8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 4, 2006

____________________

ICO, INC.

(Exact name of registrant as specified in its charter)

Texas (State or other jurisdiction of incorporation) 0-10068 (Commission File Number) 76-0566682 (I.R.S. Employer Identification No.)

1811 Bering, Suite 200

Houston, Texas 77057

(Address of principal executive offices and zip code)

(713) 351-4100

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02 Results of Operations and Financial Condition

On August 3, 2006 (after the close of business) the Company issued a press release announcing its financial results for the quarter ended June 30, 2006. A copy of the press release is furnished herewith as Exhibit 99.1.

As provided in General Instructions B.2 of Form 8-K, the information in this Item 2.02 (including the portion of the press release attached hereto as Exhibit 99.1 incorporated by reference in this Item 2.02) shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933.

ITEM 7.01 Regulation FD Disclosure

During the Company’s conference call with investors on August 4, 2006, A. John Knapp, Jr., the Company’s President and Chief Executive Officer, and Jon C. Biro, the Company’s Chief Financial Officer and Treasurer, made certain statements that may be of interest to investors, addressing the following topics.

Year-Over-Year Comparison: Q3 Fiscal Year 2006 vs. Q3 Fiscal Year 2005

·   Revenues during the third quarter of fiscal year 2006 were $82.4 million, in of 9% or $6.7 million compared to the same quarter in fiscal year 2005. Our sales and service volumes for the quarter increased 12%, a $5.5 million revenue impact, compared to fiscal year 2005. Changes in price and product sales mix had the impact of increasing revenues year-over-year by $3.1 million. Offsetting these benefits to revenues was the translation effect of foreign currencies, which reduced revenues by approximately $1.9 million year-over-year. In addition to the product sales growth we experienced during the third quarter of fiscal year 2006, toll service volumes grew 2% year-over-year, ending a string of six quarters of year-over-year declines.

·   Gross profit increased $3.4 million or 27% from the same quarter last year. This increase was 51% of the growth in revenues. The revenue improvement was mostly due to the increase in sales and service volumes of 12%, and this volume increase was the primary reason for the increase in gross profit. The volume improvement was primarily driven by our Bayshore Industrial operation, and also helped by volume growth of our ICO Polymers North America business.

·   Gross margins improved to 19.5% compared to 16.8% last year. The improvement in gross margins was again due to the strong volume growth at Bayshore Industrial, and improving margins in the ICO Polymers North America division.

·   Sales, general and administrative (“SG&A”) expense was $8.2 million, down year-over-year $1.2 million or 12.6%, as a result of our continuing efforts to reduce costs. The decline in SG&A for the quarter was due to lower Sarbanes-Oxley related expenses, lower legal fees, and the effect of weaker foreign currencies relative to the U.S. Dollar.

·   Operating income was $5.9 million, an increase of $4.6 million compared to the same quarter in fiscal year 2005, due to the increase in gross profit and lower SG&A expenses. Pre-tax income from continuing operations was $5.6 million, and net income from continuing operations was $4.1 million or 16 cents per share. On a fully diluted basis, net income from continuing operations was 14 cents per share.

·   With regard to profitability, all of our business units improved significantly compared to last year, except the Australasian division.

Sequential Comparison: Q3 Fiscal Year 2006 vs. Q2 Fiscal Year 2006

·   Compared to our second fiscal quarter ended March 31, 2006, third quarter profitability improved. Operating Income was $5.9 million for the third quarter compared to $4.9 million in the second quarter. This improvement was primarily caused by higher gross profit and to a lesser extent, lower SG&A expenses. Revenues increased 4% or $2.9 million to $82.4 million due to sequential sales and service volume growth of 3%. The volume growth was almost entirely due to strong volume gains within ICO Polymers North America. A portion of this growth has been driven by the traction we are making selling our polymer products into the oilfield service industry.

·   Gross profit increased just under $0.8 million or 5% sequentially, mostly due to the benefits of higher sales and service volumes.

·   Looking at our business segments, the business that drove much of the sequential profitability improvement was ICO Polymers North America, as the volumes in this business grew and the product and service sales mix improved.

Balance Sheet: Q3 Fiscal Year 2006

·   With regard to the balance sheet, working capital, excluding cash and debt classified as a current liability, increased modestly during the quarter up $1.5 million to $61.3 million. This increase in working capital was mostly due to an increase in accounts receivable and inventory due to the growth in revenues. The effect of these increases was partially offset by an increase in accounts payable. Our cash position increased $5.0 million during the quarter, and cash was $7.0 million as of June 30, 2006. We ended the quarter with total debt of $35.8 million. Stockholders’ equity increased during the quarter, due to the net income we generated and stronger foreign currencies, to $89.0 million as of June 30, 2006.

Additional Points

·   Regarding ICO’s Bayshore Industrial division: Bayshore continues to drive our performance. During the third quarter, Bayshore operated at its full engineered capacity. At the end of the quarter, Bayshore’s backlog was 40 million pounds. Volume shipped year-to-date at Bayshore is up 35% over last fiscal year. On September 1, 2006, Bayshore’s new production line, which should process approximately 2 million pounds per month, is expected to become operational. The near-term prospects for Bayshore are very bright. Bayshore expects to commence production on a new product for a major multinational customer which could be a significant product for Bayshore if it is received well by the consumer.  In the long term, unless there is a downturn in the market, we should expect to expand capacity again at Bayshore in fiscal year 2007.

·   Regarding ICO’s Australasian division: On August 3, 2006, ICO’s board of directors approved a significant expansion of capacity in Malaysia, which will be made over the course of the coming year. The board also approved plans to pursue installing a small facility in Dubai.

·   Outlook for the fourth quarter: Compared to the operating income exclusive of charges in the fourth quarter of fiscal year 2005, we expect fourth quarter in fiscal year 2006 to be an improvement. While we expect to encounter some seasonal weaknesses as always in Europe due to the August vacation periods, we are hopeful that the momentum we are experiencing in North America will continue in the fourth quarter.

Mr. Knapp noted that the Company’s business is good and the opportunities to improve it are significant. He also noted that operating income from continuing operations of $5.9 million is a record for ICO.

In response to investor questions about the Company’s oilfield services (“OFS”) revenues, Mr. Knapp noted that OFS revenues during the third quarter were four times as much as in the second quarter of fiscal year 2006, and that he believes the trend will continue. In response to questions about polymers used in the OFS business and the type of polymers processed by ICO for the OFS business, Mr. Knapp noted that polymers are used in cementing and drilling muds, and for fracturing wells, and that ICO processes both organic and traditional polymers for OFS applications.

In response to an investor question about the Company’s effective tax rates, Mr. Biro said that the tax rate for the quarter was slightly over 26%, and that for fiscal year 2006 he expects it to be in the low 30% range.

In response to an investor question about capital expenditures, Mr. Biro said that he expects capital expenditures for fiscal year 2006 to be around $9.0 million.

As provided in General Instructions B.2 of Form 8-K, the information in this Item 7.01 shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933.

ITEM 9.01 Financial Statements and Exhibits

(c)Exhibits

99.1Press Release dated August 3, 2006

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 hereunto duly authorized.

	ICO, INC.
Date: August 4, 2006	By:	/s/ Jon C. Biro
	Name:	Jon C. Biro
	Title:	Chief Financial Officer and
		Treasurer

EX-99.1 PRESS REL

	1811 Bering Drive, Suite 200 Houston, Texas 77057
Company Contact: Jon C. Biro Phone: 713-351-4100 Fax: 713-335-2222 www.icopolymers.com

ICO, Inc. Announces Record Results for

Fiscal Year Third Quarter 2006

HOUSTON, TEXAS, August 3, 2006 - ICO, Inc. (NASDAQ: ICOC), global producer of custom polymer powders and plastic film concentrates, today announced its results for the three and nine months ended June 30, 2006. Highlights for the quarter included:

§   Record revenues of $82.4 million and year-over-year volume growth of 12% for the quarter

§   Operating income of $5.9 million, up 350% from previous year

§   Earnings per share 16 cents (14 cents fully diluted)

Year-Over-Year Quarterly Comparison

Third quarter 2006 revenues from continuing operations of $82.4 million hit an all time high for ICO, Inc. This represented an increase of $6.7 million or 9% from the fiscal third quarter of 2005. Revenues increased due to growth in sales and service volumes (up 12% year-over-year) and higher average selling prices as a result of higher raw material prices. Partially offsetting those benefits were the effects of a stronger U.S. Dollar as compared to relevant foreign currencies and a change in product mix as a result of growth in sales at Bayshore.

As a result of the strong growth in volumes and revenues, gross profit improved $3.4 million or 27%. The Company’s North American operations, including Bayshore Industrial and ICO Polymers North America, experienced the most significant gross profit improvements. Bayshore’s improvement was primarily the result of sales volume growth of 54%, while an increase in specialty toll grinding business generated by ICO Polymers North America contributed to their gross profit improvement.

Selling, general and administrative expenses (“SG&A”) declined $1.2 million or 13% due to our continuing focus on controlling costs. This decline was a result of lower third party Sarbanes-Oxley implementation costs, professional legal fees, and effects of the stronger U.S. Dollar relative to relevant foreign currencies.

Operating income improved $4.6 million or 350% to $5.9 million as a result of the improvement in gross profit and reduction in SG&A. Net income from continuing operations was $4.1 million, or $.16 per share ($.14 per share fully diluted).

Sequential Quarter Comparison

Sequentially, an increase in volumes sold of 3% and an increase in average selling prices due to rising resin prices caused revenues to increase $2.9 million or 4%. The growth in sales and service volumes led the way to improved gross profit. Gross profit improved $0.8 million or 5%. The improvement in gross profit and a reduction in SG&A of $0.4 million drove the operating income increase of $1.1 million or 22% compared to the quarter ended March 31, 2006.

“Our business was very strong in the third quarter and we expect the momentum we now have to continue into the fourth quarter,” stated the Company’s President and CEO, Mr. A. John Knapp, Jr. “Our volume improvement this year has been led by our Bayshore Industrial operation. The expansion at Bayshore is expected to be on line late in the fourth quarter and will increase our capacity in that operation by approximately 10%. We are also considering several expansion opportunities within our Australasian business which should fuel our growth in these markets. I thank all of ICO’s employees for their efforts to produce good operating results so far this year.”

Balance Sheet and Liquidity

At June 30, 2006, the Company had $7.0 million in cash on hand, $35.8 million in debt, and $40.3 million of available borrowing capacity under committed credit facilities. The improvement in liquidity during fiscal year 2006 was due to strong earnings and cash flow the Company has generated from operations and from many of the refinancings the Company has completed over the course of 2006. During the third quarter of fiscal 2006, the Company closed on new term loans of $9.7 million and used the proceeds to repay existing long-term and short-term debt. This caused total short-term debt to fall $3.7 million compared to March 31, 2006. Capital expenditures were $2.9 million during the third quarter and were $7.0 million for the nine months ended June 30, 2006.

Preferred Dividend

The Company’s Board of Directors has determined not to declare any dividend on its depositary shares, each representing ¼ of a share of its $6.75 convertible exchangeable preferred stock, for the quarter ending on September 30, 2006.

Conference Call on the Web

A live Internet broadcast of ICO, Inc.’s conference call regarding fiscal 2006 third quarter results can be accessed at 9:00 a.m. Central Standard Time on Friday, August 4, 2006 at www.firstcallevents.com, where the webcast replay will be archived. (Minimum requirements to listen to the broadcast are: The Windows Media Player software, downloadable free from http://www.microsoft.com/windows/windowsmedia/player/download/download.aspx and at least a 28.8Kbps connection to the Internet.)

Investors are invited to participate in the conference by dialing 847-413-3237, passcode 15219128.

About ICO, Inc.

With 18 locations in 9 countries, ICO Polymers produces custom polymer powders for rotational molding and other polymer related businesses, such as the textile, metal coating and masterbatch markets. ICO remains an industry leader in size reduction, compounding and other tolling services for plastic and non-plastic materials. ICO's Bayshore Industrial subsidiary produces specialty compounds, concentrates and additives primarily for the plastic film industry. Additional information about ICO, Inc. can be found on the Company’s website at www.icopolymers.com.

This press release contains forward-looking statements, which are not statements of historical facts and involve certain risks, uncertainties and assumptions. These include, but are not limited to, restrictions imposed by the Company’s outstanding indebtedness, changes in the cost and availability of polymers, demand for the Company's services and products, business cycles and other industry conditions, the Company’s lack of asset diversification, international risks, operational risks, and other factors detailed in the Company's form 10-K for the fiscal year ended September 30, 2005 and its other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.

ICO, Inc.
Consolidated Statement of Operations
(Unaudited and in thousands, except per share data and percentages)
	Three Months Ended									Nine Months Ended
	June 30,						March 31,			June 30,
	2006			2005			2006			2006			2005
Product Sales	$	73,186		$	67,530		$	70,473		$	211,334		$	199,054
Toll Services		9,258			8,232			9,070			25,766			26,273
Total Revenues		82,444			75,762			79,543			237,100			225,327
Cost of sales and services		66,330			63,051			64,188			190,035			185,139
Gross Profit		16,114			12,711			15,355			47,065			40,188
Selling, general and administrative expense		8,278			9,470			8,722			25,663			28,169
Depreciation and amortization		1,917			1,934			1,782			5,501			5,986
Impairment, restructuring and other costs		-			-			-			118			343
Operating income		5,919			1,307			4,851			15,783			5,690
Other income (expense):
Interest expense, net		(505	)		(748	)		(562	)		(1,601	)		(2,208	)
Other income (expense)		167			(65	)		68			313			(21	)
Income from continuing operations before income taxes		5,581			494			4,357			14,495			3,461
Provision for income taxes		1,470			475			1,375			4,307			1,030
Income from continuing operations		4,111			19			2,982			10,188			2,431
Loss from discontinued operations, net of benefit for
income taxes		(19	)		(63	)		-			(52	)		(383	)
Net income (loss)	$	4,092		$	(44	)	$	2,982		$	10,136		$	2,048
Basic income from continuing operations per common share	$	0.16		$	0.00		$	0.12		$	0.40		$	0.10
Basic net income per common share	$	0.16		$	0.00		$	0.12		$	0.40		$	0.08
Diluted income from continuing operations per common share	$	0.14		$	0.00		$	0.10		$	0.34		$	0.08
Diluted net income per common share	$	0.14		$	0.00		$	0.10		$	0.34		$	0.07
Gross Margin		19.5%			16.8%			19.3%			19.9%			17.8%

ICO, Inc.
Consolidated Balance Sheet
(Unaudited and in thousands, except share data and ratios)
	June 30,			September 30,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	7,032		$	3,234
Trade receivables		65,965			57,132
Inventories		38,261			35,006
Deferred income taxes		2,413			2,579
Prepaid and other current assets		6,351			5,542
Total current assets		120,022			103,493
Property, plant and equipment, net		51,618			49,274
Goodwill		8,325			8,831
Other assets		2,497			2,657
Total assets	$	182,462		$	164,255
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings under credit facilities	$	10,619		$	8,989
Current portion of long-term debt		4,433			5,657
Accounts payable		32,947			31,387
Accrued salaries and wages		4,936			4,181
Income taxes payable		4,189			1,459
Other current liabilities		9,629			10,438
Total current liabilities		66,753			62,111
Long-term debt, net of current portion		20,756			18,993
Deferred income taxes		4,097			4,383
Other long-term liabilities		1,849			1,678
Total liabilities		93,455			87,165
Commitments and contingencies		-			-
Stockholders' equity:
Convertible preferred stock, without par value- 345,000 shares
authorized; 322,500 shares issued and outstanding with
a liquidation preference of $39,866 and $38,234, respectively		13			13
Undesignated preferred stock, without par value-
105,000 shares authorized; No shares issued and outstanding		-			-
Common stock, without par value- 50,000,000 shares
authorized; 25,751,842 and 25,544,997 shares issued
and outstanding, respectively		44,922			44,265
Additional paid-in capital		104,658			104,134
Accumulated other comprehensive loss		(645	)		(1,245	)
Accumulated deficit		(59,941	)		(70,077	)
Total stockholders' equity		89,007			77,090
Total liabilities and stockholders' equity	$	182,462		$	164,255
OTHER BALANCE SHEET DATA
Working capital	$	53,269		$	41,382
Current ratio		1.8			1.7
Total debt	$	35,808		$	33,639
Debt-to-capitalization		28.7%			30.4%

ICO, Inc.
Supplemental Segment Information
(Unaudited and in thousands, except percentages)
Revenues
Three Months Ended June 30:	2006		% of Total		2005		% of Total		Change			%
ICO Europe	$	35,181		43%	$	33,754		44%	$	1,427			4%
ICO Courtenay - Australasia		10,356		13%		12,228		16%		(1,872	)		(15%	)
ICO Polymers North America		12,261		15%		10,691		14%		1,570			15%
ICO Brazil		2,072		2%		2,009		3%		63			3%
Total ICO Polymers		59,870		73%		58,682		77%		1,188			2%
Bayshore Industrial		22,574		27%		17,080		23%		5,494			32%
Consolidated	$	82,444		100%	$	75,762		100%	$	6,682			9%

Nine Months Ended June 30:	2006		% of Total		2005		% of Total		Change			%
ICO Europe	$	95,162		40%	$	99,227		44%	$	(4,065	)		(4%	)
ICO Courtenay - Australasia		34,528		15%		34,564		15%		(36	)		0%
ICO Polymers North America		33,079		14%		30,369		14%		2,710			9%
ICO Brazil		6,894		3%		6,017		3%		877			15%
Total ICO Polymers		169,663		72%		170,177		76%		(514	)		0%
Bayshore Industrial		67,437		28%		55,150		24%		12,287			22%
Consolidated	$	237,100		100%	$	225,327		100%	$	11,773			5%

Operating income (loss)
Three Months Ended June 30:	2006			2005			Change
ICO Europe	$	1,659		$	646		$	1,013
ICO Courtenay - Australasia		340			555			(215	)
ICO Polymers North America		1,862			310			1,552
ICO Brazil		(114	)		(192	)		78
Total ICO Polymers		3,747			1,319			2,428
Bayshore Industrial		3,720			1,869			1,851
Total Operations		7,467			3,188			4,279
General Corporate Expense		(1,361	)		(1,638	)		277
Unallocated stock option compensation		(187	)		(243	)		56
Consolidated	$	5,919		$	1,307		$	4,612

Nine Months Ended June 30:	2006			2005			Change
ICO Europe	$	4,931		$	3,560		$	1,371
ICO Courtenay - Australasia		1,700			1,877			(177	)
ICO Polymers North America		3,717			514			3,203
ICO Brazil		(450	)		(767	)		317
Total ICO Polymers		9,898			5,184			4,714
Bayshore Industrial		10,879			6,377			4,502
Total Operations		20,777			11,561			9,216
General Corporate Expense		(4,355	)		(5,231	)		876
Unallocated stock option compensation		(639	)		(640	)		1
Consolidated	$	15,783		$	5,690		$	10,093

Operating income (loss) as a percentage of revenues	Three Months Ended									Nine Months Ended
	June 30,									June 30,
							Increase/									Increase/
	2006			2005			(Decrease)			2006			2005			(Decrease)
ICO Europe		5%			2%			3%			5%			4%			1%
ICO Courtenay - Australasia		3%			5%			(2%	)		5%			5%			0%
ICO Polymers North America		15%			3%			12%			11%			2%			9%
ICO Brazil		(6%	)		(10%	)		4%			(7%	)		(13%	)		6%
Total ICO Polymers		6%			2%			4%			6%			3%			3%
Bayshore Industrial		16%			11%			5%			16%			12%			4%
Consolidated		7%			2%			5%			7%			3%			4%

ICO, Inc.
Supplemental Segment Information (cont'd.)
(Unaudited and in thousands, except percentages)
Revenues
	Three Months Ended
	June 30,				March 31,
	2006		% of Total		2006		% of Total		Change			%
ICO Europe	$	35,181		43%	$	32,439		41%	$	2,742			8%
ICO Courtenay - Australasia		10,356		13%		11,458		14%		(1,102	)		(10%	)
ICO Polymers North America		12,261		15%		10,819		14%		1,442			13%
ICO Brazil		2,072		2%		2,665		3%		(593	)		(22%	)
Total ICO Polymers		59,870		73%		57,381		72%		2,489			4%
Bayshore Industrial		22,574		27%		22,162		28%		412			2%
Consolidated	$	82,444		100%	$	79,543		100%	$	2,901			4%

Operating income (loss)
	Three Months Ended
	June 30,			March 31,
	2006			2006			Change
ICO Europe	$	1,659		$	1,973		$	(314	)
ICO Courtenay - Australasia		340			305			35
ICO Polymers North America		1,862			1,161			701
ICO Brazil		(114	)		(199	)		85
Total ICO Polymers		3,747			3,240			507
Bayshore Industrial		3,720			3,411			309
Total Operations		7,467			6,651			816
General Corporate Expense		(1,361	)		(1,631	)		270
Unallocated stock option compensation		(187	)		(169	)		(18	)
Consolidated	$	5,919		$	4,851		$	1,068

Operating income (loss) as a percentage of revenues	Three Months Ended
	June 30,			March 31,			Increase/
	2006			2006			(Decrease)
ICO Europe		5%			6%			(1%	)
ICO Courtenay - Australasia		3%			3%			0%
ICO Polymers North America		15%			11%			4%
ICO Brazil		(6%	)		(7%	)		1%
Total ICO Polymers		6%			6%			0%
Bayshore Industrial		16%			15%			1%
Consolidated		7%			6%			1%