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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
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 001-31921
cmp-20220331_g1.jpg
Compass Minerals International, Inc.
(Exact name of registrant as specified in its charter)
Delaware36-3972986
(State or other jurisdiction of
 incorporation or organization)
(I.R.S. Employer
Identification Number)
9900 West 109th Street
Suite 100
Overland Park, KS 66210
(913) 344-9200
(Address of principal executive offices, zip code and telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, $0.01 par valueCMPThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files)YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YesNo
The number of shares outstanding of the registrant’s common stock, $0.01 par value per share, as of May 6, 2022, was 34,148,370 shares.


COMPASS MINERALS INTERNATIONAL, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATIONPage
PART II. OTHER INFORMATION
1

COMPASS MINERALS INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
(Unaudited)
 March 31,
2022
September 30,
2021
ASSETS
Current assets:
Cash and cash equivalents$44.9 $18.1 
Receivables, less allowance for doubtful accounts of $3.9 at March 31, 2022 and $3.0 at September 30, 2021
197.3 132.8 
Inventories210.7 321.7 
Current assets held for sale11.0 9.9 
Other58.3 48.9 
Total current assets522.2 531.4 
Property, plant and equipment, net821.1 830.5 
Intangible assets, net48.4 48.8 
Goodwill57.9 57.8 
Equity method investments49.7 5.8 
Other147.9 156.6 
Total assets$1,647.2 $1,630.9 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt$ $ 
Accounts payable114.0 90.0 
Accrued salaries and wages15.4 20.7 
Income taxes payable0.6  
Accrued interest14.1 14.3 
Current liabilities held for sale12.5 9.6 
Accrued expenses and other current liabilities67.6 60.8 
Total current liabilities224.2 195.4 
Long-term debt, net of current portion922.2 935.4 
Deferred income taxes, net65.2 57.6 
Other noncurrent liabilities149.1 149.4 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock: $0.01 par value, 200,000,000 authorized shares; 35,367,264 issued shares
0.4 0.4 
Additional paid-in capital144.1 136.3 
Treasury stock, at cost — 1,254,354 shares at March 31, 2022 and 1,313,690 shares at September 30, 2021
(5.9)(5.5)
Retained earnings252.3 272.4 
Accumulated other comprehensive loss(104.4)(110.5)
Total stockholders’ equity286.5 293.1 
Total liabilities and stockholders’ equity$1,647.2 $1,630.9 
The accompanying notes are an integral part of the consolidated financial statements.
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COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except share and per share data)
 Three Months Ended
March 31,
Six Months Ended
March 31,
 2022202120222021
Sales$448.5 $425.5 $780.0 $734.7 
Shipping and handling cost160.1 123.1 255.8 198.8 
Product cost 223.8 194.0 399.7 369.0 
Gross profit64.6 108.4 124.5 166.9 
Selling, general and administrative expenses44.6 32.4 84.1 62.8 
Operating earnings20.0 76.0 40.4 104.1 
Other expense:
Interest expense13.9 15.7 27.8 31.2 
Loss on foreign exchange3.0 2.1 2.6 8.3 
Other expense, net1.7 0.3 1.9 0.4 
Earnings from continuing operations before income taxes1.4 57.9 8.1 64.2 
Income tax expense from continuing operations30.4 16.0 29.2 7.6 
Net (loss) earnings from continuing operations(29.0)41.9 (21.1)56.6 
Net earnings (loss) from discontinued operations16.9 (256.3)11.4 (242.9)
Net loss$(12.1)$(214.4)$(9.7)$(186.3)
Basic net (loss) earnings from continuing operations per common share$(0.85)$1.22 $(0.62)$1.64 
Basic net earnings (loss) from discontinued operations per common share0.49 (7.54)0.33 (7.15)
Basic net loss per common share$(0.36)$(6.32)$(0.29)$(5.50)
Diluted net (loss) earnings from continuing operations per common share$(0.85)$1.21 $(0.62)$1.64 
Diluted net earnings (loss) from discontinued operations per common share0.49 (7.54)0.33 (7.15)
Diluted net loss per common share$(0.36)$(6.32)$(0.29)$(5.50)
Weighted-average common shares outstanding (in thousands):
Basic34,103 33,974 34,081 33,966 
Diluted34,113 34,012 34,100 33,994 
The accompanying notes are an integral part of the consolidated financial statements.

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COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in millions)
 Three Months Ended
March 31,
Six Months Ended
March 31,
 2022202120222021
Net loss$(12.1)$(214.4)$(9.7)$(186.3)
Other comprehensive income (loss):
Unrealized gain (loss) from change in pension obligations, net of tax of $0.0 for the three and six months ended March 31, 2022, and $(0.1) and $0.8 for the three and six months ended March 31, 2021, respectively
0.1 0.2 0.2 (2.8)
Unrealized gain (loss) on cash flow hedges, net of tax of $(0.3) and $0.4 for the three and six months ended March 31, 2022, respectively, and $0.0 and $(0.3) for the three and six months ended March 31, 2021, respectively
1.0 0.1 (1.0)0.8 
Cumulative translation adjustment10.7 (20.5)6.9 34.7 
Comprehensive loss$(0.3)$(234.6)$(3.6)$(153.6)
The accompanying notes are an integral part of the consolidated financial statements.

4

COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the three and six months ended March 31, 2022 and 2021
(Unaudited, in millions)
 Common
Stock
Additional
Paid-In
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Total
Balance, September 30, 2021
$0.4 $136.3 $(5.5)$272.4 $(110.5)$293.1 
Comprehensive income (loss)— — — 2.4 (5.7)(3.3)
Dividends on common stock ($0.15 per share)
— (0.1)— (5.2)— (5.3)
Stock options exercised, net of shares withheld for taxes— 0.2 — — — 0.2 
Stock-based compensation— 3.3 — — — 3.3 
Balance, December 31, 2021
$0.4 $139.7 $(5.5)$269.6 $(116.2)$288.0 
Comprehensive (loss) income— — — (12.1)11.8 (0.3)
Dividends on common stock ($0.15 per share)
— — — (5.2)— (5.2)
Shares issued for stock units, net of shares withheld for taxes— (0.1)(0.4)— — (0.5)
Stock-based compensation— 4.5 — — — 4.5 
Balance, March 31, 2022
$0.4 $144.1 $(5.9)$252.3 $(104.4)$286.5 

 Common
Stock
Additional
Paid-In
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Total
Balance, September 30, 2020
$0.4 $124.5 $(4.4)$556.1 $(356.7)$319.9 
Comprehensive income— — — 28.1 52.9 81.0 
Dividends on common stock ($0.72 per share)
— 0.2 — (25.1)— (24.9)
Shares issued for stock units, net of shares withheld for taxes— (0.1)— — — (0.1)
Stock options exercised, net of shares withheld for taxes— 0.2 — — — 0.2 
Stock-based compensation— 2.2 — — — 2.2 
Balance, December 31, 2020
$0.4 $127.0 $(4.4)$559.1 $(303.8)$378.3 
Comprehensive loss— — — (214.4)(20.2)(234.6)
Dividends on common stock ($0.72 per share)
— 0.1 — (24.2)— (24.1)
Stock options exercised, net of shares withheld for taxes— 0.2 — — — 0.2 
Stock-based compensation— 4.0 — — — 4.0 
Balance, March 31, 2021
$0.4 $131.3 $(4.4)$320.5 $(324.0)$123.8 
The accompanying notes are an integral part of the consolidated financial statements.

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COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
 Six Months Ended
March 31,
 20222021
Cash flows from operating activities:
Net loss$(9.7)$(186.3)
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
Depreciation, depletion and amortization56.2 68.9 
Amortization of deferred financing costs1.5 1.6 
Stock-based compensation7.8 6.2 
Deferred income taxes16.2 (0.6)
Unrealized foreign exchange (gain) loss(15.2)11.2 
Loss on impairment of long-lived assets24.7 253.1 
Other, net3.1 0.5 
Changes in operating assets and liabilities, net of sale:
Receivables(63.7)(73.7)
Inventories108.9 91.3 
Other assets(9.0)13.3 
Accounts payable and accrued expenses and other current liabilities25.9 11.7 
Other liabilities(0.8)(10.3)
Net cash provided by operating activities145.9 186.9 
Cash flows from investing activities:
Capital expenditures(43.5)(40.2)
Equity method investments(46.3)(2.8)
Other, net1.4 3.8 
Net cash used in investing activities(88.4)(39.2)
Cash flows from financing activities:
Proceeds from revolving credit facility borrowings221.3 162.0 
Principal payments on revolving credit facility borrowings(280.7)(262.2)
Proceeds from issuance of long-term debt50.8 119.5 
Principal payments on long-term debt(5.9)(87.6)
Dividends paid(10.5)(49.0)
Deferred financing costs (0.1)
Proceeds from stock option exercised0.2 0.2 
Shares withheld to satisfy employee tax obligations(0.5)(0.1)
Other, net(0.6)(0.9)
Net cash used in financing activities(25.9)(118.2)
Effect of exchange rate changes on cash and cash equivalents2.4  
Net change in cash and cash equivalents34.0 29.5 
Cash and cash equivalents, beginning of the year21.0 34.1 
Cash and cash equivalents, end of period55.0 63.6 
Less: cash and cash equivalents included in current assets held for sale(10.1)(20.8)
Cash and cash equivalents of continuing operations, end of period$44.9 $42.8 

Supplemental cash flow information:  
Interest paid, net of amounts capitalized$26.7 $32.3 
Income taxes paid, net of refunds$13.1 $22.9 
The accompanying notes are an integral part of the consolidated financial statements.
6

COMPASS MINERALS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.    Accounting Policies and Basis of Presentation:

Compass Minerals International, Inc. (“CMI”), through its subsidiaries (collectively, the “Company”), is a leading producer of essential minerals focused on safely delivering where and when it matters to help solve nature’s challenges for customers and communities. The Company’s salt products help keep roadways safe during winter weather and are used in numerous other consumer, industrial and agricultural applications. Its plant nutrition business is the leading producer of sulfate of potash (“SOP”), which is used in the production of specialty fertilizers for high-value crops and turf. The Company’s principal products are salt, consisting of sodium chloride and magnesium chloride, and SOP. The Company’s production sites are located in the United States (“U.S.”), Canada and the United Kingdom (“U.K.”). The Company also provides records management services to businesses located in the U.K. Except where otherwise noted, references to North America include only the continental U.S. and Canada, and references to the U.K. include only England, Scotland and Wales. References to “Compass Minerals,” “our,” “us” and “we” refer to CMI and its consolidated subsidiaries.
 
CMI is a holding company with no significant operations other than those of its wholly-owned subsidiaries. The consolidated financial statements include the accounts of CMI and its wholly-owned domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company uses the equity method of accounting for equity securities when it has significant influence or when it has more than a minor ownership interest or more than minor influence over an investee’s operations but does not have a controlling financial interest. Initial investments are recorded at cost (including certain transaction costs) and are adjusted by the Company’s share of the investees’ undistributed earnings and losses. Any difference in the Company’s cost in comparison to its underlying interest in the net assets of equity method companies that is attributable to intangible assets is amortized over the estimated useful lives of the related intangible assets.

The Company’s investment in Fortress North America, LLC (“Fortress”) is accounted for under the equity method of accounting. On November 2, 2021, the Company announced a $45 million equity investment in Fortress, building upon a previous $5 million investment as part of the Company’s strategy to strengthen and grow its essential minerals business. Fortress is a development stage company that intends to achieve commercialization of its magnesium chloride-based fire-retardant products to help combat wildfires. As of March 31, 2022, the Company had invested $50 million in Fortress in exchange for an ownership interest of approximately 45%. Under the equity method of accounting, the Company reflects its proportionate share of the income or loss of Fortress, net of tax, in its results each period on a one quarter reporting lag. The Company recorded its share of Fortress’ net losses of $1.2 million and $1.3 million, including immaterial basis difference adjustments, in the three and six months ended March 31, 2022, respectively. Fortress’ losses were immaterial for each period presented in fiscal 2021.

The carrying value of the Company’s equity investment in Fortress is in excess of its share of Fortress’s net book value by approximately $30 million as of March 31, 2022. The Company’s initial estimates indicate this primarily represents incremental value attributable to intangible assets and goodwill that has not been recognized in the financial statements of Fortress. The Company has the right to purchase units from other Fortress unit holders, subject to certain conditions. Additionally, the Company has the right of first refusal to purchase all or any portion of any available Fortress units, subject to certain conditions.

The balance of the Company’s net investment in Fortress of $48.3 million and $3.9 million is recorded in equity method investments in the Consolidated Balance Sheets as of March 31, 2022 and September 30, 2021, respectively. The Company also has other immaterial equity investments of $1.4 million and $1.9 million as of March 31, 2022 and September 30, 2021, respectively, for which it has recorded $0.5 million and $0.8 million for its share of losses and immaterial basis difference adjustments in the three and six months ended March 31, 2022, respectively.

During 2021, the Company transitioned to a September 30 fiscal year end. The nine-month period from January 1, 2021 to September 30, 2021, served as a transition period, and the Company filed one-time, nine-month transitional financial statements for the transition period in a Transition Report on Form 10-KT filed with the Securities and Exchange Commission (the “SEC”) on November 30, 2021. Prior to the transition period, the Company’s fiscal year was the calendar year ending on December 31. The Company’s fiscal year 2022 (or “fiscal 2022”) commenced on October 1, 2021 and ends on September 30, 2022.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete
7

COMPASS MINERALS INTERNATIONAL, INC.
consolidated financial statements. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the transition period ended September 30, 2021, as filed with the SEC in its Transition Report on Form 10-KT on November 30, 2021. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included.
 
The Company experiences a substantial amount of seasonality in its sales, including its deicing salt product sales. As a result, Salt segment sales and operating income are generally higher in the first and second fiscal quarters (ending December 31 and March 31) and lower during the third and fourth fiscal quarters (ending June 30 and September 30) of each year. In particular, sales of highway and consumer deicing salt and magnesium chloride products vary based on the severity of the winter conditions in areas where the products are used. Following industry practice in North America and the U.K., the Company seeks to stockpile sufficient quantities of deicing salt throughout the first, third and fourth fiscal quarters (ending December 31, June 30 and September 30) to meet the estimated requirements for the winter season. Production of deicing salt can also vary based on the severity or mildness of the preceding winter season. Due to the seasonal nature of the deicing product lines, operating results for the interim periods are not necessarily indicative of the results that may be expected for the full fiscal year. The Company’s plant nutrition business is also seasonal. As a result, the Company and its customers generally build inventories during the plant nutrition business’ low demand periods of the year (which are typically winter and summer, but can vary due to weather and other factors) to ensure timely product availability during the peak sales seasons (which are typically spring and autumn, but can also vary due to weather and other factors).

Significant Accounting Policies

The Company’s significant accounting policies are detailed in “Note 2 – Summary of Significant Accounting Policies” within Part II, Item 8 of its Transition Report on Form 10-KT for the transition period ended September 30, 2021. The Company reports its financial results from discontinued operations and continuing operations separately to recognize the financial impact of disposal transactions apart from ongoing operations. Discontinued operations reporting occurs when a component or a group of components of an entity has been disposed or classified as held for sale and represents a strategic shift that has a major effect on the entity’s operations and financial results. In the Company’s Consolidated Statements of Cash Flows, the cash flows from discontinued operations are not separately classified. Unless otherwise indicated, amounts provided in these Notes pertain to continuing operations. See Note 2 for information on discontinued operations and Note 10 for information on the Company’s reportable segments.

Recent Accounting Pronouncements

The Company has evaluated all of the recently issued, but not yet effective, accounting standards that have been issued or proposed by the Financial Accounting Standards Board or other standards-setting bodies through the filing date of these unaudited consolidated financial statements and does not believe the future adoption of any such pronouncements will have a material impact on its consolidated financial statements.

Strategic Evaluation and Plan to Sell Businesses
During fiscal 2020, the Company initiated an evaluation of the strategic fit of certain of the Company’s businesses. On February 16, 2021, the Company announced its plan to restructure its former Plant Nutrition South America segment to enable targeted and separate sales processes for each portion of the former segment, including its chemicals and specialty plant nutrition businesses, along with the Company’s equity method investment in Fermavi Eletroquímica Ltda. (“Fermavi”). Concurrently, to optimize its asset base in North America, the Company evaluated the strategic fit of its North America micronutrient product business. On March 16, 2021, the Board of Directors of the Company approved a plan to sell the Company’s South America chemicals and specialty plant nutrition businesses, investment in Fermavi and North America micronutrient product business (collectively, the “Specialty Businesses”) with the goal of reducing the Company’s leverage and enabling increased focus on optimizing the Company’s core businesses. Prior to March 31, 2021, the South America chemicals and specialty plant nutrition businesses and investment in Fermavi were reported as the Company’s Plant Nutrition South America segment. Prior to March 31, 2021, the North America micronutrient product business was included with the Company’s Plant Nutrition North America segment, which has been renamed the Plant Nutrition segment as of March 31, 2021. As of March 31, 2022, the Company has two reportable segments, Salt and Plant Nutrition, as discussed further in Note 10.

The Company concluded that the Specialty Businesses met the criteria for classification as held for sale upon receiving approval from its Board of Directors to sell the Specialty Businesses in the quarter ended March 31, 2021. In addition, the Company believes there is a single disposal plan representing a strategic shift that will have a material effect on its operations and financial results. Consequently, the Specialty Businesses qualify for presentation as assets and liabilities held for sale and
8

COMPASS MINERALS INTERNATIONAL, INC.
discontinued operations in accordance with U.S. GAAP. Accordingly, current and noncurrent assets and liabilities of the Specialty Businesses are presented in the Consolidated Balance Sheets as assets and liabilities held for sale for both periods presented and their results of operations are presented as discontinued operations in the Consolidated Statements of Operations for each period presented. Interest expense attributed to discontinued operations represents interest expense for loans in Brazil by the Company’s South America chemicals and specialty plant nutrition businesses, which were fully repaid from proceeds received from the Company’s sale of its South America specialty plant nutrition businesses.

As described further in Note 2, on May 4, 2021, July 1, 2021, August 20, 2021 and April 20, 2022, the Company completed the sales of a component of its North America micronutrient business, its South America specialty plant nutrition business, its investment in Fermavi and its South America chemicals business, respectively. In the quarter ended June 30, 2021, the Company abandoned the remaining inventory of its North America micronutrient product business and reclassified the remaining product lines in this business as discontinued operations for all periods presented.

Unless otherwise indicated, amounts provided in these Notes pertain to continuing operations.

2.    Discontinued Operations:

On March 23, 2021, the Company entered into a definitive agreement to sell its South America specialty plant nutrition business to ICL Brasil Ltda., a subsidiary of ICL Group Ltd. The transaction closed on July 1, 2021. Upon closing the Company received gross proceeds of approximately $421.1 million, following a reduction in proceeds of $6.2 million in working capital adjustments (finalized in the quarter ended September 30, 2021), comprised of cash in the amount of approximately $318.4 million and an additional $102.7 million in net debt assumed by ICL Brasil Ltda. The Brazil debt was deducted from gross proceeds from the transaction. The terms of the definitive agreement provide for an additional earnout payment of up to R$88 million Brazilian reais. On April 7, 2022, the Company received the maximum earnout possible under the terms of the sale, or $18.5 million based on exchange rates at the time of receipt. At the closing of the transaction, the parties also entered into a Reverse Transition Services Agreement, which governs the parties’ respective rights and obligations with respect to the provision of certain transition services to the Company’s Brazil subsidiaries after closing.

On April 7, 2021, the Company entered into a definitive agreement to sell a component of its North America micronutrient business (primarily consisting of intangible assets and certain inventory of the business) to Koch Agronomic Services, LLC, a subsidiary of Koch Industries, through an asset purchase and sale agreement. On May 4, 2021, the Company completed the sale for approximately $56.7 million and paid fees totaling $0.5 million. The Company recognized a gain from the sale of $30.6 million, net of $2.8 million from the release of accumulated currency translation adjustment (“CTA”) upon substantial liquidation of the business.

On June 28, 2021, the Company entered into a definitive agreement to sell its investment in Fermavi for R$45 million Brazilian reais (including R$30 million Brazilian reais of deferred purchase price). The transaction closed on August 20, 2021. Upon closing, the Company received gross proceeds of approximately $2.9 million and recorded a discounted deferred proceeds receivable of approximately $4.8 million (based on exchange rates at the time of closing).

On April 20, 2022, the Company completed the sale of its South America chemicals business to a subsidiary of Cape Acquisitions LLC. Upon closing of the all-cash sale, the Company received gross proceeds of approximately $51.0 million based on exchange rates at the time of closing, subject to a post-closing adjustment. The sale includes all of the Company’s remaining operations in Brazil, concluding its previously announced plan to exit the South American market.

In measuring the assets and liabilities held for sale at fair value less estimated costs to sell, the Company completed an impairment analysis when its Board of Directors committed to a plan to sell the Specialty Businesses and the Company updated the analysis each quarter prior to the sale of the Company’s South America chemicals business. Accordingly, management evaluated indicators of fair value of the Company’s South America chemicals business as of March 31, 2022, including the sale price and estimated net proceeds from the sale of the South America chemical business. The amount of CTA loss within accumulated other comprehensive loss (“AOCL”) on the Company’s Consolidated Balance Sheets related to the South America chemicals business was considered in the Company’s determination of the adjustment to fair value less estimated costs to sell.

The Company recorded a loss on the sale of its South American specialty plant nutrition business and its investment in Fermavi totaling approximately $209.8 million and a non-cash impairment loss for the remaining chemical business of approximately $114.9 million (including $16.3 million and $24.7 million recorded for the three and six months ended March 31, 2022, respectively), which included the effect of the significant weakening of the Brazilian real against the U.S. dollar. These losses
9

COMPASS MINERALS INTERNATIONAL, INC.
were partially offset by a gain of approximately $30.6 million from the sale of a component of the North America micronutrient business in fiscal 2021.

The information below sets forth selected financial information related to the operating results of the Specialty Businesses classified as discontinued operations. The Specialty Businesses’ revenue and expenses have been reclassified to net earnings from discontinued operations in prior periods. The Consolidated Balance Sheets present the assets and liabilities that were reclassified from the specified line items to assets and liabilities held for sale and the Consolidated Statements of Operations present the revenue and expenses that were reclassified from the specified line items to discontinued operations.

The following table represents summarized Consolidated Balance Sheets information of assets and liabilities held for sale (in millions):

March 31,
2022
September 30,
2021
Cash and cash equivalents$10.1 $2.9 
Receivables, less allowance for doubtful accounts of $0.3 at March 31, 2022 and $0.2 at September 30, 2021
18.6 13.7 
Inventories11.3 7.7 
Property, plant and equipment, net41.1 35.6 
Goodwill38.1 33.3 
Loss recognized on held for sale classification(114.9)(90.2)
Other6.7 6.9 
Current assets held for sale$11.0 $9.9 
Current portion of long-term debt$ $ 
Accounts payable7.6 5.9 
Accrued expenses and other current liabilities4.9 3.7 
Current liabilities held for sale$12.5 $9.6 

The following table represents summarized Consolidated Statements of Operations information of discontinued operations (in millions):

Three Months Ended
March 31,
Six Months Ended
March 31,
2022202120222021
Sales$24.3 $85.9 $46.7 $197.8 
Shipping and handling cost1.3 3.9 2.5 8.8 
Product cost14.4 63.0 25.3 134.4 
Gross profit8.6 19.0 18.9 54.6 
Selling, general and administrative expenses1.4 13.5 3.0 28.6 
Operating earnings7.2 5.5 15.9 26.0 
Interest expense0.1 1.7 0.1 4.2 
(Gain) loss on foreign exchange(20.4)4.3 (17.3)2.9 
Net loss on adjustment to fair value less estimated costs to sell16.3 255.2 24.7 255.2 
Other income, net(0.3)(0.4)(0.5)(1.1)
Earnings (loss) from discontinued operations before income taxes11.5 (255.3)8.9 (235.2)
Income tax (benefit) expense(5.4)1.0 (2.5)7.7 
Net earnings (loss) from discontinued operations$16.9 $(256.3)$11.4 $(242.9)
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COMPASS MINERALS INTERNATIONAL, INC.

The significant components included in the Company’s Consolidated Statements of Cash Flows for discontinued operations are as follows (in millions):

Six Months Ended
March 31,
20222021
Depreciation, depletion and amortization$ $8.9 
Loss on impairment of long-lived assets24.7 253.1 
Capital expenditures(1.2)(5.3)
Proceeds from issuance of long-term debt 40.5 
Principal payments on long-term debt (33.9)

3.    Revenues:

Nature of Products and Services

The Company’s Salt segment products include salt and magnesium chloride for use in road deicing and dust control, food processing, water softeners, and agricultural and industrial applications. The Company’s Plant Nutrition segment produces and markets SOP in various grades worldwide to distributors and retailers of crop inputs, as well as growers and for industrial uses. In the U.K., the Company operates a records management business utilizing excavated areas of its Winsford salt mine with one other location in London, England.

Identifying the Contract

The Company accounts for a customer contract when there is approval and commitment from both parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Identifying the Performance Obligations

At contract inception, the Company assesses the goods and services it has promised to its customers and identifies a performance obligation for each promise to transfer to the customer a distinct good or service (or bundle of goods or services). Determining whether products and services are considered distinct performance obligations that should be accounted for separately or aggregated together may require significant judgment.

Identifying and Allocating the Transaction Price

The Company’s revenues are measured based on consideration specified in the customer contract, net of any sales incentives and amounts collected on behalf of third parties such as sales taxes. In certain cases, the Company’s customer contracts may include promises to transfer multiple products and services to a customer. For multiple-element arrangements, the Company generally allocates the transaction price to each performance obligation in proportion to its stand-alone selling price.

When Performance Obligations Are Satisfied

The vast majority of the Company’s revenues are recognized at a point in time when the performance obligations are satisfied based upon transfer of control of the product or service to a customer. To determine when the control of goods is transferred, the Company typically assesses, among other things, the shipping terms of the contract, as shipping is an indicator of transfer of control. Some of the Company’s products are sold when the control of the goods transfers to the customer at the time of shipment. There are also instances when the Company provides shipping services to deliver its products. Shipping and handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs. The Company has made an accounting policy election to recognize any shipping and handling costs that are incurred after the customer obtains control of the goods as fulfillment costs which are accrued at the time of revenue recognition.
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COMPASS MINERALS INTERNATIONAL, INC.

Significant Payment Terms

The customer contract states the final terms of the sale, including the description, quantity and price of each product or service purchased. Payment is typically due in full within 30 days of delivery. The Company does not adjust the consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the good or service is transferred to the customer and when the customer pays for that good or service will be one year or less.

Refunds, Returns and Warranties

The Company’s products are generally not sold with a right of return and the Company does not generally provide credits or incentives, which may be required to be accounted for as variable consideration when estimating the amount of revenue to be recognized. The Company uses historical experience to estimate accruals for refunds due to manufacturing or other defects.

See Note 10 for disaggregation of sales by segment, type and geographical region.

4.    Inventories:
 
Inventories consist of the following (in millions):
 March 31,
2022
September 30,
2021
Finished goods$155.0 $272.6 
Raw materials and supplies55.7 49.1 
Total inventories$210.7 $321.7 

5.    Property, Plant and Equipment, Net:
 
Property, plant and equipment, net, consists of the following (in millions):
 March 31,
2022
September 30,
2021
Land, buildings and structures, and leasehold improvements$542.3 $539.3 
Machinery and equipment1,079.6 1,062.9 
Office furniture and equipment55.8 55.7 
Mineral interests172.8 172.5 
Construction in progress67.0 44.8 
 1,917.5 1,875.2 
Less: accumulated depreciation and depletion(1,096.4)(1,044.7)
Property, plant and equipment, net$821.1 $830.5 

6.    Goodwill and Intangible Assets, Net:

Amounts related to the Company’s amortization of intangible assets are as follows (in millions):
Three Months Ended
March 31,
Six Months Ended
March 31,
2022202120222021
Aggregate amortization expense$0.4 $0.4 $0.8 $0.8 
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COMPASS MINERALS INTERNATIONAL, INC.
Amounts related to the Company’s goodwill are as follows (in millions):
March 31,
2022
September 30,
2021
Plant Nutrition Segment$51.9 $51.8 
Other6.0 6.0 
Total$57.9 $57.8 
The change in goodwill between September 30, 2021, and March 31, 2022 was due to the impact from translating foreign-denominated amounts to U.S. dollars. As of March 31, 2022, there were no indicators necessitating an interim impairment test of the Company’s operating segments based on the Company’s review of operating performance for the relevant segments.

7.    Income Taxes:

Under ASC 740 “Income Taxes” (ASC 740), companies are required to apply their estimated annual tax rate on a year-to-date basis in each interim period. However, under ASC 740, companies should not apply the estimated annual tax rate to interim financial results if the estimated annual tax rate is not reliably predictable. In this situation, the interim tax rate should be based on the actual year-to-date results. As a result of the low amount of pretax income for the six months ended March 31, 2022 and the full fiscal year pretax projections as of March 31, 2022, as well as the existence of large favorable permanent book-tax differences for fiscal 2022, a reliable projection of the Company’s annual effective tax rate as of March 31, 2022 is not readily determinable, as a small change in forecasted pretax income could cause a significant change in the estimated annual effective tax rate. Consequently, the effective tax rates applied to the three and six months ended March 31, 2022 were determined based on fiscal year-to-date results rather than an estimated annual effective tax rate which was the method previously used for the period ended December 31, 2021 and for the three and six months ended March 31, 2021.

The Company’s effective income tax rate differs from the U.S. statutory federal income tax rate primarily due to U.S. statutory depletion, state income taxes (net of federal tax benefit), nondeductible executive compensation over $1 million, foreign income, mining and withholding taxes, global intangible low-taxed income, interest expense recognition differences for book and tax purposes and, for the period ended March 31, 2022, nondeductible contingent loss accrual and valuation allowances recorded on deferred tax assets.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended March 31, 2022. Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections for future income. On the basis of this evaluation, as of March 31, 2022, a valuation allowance of $28.0 million has been recorded to recognize only the portion of the deferred tax assets that are more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased or reduced or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as the Company’s projections for income.

As of March 31, 2022, and September 30, 2021, the Company had $8.8 million and $0, respectively, of gross domestic federal net operating loss (“NOL”) carryforwards which expire in 2042 and $3.2 million and $3.3 million, respectively of gross foreign federal NOL carryforwards that have no expiration date and $1.2 million and $0.3 million, respectively, of net operating tax-effected state NOL carryforwards which expire beginning in 2027.

Canadian provincial tax authorities have challenged tax positions claimed by one of the Company’s Canadian subsidiaries and have issued tax reassessments for fiscal years 2002-2016. The reassessments are a result of ongoing audits and total $172.6 million, including interest, through March 31, 2022. The Company disputes these reassessments and will continue to work with the appropriate authorities in Canada to resolve the dispute. There is a reasonable possibility that the ultimate resolution of this dispute, and any related disputes for other open tax years, may be materially higher or lower than the amounts the Company has reserved for such disputes. In connection with this dispute, local regulations require the Company to post security with the tax authority until the dispute is resolved. The Company has posted collateral in the form of a $137.4 million performance bond and has paid $39.8 million to the Canadian tax authorities (most of which is recorded in other assets in the Consolidated Balance Sheets at March 31, 2022, and September 30, 2021), which is necessary to proceed with future appeals or litigation.
 
The Company expects that it will be required by local regulations to provide security for additional interest on the above unresolved disputed amounts and for any future reassessments issued by these Canadian tax authorities in the form of cash,
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COMPASS MINERALS INTERNATIONAL, INC.
letters of credit, performance bonds, asset liens or other arrangements agreeable with the tax authorities until the disputes are resolved.

The Company expects that the ultimate outcome of these matters will not have a material impact on its results of operations or financial condition. However, the Company can provide no assurance as to the ultimate outcome of these matters, and the impact could be material if they are not resolved in the Company’s favor. As of March 31, 2022, the Company believes it has adequately reserved for these reassessments.
 
Additionally, the Company has other uncertain tax positions as well as assessments and disputed positions with taxing authorities in its various jurisdictions, which are consistent with those matters disclosed in the Company’s Transition Report on Form 10-KT for the transition period ended September 30, 2021.

8.    Long-Term Debt:
 
Long-term debt consists of the following (in millions):
 March 31,
2022
September 30,
2021
4.875% Senior Notes due July 2024
$250.0 $250.0 
Term Loan due January 202577.5 80.8 
Revolving Credit Facility due January 202529.0 88.4 
6.75% Senior Notes due December 2027
500.0 500.0 
AR Securitization Facility expires June 202375.0 26.8 
931.5 946.0 
Less unamortized debt issuance costs(9.3)(10.6)
Total debt922.2 935.4 
Less current portion  
Long-term debt$922.2 $935.4 

As of March 31, 2022, the term loan and revolving credit facility under the Company’s credit agreement entered into on November 26, 2019 (the “Credit Agreement”) were secured by substantially all existing and future U.S. assets of the Company, the Goderich mine in Ontario, Canada and capital stock of certain subsidiaries. As of March 31, 2022, the weighted average interest rate on all borrowings outstanding under the term loan and revolving credit facility under the Credit Agreement was approximately 2.4%.

The Company is in compliance as of March 31, 2022 with its debt covenants under the Credit Agreement. The Company routinely prepares earnings scenarios and forecasts throughout the year. Due to inflationary pressures and higher costs (including transportation costs), the Company believes it is reasonably possible that its consolidated total leverage ratio, as defined in the Credit Agreement, will exceed the maximum limit of 4.5x by the third quarter of its 2022 fiscal year. If the Company were to violate this financial covenant, the lenders could declare the Company in default and could accelerate the amounts due under its Credit Agreement. Further, a default under the Credit Agreement would trigger cross-default provisions within the Company’s other debt agreements. The Company plans to obtain a waiver or amendment to the relevant provisions of the Credit Agreement, as it has done successfully in the past, to alleviate the reasonable possibility of exceeding its consolidated total leverage ratio for at least the next twelve months. The Company has begun discussions with its lenders, however a waiver or amendment would be granted at the sole discretion of the lenders and there can be no assurance that the Company would be able to obtain such a waiver.

In April 2022, the Company utilized earnout proceeds from the 2021 sale of its South America specialty plant nutrition business and proceeds from the April 2022 sale of the South America chemicals business to repay approximately $60.6 million of its term loan balance.

9.    Commitments and Contingencies:

The Wisconsin Department of Agriculture, Trade and Consumer Protection (“DATCP”) has information indicating that agricultural chemicals are present within the subsurface area of the Company’s Kenosha, Wisconsin property. The agricultural chemicals were used by previous owners and operators of the site. None of the identified chemicals have been used in
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COMPASS MINERALS INTERNATIONAL, INC.
association with the Company’s operations since it acquired the property in 2002. DATCP directed the Company to conduct further investigations into the possible presence of agricultural chemicals in soil and ground water at the Kenosha property. The Company has completed initial on-property investigations and has provided the findings to DATCP. All investigations and mitigation activities to date, and any potential future remediation work, are being conducted under the Wisconsin Agricultural Chemical Cleanup Program (the “ACCP”), which provides for reimbursement of some of the costs. The Company may seek participation by, or cost reimbursement from, other parties responsible for the presence of any agricultural chemicals found in soil and ground water at this site if the Company does not receive an acknowledgment of no further action and is required to conduct further investigation or remedial work that may not be eligible for reimbursement under the ACCP.

The Division of Enforcement of the SEC is investigating the Company’s disclosures primarily concerning the operation of the Goderich mine, the former South American businesses, and related accounting and internal control matters including Salt interim inventory valuation methodology issues that were disclosed in the Company’s Form 10-K/A for the year ended December 31, 2020, and Form 10-Q/A for the quarter ended March 31, 2021, each filed with the SEC on September 3, 2021.

In connection with the SEC investigation, the Company’s former Senior Vice President, Salt, received a Wells Notice from the SEC staff on November 22, 2021. The Company’s former President and Chief Executive Officer, its former Chairman of the Board (who also served as its Interim Chief Executive Officer), and its former Director of Investor Relations also each received a Wells Notice from the SEC staff on November 29, 2021. The Company’s Chief Commercial Officer (who previously served as its Chief Financial Officer) received a Wells Notice from the SEC staff on November 30, 2021 and the Company received a Wells Notice from the SEC staff on December 1, 2021. A Wells Notice is a notice from the SEC staff that it has made a preliminary determination to recommend that the SEC take action against a person or company.

The Company has cooperated with the SEC investigation and initiated discussions with the SEC staff about the staff’s investigation with respect to the Company so as to gain a better understanding of specific details of the staff’s investigation. The Company does not agree with the positions taken by the SEC staff in these discussions, and is vigorously defending itself against the SEC staff’s claims. The Company is continuing discussions with the SEC staff, but there can be no assurance those discussions will result in a resolution acceptable to the Company. Any resolution reached by the Company with the SEC staff would also be subject to approval by the SEC, and there can be no assurance that it would be approved.

The Company is unable to predict the ultimate outcome of the SEC investigation or these discussions. However, based upon the current circumstances, the Company has recorded a contingent loss of $8 million in selling, general and administrative expenses in the Consolidated Statements of Operations and accrued expenses and other current liabilities in the Consolidated Balance Sheets in the second quarter of fiscal 2022. As the discussions with the SEC are continuing, there can be no assurance that the Company’s efforts to reach a final resolution with the SEC on terms acceptable to the Company will be successful or, if they are, what the timing, amount or terms of such resolution will be. The ultimate amount of loss could differ materially from the Company’s estimate and could have a material adverse effect on the Company’s results of operations, cash flows or financial position. In the event that the SEC brings a civil action, the Company believes it would have strong defenses and would vigorously defend the case.

The Company is also involved in legal and administrative proceedings and claims of various types from the ordinary course of the Company’s business.

Management cannot predict the outcome of legal claims and proceedings with certainty. Nevertheless, management believes that the outcome of legal proceeding and claims, which are pending or known to be threatened, even if determined adversely, will not, individually or in the aggregate, have a material adverse effect on the Company’s results of operations, cash flows or financial position, except as otherwise described in Note 7 and this Note 9.

The collective bargaining agreement for the Company’s Cote Blanche mine was due to expire on March 31, 2022, but has been extended while the parties negotiate a new agreement.

10.    Operating Segments:
 
The Company’s reportable segments are strategic business units that offer different products and services, and each business requires different technology and marketing strategies. In connection with the executed business disposals discussed in Note 1 and Note 2, the Company has identified two reportable segments. The Specialty Businesses that comprised the Company’s former Plant Nutrition South America reportable segment and the North America micronutrient product business previously reported within the former Plant Nutrition North America reportable segment were classified as discontinued operations for all periods presented in its Consolidated Financial Statements in this Quarterly Report on Form 10-Q. As part of the Company’s strategic shift, the Company renamed the former Plant Nutrition North America segment as the Plant Nutrition segment.
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COMPASS MINERALS INTERNATIONAL, INC.

For the three and six months ended March 31, 2022 and 2021, the Company has presented two reportable segments in its Consolidated Financial Statements: Salt and Plant Nutrition. The Salt segment produces and markets salt, consisting of sodium chloride and magnesium chloride, for use in road deicing for winter roadway safety and for dust control, food processing, water softeners and other consumer, agricultural and industrial applications. The Plant Nutrition segment produces and markets various grades of SOP.

Segment information is as follows (in millions):
Three Months Ended March 31, 2022SaltPlant
Nutrition
Corporate
& Other(a)
Total
Sales to external customers$391.3 $54.3 $2.9 $448.5 
Intersegment sales 0.7 (0.7)— 
Shipping and handling cost153.4 6.7  160.1 
Operating earnings (loss)