the 16% drop in sales volume which resulted in less inventory converting to cash during the period. Typically, during the period from September to June the bulk of our inventory on hand is converted to cash via sales during the winter season,
as was the case in 2005. However, due to lower sales volume inventory increased by $1.9 million which compared to the $5.3 million decrease in inventory during the prior comparable period resulted in a $7.2 million swing in cash. Net working capital
increased $10.0 million during the first nine months of fiscal 2006 as compared to a $8.0 million increase during the first nine months of 2005.

Investing Activities - Net cash flow used in investing activities for the first nine months of fiscal 2006 and 2005 was $3.3 million and $11.6 million, respectively. For the nine months ended June 30, 2006, these cash
flows primarily consisted of maintenance-related capital expenditures. For the nine months ended June 30, 2005 net cash flow used in investing activities consisted primarily of $1.6 million of maintenance related capital expenditures $4.8
million in capitalized mine development expenses resulting from the settlement of litigation with the EPC Contractor, $4.2 million of mine construction retention previously withheld and owed to the EPC Contractor, and payment of $1.0 million with
respect to the EPC contractors last invoice dated December 2001. Both mine construction retention and last invoice amounts had been previously recorded as accrued liabilities on the Companys balance sheet.

Financing Activities - Net cash used in financing activities was $21.6 million for the first nine months of fiscal 2006 as compared to $15.5 million used
during the same period in fiscal 2005. During the nine months ended June 30, 2006, $13.7 million of cash was used for repayments on our revolving line of credit, and $3.3 million for principal payments under our term loan facility. Also during
the nine months ended June 30, 2006, we paid distributions in the aggregate amount of $4.6 million to our members. This compares to $12.8 million used for net repayments on our revolving line of credit, $0 principal repayments on our term loan
and distribution to members of $1.9 million during the nine months ended June 30, 2005. In addition, during the nine months ended June 30, 2005 we had $2.0 million in cash provided by financed payables related to the timing of the EPC
Litigation Settlement payment discussed in our Legal footnote within this Form 10Q. And $2.9 million of cash was used for payments into our sinking fund shown as restricted cash on the balance sheet. Our 2004 refinancing included a $32.1 million
term loan that was used in support of the then ongoing contractor litigation arising out of the development of our mine. Prior to its conversion to a term loan, the quarterly principal payments due were held in a sinking fund and were accordingly
reported as restricted cash. Upon settlement of the litigation, the $27.3 million draw on the term loan was net of the release of the $1.3 million balance in the restricted cash account at September 30, 2004 and the additional payments made in
the current period prior to the release of $2.9 million. The ending balance at the time of release was $4.2 million.



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EBITDA

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

The following table reconciles EBITDA to net income and net cash provided (used in) by operating activities, the most directly
comparable GAAP financial measures, for the periods indicated (dollars in thousands):

American Rock Salt Company LLC

EBITDA Reconciliation to Net Income



|                                                            |  |                             |        |   |                            |   |         |      |  |   |                          |   |  |   |         |  
|----------------------------------------------------------- |  | --------------------------- | ------ | - | -------------------------- | - | ------- | ---- |  | - | ------------------------ | - |  | - | ------- | -
|                                                            |  | Three Months Ended June 30, |        |   | Nine Months Ended June 30, |  
|                                                            |  | 2006                        |        |   | 2005                       |   |         | 2006 |  |   | 2005                     |  
|                                                            |  |                             |        |   | As Adjusted (See Note 2)   |   |         |      |  |   | As Adjusted (See Note 2) |  
|Net Income (loss) to Members                                |  | $                           | (3,765 | ) |                            | $ | (4,034  | )    |  | $ | 16,128                   |   |  | $ | 12,507  |  
|Interest Expense                                            |  |                             | 2,622  |   |                            |   | 2,695   |      |  |   | 8,706                    |   |  |   | 8,606   |  
|Depletion, Depreciation and Amortization                    |  |                             | 1,316  |   |                            |   | 1,173   |      |  |   | 4,126                    |   |  |   | 3,763   |  
|                                                            |  |                             |        |   |                            |   |         |      |  |   |                          |   |  |   |         |  
|EBITDA                                                      |  |                             | 173    |   |                            |   | (166    | )    |  | $ | 28,960                   |   |  | $ | 24,876  |  
|                                                            |  |                             |        |   |                            |   |         |      |  |   |                          |   |  |   |         |  
|Add/Subtract                                                |  |                             |        |   |                            |   |         |      |  |   |                          |   |  |   |         |  
|Interest Expense                                            |  |                             | (2,622 | ) |                            |   | (2,695  | )    |  |   | (8,706                   | ) |  |   | (8,606  | )
|Changes in working capital and other assets and liabilities |  |                             | (3,160 | ) |                            |   | 2,162   |      |  |   | 2,984                    |   |  |   | 8,209   |  
|                                                            |  |                             |        |   |                            |   |         |      |  |   |                          |   |  |   |         |  
|Net cash provided by (used in) operating activities         |  |                             | (5,609 | ) |                            |   | (699    | )    |  | $ | 23,238                   |   |  | $ | 24,479  |  
|                                                            |  |                             |        |   |                            |   |         |      |  |   |                          |   |  |   |         |  
|Net cash used in investing activities                       |  | $                           | (365   | ) |                            | $ | (10,483 | )    |  | $ | (3,315                   | ) |  | $ | (11,634 | )
|                                                            |  |                             |        |   |                            |   |         |      |  |   |                          |   |  |   |         |  
|Net cash used in financing activities                       |  | $                           | (2,506 | ) |                            | $ | (609    | )    |  | $ | (21,569                  | ) |  | $ | (15,532 | )
|                                                            |  |                             |        |   |                            |   |         |      |  |   |                          |   |  |   |         |  



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Contractual Cash Obligations

There have been no material changes outside the ordinary course of the Companys business to the Companys contractual cash obligations as reported in its Annual Report on Form 10-K for the fiscal year ended September 30,
2005.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Companys business is subject to a variety of
market risks, including but not limited to, interest rate risks and commodity pricing risks. Although the Companys senior secured notes bear interest at a fixed rate of 9.5% per annum, borrowings under its bank facility are subject to
variable interest rates keyed to LIBOR. As of June 30, 2006 the variable rate was 5.845%. As of June 30, 2006, we had $100.0 million of debt outstanding under our senior secured notes, and $24.0 million outstanding under our bank facility.
Our bank facility, in the aggregate principal amount of $51.0 million, consists of (a) a $24.0 million term loan facility, and (b) a $27.0 million working capital facility. The working capital facility permits us to borrow up to $27.0
million in revolving loans with a sub-limit available for the issuance of letters of credit. As of June 30, 2006, there was $0.0 million drawn and $2.0 million of standby letters of credit outstanding under the working capital facility with
approximately $24.4 million of remaining availability thereunder.

Our earnings and cash flows are affected by changes in interest rates applicable to our
bank facility. Given our current debt structure and assuming an average level of borrowings from our revolving credit facility at variable rates and a one hundred basis point increase in the average interest rate under these borrowings, it is
estimated that our interest expense for the quarter ended June 30, 2006 would have increased by approximately $0.3 million.

ITEM 4. CONTROLS AND PROCEDURES

The Companys management, with the participation of its Co-Principal Executive
Officers and Principal Financial Officer, evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (the
Exchange Act)). Based on that evaluation, the Companys Co-Principal Executive Officers and its Principal Financial Officer concluded that the Companys disclosure controls and procedures as of June 30, 2006 (the end of
the period covered by this report) have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and forms.

There were no changes to the Companys
internal control over financial reporting that occurred during the three months ended June 30, 2006 that materially affected or are reasonably likely to materially affect the Companys internal control over financial reporting.



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##### Table of Contents

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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



|ITEM 1A. | RISK FACTORS
|-------- | ------------

There have been no material changes to the risk
factors that the Company disclosed in its Annual Report on Form 10-K for the fiscal year ended September 30, 2005.

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

Nothing to report.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Nothing to report.

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

Nothing to report.

ITEM 5. OTHER INFORMATION

Nothing to report.



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##### Table of Contents

ITEM 6. EXHIBITS

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



|            |  |                                                                                                                                           
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                    
|18.1        |  | Letter from Independent Registered Public Accounting Firm re Change in Accounting Principle (filed herewith)                              
|            | 
|31.1        |  | Certificate of the Co-Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)
|            | 
|31.2        |  | Certificate of the Co-Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)
|            | 
|31.3        |  | Certificate of the Co-Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)
|            | 
|31.4        |  | Certificate of the Chief Financial Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)   



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##### Table of Contents

SIGNATURES

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

October 24, 2006



AMERICAN ROCK SALT COMPANY LLCBy:

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




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##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                           
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                    
|18.1        |  | Letter from Independent Registered Public Accounting Firm re Change in Accounting Principle (filed herewith)                              
|            | 
|31.1        |  | Certificate of the Co-Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)
|            | 
|31.2        |  | Certificate of the Co-Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)
|            | 
|31.3        |  | Certificate of the Co-Chief Executive Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)
|            | 
|31.4        |  | Certificate of the Chief Financial Officer pursuant to 18 U.S.C. §1350 (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith)   



18