FORM 10-Q, 2nd Quarter 2007

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MtmtS8CFHjwx4QjsFIkR80mJ22XeHPpYH8FPSRzStl2J/mNPhRq6EcVxmkYXpnog 2AoU1oH3l3H6vRXg2WDN4A== 0000842295-07-000068.txt : 20070813 0000842295-07-000068.hdr.sgml : 20070813 20070813160851 ACCESSION NUMBER: 0000842295-07-000068 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20070630 FILED AS OF DATE: 20070813 DATE AS OF CHANGE: 20070813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOR MINERALS INTERNATIONAL INC CENTRAL INDEX KEY: 0000842295 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 742081929 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17321 FILM NUMBER: 071049139 BUSINESS ADDRESS: STREET 1: 722 BURLESON CITY: CORPUS CHRISTI STATE: TX ZIP: 78402 BUSINESS PHONE: 3618825175 MAIL ADDRESS: STREET 1: 722 BURLESON CITY: CORPUS CHRISTI STATE: TX ZIP: 78402 FORMER COMPANY: FORMER CONFORMED NAME: HITOX CORPORATION OF AMERICA DATE OF NAME CHANGE: 19920703 10-Q 1 x10q2nd2007.htm FORM 10-Q, SECOND QUARTER 2007 FORM 10-Q, 2nd Quarter 2007

United States Securities and Exchange Commission Washington, D. C. 20549 ____________________________ FORM 10-Q ____________________________
(Mark One)
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2007 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 0-17321 TOR MINERALS INTERNATIONAL, INC. (Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization)		74-2081929 (I.R.S. Employer Identification No.)
722 Burleson Street, Corpus Christi, Texas 78402 (Address of principal executive offices)
(361) 883-5591 (Issuer’s telephone number) ____________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ]		No [__]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
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 ]
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.
Class Common Stock, $0.25 par value		Shares Outstanding as of July 31, 2007 7,856,021

Table of Contents 1

	Table of Contents Part I - Financial Information
		Page No
Item 1.	Condensed Consolidated Financial Statements (Unaudited)

	Condensed Consolidated Statements of Income -- Three months and six months ended June 30, 2007 and 2006	3

	Condensed Consolidated Statements of Comprehensive Income -- Three months and six months ended June 30, 2007 and 2006	4

	Condensed Consolidated Balance Sheets -- June 30, 2007 and December 31, 2006	5

	Condensed Consolidated Statements of Cash Flows -- Six months ended June 30, 2007 and 2006	6
	Notes to the Condensed Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
	Part II - Other Information
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Submission of Matters to a Vote of Security Holders	34
Item 5.	Other Information	34
Item 6.	Exhibits	35

Signatures		35

Forward Looking Information

Certain portions of this report contain forward-looking statements about the business, financial condition and prospects of the Company. The actual results of the Company could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties including, without limitation, changes in demand for the Company’s products, changes in competition, economic conditions, fluctuations in market price for TiO₂ pigments, changes in foreign currency exchange rates, increases in the price of energy and raw materials, such as ilmenite, interest rate fluctuations, changes in the capital markets, changes in tax and other laws and governmental rules and regulations applicable to the Company’s business, and other risks indicated in the Company’s filings with the Securities and Exchange Commission. These risks and uncertainties are beyond the ability of the Company to control, and, in many cases, the Company cannot predict all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. The Company assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws. When used in this report, the words “believes,” “estimates,” “plans,” “expects,” “anticipates” and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements.

Table of Contents 2

TOR Minerals International, Inc. and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (In thousands, except per share amounts)
		Three Months Ended June 30,				Six Months Ended June 30,
		2007		2006		2007		2006
NET SALES	$	7,281	$	6,541	$	14,434	$	13,726
Cost of sales		5,906		5,002		11,657		10,632
GROSS MARGIN		1,375		1,539		2,777		3,094
Technical services and research and development		56		53		118		138
General, administrative and selling expenses		1,078		1,113		2,221		2,204
OPERATING INCOME		241		373		438		752
OTHER INCOME (EXPENSE):
Interest income		2		7		3		11
Interest expense		(180)		(135)		(339)		(257)
Gain (loss) on foreign currency exchange rate		46		(20)		51		(31)
INCOME BEFORE INCOME TAX		109		225		153		475
Income tax expense		27		88		32		138
NET INCOME	$	82	$	137	$	121	$	337
Less: Preferred Stock Dividends		15		15		30		30
Income Available to Common Shareholders	$	67	$	122	$	91	$	307

Income per common share:
Basic	$	0.01	$	0.02	$	0.01	$	0.04
Diluted	$	0.01	$	0.02	$	0.01	$	0.04
Weighted average common shares outstanding:
Basic		7,839		7,837		7,839		7,833
Diluted		7,937		7,876		7,926		7,898

See accompanying notes.

Table of Contents 3

TOR Minerals International, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Unaudited) (In thousands)


		Three Months Ended June 30,				Six Months Ended June 30,
		2007		2006		2007		2006
NET INCOME	$	82	$	137	$	121	$	337
OTHER COMPREHENSIVE INCOME, net of tax
Net gain on derivative instruments designated and qualifying as cash flow hedges, net of tax:
Net gain (loss) arising during the period		(2)		126		(2)		331
Net gain reclassified to income		(81)		(205)		(81)		(312)
Currency translation adjustment, net of tax:
Net foreign currency translation adjustment gains		141		226		472		786
Other comprehensive income, net of tax		58		147		389		805
COMPREHENSIVE INCOME	$	140	$	284	$	510	$	1,142

See accompanying notes.

Table of Contents 4

TOR Minerals International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands, except per share amounts)

		June 30, 2007 (Unaudited)		December 31, 2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	513	$	896
Trade accounts receivable, net		4,747		3,593
Inventories, net		11,008		10,949
Other current assets		761		555
Total current assets		17,029		15,993
PROPERTY, PLANT AND EQUIPMENT, net		19,986		20,034
GOODWILL		1,977		1,927
OTHER ASSETS		52		57
	$	39,044	$	38,011

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,940	$	2,036
Accrued expenses		1,643		2,062
Notes payable under lines of credit		1,210		811
Current deferred tax liability		397		401
Current maturities - Capital leases		69		65
Current maturities of long-term debt – Financial Institutions		588		580
Current maturities of long-term debt – Related Parties		-		400
Total current liabilities		5,847		6,355
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES
Capital leases		226		254
Long-term debt – Financial Institutions		3,151		2,835
Notes payable under lines of credit		4,150		3,525
DEFERRED TAX LIABILITY		246		213
Total liabilities		13,620		13,182
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Series A 6% convertible preferred stock $.01 par value: authorized, 5,000 shares; 200 shares issued and outstanding		2		2
Common stock $.25 par value: authorized, 10,000 shares; 7,839 shares issued and outstanding at 6/30/07 and 12/31/06		1,960		1,960
Additional paid-in capital		22,767		22,652
Accumulated deficit		(2,509)		(2,600)
Accumulated other comprehensive income:
Unrealized gain (loss) on derivatives		(2)		81
Cumulative translation adjustment		3,206		2,734
Total shareholders' equity		25,424		24,829
	$	39,044	$	38,011
See accompanying notes.

Table of Contents 5

TOR Minerals International, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)

		Six Months Ended June 30,
		2007		2006
*CASH FLOWS FROM OPERATING ACTIVITIES:*
Net income	$	121	$	337
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		807		713
Non-cash compensation - Stock Options		114		120
Deferred income taxes		30		133
Provision for bad debt		-		41
Changes in working capital:
Receivables		(1,112)		495
Inventories		198		(1,379)
Other current assets		(279)		(454)
Accounts payable and accrued expenses		(591)		(26)
Net cash used in operating activities		(712)		(20)
*CASH FLOWS FROM INVESTING ACTIVITIES:*
Additions to property, plant and equipment		(397)		(375)
Proceeds from sales of property, plant and equipment		-		1
Net cash used in investing activities		(397)		(374)
*CASH FLOWS FROM FINANCING ACTIVITIES:*
Net proceeds from lines of credit		1,002		668
Payments on capital lease		(33)		(29)
Proceeds from long-term bank debt		500		211
Payments on long-term bank debt		(233)		(350)
Payments on related party long-term debt		(400)		(100)
Proceeds from the issuance of common stock through exercise of common stock options		1		21
Preferred stock dividends paid		(30)		(30)
Net cash provided by financing activities		807		391
Effect of exchange rate fluctuations on cash and cash equivalents		(81)		7
Net (decrease) increase in cash and cash equivalents		(383)		4
Cash and cash equivalents at beginning of period		896		1,280
Cash and cash equivalents at end of period	$	513	$	1,284

Supplemental cash flow disclosures:
Interest paid	$	339	$	257
Taxes paid	$	18	$	10
See accompanying notes.

Table of Contents 6

TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Note 1.

Accounting Policies

Basis of Presentation and Use of Estimates

The interim financial statements of TOR Minerals International, Inc. and Subsidiaries (the "Company") are unaudited, but include all adjustments which the Company deems necessary for a fair presentation of its financial position and results of operations. All adjustments are of a normal and recurring nature. Results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. All significant accounting policies conform to those previously set forth in the Company's fiscal 2006 Annual Report on Form 10-K.

The consolidated financial statements include the accounts of TOR Minerals International, Inc. and its wholly-owned subsidiaries, TOR Minerals Malaysia, Sdn. Bhd. (TMM) and TOR Processing & Trade BV (TP&T). All significant inter-company transactions are eliminated in the consolidation process.

TMM measures and records its transactions in terms of the local Malaysian currency, the Ringgit, which is also the functional currency. TP&T’s functional currency is the Euro. Results of operations for TMM and TP&T are translated from the designated functional currency to the U.S. dollar using average exchange rates during the period, while assets and liabilities are translated at the exchange rate in effect at the reporting date. Resulting gains or losses from translating foreign currency financial statements are reported as other comprehensive income. The effect of changes in exchange rates between the designated functional currency and the currency in which a transaction is denominated are recorded as foreign currency transaction gains (losses) in earnings.

In preparing the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America, management is 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 the consolidated financial statements and revenues and expenses during the reporting period. Actual results could differ from these estimates.

Income Tax

Due to the utilization of operating loss carry-forwards, the Company recorded U.S. tax expense of $9,000 during the second quarter 2007 and foreign income tax expense of $18,000 compared to U.S. tax expense of $2,000 and foreign income tax expense of $86,000, respectively, for the second quarter 2006. For the six month period ended June 30, 2007, the Company recorded U.S. tax expense of $18,000 and foreign income tax expense of $14,000 compared to $10,000 and $128,000 for the same period 2006, respectively. Taxes are applied based on an estimated annualized consolidated effective rate of 21%, which assumes continued ability to offset U.S. federal income taxes through the utilization of net operating loss carry-forwards.

In May 2006, the State of Texas enacted a new business tax that is imposed on gross revenues to replace the State’s current franchise tax regime. The new legislation’s effective date is January 1, 2008, which means that our first Texas margins tax (“TMT”) return will not become due until May 15, 2008 and will be based on our 2007 operations. Although the TMT is imposed on an entity’s gross revenues rather than on its net income, certain aspects of the tax make it similar to an income tax. In accordance with the guidance provided in SFAS No. 109, we have properly determined the impact of the newly-enacted legislation in the determination of our reported state current and deferred income tax liability.

Table of Contents 7

TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Accounting for Uncertainty in Income Taxes

We adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (“FIN 48”), effective January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. It prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

In accordance with the requirements of FIN 48, we evaluated all tax years still subject to potential audit under the applicable state, federal and foreign income tax laws. As of January 1, 2007, the Company did not have any unrecognized tax benefits and there was no change during the six month period ended June 30, 2007.

We did not recognize any interest and penalties in our consolidated financial statements as a result of the adoption of FIN 48. If any interest or penalties related to any income tax liabilities are imposed in future reporting periods, we expect to record both of these items as components of income tax expense.

We are subject to taxation in the United States, Malaysia and The Netherlands. Our federal income tax returns in the United States are subject to examination for the tax years ended December 31, 2003 through December 31, 2006. Our state returns, which are filed in Texas and Michigan, are subject to examination for the tax years ended December 2002 through December 31, 2006. Our tax returns in various non-US jurisdictions are subject to examination for various tax years ending December 31, 2000 through December 31, 2006.

Recent Accounting Pronouncements

In September 2006, FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and for interim periods within those years. We do not believe the adoption of SFAS 157 will have a material impact on our consolidated financial position or results of operations.

On February 15, 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. This option is available to all entities, including not-for-profit organizations. Most of the provisions in Statement 159 are elective; however, the amendment to FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. Some requirements apply differently to entities that do not report net income. The FASB's stated objective in issuing this standard is as follows: "to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions."

The fair value option established by Statement 159 permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. A not-for-profit organization will report unrealized gains and losses in its statement of activities or similar statement. The fair value option: (a) may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments.

Table of Contents 8

TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Statement 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year. However, in order for a company to early adopt Statement 159, it must also early adopt all of the provisions of FASB Statement No. 157, Fair Value Measurements. We do not believe the adoption of SFAS 159 will have a material impact on our consolidated financial position, cash flows or results of operations.

Note 2.

Related Party Transactions

The Company entered into a loan and security agreement on December 12, 2003, with the Company’s Chairman of the Board, Bernard Paulson, a 15.9% shareholder, through Paulson Ranch, Ltd. Under the Agreement, Paulson Ranch made a loan to us in the amount $500,000 with a variable interest rate of 4% per annum above the “Wall Street Journal Prime Rate”. The loan proceeds were used for working capital. The Company paid the outstanding principal balance of $400,000 and accrued interest to Paulson Ranch, Ltd., on March 15, 2007.

Note 3.

Long-Term Debt and Notes Payable

A summary of long-term debt and notes payable follows:

(In thousands)		June 30, 2007		December 31, 2006
Note payable to Paulson Ranch, a related party, paid off on March 15, 2007.	$	-	$	400
Fixed rate term note payable to a U.S. bank, paid off on May 1, 2007.		-		100
Term note payable to a U.S. bank, with an interest rate of 8.25% at June 30, 2007, due November 30, 2010.		796		870
Term note payable to a U.S. bank, with an interest rate of 8.25% at June 30, 2007, due May 1, 2012.		492		-
Fixed rate term Euro note payable to a Netherlands bank, with an interest rate of 5.5% at June 30, 2007, due June 1, 2009. (270 Euro)		366		446
Fixed rate term Euro note payable to a Netherlands bank, with an interest rate of 5.2% at June 30, 2007, due July 1, 2029. (430 Euro)		583		580
Fixed rate term Euro note payable to a Netherlands bank, with an interest rate of 4.7% at June 30, 2007, due January 31, 2030. (426 Euro)		577		575
Fixed rate term Euro note payable to a Netherlands bank, with an interest rate of 6.1% at June 30, 2007, due July 31, 2015. (408 Euro)		553		572
U.S. Dollar term note payable to a Malaysian bank, with an interest rate of 6.5% at June 30, 2007, due June 30, 2010.		372		272
Revolving line of credit, payable to a U.S. bank, with an interest rate of bank prime, 8.25% at June 30, 2007, due October 1, 2008.		4,150		3,525
Total		7,889		7,340
Less current maturities		588		980
Total long-term debt and notes payable	$	7,301	$	6,360

The majority of the Company's debt is either floating rate or has been recently negotiated and the carrying values approximate fair value.

Table of Contents 9

TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

U.S. Bank Credit Facility and Term Loans

We amended and restated our previous loan agreement with Bank of America, N.A. (the “Bank”) on November 29, 2006. Under the amendment, the Bank extended the maturity date on our Line of Credit (the “Line”) from October 1, 2007 to October 1, 2008. The Line, which provides us with a $5,000,000 revolving line of credit subject to a defined borrowing base, is secured by our U.S. property, plant and equipment, as well as inventory and accounts receivable. The Bank has also agreed to issue standby letters of credit for our account up to the amount available under the Line. At June 30, 2007, the outstanding balance on the Line was $4,150,000 and we had $666,000 available on that date based on eligible accounts receivable and inventory borrowing limitations.

On February 28, 2007, we amended our current loan agreement with the Bank. Under the terms of the amendment, the Bank revised the basis for determining the “Borrowing Base” and “Eligible Inventory” to the following: “Borrowing Base” means the sum of 80% of Borrower’s Eligible Accounts Receivable plus the lesser of (x) 50% of Borrower’s Eligible Inventory or (y) $3,500,000. “Eligible Inventory” for purposes of determining the borrowing base under the Company’s line of credit with the Bank was amended. The effect of the amendment expands the definition of Eligible Inventory to now permit Synthetic Rutile to be included in the borrowing base for ascertaining the amount of permitted borrowings by the Company, provided that it has been purchased by the Company and is in transit from TOR Minerals Malaysia, a wholly-owned subsidiary of the Company, to the Company’s U.S. facility at Corpus Christi, Texas, is fully insured on terms acceptable to the lender and is evidenced by bills of lading and other documents acceptable to the Bank. The value of all Qualified Synthetic Rutile shall not exceed $3,000,000 for purposes of this calculation.

Our existing fixed rate term loan with the Bank, which had an outstanding principal balance of $100,000 at December 31, 2006, was paid off on May 1, 2007.

On December 13, 2005, we entered into a real estate term loan (the “Loan”) with the Bank in the amount of $1,029,000. The Loan is secured by our U.S. real estate and leasehold improvements. Interest, which is a rate equal to the Bank’s Prime Rate (currently 8.25%), is due and payable monthly. The monthly principal and interest payments commenced on December 30, 2005, and will continue through November 30, 2010 at which time the “final payment” of $294,000 is due. The monthly principal payment is $12,250. The Loan balance at June 30, 2007, was $796,000.

On May 7, 2007, we amended our current loan agreement with the Bank. Under the terms of the fourth amendment, we entered into a term loan (the “Term Loan”) with the bank in the amount of $500,000 which is secured by our U.S. property, plant and equipment, as well as inventory and accounts receivable. Interest, which is a rate equal to the Bank’s Prime Rate (currently 8.25%), is due and payable monthly. The monthly principal and interest payments commenced on June 1, 2007, and will continue through May 1, 2012. The monthly principal payment is $8,333.33. The Term Loan balance at June 30, 2007, was $492,000.

In addition, the fourth amendment changed the existing covenant requiring the Company to maintain a positive net income after tax on a rolling four quarter basis to the following: “Beginning January 1, 2007, Borrower agrees that it will maintain a positive net income after taxes, on a consolidated basis, including foreign subsidiaries and properties and excluding only events resulting from required changes in GAAP accounting treatment of intangibles or similar events beyond the control of the Borrower, when determined for the following periods: (i) the three-month period ending March 31, 2007; (ii) the six-month period ending June 30, 2007; (iii) the nine-month period ending September 30, 2007, and (iv) the twelve-month period ending December 31, 2007, and as of each March 31, June 30, September 30, and December 31, thereafter, for the preceding twelve-month period ended on such date.” The effect of this amendment is to exclude the impact of the loss experienced by the Company in the fourth quarter of 2006 from the determination of the positive net income.

Table of Contents 10

TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

The Agreement contains covenants that, among other things, require the maintenance of financial ratios based on our consolidated results of operations. The Agreement also requires us to notify the Bank upon the occurrence of a “material adverse event”, which among other items, is considered to be an event that may adversely affect our consolidated financial condition, business, properties, operations, the Bank’s collateral or the Bank’s ability to enforce its rights under the Agreement.

As noted above, the Agreement contains covenants that, among other things, require maintenance of certain financial ratios based on the results of the consolidated operations. The covenants, which are calculated at the end of each quarter, are as follows:

Debt to Net Worth Ratio – Required to be less than or equal to 2.0 to 1.0. At June 30, 2007, the Company’s Debt to Net Worth Ratio was 0.4 to 1.0.
Current Ratio – Required to be at least 1.1 to 1.0. At June 30, 2007, the Company’s Current Ratio was 2.9 to 1.0.
Fixed Charge Coverage Ratio – Required to be at least 1.25 to 1.0. For the four quarters ended June 30, 2007, the Company’s Fixed Charge Coverage Ratio was 1.6 to 1.0.
Maintain a consolidated after tax profit for the six-month period ending June 30, 2007.

As of and for the four quarters ended June 30, 2007, we were in compliance with all financial ratios contained in the Agreement and expect to be in compliance for a period of twelve-months beyond June 30, 2007.

Netherlands Bank Credit Facility, Mortgage and Term Loan

On March 20, 2007, our subsidiary, TP&T, entered into a new short-term credit facility (“Credit Facility”) with Rabobank which replaced the existing Euro 650,000 short-term credit facility (dated April 2, 2004). Under the terms of the Credit Facility, TP&T’s line of credit increased from Euro 650,000 ($880,000) to Euro 1,100,000 ($1,489,000). The Credit Facility, which has a variable interest rate of Bank prime plus 2.8% (7.55% at June 30, 2007), will mature on December 31, 2009 and is secured by TP&T’s accounts receivable and inventory. At June 30, 2007, TP&T had utilized Euro 894,000 ($1,210,000) of its short-term credit facility.

On April 2, 2004, TP&T entered into a term loan with Rabobank in the amount of Euro 676,000. The proceeds of the term loan were used to reduce TP&T’s credit facility and reduce inter-company payables to the U.S. Operation. The term loan, which is secured by TP&T’s assets, will be repaid over a period of five years with a fixed interest rate until maturity of 5.5%. Monthly principal and interest payments commenced on July 1, 2004, and will continue through June 1, 2009. The monthly principal payment is Euro 11,266 ($15,255). The loan balance at June 30, 2007, was Euro 270,000 ($366,000). Under the terms of the Loan Agreement, the Company has guaranteed the term loan.

On July 7, 2004, TP&T entered into a mortgage loan (the “First Mortgage”) with Rabobank. The First Mortgage, in the amount of Euro 485,000, will be repaid over 25 years with interest fixed at 5.2% per year for the first four years. Thereafter, the rate will change to Rabobank prime plus 1.75%. TP&T utilized Euro 325,000 of the loan to finance the July 14, 2004, purchase of land and an office building, as well as to remodel the office building. The balance of the loan proceeds, Euro 160,000, was used for the expansion of TP&T’s existing building. Monthly principal and interest payments commenced on September 1, 2004, and will continue through July 1, 2029. The monthly principal payment is Euro 1,616 ($2,188). The loan balance at June 30, 2007 was Euro 430,000 ($583,000). The mortgage loan is secured by the land and office building purchased on July 7, 2004.

Table of Contents 11

TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

On January 3, 2005, TP&T entered into a second mortgage loan (the “Second Mortgage”) with Rabobank to fund the acquisition of a 10,000 square foot warehouse with a loading dock that is located adjacent to TP&T’s existing production facility. The Second Mortgage, in the amount of Euro 470,000, will be repaid over 25 years with interest fixed at 4.7% per year for the first five years. Thereafter, the rate will change to Rabobank prime plus 1.75%. Monthly principal and interest payments commenced on February 28, 2005 and will continue through January 31, 2030. The monthly principal payment is Euro 1,566 ($2,120). The mortgage is secured by the land and building purchased by TP&T on January 3, 2005. The loan balance at June 30, 2007 was Euro 426,000 ($577,000).

On July 19, 2005, TP&T entered into a new term loan with Rabobank to fund the completion of its building expansion. The loan, in the amount of Euro 500,000, will be repaid over 10 years with interest fixed at 6.1% per year for the first five years. Thereafter, the rate will change to Rabobank prime plus 1.75%. Monthly principal and interest payments commenced on August 31, 2005 and will continue through July 31, 2015. The monthly principal payment is Euro 4,167 ($5,642). The loan is secured by TP&T’s assets. The loan balance at June 30, 2007 was Euro 408,000 ($553,000).

TP&T’s loan agreements covering both the credit facility and the term loans include subjective acceleration clauses that allow Rabobank to accelerate payment if, in the judgment of the bank, there are adverse changes in our business. We believe that such subjective acceleration clauses are customary in the Netherlands for such borrowings. However, if demand is made by Rabobank, we may require additional debt or equity financing to meet our working capital and operational requirements, or if required, to refinance the demanded indebtedness.

Malaysian Bank Credit Facility and Term Loan

On September 14, 2005, the Company’s subsidiary, TMM, amended its banking facility with HSBC Bank Malaysia Berhad (“HSBC”). The amendment increased the Bankers Acceptance from RM 500,000 ($145,000) to RM 3,780,000 ($1,096,000) and added a U.S. Dollar term loan (“USD Loan”) in the amount of $1,000,000 (or RM 3,780,000 Malaysian Ringgits, which ever is less). Funding on the USD Loan will represent 74% of the invoice amount that TMM utilizes in the upgrading of their plant and machinery. If the amount funded is less than $1,000,000 on October 31, 2007 the loan amount will be adjusted to what has been funded.

At June 30, 2007, TMM had drawn down $372,000 on the USD Loan. Monthly interest payments began in December 2005 based on an annual interest rate of 6.5%. Monthly principal payments are scheduled to begin on August 26, 2007 and will continue through June 30, 2010.

TMM renewed its banking facility with HSBC on October 30, 2006, for the purpose of extending the maturity date of the current facility from October 31, 2006, to October 31, 2007. The HSBC facility provides for an overdraft line of credit up to RM 500,000 ($145,000), a bank guarantee of RM 300,000 ($87,000) and an ECR up to RM 8,000,000 ($2,321,000). The ECR, a government supported financing arrangement specifically for exporters, is used by TMM for short-term financing of up to 180 days against customers’ and inter-company shipments.

On October 30, 2006, TMM renewed its banking facility with RHB Bank Berhad (“RHB”) for the purpose of extending the maturity date of the current facilities from October 31, 2006, to October 31, 2007. The RHB facility provides for an overdraft line of credit up to RM 1,000,000 ($290,000) and an ECR up to RM 9,300,000 ($2,698,000). The RHB facility was also amended to include the following:

Table of Contents 12

TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Incorporate a Revolving Credit facility as part of the existing Overdraft facility of RM 1,000,000 ($290,000) (i.e. an interchangeable Overdraft/Revolving Credit facility) with a combined limit of RM 1.0 million to be used for working capital purposes.
Increase the Foreign Exchange Contract Line facility by an additional RM 10 million from RM 15 million to RM 25 million ($4,351,000 to $7,252,000) to be used for hedging purposes against TMM’s sales based in currencies other than the Malaysian Ringgit (RM).
Increase the maximum length of financing for the Multi-Trade Line facility (ECR), which is used by TMM for short-term financing against customers’ and inter-company shipments, from the existing 150 days up to 180 days.

The banking facilities with both HSBC and RHB bear an interest rate on the overdraft facilities at 1.25% over bank prime and the ECR facilities bear interest at 1.0% above the funding rate stipulated by the Export-Import Bank of Malaysia Berhad. At June 30, 2007, TMM was not utilizing their overdraft or their ECR facilities.

The borrowings under both the HSBC and the RHB short term credit facilities are subject to certain subjective acceleration covenants based on the judgment of the banks and a demand provision that provide that the banks may demand repayment at any time. We believe such a demand provision is customary in Malaysia for such facilities. The loan agreements are secured by TMM’s property, plant and equipment. The credit facilities prohibit TMM from paying dividends and the HSBC facility further prohibits loans to related parties without the prior consent of HSBC.

Liquidity

The terms of the Company’s borrowings contain restrictions and covenants, including covenants based on the performance of the Company, and the failure of the Company to comply with such restrictions and covenants could also adversely affect the Company’s financial position.

Management believes that it has adequate liquidity for the next 12 months and expects to maintain compliance with all financial covenants throughout the next 12 months.

Table of Contents 13

TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Note 4.

Capital Lease

On June 27, 2005, TP&T entered into a financial lease agreement with De Lage Landen Financial Services, BV for equipment related to the production of ALUPREM. The cost of the equipment under the capital lease is included in the balance sheets as property, plant and equipment and was $381,181. Accumulated amortization of the leased equipment at June 30, 2007 was Euro 62,735 ($85,000). Amortization of assets under capital leases is included in depreciation expense. The capital lease is in the amount of Euro 377,351 including interest of Euro 62,113 (implicit interest rate 6.3%) and Euro 238 in executory costs. The lease term is 72 months with equal monthly installments of Euro 5,241 ($7,100). The net present value of the lease at June 30, 2007 was Euro 218,000 ($295,000).

The following table sets forth the minimum future lease payments under this lease as of June 30, 2007:

Year Ending December 31,		Amount
2007	$	43
2008		85
2009		85
2010		85
2011		35
Total minimum lease payments		333
Less: Amount representing executory costs		-
Net minimum lease payments		333
Less: Amount representing interest		(38)
Present value of net minimum lease payments		295
Less: Current maturities of capital lease obligations		(69)
Long-term capital lease obligations	$	226


Note 5.	Series A Convertible Preferred Stock Dividend

On June 7, 2007, the Company declared a dividend, in the amount of $15,000, or $0.075 per share, for the quarterly period ended June 30, 2007, payable on July 1, 2007, to the holders of record of the Series A Convertible Preferred Stock as of the close of business on June 7, 2007.

Table of Contents 14

TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Note 6.

Calculation of Basic and Diluted Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share:

(in thousands, except per share amounts)		Three Months Ended June 30,				Six Months Ended June 30,
		2007		2006		2007		2006
Numerator:
Net Income	$	82	$	137	$	121	$	337
Preferred Stock Dividends		(15)		(15)		(30)		(30)
Numerator for diluted earnings per share - income available to common shareholders after assumed conversions	$	67	$	122	$	91	$	307
Denominator:
Denominator for basic earnings per share - weighted-average shares		7,839		7,837		7,839		7,833
Effect of dilutive securities:
Employee stock options		98		39		87		65
Dilutive potential common shares		98		39		87		65
Denominator for diluted earnings per share - weighted-average shares and assumed conversions		7,937		7,876		7,926		7,898
*Basic earnings per common share*	$	0.01	$	0.02	$	0.01	$	0.04
*Diluted earnings per common share*	$	0.01	$	0.02	$	0.01	$	0.04

Excluded from the calculation of diluted earnings per share were a total of 168,000 common shares related to the 200,000 convertible preferred shares at June 30, 2007 and 2006. The convertible preferred shares were not included in the computation of diluted earnings per share as the effect would be antidilutive.

Employee stock options excluded from diluted earnings per share for the three month periods ended June 30, 2007 and 2006 were 319,500 and 256,300, respectively. For the six month periods ended June 30, 2007 and 2006, options excluded from diluted earnings per share were 252,000 and 256,300, respectively. These options were excluded from the computation of diluted earnings per share during these periods because the exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive.

Table of Contents 15

TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Note 7.

Segment Information

The Company and its subsidiaries operate in the business of pigment manufacturing and related products in three geographic segments. All United States manufacturing is done at the facility located in Corpus Christi, Texas. Foreign manufacturing is done by the Company’s wholly-owned subsidiaries, TMM, located in Malaysia and TP&T, located in the Netherlands. A summary of the Company’s manufacturing operations by geographic area is presented below:

(In thousands)		United States (Corpus Christi)		Europe (TP&T)		Asia (TMM)		Inter-Company Eliminations		Consolidated
As of and for the three months ended:
*June 30, 2007*
Net Sales:
Customer sales	$	4,923	$	1,621	$	737	$	-	$	7,281
Intercompany sales		-		567		1,678		(2,245)		-
Total Net Sales	$	4,923	$	2,188	$	2,415	$	(2,245)	$	7,281

Location profit (loss)	$	(57)	$	144	$	(37)	$	32	$	82

*June 30, 2006*
Net Sales:
Customer sales	$	4,627	$	1,097	$	817	$	-	$	6,541
Intercompany sales		-		255		1,314		(1,569)		-
Total Net Sales	$	4,627	$	1,352	$	2,131	$	(1,569)	$	6,541

Location profit (loss)	$	180	$	(297)	$	208	$	46	$	137
As of and for the six months ended:
*June 30, 2007*
Net Sales:
Customer sales	$	9,801	$	3,051	$	1,582	$	-	$	14,434
Intercompany sales		-		1,408		3,710		(5,118)		-
Total Net Sales	$	9,801	$	4,459	$	5,292	$	(5,118)	$	14,434

Location profit (loss)	$	(72)	$	207	$	(108)	$	94	$	121
Location assets	$	14,539	$	11,088	$	13,417	$	-	$	39,044

*June 30, 2006*
Net Sales:
Customer sales	$	10,081	$	2,246	$	1,399	$	-	$	13,726
Intercompany sales		-		1,032		3,400		(4,432)		-
Total Net Sales	$	10,081	$	3,278	$	4,799	$	(4,432)	$	13,726

Location profit (loss)	$	212	$	(208)	$	365	$	(32)	$	337
Location assets	$	11,745	$	10,014	$	14,394	$	-	$	36,153

Table of Contents 16

TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Product sales of inventory between Corpus Christi, TP&T and TMM are based on inter-company pricing, which includes an inter-company profit margin. In the geographic information, the location profit (loss) from all locations is reflective of these inter-company prices, as is inventory at the Corpus Christi location prior to elimination adjustments. Such presentation is consistent with the internal reporting reviewed by the Company’s chief operating decision maker. The elimination entries include an adjustment to the cost of sales resulting from the adjustment to ending inventory to eliminate inter-company profit, and the reversal of a similar adjustment from a prior period. To the extent there are net increases/declines period over period in Corpus Christi inventories that include an inter-company component, the net effect of these adjustments can decrease/increase location profit.

Sales from the subsidiary to the parent company are based upon profit margins which represent competitive pricing of similar products. Intercompany sales consisted of SR, HITOX and ALUPREM.

Note 8.

Stock Options and Equity Compensation Plan

The following table provides information as of June 30, 2007, about the Company’s common stock that may be issued upon the exercise of options, warrants and rights under all of the Company’s existing equity compensation plans (including individual arrangements):

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	948,600	$2.632	69,400
Equity compensation plans not approved by security holders	--		--
Total	948,600	$2.632	69,400

The Company's 1990 Incentive Stock Option Plan (“ISO”) for TOR Minerals International, Inc. (the "1990 Plan") provided for the award of a variety of incentive compensation arrangements to such employees and directors as may be determined by a Committee of the Board. The ability to issue new options under the 1990 Plan expired in February of 2000, with options to acquire 372,200 shares of common stock still outstanding. At June 30, 2007, the 1990 Plan had 84,700 options outstanding.

On February 21, 2000, the Company's Board of Directors approved the adoption of the 2000 Incentive Stock Option Plan for TOR Minerals International, Inc. (the "Plan"). The Plan provides for the award of a variety of incentive compensation arrangements to such employees and directors as may be determined by a Committee of the Board. The maximum number of shares of the Company's common stock initially authorized to be sold or issued under the Plan was 750,000. At the Annual Shareholders’ meeting on May 14, 2004, the maximum number of shares of the Company’s common stock that may be sold or issued under the Plan was increased 300,000 shares from 750,000 shares to 1,050,000 shares subject to certain adjustments upon recapitalization, stock splits and combinations, merger, stock dividend and similar events. At June 30, 2007, the Plan had 863,900 options outstanding, 116,700 exercised and 69,400 available for future issuance.

Both the 1990 Plan and the 2000 Plan provide for the award of a variety of incentive compensation arrangements, including restricted stock awards, performance units or other non-option awards.

Table of Contents 17

TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

For the three month periods ended June 30, 2007 and 2006, the Company recorded $84,000 and $90,000, respectively, in stock-based employee compensation and for the six month periods ended June 30, 2007 and 2006, $114,000 and $120,000, respectively. This compensation cost is included in the general and administrative expenses and inventory/cost of sales in the accompanying consolidated income statements.

The Company granted 167,500 and 20,200 options during the six month periods ended June 30, 2007 and 2006, respectively. The weighted average fair value per option at the date of grant for options granted in the six month periods ended June 30, 2007 and 2006 was $2.01 and $1.62, respectively, as valued using the Black-Scholes option-pricing model with the following weighted average assumptions:

	Six Months Ended June 30,
	2007	2006
Risk-free interest rate	4.71%	4.95%
Expected dividend yield	0.00%	0.00%
Expected volatility	0.74	0.74
Expected term (in years)	7.00	6.60

The risk free interest rate is based on the Treasury Constant Maturity Rate as quoted by the Federal Reserve at the time of the grant for a term equivalent to the expected term of the grant. The estimated volatility is based on the historical volatility of our stock and other factors. The expected term of options represents the period of time the options are expected to be outstanding from grant date.

The number of options exercisable at June 30, 2007 and 2006 was 707,340 and 677,870, respectively. The weighted-average remaining contractual life of those options is 6.5 years. Exercise prices on options outstanding at June 30, 2007 and 2006, ranged from $0.92 to $6.11 per share as noted in the following table.

Options Outstanding at June 30,
2007	2006	Range of Exercise Prices
92,100	95,150	$ 0.92 - $ 1.99
713,200	512,900	$ 2.00 - $ 2.99
600	600	$ 3.00 - $ 3.99
95,500	95,500	$ 4.00 - $ 4.99
20,200	120,800	$ 5.00 - $ 5.99
27,000	27,000	$ 6.00 - $ 6.11
948,600	851,950

As of June 30, 2007, there was $482,000 of option compensation expense related to non-vested awards which is expected to be recognized over a weighted average period of 3.6 years.

As all options issued under the Plan are Incentive Stock Options, the Company does not receive any excess tax benefits relating to the compensation expense recognized on vested options.

Table of Contents 18

TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Note 9.

Inventories

(In thousands)		June 30, 2007		December 31, 2006
Raw materials	$	6,326	$	6,404
Work in progress		763		703
Finished goods		3,361		3,259
Supplies		586		583
Total Inventories		11,036		10,949
Inventory reserve		(28)		-
Net Inventories	$	11,008	$	10,949


10.	Derivatives and Hedging Activities

Natural Gas Contract

To protect against the increase in the cost of natural gas used in the manufacturing process, the Company has instituted a natural gas hedging program. The Company hedges portions of its forecasted natural gas purchases with forward contracts. When the price of natural gas increases, its cost is offset by the gains in the value of the forward contracts designated as hedges. Conversely, when the price of natural gas declines, the decrease in the cash flows on natural gas purchases is offset by losses in the value of the forward contract.

At June 30, 2007 and 2006, there were no natural gas hedge contracts outstanding.

Foreign Currency Forward Contracts

The purpose of the Company’s foreign currency hedging activities is to protect the Company from the risk that the eventual cash flows resulting from transactions in foreign currencies, including sales and purchases transacted in a currency other than the functional currency, will be adversely affected by changes in exchange rates. The Company has not entered into these contracts for trading or speculative purposes in the past, nor do we currently anticipate entering into such contracts for trading or speculative purposes in the future. Derivatives used to hedge forecasted transactions and specific cash flows associated with foreign currency denominated financial assets and liabilities which meet the criteria for hedge accounting are designated as cash flow hedges. Consequently, the effective portion of gains and losses is deferred as a component of accumulated other comprehensive income and is recognized in earnings at the time the hedged item affects earnings. The Company measures hedge effectiveness by formally assessing, at least quarterly, the historical and probable future high correlation of changes in the fair value or expected future cash flows of the hedged item. The ineffective portions, if any, are recorded in current earnings in the current period. If the hedging relationship ceases to be highly effective or if it becomes probable that an expected transaction will no longer occur, gains or losses on the derivative are recorded in current earnings. If no hedging relationship is designated, the derivative is marked to market through current earnings. For the three and six month periods ended June 30, 2007, we marked the contracts to market, recording a net loss of approximately $2,000 as a component of "Other Comprehensive Income" and as a current liability on the balance sheet at June 30, 2007. The recognition of this net loss had no effect on our cash flow.

Table of Contents 19

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a global specialty chemical company engaged in the business of manufacturing and marketing mineral products for use as pigments, pigment extenders and flame retardants used in the manufacture of paints, industrial coatings, plastics, catalysts and solid surface applications. We have operations in the U.S., Asia and Europe.

Our U.S. Operation, located in Corpus Christi, Texas, manufactures HITOX, BARTEX, and HALTEX. The facility is also the Global Headquarters for the Company. The Asian Operation, located in Ipoh, Malaysia, manufactures SR and HITOX and our European Operation, located in Hattem, Netherlands, manufactures Alumina based products.

Operating expenses in the foreign locations are primarily in local currencies. Accordingly, we have exposure to fluctuation in foreign currency exchange rates. These fluctuations impact the translation of sales, earnings, assets and liabilities from local currency to the U.S. Dollar.

Our business is closely correlated with the construction industry and its demand for materials that use pigments, such as paints and plastics. This has generally led to higher sales in our second and third quarters due to increases in construction and maintenance during warmer weather. Also, pigment consumption is closely correlated with general economic conditions. When the economy is in an expansionary state, there is typically an increase in pigment consumption while a slow down typically results in decreased pigment consumption. When the construction industry or the economy is in a period of decline, TOR's sales and profit are likely to be adversely affected.

Following are our results for the three month and six month periods ended June 30, 2007 and 2006.

(In thousands, except per share amounts)		Three Months Ended June 30,				Six Months Ended June 30,
		2007		2006		2007		2006
NET SALES	$	7,281	$	6,541	$	14,434	$	13,726
Cost of sales		5,906		5,002		11,657		10,632
GROSS MARGIN		1,375		1,539		2,777		3,094
Technical services and research and development		56		53		118		138
General, administrative and selling expenses		1,078		1,113		2,221		2,204
OPERATING INCOME		241		373		438		752
OTHER INCOME (EXPENSE):
Interest income		2		7		3		11
Interest expense		(180)		(135)		(339)		(257)
Gain (loss) on foreign currency exchange rate		46		(20)		51		(31)
INCOME BEFORE INCOME TAX		109		225		153		475
Income tax expense		27		88		32		138
NET INCOME	$	82	$	137	$	121	$	337

Income per diluted common share:	$	0.01	$	0.02		0.01		0.04

Table of Contents 20

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Going forward, we see 2007 as a building year at TOR, we are focusing on sales growth in global markets, manufacturing efficiencies and new product development for 2008 and beyond.

We believe our geographic diversity is an advantage to selling in the global markets. While we see relatively flat sales in the U.S. throughout 2007, we believe our sales growth in Europe and Asia will reach approximately 30% this year. In addition, we believe that:

HITOX markets in Europe and Asia will continue to grow at above average market growth;
HITOX sales in the U.S. will be flat due to the U.S. market slow-down;
ALUPREM sales worldwide will continue to grow at above average market growth; and
Net sales for the year 2007 will be approximately $29 million to $30 million.

We are making improvements to our SR production process to increase yields and help offset increasing raw material and energy costs in our Asian operation. The improvements are expected to be operational in early 2008. However, given the recent increase in fuel oil costs, combined with sufficient inventory levels, we are considering the temporary idling of synthetic rutile production. As a result, we may incur lower fixed cost absorption at our Malaysian facility, which will reduce earnings for 2007. Due to this fact, we are withdrawing the previous earnings guidance for the year ending December 31, 2007.

Actual results could differ materially from those indicated by these forward looking statements because of various risks and uncertainties. See the information under the caption “Forward Looking Information” appearing below the Table of Contents of this report.

Table of Contents 21

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Net Sales: Consolidated net sales for the quarter ended June 30, 2007 increased approximately $740,000 compared to the second quarter 2006 primarily due to an increase in volume of our ALUPREM sales in the U.S. and Europe, offset by a decrease in sales volume of HITOX in both the U.S. and Asia.

Following is a summary of our consolidated products sales for the three month periods ended June 30, 2007 and 2006 (in thousands):

		Three Months Ended June 30,
Product		2007			2006			Variance
HITOX	$	3,686	51%	$	4,018	61%	$	(332)	-8%
ALUPREM		2,455	34%		1,471	23%		984	67%
BARTEX		847	12%		729	11%		118	16%
HALTEX		161	2%		212	3%		(51)	-24%
SR		12	0%		9	0%		3	33%
OTHER		120	1%		102	2%		18	18%
Total	$	7,281	100%	$	6,541	100%	$	740	11%

HITOX –HITOX sales declined due to a decrease in volume primarily related to a decline in the U.S. housing market.
ALUPREM – Worldwide ALUPREM sales increased primarily due to an increase in volume in both the U.S. and Europe.
BARTEX and HALTEX – BARTEX sales increased modestly and HALTEX sales decreased primarily due to the slow down in the U.S. economy.
Other Products –SYNFLUX and OSO decreased in the U.S., while the ZIRCON sales increased in Asia.

Following is a summary of our consolidated products sales for the six month periods ended June 30, 2007 and 2006 (in thousands):

		Six Months Ended June 30,
Product		2007			2006			Variance
HITOX	$	7,637	53%	$	7,629	55%	$	8	0%
ALUPREM		4,524	31%		3,839	28%		685	18%
BARTEX		1,608	11%		1,493	11%		115	8%
HALTEX		397	3%		491	4%		(94)	-19%
SR		12	0%		9	0%		3	33%
OTHER		256	2%		265	2%		(9)	-3%
Total	$	14,434	100%	$	13,726	100%	$	708	5%

HITOX –HITOX sales remained flat primarily due to the decline in the U.S. housing market.
ALUPREM – Worldwide ALUPREM sales increased primarily due to an increase in volume in both the U.S. and Europe.
BARTEX and HALTEX – BARTEX sales increased modestly and HALTEX sales decreased primarily due to the slow down in the U.S. economy.
Other Products – SYNFLUX and OSO decreased in the U.S. and ZIRCON sales increased in Asia.

Table of Contents 22

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

U.S. Operation

Following is a summary of net sales for our U.S. operation for the three month periods ended June 30, 2007 and 2006 (in thousands):

		Three Months Ended June 30,
Product		2007			2006			Variance
HITOX	$	2,664	54%	$	2,918	63%	$	(254)	-9%
ALUPREM		1,164	24%		666	14%		498	75%
BARTEX		847	17%		729	16%		118	16%
HALTEX		161	3%		212	5%		(51)	-24%
OTHER		87	2%		102	2%		(15)	-15%
Total	$	4,923	100%	$	4,627	100%	$	296	6%

HITOX – Sales declined in the U.S. due primarily to the decline in the U.S. housing market.
ALUPREM – Increase in U.S. ALUPREM sales due to an increase in volume.

Following is a summary of net sales for our U.S. operation for the six month periods ended June 30, 2007 and 2006 (in thousands):

		Six Months Ended June 30,
Product		2007			2006			Variance
HITOX	$	5,475	56%	$	5,668	56%	$	(193)	-3%
ALUPREM		2,135	22%		2,167	21%		(32)	-1%
BARTEX		1,608	16%		1,493	15%		115	8%
HALTEX		397	4%		491	5%		(94)	-19%
OTHER		186	2%		262	3%		(76)	-29%
Total	$	9,801	100%	$	10,081	100%	$	(280)	-3%

HITOX – Sales declined in the U.S. due primarily to a decrease in volume related to the decline in the U.S. housing market.
ALUPREM – Decrease in U.S. ALUPREM sales due to a decrease in price, offset by an increase in volume.

Table of Contents 23

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Netherlands Operation

Our subsidiary in the Netherlands, TP&T, manufactures and sells ALUPREM to third party customers, as well as to our U.S. operation for distribution to our U.S. customers. In addition, TP&T purchases HITOX from TMM for distribution in Europe. Our increased sales efforts in Europe have resulted in an increase in our customer base, as well as our sales volume. The following table represents TP&T’s ALUPREM and HITOX sales (in thousands) for the three month periods ended June 30, 2007 and 2006 to third party customers. All inter-company sales have been eliminated.

		Three Months Ended June 30,
Product		2007			2006			Variance
ALUPREM	$	1,291	80%	$	805	73%	$	486	60%
HITOX		330	20%		292	27%		38	13%
Total	$	1,621	100%	$	1,097	100%	$	524	48%

ALUPREM – Increase primarily related to an increase in volume and the effects of the foreign currency exchange rate, offset by a reduction in price. These sales are made primarily in Europe and the volume increase is due primarily to an increase in TP&T’s customer base.
HITOX – Increase primarily related to an increase in price and the effects of the foreign currency exchange rate.

The following table represents TP&T’s ALUPREM and HITOX sales (in thousands) for the six month periods ended June 30, 2007 and 2006 to third party customers. All inter-company sales have been eliminated.

		Six Months Ended June 30,
Product		2007			2006			Variance
ALUPREM		2,389	78%	$	1,672	74%		717	43%
HITOX	$	662	22%		574	26%	$	88	15%
Total	$	3,051	100%	$	2,246	100%	$	805	36%

ALUPREM – Increase primarily related to an increase in volume and the effects of the foreign currency exchange rate. These sales are made primarily in Europe and the volume increase is due primarily to an increase in TP&T’s customer base.
HITOX – Increase related to an increase in volume, price and the effects of the foreign currency exchange rate. The volume increase is primarily related to the growth in TP&T’s customer base throughout Europe.

Table of Contents 24

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Malaysian Operation

Our subsidiary in Malaysia, TMM, manufactures and sells HITOX and SR to third party customers, as well as to our U.S. Operation and TP&T. The following table represents TMM’s sales (in thousands) for the three month periods ended June 30, 2007 and 2006 to third party customers. All inter-company sales have been eliminated.

		Three Months Ended June 30,
Product		2007			2006			Variance
HITOX	$	692	94%	$	808	99%	$	(116)	-14%
SR		12	1%		9	1%		3	33%
OTHER		33	5%		-	0%		33	100%
Total	$	737	100%	$	817	100%	$	(80)	-10%

HITOX – Decrease primarily related to a decrease in volume and price, offset by the effects of the foreign currency exchange rate.
Other Products – Increase primarily due to the sale of Zircon.

The following table represents TMM’s sales (in thousands) for the six month periods ended June 30, 2007 and 2006 to third party customers. All inter-company sales have been eliminated.

		Six Months Ended June 30,
Product		2007			2006			Variance
HITOX	$	1,500	95%	$	1,387	99%	$	113	8%
SR		12	1%		9	1%		3	33%
OTHER		70	4%		3	0%		67	2233%
Total	$	1,582	100%	$	1,399	100%	$	183	13%

HITOX – Increase primarily related to an increase in volume and the effects of the foreign currency exchange rate, offset by a reduction in price. The increase in volume is primarily related to our increased sales effort throughout Asia and South America.
Other Products – Increase primarily due to the sale of Zircon.

Table of Contents 25

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Gross Margin: For the three month and six month periods ended June 30, 2007, gross margin decreased 4.6% and 3.3%, respectively. Primary factors affecting the gross margin include higher fuel oil and raw material costs, as well as reduced fixed cost absorption associated with our Malaysian SR plant. These negative affects have been partially offset by lower energy costs related to our new HITOX production process at the U.S. Operation, improved absorption at our European operation and a shift to higher margin specialty alumina product sales in Europe.

Technical Services and General, Administrative and Selling Expenses: For the three month period ended June 30, 2007, technical services and general, administrative and selling expenses decreased approximately 3% compared to the same period 2006 and remained flat for the six month period ended June 30, 2007 compared to 2006.

Interest Expense: Net interest expense for the quarter increased approximately $45,000 and $82,000 year to date as compared to the same periods in 2006. The increases are primarily related to an increase in long-term debt and our lines of credit, as well as higher interest rates.

Income Taxes: We recorded U.S. tax expense of $9,000 during the second quarter 2007 and foreign income tax expense of $18,000 compared to U.S. tax expense of $2,000 and foreign income tax expense of $86,000, respectively, for the second quarter 2006. For the six month period ended June 30, 2007, we recorded U.S. tax expense of $18,000 and foreign income tax expense of $14,000 compared to $10,000 and $128,000 for the same period 2006, respectively. Taxes are applied based on an estimated annualized consolidated effective rate of 21%, which assumes continued ability to offset U.S. federal income taxes through the utilization of net operating loss carry-forwards.

Table of Contents 26

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity, Capital Resources and Other Financial Information

Cash and Cash Equivalents

As noted on the following table, cash and cash equivalents decreased $383,000 from December 31, 2006 to June 30, 2007.

		Six Months Ended June 30,
(In thousands)		2007		2006
Net cash provided by (used in)
Operating activities	$	(712)	$	(20)
Investing activities		(397)		(374)
Financing activities		807		391
Effect of exchange rate fluctuations		(81)		7
Net change in cash and cash equivalents	$	(383)	$	4

Operating Activities

We used $712,000 during the first six months of 2007 in operating activities. Following are the major changes in working capital affecting cash used in operating activities for the six month period ended June 30, 2007:

Accounts Receivable: Accounts receivable increased $1,112,000 primarily due to an increase in ALUPREM sales during the second quarter at both the U.S. Operation and TPT. Accounts receivable increased at the U.S. Operation $746,000 and at TP&T $438,000, offset by a decrease at TMM of $72,000.
Inventories: Inventories decreased $198,000. Inventories at the U.S. Operation increased $963,000 due primarily to a shipment of SR and Barite received in the first quarter, as well as an increase in the operation’s level of finished goods. Inventories at TMM decreased $1,101,000 primarily due to a decrease in SR inventory that was shipped to the U.S. Operation during the first quarter and lower production levels of SR in both the first and second quarters of 2007. TP&T’s finished goods inventory decreased $60,000.
Other Current Assets: Other current assets increased $279,000 primarily related to prepaid insurance at both the U.S. Operation and TPT.
Accounts Payable and Accrued Expenses: Trade accounts payable and accrued expenses decreased $591,000. Accounts payable and accrued expenses at TMM decreased $629,000 primarily due to the payment of raw materials and fuel utilized during the build up of their SR inventory in the fourth quarter 2006. Accounts payable and accrued expenses decreased $141,000 at the U.S. Operation and increased at TP&T $179,000 primarily due to timing.

Investing Activities

We used cash of $397,000 in investing activities during the first six months of 2007 primarily for the purchase of fixed assets. Net investments for each of our three locations are as follows:

U.S. Operation: We invested approximately $161,000 primarily for new manufacturing equipment and facility improvements.
Netherlands Operation: We invested approximately $207,000 at TP&T primarily for new manufacturing equipment and computer hardware.
Malaysian Operation: We invested approximately $29,000 at TMM for new equipment related to the production of SR.

Table of Contents 27

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financing Activities

We received $807,000 from financing activities during the six month period ended June 30, 2007. Significant factors relating to financing activities include the following:

Lines of Credit: The line of credit increased $1,002,000 primarily for the purpose of financing working capital. Our borrowings on the domestic line of credit increased $625,000 and TP&T’s increased $377,000.
Capital Lease: TP&T’s capital lease decreased approximately $33,000.
Long-term Debt – Financial Institutions: Long-term debt at the U.S. Operation increased $324,000 primarily due to a new $500,000 term loan which was used to pay off the related party debt to Paulson Ranch and for working capital, offset by a reduction in other long term debt. TMM’s net long-term debt increased $94,000 primarily related to upgrading their SR plant and TP&T’s decreased approximately $151,000.
Related Party Debt: We paid the balance outstanding of $400,000 on our related party debt to Paulson Ranch.
Issuance of Common Stock Options. We received proceeds of $1,000 as a result of employees exercising their common stock options.
Preferred Stock Dividends: The Company paid dividends of $30,000 on its Series A convertible preferred stock.

Liquidity

The terms of our borrowings contain restrictions and covenants, including subjective acceleration clauses and demand clauses on our foreign debt and covenants on our U.S. debt based on our performance. Our failure to comply with such restrictions and covenants, or the exercise of subjective acceleration or demand clauses, could adversely affect our financial position. We believe that we have adequate liquidity for the next 12 months and expect to maintain compliance with all financial covenants throughout the next 12 months. Following is a summary of our long-term debt and notes payable:

(In thousands)		June 30, 2007		December 31, 2006
Note payable to Paulson Ranch, a related party, paid off on March 15, 2007.	$	-	$	400
Fixed rate term note payable to a U.S. bank, paid off on May 1, 2007.		-		100
Term note payable to a U.S. bank, with an interest rate of 8.25% at June 30, 2007, due November 30, 2010.		796		870
Term note payable to a U.S. bank, with an interest rate of 8.25% at June 30, 2007, due May 1, 2012.		492		-
Fixed rate term Euro note payable to a Netherlands bank, with an interest rate of 5.5% at June 30, 2007, due June 1, 2009. (270 Euro)		366		446
Fixed rate term Euro note payable to a Netherlands bank, with an interest rate of 5.2% at June 30, 2007, due July 1, 2029. (430 Euro)		583		580
Fixed rate term Euro note payable to a Netherlands bank, with an interest rate of 4.7% at June 30, 2007, due January 31, 2030. (426 Euro)		577		575
Fixed rate term Euro note payable to a Netherlands bank, with an interest rate of 6.1% at June 30, 2007, due July 31, 2015. (408 Euro)		553		572
U.S. Dollar term note payable to a Malaysian bank, with an interest rate of 6.5% at June 30, 2007, due June 30, 2010.		372		272
Revolving line of credit, payable to a U.S. bank, with an interest rate of bank prime, 8.25% at June 30, 2007, due October 1, 2008.		4,150		3,525
Total		7,889		7,340
Less current maturities		588		980
Total long-term debt and notes payable	$	7,301	$	6,360

Table of Contents 28

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

U.S. Operations

Our existing fixed rate term loan with the Bank, which had an outstanding principal balance of $100,000 at December 31, 2006, was paid off on May 1, 2007.

Table of Contents 29

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Debt to Net Worth Ratio – Required to be less than or equal to 2.0 to 1.0. At June 30, 2007, the Company’s Debt to Net Worth Ratio was 0.4 to 1.0.
Current Ratio – Required to be at least 1.1 to 1.0. At June 30, 2007, the Company’s Current Ratio was 2.9 to 1.0.
Fixed Charge Coverage Ratio – Required to be at least 1.25 to 1.0. For the four quarters ended June 30, 2007, the Company’s Fixed Charge Coverage Ratio was 1.6 to 1.0.
Maintain a consolidated after tax profit for the six-month period ending June 30, 2007.

Related Parties

On December 12, 2003, we entered into a loan and security agreement with Paulson Ranch, Ltd., which is owned by the Company’s Chairman of the Board, Bernard Paulson. Under the Agreement, Paulson Ranch made a loan to us in the amount $500,000 with a variable interest rate of 4% per annum above the “Wall Street Journal Prime Rate”. The loan proceeds were used for working capital. The Company paid the outstanding principal balance of $400,000 and accrued interest to Paulson Ranch, Ltd., on March 15, 2007.

Table of Contents 30

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Netherlands Operations

Table of Contents 31

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Malaysian Operations

Incorporate a Revolving Credit facility as part of the existing Overdraft facility of RM 1,000,000 ($290,000) (i.e. an interchangeable Overdraft/Revolving Credit facility) with a combined limit of RM 1.0 million to be used for working capital purposes.
Increase the Foreign Exchange Contract Line facility by an additional RM 10 million from RM 15 million to RM 25 million ($4,351,000 to $7,252,000) to be used for hedging purposes against TMM’s sales based in currencies other than the Malaysian Ringgit (RM).
Increase the maximum length of financing for the Multi-Trade Line facility (ECR), which is used by TMM for short-term financing against customers’ and inter-company shipments, from the existing 150 days up to 180 days.

Table of Contents 32

TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Off-Balance Sheet Arrangements and Contractual Obligations

No material changes have been made to the “Off-Balance Sheet Arrangements and Contractual Obligations” noted in the Company’s 2006 Annual Report on Form 10-K.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

See the Company’s 2006 Annual Report on Form 10-K

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, management of the Company has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the date of the evaluation, the Company's disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

During the period covered by this report, there were no significant changes in the Company's internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the period covered by this report that have materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting.

Table of Contents 33

Part II - Other Information

Item 1.

Legal Proceedings

The Company is involved in routine litigation incidental to its business. Management believes that the outcome of such litigation will not have a material adverse affect on its financial position, results of operations and cash flows.

Item 1A.

Risk Factors

No material changes have been made in the disclosure of risk factors for those set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Submission of Matters to a Vote of Security Holders

Our Annual Meeting of Shareholders was held on May 18, 2007, at the Omni Marina Hotel, Corpus Christi, Texas. The following matters were submitted for vote of the security holders:

Election of Directors		For		Withheld
John J. Buckley		7,108,915		37,222
W. Craig Epperson		7,108,415		37,722
David A. Hartman		7,107,915		38,222
Douglas M. Hartman		7,108,915		37,222
Olaf Karasch		7,095,915		50,222
Thomas W. Pauken		7,108,415		37,722
Bernard A. Paulson		7,095,715		50,422
Chin-Yong Tan		7,108,415		37,722
	For	Against	Abstain	Broker Non-Vote
Ratification of Auditors	7,019,880	20,059	106,198	-



Item 5.	Other Information

None.

Table of Contents 34

Part II - Other Information

Item 6.

Exhibits

(a)	Exhibits
	Exhibit 31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Signatures:

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

	TOR Minerals International, Inc.
	____________
	(Registrant)

Date:	August 13, 2007	OLAF KARASCH Olaf Karasch President and CEO

Date:	August 13, 2007	STEVEN PARKER Steven Parker Treasurer and CFO

Table of Contents 35

EX-31 2 ceo31-1.htm EXHIBIT 31.1 - CEO CERTIFICATION Exhibit 31 Exhibit 31.1

CERTIFICATION

I, Olaf Karasch, President and Chief Executive Officer of TOR Minerals International, Inc. (the "Registrant"), certify that:

I have reviewed this report on Form 10-Q of TOR Minerals International, Inc.;
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;
The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986);
evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
disclosed in this quarterly report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

/s/ Olaf Karasch
Olaf Karasch
President and Chief Executive Officer
(Principal Executive Officer)
August 13, 2007

EX-31 3 cfo31-2.htm EXHIBIT 31.2 - CFO CERTIFICATION Exhibit 31 Exhibit 31.2

CERTIFICATION

I, Steven H. Parker, Treasurer and Chief Financial Officer of TOR Minerals International, Inc. (the "Registrant"), certify that:

I have reviewed this report on Form 10-Q of TOR Minerals International, Inc.;
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;
The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986);
evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
disclosed in this quarterly report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

/s/ STEVEN H. PARKER
Steven H. Parker
Treasurer and Chief Financial Officer
(Principal Financial Officer)
August 13, 2007

EX-32 4 ceo32-1.htm EXHIBIT 32.1 - CEO CERTIFICATION Exhibit 32 Exhibit 32.1

Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of TOR Minerals, Inc. ("Registrant") for the quarter ended June 30, 2007 (the "Report") as filed with the Securities and Exchange Commission, the undersigned Chief Executive Officer of the Registrant hereby certifies, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ OLAF KARASCH
Olaf Karasch
President and Chief Executive Officer
(Principal Executive Officer)
August 13, 2007

EX-32 5 cfo32-2.htm EXHIBIT 32.2 - CFO CERTIFICATION Exhibit 32 Exhibit 32.2

Certification of Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of TOR Minerals, Inc. ("Registrant") for the quarter ended June 30, 2007 (the "Report") as filed with the Securities and Exchange Commission, the undersigned Chief Financial Officer of the Registrant hereby certifies, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant

/s/ STEVEN H. PARKER
Steven H. Parker
Treasurer and CFO
(Principal Financial Officer)
August 13, 2007

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