UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
þ
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017December 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
compasslogoa05.jpgcmp-20221231_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)
Indicate by check mark whether the registrant (1) has filed all reports required
Securities registered pursuant to be filed by Section 13 or 15(d)12(b) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.            
Yes: þ     No:  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
Yes: þ     No:  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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.Yes☑No☐
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)Yes☑No☐
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 filer☑Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨
Smaller 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.☐
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).Yes☐No☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes: ¨     No: þ
The number of shares outstanding of the registrant’s common stock, $0.01 par value per share, as of October 27, 2017,February 3, 2023, was 33,827,501 shares.41,098,585 shares.

COMPASS MINERALS INTERNATIONAL, INC.

COMPASS MINERALS INTERNATIONAL, INC.

TABLE OF CONTENTS
PART I. FINANCIAL INFORMATIONPage
Page
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets as of December 31, 2022 (unaudited) and September 30, 2017, (unaudited) and December 31, 20162022
2
Consolidated Statements of Operations for the three and nine months ended September 30, 2017,December 31, 2022 and 20162021 (unaudited)
3
Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017,December 31, 2022 and 20162021 (unaudited)
4
Consolidated StatementStatements of Stockholders’ Equity for the ninethree months ended September 30, 2017December 31, 2022 and 2021 (unaudited)
5
Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017,December 31, 2022 and 20162021 (unaudited)
6
7
2322
3433
34
PART II. OTHER INFORMATION
35
35
35
3536
3536
3536
Exhibits
36
36
EXHIBIT INDEX
37

1
COMPASS MINERALS INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
(Unaudited)  (Unaudited)
September 30,
2017		 December 31,
2016		 December 31,
2022		September 30,
2022
ASSETSASSETSASSETS
Current assets:   Current assets:
Cash and cash equivalents$39.1
 $77.4
Cash and cash equivalents$146.1 $46.1 
Receivables, less allowance for doubtful accounts of $10.9 in 2017 and $9.0 in 2016
209.6
 320.9
Receivables, less allowance for doubtful accounts of $3.8 at December 31, 2022 and $3.4 at September 30, 2022Receivables, less allowance for doubtful accounts of $3.8 at December 31, 2022 and $3.4 at September 30, 2022202.2 167.2 
Inventories336.0
 280.6
Inventories301.0 304.4 
Other47.4
 36.1
Other35.4 44.3 
Total current assets632.1
 715.0
Total current assets684.7 562.0 
Property, plant and equipment, net1,140.0
 1,092.3
Property, plant and equipment, net774.8 776.6 
Intangible assets, net150.9
 157.6
Intangible assets, net45.3 45.4 
Goodwill421.6
 412.2
Goodwill56.8 56.4 
Investment in equity investee24.7
 24.9
Equity method investmentsEquity method investments45.7 46.6 
Other77.5
 64.5
Other157.4 156.5 
Total assets$2,446.8
 $2,466.5
Total assets$1,764.7 $1,643.5 
   
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:   Current liabilities:
Current portion of long-term debt$55.4
 $130.2
Current portion of long-term debt$— $— 
Accounts payable94.6
 100.8
Accounts payable113.4 114.7 
Accrued expenses70.2
 105.3
Accrued salaries and wages25.5
 22.6
Accrued salaries and wages15.4 22.2 
Income taxes payable—
 4.4
Income taxes payable6.6 1.0 
Accrued interest5.3
 8.7
Accrued interest8.5 14.1 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities74.8 81.1 
Total current liabilities251.0
 372.0
Total current liabilities218.7 233.1 
Long-term debt, net of current portion1,274.2
 1,194.8
Long-term debt, net of current portion832.1 947.6 
Deferred income taxes, net123.7
 130.8
Deferred income taxes, net59.2 63.4 
Other noncurrent liabilities49.9
 51.8
Other noncurrent liabilities144.9 143.0 
Commitments and contingencies (Note 8)

 

Commitments and contingencies (Note 10)
Commitments and contingencies (Note 10)
Stockholders’ equity:   Stockholders’ equity:
Common stock: $0.01 par value, 200,000,000 authorized shares; 35,367,264 issued shares0.4
 0.4
Common stock: $0.01 par value, 200,000,000 authorized shares; 42,197,964 issued shares at December 31, 2022 and 35,367,264 issued shares at September 30, 2022Common stock: $0.01 par value, 200,000,000 authorized shares; 42,197,964 issued shares at December 31, 2022 and 35,367,264 issued shares at September 30, 20220.4 0.4 
Additional paid-in capital101.2
 97.1
Additional paid-in capital403.4 152.1 
Treasury stock, at cost — 1,540,418 shares at September 30, 2017, and 1,577,960 shares at December 31, 2016(2.9) (3.0)
Treasury stock, at cost — 1,174,077 shares at December 31, 2022 and 1,196,300 shares at September 30, 2022Treasury stock, at cost — 1,174,077 shares at December 31, 2022 and 1,196,300 shares at September 30, 2022(7.6)(7.3)
Retained earnings701.3
 727.5
Retained earnings219.9 226.5 
Accumulated other comprehensive loss(52.0) (104.9)Accumulated other comprehensive loss(106.3)(115.3)
Total stockholders’ equity748.0
 717.1
Total stockholders’ equity509.8 256.4 
Total liabilities and stockholders’ equity$2,446.8
 $2,466.5
Total liabilities and stockholders’ equity$1,764.7 $1,643.5 
The accompanying notes are an integral part of the consolidated financial statements.

2

COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except share and per share data)
Three Months Ended
September 30,		 Nine Months Ended
September 30,		 Three Months Ended
December 31,
2017 2016 2017 2016 20222021
Sales$290.7
 $179.6
 $906.5
 $694.8
Sales$352.4 $331.5 
Shipping and handling cost45.5
 38.4
 179.8
 164.9
Shipping and handling cost107.4 95.7 
Product cost169.1
 96.0
 524.1
 340.8
Product cost175.0 175.9 
Gross profit76.1
 45.2
 202.6
 189.1
Gross profit70.0 59.9 
Selling, general and administrative expenses44.7
 25.7
 123.8
 79.8
Selling, general and administrative expenses42.1 39.5 
Operating earnings31.4
 19.5
 78.8
 109.3
Operating earnings27.9 20.4 
       
Other expense (income):       
Other (income) expense:Other (income) expense:
Interest incomeInterest income(1.1)(0.3)
Interest expense13.5
 5.4
 39.5
 16.8
Interest expense13.9 13.9 
Net (earnings) loss in equity investee(0.4) 0.4
 (0.6) 1.7
Other, net(1.2) 1.5
 0.5
 1.6
Earnings before income taxes19.5
 12.2
 39.4
 89.2
Income tax (benefit) expense(12.5) 3.1
 (7.7) 24.1
Net earnings$32.0
 $9.1
 $47.1
 $65.1
Loss (gain) on foreign exchangeLoss (gain) on foreign exchange2.5 (0.4)
Net loss in equity investeeNet loss in equity investee0.9 0.4 
Other expense, netOther expense, net0.1 0.1 
Earnings from continuing operations before income taxesEarnings from continuing operations before income taxes11.6 6.7 
Income tax expense (benefit) from continuing operationsIncome tax expense (benefit) from continuing operations11.9 (1.2)
Net (loss) earnings from continuing operationsNet (loss) earnings from continuing operations(0.3)7.9 
Net loss from discontinued operationsNet loss from discontinued operations— (5.5)
Net (loss) earningsNet (loss) earnings$(0.3)$2.4 
       
Basic net earnings per common share$0.94
 $0.27
 $1.38
 $1.92
Diluted net earnings per common share$0.94
 $0.27
 $1.38
 $1.92
Basic net (loss) earnings from continuing operations per common shareBasic net (loss) earnings from continuing operations per common share$(0.01)$0.23 
Basic net loss from discontinued operations per common shareBasic net loss from discontinued operations per common share— (0.16)
Basic net (loss) earnings per common shareBasic net (loss) earnings per common share$(0.01)$0.07 
Diluted net (loss) earnings from continuing operations per common shareDiluted net (loss) earnings from continuing operations per common share$(0.01)$0.23 
Diluted net loss from discontinued operations per common shareDiluted net loss from discontinued operations per common share— (0.16)
Diluted net (loss) earnings per common shareDiluted net (loss) earnings per common share$(0.01)$0.07 
       
Weighted-average common shares outstanding (in thousands):       Weighted-average common shares outstanding (in thousands):
Basic33,825
 33,786
 33,817
 33,772
Basic39,751 34,060 
Diluted33,825
 33,789
 33,817
 33,775
Diluted39,751 34,089 
       
Cash dividends per share$0.72
 $0.695
 $2.16
 $2.085
The accompanying notes are an integral part of the consolidated financial statements.



3
COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in millions)
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Net earnings$32.0
 $9.1
 $47.1
 $65.1
Other comprehensive income (loss):       
Unrealized gain from change in pension obligations, net of tax of $(0.0) in both the three and nine months ended September 30, 2017, and 2016.—
 —
 0.2
 0.2
Unrealized (loss) gain on cash flow hedges, net of tax of $0.4 and $0.9 in the three and nine months ended September 30, 2017, respectively, and $0.0 and $(0.8) in the three and nine months ended September 30, 2016, respectively.(0.7) (0.1) (1.6) 1.3
Cumulative translation adjustment46.1
 (3.9) 54.3
 27.2
Comprehensive income$77.4
 $5.1
 $100.0
 $93.8

 Three Months Ended
December 31,
 20222021
Net (loss) earnings$(0.3)$2.4 
Other comprehensive income (loss):
Unrealized gain from change in pension obligations, net of tax of $0.0 for the three months ended December 31, 2022 and 20210.1 0.1 
Unrealized loss on cash flow hedges, net of tax of $0.4 and $0.7 for the three months ended December 31, 2022 and 2021, respectively(2.8)(2.0)
Cumulative translation adjustment11.7 (3.8)
Comprehensive income (loss)$8.7 $(3.3)
The accompanying notes are an integral part of the consolidated financial statements.



4
COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITY
For the ninethree months ended September 30, 2017December 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, 2022$0.4 $152.1 $(7.3)$226.5 $(115.3)$256.4 
Comprehensive (loss) income— — — (0.3)9.0 8.7 
Dividends on common stock ($0.15 per share)— — — (6.3)— (6.3)
Private placement of common stock— 240.7 — — — 240.7 
Shares issued for stock units, net of shares withheld for taxes— — (0.3)— — (0.3)
Stock-based compensation— 10.6 — — — 10.6 
Balance, December 31, 2022$0.4 $403.4 $(7.6)$219.9 $(106.3)$509.8 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 Total
Balance, December 31, 2016$0.4
 $97.1
 $(3.0) $727.5
 $(104.9) $717.1
Comprehensive income      47.1
 52.9
 100.0
Dividends on common stock  0.1
   (73.3)   (73.2)
Shares issued for stock units  (0.1) 0.1
     —
Stock options exercised  0.3
 

     0.3
Stock-based compensation  3.8
       3.8
Balance, September 30, 2017$0.4
 $101.2
 $(2.9) $701.3
 $(52.0) $748.0


 Common
Stock		Additional
Paid-In
Capital		Treasury
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		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 
The accompanying notes are an integral part of the consolidated financial statements.



5
COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
 Three Months Ended
December 31,
 20222021
Cash flows from operating activities:
Net (loss) earnings$(0.3)$2.4 
Adjustments to reconcile net (loss) earnings to net cash flows provided by operating activities:
Depreciation, depletion and amortization23.9 28.3 
Amortization of deferred financing costs0.7 0.7 
Stock-based compensation10.6 3.3 
Deferred income taxes(5.4)(1.4)
Unrealized foreign exchange loss2.0 2.2 
Loss on impairment of long-lived assets— 8.4 
Net loss in equity investees0.9 0.4 
Other, net1.0 0.1 
Changes in operating assets and liabilities:
Receivables(34.0)(68.8)
Inventories5.1 12.6 
Other assets10.4 (1.2)
Accounts payable and accrued expenses and other current liabilities(13.1)2.7 
Other liabilities0.3 (4.0)
Net cash provided by (used in) operating activities2.1 (14.3)
Cash flows from investing activities:
Capital expenditures(19.9)(14.5)
Investments in equity method investees— (28.2)
Other, net(0.2)1.5 
Net cash used in investing activities(20.1)(41.2)
Cash flows from financing activities:
Proceeds from revolving credit facility borrowings16.7 162.4 
Principal payments on revolving credit facility borrowings(168.2)(122.8)
Proceeds from issuance of long-term debt35.4 32.5 
Principal payments on long-term debt— (3.3)
Net proceeds from private placement of common stock240.7 — 
Dividends paid(6.3)(5.3)
Proceeds from stock options exercised— 0.2 
Shares withheld to satisfy employee tax obligations(0.3)— 
Other, net(0.3)(0.4)
Net cash provided by financing activities117.7 63.3 
Effect of exchange rate changes on cash and cash equivalents0.3 0.1 
Net change in cash and cash equivalents100.0 7.9 
Cash and cash equivalents, beginning of the year46.1 21.0 
Cash and cash equivalents, end of period146.1 28.9 
Less: cash and cash equivalents included in current assets held for sale— (8.6)
Cash and cash equivalents of continuing operations, end of period$146.1 $20.3 
  Nine Months Ended
September 30,
 2017 2016
Cash flows from operating activities:   
Net earnings$47.1
 $65.1
Adjustments to reconcile net earnings to net cash flows provided by operating activities:   
Depreciation, depletion and amortization89.1
 62.7
Finance fee amortization1.7
 1.0
Early extinguishment of debt—
 0.1
Stock-based compensation3.8
 3.8
Deferred income taxes(11.9) (4.5)
Net (earnings) loss in equity method investee(0.6) 1.7
Gain on settlement of acquisition-related contingent consideration(1.9) —
Other, net(1.7) 0.5
Changes in operating assets and liabilities:   
Receivables116.6
 33.6
Inventories(49.0) 3.1
Other assets(20.2) (12.8)
Accounts payable and accrued expenses(46.1) (46.6)
Other liabilities(0.2) (0.6)
Net cash provided by operating activities126.7
 107.1
Cash flows from investing activities:   
Capital expenditures(81.0) (148.7)
Investment in equity method investee—
 (4.7)
Other, net(3.8) (2.9)
Net cash used in investing activities(84.8) (156.3)
Cash flows from financing activities:   
Proceeds from revolving credit facility borrowings183.5
 264.9
Principal payments on revolving credit facility borrowings(137.9) (147.4)
Proceeds from issuance of long-term debt52.9
 850.0
Principal payments on long-term debt(95.6) (474.5)
Acquisition-related contingent consideration payment(12.8) —
Dividends paid(73.3) (70.5)
Fees paid to refinance debt(0.1) (1.5)
Deferred financing costs(0.7) (5.8)
Proceeds received from stock option exercises0.3
 0.7
Excess tax benefit (deficiency) from equity compensation awards—
 (0.2)
Other, net1.0
 —
Net cash (used in) provided by financing activities(82.7) 415.7
Effect of exchange rate changes on cash and cash equivalents2.5
 7.3
Net change in cash and cash equivalents(38.3) 373.8
Cash and cash equivalents, beginning of the year77.4
 58.4
Cash and cash equivalents, end of period$39.1
 $432.2

Supplemental cash flow information: 
  
Supplemental cash flow information:  
Interest paid, net of amounts capitalized$33.5
 $18.6
Interest paid, net of amounts capitalized$18.8 $18.6 
Income taxes paid, net of refunds$22.9
 $54.0
Income taxes paid, net of refunds$2.0 $5.5 
The accompanying notes are an integral part of the consolidated financial statements.

6
COMPASS MINERALS INTERNATIONAL, INC.

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

1.Accounting Policies and Basis of Presentation:
1.    Accounting Policies and Basis of Presentation:

Compass Minerals International, Inc. (“CMI”), through its subsidiaries (collectively, the “Company”), is a leading producerglobal provider of essential minerals thatfocused on safely delivering where and when it matters to help solve nature’s challenges includingfor customers and communities. The Company��s salt forproducts help keep roadways safe during winter roadway safetyweather and are used in numerous other consumer, industrial, chemical and agricultural uses, specialtyapplications. Its plant nutrition minerals thatbusiness is the leading North American producer of sulfate of potash (“SOP”), which is used in the production of specialty fertilizers for high-value crops and turf and helps improve the quality and yield of crops, and specialty chemicals for water treatment and other industrial processes.while supporting sustainable agriculture. The Company’s principal products are salt, consisting of sodium chloride and magnesium chloride, sulfateand SOP. Additionally, the Company is pursuing development of potasha sustainable lithium brine resource to support the North American battery market and is a minority owner of Fortress North America, LLC (“SOP”Fortress”), various micronutrient products, and specialty chemicals for water treatment and other industrial processes.a next-generation fire retardant company. The Company’s production sites are located in the United States (“U.S.”), Canada Brazil and the United Kingdom (the “U.K.(“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. The Company also provides records management services to businesses located in the U.K. In October 2016, the Company acquired Produquímica Indústria e Comércio S.A. (“Produquímica”), which operates two primary businesses in Brazil – agricultural productivity and chemical solutions.
 
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 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 consolidated financial statements. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the annual period ended September 30, 2022, as filed with the Securities and Exchange Commission (the “SEC”) in its Annual Report on Form 10-K on December 14, 2022. 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 Annual Report on Form 10-K for the annual period ended September 30, 2022. 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 11 for information on the Company’s reportable segments.

7
COMPASS MINERALS INTERNATIONAL, INC.
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

Following an evaluation of the strategic fit of certain of the Company’s businesses and subsequent restructuring of its former South American Plant Nutrition segment to enable separate sales processes for its chemicals and specialty plant nutrition businesses and equity investment in Fermavi Eletroquímica Ltda. (“Fermavi”), in fiscal 2021 the Company’s Board of Directors approved the plan to sell each of these businesses and the North America micronutrient business (the “Specialty Businesses”) with a goal of reducing the Company’s leverage and enabling increased focus on optimizing the Company’s core businesses.

The Company concluded that the sale of the Specialty Businesses represented a strategic shift for the Company that would have a material effect on its operations and financial results. Consequently, the Specialty businesses were reclassified as discontinued operations on the Consolidated Statements of Operations. See Note 2 for further discussion of the sales of these businesses.

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

2.    Discontinued Operations:

During fiscal 2021 the Company sold its South America specialty plant nutrition business and equity investment in Fermavi and its North America micronutrient business. In connection with the sale of its South America specialty plant nutrition business the Company received net cash of approximately $318.4 million with 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.

Also in fiscal 2021, the Company completed the sale of its North America micronutrient business for approximately $56.7 million and its investment in Fermavi for R$45 million Brazilian reais (including R$30 million Brazilian reais of deferred purchase price). 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). As of December 31, 2022 approximately R$22.5 million Brazilian reais of deferred proceeds remains outstanding.

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 $51.5 million based on exchange rates at the time of receipt, including a post-closing adjustment and compensation of $6.4 million for cash on hand that transferred to the buyer. The Company also paid fees of $2.4 million related to this sale. The Company recognized a loss recovery of $1.6 million during the three months ended June 30, 2022, an incremental loss from the sale of $23.1 million during the nine months ended June 30, 2022 and released $49.5 million from accumulated currency translation adjustment (“CTA”). The sale included 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 until each of the Specialty Businesses were sold.

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 Statements of Operations present the revenue and expenses that were reclassified from the specified line items to discontinued operations.
8
COMPASS MINERALS INTERNATIONAL, INC.

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

Three Months Ended
December 31,
2021
Sales$22.4 
Shipping and handling cost1.2 
Product cost10.9 
Gross profit10.3 
Selling, general and administrative expenses1.6 
Operating earnings8.7 
Loss on foreign exchange3.1 
Net loss on adjustment to fair value less estimated costs to sell8.4 
Other income, net(0.2)
Loss from discontinued operations before income taxes(2.6)
Income tax expense2.9 
Net loss from discontinued operations$(5.5)

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

Three Months Ended
December 31,
2021
Loss on impairment of long-lived assets$8.4 
Capital expenditures(0.7)

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 softening, 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.

9
COMPASS MINERALS INTERNATIONAL, INC.
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.

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 11 for disaggregation of sales by segment, type and geographical region.

4.    Inventories:
Inventories consist of the following (in millions):
 December 31,
2022		September 30,
2022
Finished goods$242.3 $251.6 
Raw materials and supplies58.7 52.8 
Total inventories$301.0 $304.4 

10
COMPASS MINERALS INTERNATIONAL, INC.
5.    Property, Plant and Equipment, Net:
Property, plant and equipment, net, consists of the following (in millions):
 December 31,
2022		September 30,
2022
Land, buildings and structures, and leasehold improvements$543.0 $534.8 
Machinery and equipment1,058.2 1,026.3 
Office furniture and equipment56.9 56.8 
Mineral interests168.7 167.1 
Construction in progress48.0 64.3 
 1,874.8 1,849.3 
Less: accumulated depreciation and depletion(1,100.0)(1,072.7)
Property, plant and equipment, net$774.8 $776.6 

6.    Goodwill and Intangible Assets, Net:

Amounts related to the Company’s amortization of intangible assets are as follows (in millions):
Three Months Ended
December 31,
20222021
Aggregate amortization expense$0.4 $0.4 
Amounts related to the Company’s goodwill are as follows (in millions):
December 31,
2022		September 30,
2022
Plant Nutrition$51.0 $50.9 
Other5.8 5.5 
Total$56.8 $56.4 
The change in goodwill between September 30, 2022, and December 31, 2022 was due to the impact from translating foreign-denominated amounts to U.S. dollars. As of December 31, 2022, there were no indicators necessitating an interim impairment test of the Company’s reporting units based on the Company’s review of operating performance, among other factors, for the relevant reporting units.

7.    Equity Method Investments:

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. The Company may recognize its share of an investee’s earnings on a lag, if an investee’s financial results are not available in a timely manner.


The accompanying unaudited consolidated financial statements have been preparedFor certain of the Company's equity method investments, such as investments where the capital structure of the equity investment results in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”different liquidation rights and priorities than what is reflected by the underlying percentage ownership interests, the Company's proportionate share of net earnings is accounted for using the Hypothetical Liquidation at Book Value ("HLBV") for interim financial information and withmethodology available under the instructionsequity method of accounting. When applying HLBV, the Company determines the amount that would be received if the investee were to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not includeliquidate all of its assets and distribute the information and footnotes required by U.S. GAAP for complete financial statements. These unaudited consolidated financial statements should be read in conjunction withresulting cash to the consolidated financial statements ofinvestors based on contractually defined liquidation priorities, assuming the Company for the year ended December 31, 2016, as filed with the Securities and Exchange Commission in its Annual Report on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included.net assets were liquidated at their net book value.

The Company experiences a substantial amount of seasonalityevaluates its equity method investments for impairment whenever events or changes in its sales with respect to its deicing salt products. As a result, sales and operating income are generally higher in the first and fourth quarters and lower during the second and third quarters 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 second, third and fourth quarters to meet the estimated requirements for the upcoming 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 resultscircumstances indicate that may be expected for the full year.

The Company’s plant nutrition business is also seasonal. For example, the strongest demand for the Company’s plant nutrition products in Brazil typically occurs during the spring planting season. As a result, the Company and its customers generally build inventories during the low demand periods of the year to ensure timely product availability during the peak sales season. The seasonality of this demand results in the Company’s sales volumes and net sales for the Plant Nutrition South America segment usually being the highest during the third and fourth quarters of each year (as the spring planting season begins in September in Brazil).
Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (the “FASB”) issued guidance to simplify the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amountamounts of goodwill. All other goodwill impairment guidance will remain largely unchanged. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permittedsuch investments may not be recoverable.


for annual and interim goodwill impairment testing dates after January 1, 2017. The Company plans to early adopt the guidance for its 2017 impairment testing.
11

In August 2016, the FASB issued guidance to clarify how certain cash receipts and payments should be presented and classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.

In June 2016, the FASB issued guidance for estimating credit losses on certain types of financial instruments, including trade receivables, by introducing an approach based on expected losses. The expected loss approach will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, requires a modified retrospective transition method and early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.

In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The Company adopted this guidance in the first quarter of 2017 on a prospective basis, and prior periods have not been adjusted. The Company elected the option available under the new guidance to continue to estimate the effect of forfeitures in the calculation of share-based payment expense. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued guidance which requires lessees to recognize on their balance sheet a right-of-use asset which represents a lessee’s right to use the underlying asset. Under this guidance, an entity must also recognize a lease liability which represents a lessee’s obligation to make lease payments for the right to use the asset. In addition, the standard requires expanded qualitative and quantitative disclosures. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and requires a modified retrospective transition method. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.

In July 2015, the FASB issued guidance that requires entities to measure inventory within the scope of the standard at the lower of cost or net realizable value. “Net realizable value” is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company adopted this guidance in the first quarter of 2017. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued guidance to provide a single, comprehensive revenue recognition model for all contracts with customers. The new revenue recognition model supersedes existing revenue recognition guidance and requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration an entity expects to receive in exchange for those goods or services. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those years, and early adoption is permitted. The guidance permits the use of either a full or modified retrospective transition method. The Company plans to use the modified retrospective transition method. While the Company has not identified any material differences in the amount and timing of revenue recognition for the revenue streams management has reviewed to date, the Company is still evaluating the impact of this guidance and has not concluded on the overall impact of adopting this guidance. Adoption of this guidance will significantly impact the Company’s financial statement disclosures regarding revenue.

2.
Table of Contents
Acquisition:COMPASS MINERALS INTERNATIONAL, INC.

Background and Financing

On December 16, 2015, Compass Minerals do Brasil Ltda., a wholly owned subsidiary ofNovember 2, 2021, the Company (“Compass Minerals Brazil”), entered into (i)announced an investment in Fortress, a subscription agreementnext-generation fire retardant business dedicated to developing and other covenants (as amended,producing a portfolio of magnesium chloride-based fire retardant products to help combat wildfires. As of December 31, 2022, the “Subscription Agreement”) with certain shareholders of Produquímica and Produquímica and (ii) a share purchase and sale agreement and other covenants (the “Purchase Agreement”) with certain shareholders of Produquímica and Produquímica. Pursuant to the Subscription Agreement and the Purchase Agreement, Compass Minerals Brazil acquired 35% of the issued and outstanding capital stock of Produquímica on December 23, 2015, for R$452.4 million Brazilian Reais (“R” or “BRL”), or $114.1 million U.S. dollars at closing, and paid additional consideration of $4.7Company has invested $50 million in Fortress in exchange for an ownership interest of approximately 45%. Under the second quarter of 2016 related to Produquímica’s 2015 financial performance.

The Subscription Agreement also contained a put right (the “Put”), allowing the Produquímica shareholders to sell the remainder of their interests in Produquímica to Compass Minerals Brazil. On August 12, 2016, Produquímica shareholders notified Compass

Minerals Brazil of their exercise of the Put. On October 3, 2016, the Company acquired the remaining 65% of the issued and outstanding capital stock of Produquímica.

The Company entered into a new $100.0 million term loan tranche in the fourth quarter of 2015 to fund the acquisition of the 35% of Produquímica’s equity. In September 2016, the Company entered into a new $450.0 million term loan tranche to fund the acquisition of the remaining 65% of Produquímica’s equity. See Note 7 for more information regarding these financings.

Based in São Paulo, Brazil, Produquímica operates two primary businesses – agricultural productivity and chemical solutions. The agricultural productivity division manufactures and distributes a broad offering of specialty plant nutrition solution-based products. These include micronutrients, controlled release fertilizers and other specialty supplements that are used in direct soil and foliar applications, as well as through irrigation systems and for seed treatment. Many of these products are developed through Produquímica’s research and development capabilities. Produquímica also manufactures and markets specialty chemicals used primarily in the industrial chemical and water treatment industries in Brazil. The acquisition broadens the Company’s geographic scope of operations and expands its specialty plant nutrition portfolio while reducing the Company’s dependence on winter weather conditions.

Purchase Price Allocation

The Company accounted for the Produquímica acquisition as a business combination in accordance with U.S. GAAP. The accounting guidance for business combinations requires estimates and judgments regarding expectations for future cash flows of the acquired entity as well as other valuation assumptions and an allocation to the net assets acquired. The fair values assigned to tangible and intangible assets acquired and liabilities assumed, including contingent consideration, are based on management’s best estimates. As of September 30, 2017, the purchase price allocation was finalized.

A summary of the acquisition-date fair value of the consideration transferred is presented in the table below:
Fair Value of Consideration Transferred (in millions)October 3, 2016
Cash paid at closing$317.1
Additional cash due at closing20.6
Fair value of contingent consideration31.4
Fair value of 35% equity investment178.7
Total$547.8

The calculation of the purchase price at closing was based in part on an estimate of full-year 2016 operating results of Produquímica. As of the acquisition closing date, some of the periods included in the 2016 operating results of Produquímica had not ended and actual results were not known. The portion of the purchase price which was based on management’s estimate of results relating to periods which occurred after the closing date was classified as contingent consideration. There were no thresholds or tiers in the payment structure, and management used an income approach to estimate the acquisition date fair value of the contingent consideration. As of the closing date, the Company had estimated the fair value of contingent consideration to be $31.4 million.

During the first quarter of 2017, the purchase price was adjusted based on the final full-year 2016 operating results of Produquímica, and a final payment was made to the Produquímica shareholders. The difference between the estimated closing date fair value of the contingent consideration and the final amount paid resulted in the recognition of a gain of $1.9 million in the first quarter of 2017, which was included as a component of operating earnings in the Company’s Plant Nutrition South America segment.

Prior to the acquisition closing date, the Company accounted for its 35% interest in Produquímica as an equity method investment. The acquisition-date fair value of the previously held equity investment was $178.7 million and is included in the consideration transferred. To measure the acquisition closing date fair value ofHLBV methodology available under the equity interest, the Company utilized a market-based approach which relied on Level 3 inputs (see Note 12 for a discussion of the levels in the fair value hierarchy). The Company recognized a $59.3 million non-cash gain during the fourth quarter of 2016 as a result of remeasuring its prior equity interest in Produquímica held before the business combination.

Under the acquisition method of accounting, the total purchase price is allocatedCompany reflects its share of the income or loss of Fortress, net of tax, in its results each period on a preliminary basis to Produquímica’s assetsone quarter reporting lag. The Company recorded $0.5 million and liabilities based upon their estimated fair$0.1 million for its share of Fortress’ net losses in the three months ended December 31, 2022 and 2021, respectively.

The carrying value as of the closing date of the acquisition. During the first nine months of 2017, the Company adjusted the preliminary purchase price allocation based on additional information obtained regarding facts and circumstances which existed as of the acquisition date. These adjustments resultedCompany’s equity investment in a decrease of $3.6 million to goodwill, a decrease of $4.4 million to other noncurrent liabilities and an increase of $0.8 million to net deferred income taxes. Additionally,

during the third quarter of 2017 in connection with finalizing the accounting for the acquisition, the Company recorded an adjustment increasing depreciation expense by $1.9 million. This adjustment resulted from finalizing the Company’s estimate of the useful lives of acquired tangible assets.

Based upon the final purchase price and the updated valuation, the final purchase price allocationFortress is presented in the table below:
Recognized amounts of identifiable assets acquired and liabilities assumed (in millions):Purchase Price Allocation
Cash and cash equivalents$73.8
Accounts receivable89.4
Inventory77.1
Other current assets13.7
Property, plant and equipment189.4
Identified intangible assets81.2
Investment in equity method investee24.5
Other noncurrent assets6.9
Accounts payable(27.1)
Accrued expenses(40.3)
Current portion of long-term debt(129.6)
Other current liabilities(14.0)
Long-term debt, net of current portion(62.0)
Deferred income taxes, net(66.0)
Other noncurrent liabilities(21.9)
Total identifiable net assets195.1
Goodwill352.7
Total fair value of business combination$547.8

The total purchase price in excess of theits share of Fortress’s net identifiable assets has been recognized as goodwill in the amount of $352.7 million and has been assigned to the Company’s new Plant Nutrition South America segment. The goodwill recognized is attributable primarily to expected synergies with the Company’s existing plant nutrition business and the assembled workforce of Produquímica. The future deductibility of the goodwill for income tax purposes is uncertain at this time.

The Company determined that the book value of the accounts receivables included in the purchase price allocation approximates their fair value due to their short-term nature. The gross contractual amounts of the receivables exceeded their fair value by the amount of an allowance for doubtful accounts of approximately $8 million.

In connection with the acquisition, the Company acquired identifiable intangible assets which consisted principally of trade names, developed technologies and customer relationships. The fair values were determined using Level 3 inputs (see Note 12 for a discussion of the levels in the fair value hierarchy). The fair values of the identifiable intangible assets were estimated using an income approach method.

The estimated fair values and weighted average amortization period of the identifiable intangible assets are presented in the table below:
 
Estimated Fair Value
(in millions)
Weighted-Average Amortization Period
(in years)
Trade names$36.9
11.0
Developed technology37.5
5.3
Customer relationships6.8
13.5
Total identifiable intangible assets$81.2
8.6


Impact on Operating Results

During the three and nine months ended September 30, 2017, Produquímica contributed revenues of $123.2 million and $250.6 million, respectively, and net earnings of $29.5 million and $20.7 million, respectively, to the Company.

The following table presents combined unaudited pro forma results for the three and nine months ended September 30, 2016. The pro forma financial information combines the historical results of operations for Produquímica and Compass Minerals as though the acquisition occurred on January 1, 2015. The pro forma information does not purport to represent the actual results of operations that Produquímica and Compass Minerals would have achieved had the companies been combined during the periods presented nor is the information intended to project the future results of operations. Certain adjustments to Produquímica’s historical results have been made to conform to U.S. GAAP and amounts have been translated to U.S. dollars.
Unaudited Combined Pro Forma Results of Operations (in millions)Three Months Ended
September 30, 2016		Nine Months Ended
September 30, 2016
Revenues$289.7
$938.1
Net earnings18.5
68.7

Significant adjustments to the pro forma information above include:
Adjustments to exclude non-recurring direct incremental costs of the acquisition;
Adjustments to expenses relating to the financing transactions described above;
Adjustments to reflect incremental amortization and depreciation from the preliminary allocation of the purchase price;
Adjustments to reflect certain income tax effects of the acquisition; and
Adjustments to remove net earnings related to the previously held 35% equity interest in Produquímica.

3.Inventories:
Inventories consist of the following (in millions):
 September 30,
2017		 December 31,
2016
Finished goods$260.3
 $206.1
Raw materials and supplies75.7
 74.5
Total inventories$336.0
 $280.6

4.Property, Plant and Equipment, Net:
Property, plant and equipment, net, consists of the following (in millions):
 September 30,
2017		 December 31,
2016
Land, buildings and structures, and leasehold improvements$507.6
 $480.1
Machinery and equipment914.9
 848.2
Office furniture and equipment51.5
 28.3
Mineral interests173.1
 168.5
Construction in progress267.2
 243.6
 1,914.3
 1,768.7
Less accumulated depreciation and depletion(774.3) (676.4)
Property, plant and equipment, net$1,140.0
 $1,092.3

5.Goodwill and Intangible Assets, Net:
Aggregate amortization expense for the Company’s finite-lived intangible assets was $4.1 million and $1.1 million in the third quarters of 2017 and 2016, respectively, and $12.2 million and $3.2 million in the first nine months of 2017 and 2016, respectively. The increases in amortization expense were primarily due to amortization of the additional finite-lived intangible assets which were recognized as a result of the purchase price allocation for the Produquímica acquisition (see Note 2 for more information).

The Company had goodwill of $421.6 million and $412.2$27 million as of September 30, 2017, and December 31, 2016, respectively,2022. The basis difference primarily represents incremental value attributable to intangible assets and goodwill that has not been recognized in its consolidatedthe financial statements of Fortress. The Company has liquidation preference under the terms of Fortress’ LLC agreement. Additionally, the Company has the right to purchase units from other Fortress unit holders and the right of first refusal to purchase all or any portion of any available Fortress units, both subject to certain conditions.

The balance sheets. Of these amounts, $57.5of the Company’s net investment in Fortress of $45.3 million and $53.6$45.8 million of the amounts recorded for goodwill as of September 30, 2017, and December 31, 2016, respectively, were recorded in the Company’s Plant Nutrition North America segment, and $358.1 million and $352.8 million of the amounts recorded for goodwill as of September 30, 2017 and December 31, 2016, respectively, were recorded in the Company’s Plant Nutrition South America segment. The remaining amounts in both periods were immaterial and recorded in the Company’s Salt segment and corporate and other. The change in goodwill between December 31, 2016,2022 and September 30, 2017, was primarily due to2022, respectively is recorded in equity method investments in the impact from translating foreign-denominated amounts to U.S. dollarsConsolidated Balance Sheets. The Company also has other immaterial equity investments of $0.4 million and purchase price adjustments made related to$0.8 million as of December 31, 2022 and September 30, 2022, respectively, for which it has recorded $0.4 million and $0.3 million for its share of losses in the Produquímica acquisition (see Note 2 for more information).three months ended December 31, 2022 and 2021, respectively.

6.Income Taxes:
8.    Income Taxes:

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, base erosion and anti-abuse tax, rate differentials, foreign mining taxes, domestic manufacturing deductions,and for the period ended December 31, 2022, valuation allowances recorded on deferred tax assets. For the period ended December 31, 2021, there were also interest expense recognition differences for book and tax purposespurposes.

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 in the U.S. over the three-year period ended December 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, during the three months ended December 31, 2022, a partial release of valuation allowance in connection withof $6.1 million has been recorded to recognize only the acquisitionportion of Produquímica. The Company’s effective rate is impacted by permanentthe U.S. deferred tax deductions which have a less favorable impact as pretax income increases.

During the nine months ended September 30, 2017, the Company determined itassets that is more likely than not that a portionto be realized. The amount of its Brazilianthe deferred tax assets acquired in connection with the acquisition of Produquímica willconsidered realizable, however, could be used to reduce taxable income. Based on currentadjustedif estimates of future taxable income the Company projects to release approximately $25 million of valuation allowances during the year endingcarryforward 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 December 31, 2017. For the nine months ended2022, and September 30, 2017, the Company included approximately $12 million of this valuation allowance release in the calculation of the estimated annual effective tax rate for the current fiscal year, and approximately $13 million as a discrete income tax benefit.
The Company had $52.0 million and $53.6 million as of September 30, 2017, and December 31, 2016, respectively, of gross foreign federal net operating loss (“NOL”) carryforwards that have no expiration date. In addition,2022, the Company had $10.8 $87.2 million and $7.5$94.1 million, as of September 30, 2017, and December 31, 2016, respectively of gross foreign federal NOL carryforwards which expire beginning in 2033that have no expiration date and $1.3$3.2 million at both December 31, 2022 and $0.9 million as of September 30, 2017, and December 31, 2016, respectively,2022 of net operating tax-effected state NOL carryforwards which expire beginning in 2033.2035.

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 2002-2012.2002-2017. The reassessments are a result of ongoing audits and total $104.4total $170.2 million, including interest, through September 30, 2017.December 31, 2022. The Company disputes these reassessments and will continue to work with thethe appropriate authorities in Canada to resolve the dispute. Although the Company believes it has recorded an adequate reserve for this matter, thereThere 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.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 $63.6$143.4 million performance bond and has paid $35.2$36.7 million to the Canadian tax authorities (most of which is recorded in other assets in its consolidated balance sheets)in the Consolidated Balance Sheets at December 31, 2022, and the remaining balance of $5.6 million is expected to be addressed later this year,September 30, 2022), which is necessary to proceed with future appeals or litigation.
 
In addition, Canadian federal and provincial taxing authorities had reassessed the Company for years 2004-2006, which had been previously settled by agreement among the Company, the Canada Revenue Agency and the Internal Revenue Service of the United States. The Company sought to enforce the agreement, which provided the basis upon which the returns were previously filed and settled. In July 2016, a trial commenced in the Tax Court of Canada with respect to the Canadian federal tax issues for these matters, and in March 2017, the Tax Court of Canada ruled in favor of the Company. The decision of the Tax Court of Canada was not appealed by the Canada Revenue Agency. As a result, the Company believes that reassessed Canadian tax, penalties and interest for the Company for years 2004-2006 of approximately $94.7 million are effectively resolved. The Company is in the process of having certain posted collateral returned in connection with the resolution of the dispute.
The Company received Canadian income tax reassessments for years 2007-2008. The total amount of the reassessments, including penalties and interest through September 30, 2017, related to this matter is $37.2 million. The Company does not agree with these adjustments and is receiving assistance from the tax jurisdictions for relief from the impact of double taxation as available in the tax treaty between the U.S. and Canada. The Company has filed protective Notices of Objection and has posted collateral in the form of a $10.2 million performance bond and a $8.0 million bank letter guarantee, which is necessary to proceed with future appeals or litigation. Although the outcome of examinations by taxing authorities is uncertain, the Company believes it has adequately reserved for this matter.

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, letters of credit, performance bonds, asset liens or other arrangements agreeable with the tax authorities until the disputes are resolved.


12
COMPASS MINERALS INTERNATIONAL, INC.
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 September 30, 2017,December 31, 2022, the amountCompany believes it has adequately reserved related tofor these reassessments was immaterial to the Company’s consolidated financial statements.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 Annual Report on Form 10-K for the yearannual period ended December 31, 2016.September 30, 2022.


7.Long-term Debt:
9.    Long-Term Debt:
 
Long-term debt consists of the following (in millions):
 December 31,
2022		September 30,
2022
4.875% Senior Notes due July 2024$250.0 $250.0 
Term Loan due January 202516.9 16.9 
Revolving Credit Facility due January 2025— 151.5 
6.75% Senior Notes due December 2027500.0 500.0 
AR Securitization Facility expires June 202572.9 37.5 
839.8 955.9 
Less unamortized debt issuance costs(7.7)(8.3)
Total debt832.1 947.6 
Less current portion— — 
Long-term debt$832.1 $947.6 
 September 30,
2017		 December 31,
2016
Term Loans due July 2021$839.5
 $845.9
Revolving Credit Facility due July 2021151.2
 105.4
4.875% Senior Notes due July 2024250.0
 250.0
Banco Bradesco Loan due February 2017—
 13.2
Banco Votorantim Loan due April 2017—
 12.4
Banco Bradesco Loan due July 2017—
 4.8
Scotiabank Loan due August 2017—
 20.2
Scotiabank Loan due September 2017—
 15.1
Banco Votorantim Loan due September 2017—
 0.8
Banco Bradesco Loan due October 2017—
 16.8
Rabobank Loan due November 201722.4
 22.6
Banco Itaú Loans due May 2019 to April 20202.3
 3.1
Financiadora de Estudos e Projetos Loan due November 202314.1
 7.4
Banco do Brasil Loans due October 20170.4
 —
Banco do Brasil Loan due November 20170.5
 —
Banco do Brasil Loan due February 20180.2
 —
Banco Santander Loan due September 201920.5
 —
Banco Itaú Loans due March 2019(a)
15.0
 15.1
Banco Scotiabank Loan due September 201920.6
 —

1,336.7
 1,332.8
Less unamortized debt issuance costs(7.1) (7.8)
Total debt1,329.6
 1,325.0
Less current portion(55.4) (130.2)
Long-term debt$1,274.2
 $1,194.8


(a)In September 2017,As of December 31, 2022, the maturity date of this loan was extended from September 2017 to March 2019.

In September 2017, the Company entered into an amendment to its credit agreement, which increased the maximum allowed leverage ratio under the credit agreement through September 2018. In connection with this amendment, the Company paid fees totaling $0.6 million ($0.1 million was recorded as an expense and $0.5 million was capitalized as deferred financing costs).

In September 2017, the Company refinanced $32.1 million of its Brazilian loans using proceeds from $41.1 million of new loans. The new loans bear interest rates ranging from 116.25% and 118% of CDI, an overnight inter-bank lending rate in Brazil, and mature in September 2019. No material fees were paid in connection with these transactions. A portion of the loans are denominated in U.S. dollars and a portion of the loans are denominated in Brazilian Reais. In September 2017, the Company also entered into

foreign currency swap agreements whereby the Company agreed to swap interest and principal payments on the loans denominated in U.S. dollars for principal and interest payments denominated in Brazilian Reais, Produquímica’s functional currency (see Note 11 for further discussion).

In September 2016, the Company entered into a new $450 million term loan tranche under its existing credit agreement to fund the acquisition of the remaining 65% of Produquímica’s equity in October 2016 (see Note 2 for more information). This additional tranche will mature July 1, 2021, and bears interest at LIBOR plus 2.0%. In connection with this transaction, the Company incurred $2.2 million of financing fees in 2016 ($0.7 million was recorded as an expense and $1.5 million was capitalized as deferred financing costs).

In April 2016, the Company entered into a new credit agreement to refinance its existing $471 million term loans and $125 million revolving credit facility with a new $400 million senior secured term loan and a $300 million senior secured revolving credit facility, which both mature July 1, 2021. The new term loan and revolving credit facility bear interest at LIBOR plus 1.75% based onunder the Company’s current leverage ratio and credit rating. In connection with the refinancing, the Company incurred $5.8 million of refinancing fees ($1.4 million was recorded as an expense and $4.4 million was capitalized as deferred financing costs) and wrote-off $0.1 million of existing deferred financing costs related to the previous term loans and revolving credit facility.

As of September 30, 2017, the term loans and revolving credit facility under the credit agreement entered into on November 26, 2019 (as amended, 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 December 31, 2022, the weighted average interest rate on all borrowings outstanding under the term loan under the Credit Agreement was approximately 6.4%.


The Company is in compliance as of December 31, 2022 with its debt covenants under the Credit Agreement and its AR Securitization Facility. Pursuant to the terms of the second amendment to the Credit Agreement the maximum allowed consolidated total net leverage ratio (as defined and calculated under the terms of the Credit Agreement and discussed further below) was 5.0x for the quarter ended December 31, 2022, which steps down to 4.75x in the quarter ending March 31, 2024, and to 4.5x for the fiscal quarter ended June 30, 2024 and thereafter. The consolidated total net leverage ratio represents the ratio of (a) consolidated total net debt to (b) consolidated adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Consolidated total net debt includes the aggregate principal amount of total debt, net of unrestricted cash not to exceed $50.0 million.

In November 2022, the Company entered into the third amendment to the 2019 Credit Agreement, principally to affect a transition from the London Inter-Bank Offered Rate to the Secured Overnight Financing Rate pricing benchmark provisions.

During the quarter ended December 31, 2022, the Company paid off the outstanding revolving credit facility balance utilizing proceeds from a private placement of common stock. Refer to Note 12 for additional details of the private placement transaction.

In January 2023, certain of the Company’s U.S. subsidiaries entered into the second amendment to the AR Securitization Facility with PNC Bank, which temporarily eases the restrictions of certain covenants contained in the agreement through March 2023. The amendment made certain adjustments to the financial tests including: (i) the default ratio and (ii) the delinquency ratio to make compliance with such tests more likely.

13
8.Commitments and Contingencies:COMPASS MINERALS INTERNATIONAL, INC.

The10.    Commitments and Contingencies:

As previously disclosed, the Company was involvedthe subject of an investigation by the Division of Enforcement of the SEC regarding 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 proceedings alleging unfair labor practices at its Cote Blanche, Louisiana, mine. This matter arose out of a labor dispute between the CompanyCompany’s Form 10-K/A for the year ended December 31, 2020, and Form 10-Q/A for the United Steelworkers Union over the terms of a contract for certain employees at the mine. These employees initiated a strike that began on April 7, 2010, andquarter ended on June 15, 2010. In September 2012, the U.S. National Labor Relations Board (the “NLRB”) issued a decision finding that the Company had committed unfair labor practices in connectionMarch 31, 2021, each filed with the labor dispute. Under the ruling, the Company is responsible for back pay to affected employees as a result of changes made in union work rules and past practices beginning April 1, 2010. In the fourth quarter of 2013, this ruling was upheld by an appeals court. As of December 31, 2016, the Company had recorded a reserve of $7.4 million in its consolidated financial statements related to expected payments, including interest, required to resolve the dispute.SEC on September 3, 2021.


In March 2017,On September 23, 2022, the Company reached a settlement with the United Steelworkers UnionSEC, concluding and resolving the NLRB with respect to this matter.SEC investigation in its entirety. Under the terms of the agreement, the Company paid $7.7 million to the affected employees in the second quarter of 2017. As a result of the settlement, the Company, recognized an immaterial losswithout admitting or denying the findings in its consolidated financial statements in 2017.

The Wisconsin Departmentthe administrative order issued by the SEC, agreed to pay a civil penalty of Agriculture, Trade$12 million and Consumer Protection (“DATCP”) has information indicating that agricultural chemicals are present within the subsurface areato cease and desist from violations of specified provisions of the Company’s Kenosha, Wisconsin, plant.federal securities laws and rules promulgated thereunder, and to retain an independent compliance consultant for a period of approximately one year to review certain accounting practices and procedures. As set forth in the administrative order, the $12 million civil penalty is to be paid in installments: $2 million, which was paid on September 29, 2022, and $10 million to be paid no later than September 30, 2023. The agricultural chemicals were used by previous owners and operatorsCompany previously recorded an accrual for the full amount of the site. Nonepenalty in the third quarter of the identified chemicals have been usedfiscal 2022, which is reflected in association withaccrued expenses and other current liabilities on 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 plant. The Company has completed initial on-property investigations and has provided the findings to DATCP. A second series of sampling and analysis is underway. 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 would provide 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.Consolidated Balance Sheets.

The Company conducts business operations in several countries and is subject to various federal and local labor, social security, environmental and tax laws. While the Company believes it complies with such laws, they are complex and subject to interpretation. In addition to the tax assessments discussed in Note 6, the Company’s Brazilian subsidiaries are party to administrative tax proceedings and claims which totaled $18.7 million as of September 30, 2017, and relate primarily to value added tax, state tax (ICMS) and social security tax (PIS and COFINS) assessments. The Company has assessed the likelihood of a loss at less than probable and therefore, has not established a reserve for these matters. The Company also has assumed liabilities for labor-related matters in connection with the acquisition of Produquímica, which are primarily related to compensation, labor benefits and consequential tax claims and totaled $11.5 million as of September 30, 2017. The Company believes the maximum exposure for these other labor matters totaled approximately $46 million as of September 30, 2017.


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.position, except as otherwise described in Note 8 and this Note 10.


9.Operating Segments:
11.    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. TheIn connection with the executed business disposals discussed in Note 1 and Note 2, the Company has threeidentified two reportable segments: Salt,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.

For the three months ended December 31, 2022 and 2021, the Company has presented two reportable segments in its Consolidated Financial Statements: Salt and Plant Nutrition South America.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 softenerssoftening and other consumer, agricultural and industrial applications. SOP crop nutrients, industrial-grade SOP, micronutrients and magnesium chloride for agricultural purposes are produced and marketed through the Plant Nutrition North America segment. The Plant Nutrition South America segment represents the results of Produquímica, which was acquired in October 2016. This segment operates two primary businesses in Brazil – agricultural productivity and chemical solutions. See Note 2 for a further discussion of the acquisition. The agricultural productivity division manufactures and distributes a broad offering of specialty plant nutrition solution-based products that are used in direct soil and foliar applications, as well as through irrigation systems and for seed treatment. Produquímica also manufacturesproduces and markets specialty chemicals for the industrial chemical industry.various grades of SOP.


Segment information is as follows (in millions):
Three Months Ended December 31, 2022SaltPlant
Nutrition
Corporate
& Other(a)(b)
Total
Sales to external customers$308.1 $41.6 $2.7 $352.4 
Intersegment sales— 2.9 (2.9)— 
Shipping and handling cost102.7 4.7 — 107.4 
Operating earnings (loss)(b)
47.1 11.0 (30.2)27.9 
Depreciation, depletion and amortization13.9 8.3 1.7 23.9 
Total assets (as of end of period)985.2 456.5 323.0 1,764.7 

14
Three Months Ended September 30, 2017 Salt 
Plant
Nutrition North America
 Plant
Nutrition South America		 
Corporate
& Other(a)
 Total
Sales to external customers $124.7
 $40.3
 $123.2
 $2.5
 $290.7
Intersegment sales —
 1.5
 —
 (1.5) —
Shipping and handling cost 34.9
 4.8
 5.8
 —
 45.5
Operating earnings (loss) (b)
 22.5
 2.3
 21.4
 (14.8) 31.4
Depreciation, depletion and amortization 13.5
 9.2
 7.5
 2.5
 32.7
Total assets (as of end of period) 948.7
 593.1
 844.2
 60.8
 2,446.8

Three Months Ended September 30, 2016 Salt 
Plant
Nutrition North America(c)
 Plant
Nutrition South America		 
Corporate
& Other(a)
 Total
Sales to external customers $135.7
 $41.5
 $—
 $2.4
 $179.6
Intersegment sales —
 0.6
 —
 (0.6) —
Shipping and handling cost 33.3
 5.1
 —
 —
 38.4
Operating earnings (loss)  30.0
 2.5
 —
 (13.0) 19.5
Depreciation, depletion and amortization 12.2
 8.3
 —
 1.3
 21.8
Total assets (as of end of period) 1,249.3
 794.1
 —
 59.0
 2,102.4

Nine Months Ended September 30, 2017 Salt 
Plant
Nutrition North America
 Plant
Nutrition South America		 
Corporate
& Other(a)
 Total
Sales to external customers $508.5
 $140.0
 $250.6
 $7.4
 $906.5
Intersegment sales —
 4.4
 —
 (4.4) —
Shipping and handling cost 147.6
 18.4
 13.8
 —
 179.8
Operating earnings (loss) (b)
 78.6
 17.5
 24.0
 (41.3) 78.8
Depreciation, depletion and amortization 39.1
 26.7
 18.2
 5.1
 89.1


Nine Months Ended September 30, 2016 Salt 
Plant
Nutrition North America
 Plant
Nutrition South America		 
Corporate
& Other(a)
 Total
Sales to external customers $546.9
 $140.4
 $—
 $7.5
 $694.8
Intersegment sales —
 2.7
 —
 (2.7) —
Shipping and handling cost 147.7
 17.2
 —
 —
 164.9
Operating earnings (loss) 
 136.0
 12.5
 —
 (39.2) 109.3
Depreciation, depletion and amortization 34.2
 24.6
 —
 3.9
 62.7

(a)Corporate and other includes corporate entities, records management operations and other incidental operations and eliminations. Operating earnings (loss) for corporate and other includes indirect corporate overhead, including costs for general corporate governance and oversight, as well as costs for the human resources, information technology, legal and finance functions.COMPASS MINERALS INTERNATIONAL, INC.
Three Months Ended December 31, 2021SaltPlant
Nutrition
Corporate
& Other(a)(b)
Total
Sales to external customers$273.9 $54.6 $3.0 $331.5 
Intersegment sales— 2.4 (2.4)— 
Shipping and handling cost88.4 7.3 — 95.7 
Operating earnings (loss)(b)
39.4 9.5 (28.5)20.4 
Depreciation, depletion and amortization16.2 8.8 3.3 28.3 
Total assets (as of end of period)1,035.4 445.3 206.7 1,687.4 

Disaggregated revenue by product type is as follows (in millions):
Three Months Ended December 31, 2022SaltPlant
Nutrition
Corporate
& Other(a)(b)
Total
Highway Deicing Salt$190.3 $— $— $190.3 
Consumer & Industrial Salt117.8 — — 117.8 
SOP— 44.5 — 44.5 
Eliminations & Other— (2.9)2.7 (0.2)
Sales to external customers$308.1 $41.6 $2.7 $352.4 

Three Months Ended December 31, 2021SaltPlant
Nutrition
Corporate
& Other(a)(b)
Total
Highway Deicing Salt$163.7 $— $— $163.7 
Consumer & Industrial Salt110.2 — — 110.2 
SOP— 57.0 — 57.0 
Eliminations & Other— (2.4)3.0 0.6 
Sales to external customers$273.9 $54.6 $3.0 $331.5 
(a)Corporate and Other includes corporate entities, records management operations, equity method investments, lithium development costs and other incidental operations and eliminations. Operating earnings (loss) for corporate and other includes indirect corporate overhead, including costs for general corporate governance and oversight, lithium-related expenses, as well as costs for the human resources, information technology, legal and finance functions.
(b)Corporate operating results include costs related to the settled SEC investigation of $0.3 million for the three months ended December 31, 2022. Corporate operating results for the three months ended December 31, 2021 include executive transition costs of $3.3 million and costs, net of reimbursements, related to the settled SEC investigation of $3.1 million. Refer to Note 10 for more information regarding the SEC investigation.

The Company’s revenue by geographic area is as follows (in millions):
Three Months Ended
December 31,
Revenue20222021
United States(a)
$248.2 $221.3 
Canada87.6 89.4 
United Kingdom14.1 19.8 
Other2.5 1.0 
Total revenue$352.4 $331.5 
(a)United States sales exclude product sold to foreign customers at U.S. ports.
15
(b)Operating results for the three months ended September 30, 2017 include $4.3 million of restructuring charges.COMPASS MINERALS INTERNATIONAL, INC.
(c)In 2016, total assets for Plant Nutrition North America include the equity investment in Produquímica.

12.    Stockholders’ Equity and Equity Instruments:
10.Stockholders’ Equity and Equity Instruments:

In May 2015,2020, the Company’s stockholders approved the 20152020 Incentive Award Plan (the “2015(as amended, the “2020 Plan”), which authorizesauthorized the issuance of 3,000,0002,977,933 shares of Company common stock. In February 2022, the Company’s stockholders approved an amendment to the 2020 Plan authorizing an additional 750,000 shares of Company stock. Since the date the 20152020 Plan was approved, the Company ceased issuing equity awards under the 2015 Incentive Award Plan (as amended, the “2015 Plan”). Since the approval of the 2015 Plan in May 2015, the Company ceased issuing equity awards under the 2005 Incentive Award Plan (the(as amended, the “2005 Plan”). The 2005 Plan, the 2015 Plan and 2015the 2020 Plan allow for grants of equity awards to executive officers, other employees and directors, including restricted stock units (“RSUs”), performance stock units (“PSUs”), stock options and deferred stock units. The grants occur following approval by

Koch Equity Investment

On September 14, 2022, the compensation committeeCompany entered into a Stock Purchase Agreement with Koch Minerals & Trading, LLC (“KM&T”), a subsidiary of Koch Industries, Inc. (“KII”), pursuant to which the Company agreed to issue and sell 6,830,700 shares of its common stock at a purchase price of $36.87 for aggregate net proceeds of approximately $240.7 million, net of transaction costs. On October 18, 2022, the Company closed the direct private placement with KM&T, through its affiliate KM&T Investment Holdings, LLC, resulting in their ownership of approximately 17% of the Company’s boardoutstanding common stock. The Company expects to use approximately $200 million of directors, with the amount and terms communicatedproceeds from the private placement to employees shortly thereafter. advance the first development phase of its sustainable lithium development project at its Ogden site. The Company used the remaining approximately $40.7 million of proceeds to reduce debt.


Options


Substantially all of the stock options granted under the 2005 Plan and 2015 Plan vest ratably, in tranches, over a four-year service period. Unexercised options expire after seven years. Options do not have dividend or voting rights. Upon vesting, each option can be exercised to purchase one share of the Company’s common stock. The exercise price of options is equal to the closing stock price on the grant date.


To estimate the fair value of options on the grant date, the Company uses the Black-Scholes option valuation model. Award recipients are grouped according to expected exercise behavior. Unless better information is available to estimate the expected term of the options, the estimate is based on historical exercise experience. The risk-free rate, using U.S. Treasury yield curves in effect at the time of grant, is selected based on the expected term of each group. The Company’s historical stock price is used to estimate expected volatility. The inputs used to calculate fair value for options granted in 2017 are included in the table below:
Fair value of options granted$9.54
Exercise price$68.00
Expected term (years)4.5
Expected volatility23.2%
Dividend yield3.5%
Risk-free rate of return1.8%


RSUs


Substantially all ofTypically, the RSUs granted under the 20052015 Plan and 2015the 2020 Plan vest after one to three years of service, entitlingservice. RSUs entitle the holders to one share of common stock for each vested RSU. Unvested RSUs do not have voting rights but are entitled to receive non-forfeitable dividends (generally after a performance hurdle has been satisfied for the year of the grant) or other distributions equal to those declared on the Company’s common stock for RSUs that are earned as a result of the satisfaction of the performance hurdle. The closing stock price on the grant date is used to determine the fair value of RSUs.


PSUs


Substantially all of the PSUs grantedoutstanding under the 20052015 Plan and 2015the 2020 Plan are either total shareholderstockholder return PSUs (“TSR PSUs”) or return on invested capitaladjusted EBITDA growth PSUs (“ROICEBITDA Growth PSUs”). The actual number of shares of the Company’s common stock that may be earned with respect to TSR PSUs is calculated by comparing the Company’s total shareholderstockholder return to the total shareholderstockholder return

for each company comprising the Russell 3000 IndexCompany’s peer group or a total return percentage target over thea two- or three-year performance period and may range from 0% to 150%300% of the target number of shares based upon the attainment of these performance conditions. The actual number of shares of common stock that may be earned with respect to ROICEBITDA Growth PSUs is calculated based on the averageattainment of adjusted EBITDA growth during the Company’s annual return on invested capital for each year in the three-year performance period and may range from 0% to 200%300% of the target number of shares based upon the attainment of these performance conditions.


PSUs represent a target number of shares of the Company’s common stock that may be earned before adjustment based upon the attainment of certain performance conditions. Holders of PSUs do not have voting rights but are entitled to receive non-forfeitable dividends or other distributions equal to those declared on the Company’s common stock for PSUs that are earned, which are paid when the shares underlying the PSUs are paid.issued.


16
COMPASS MINERALS INTERNATIONAL, INC.
To estimate the fair value of the TSR PSUs on the grant date for accounting purposes, the Company uses a Monte-Carlo simulation model, which simulates future stock prices of the Company as well as the companies comprising the Russell 3000 Index.Company’s peer group. This model uses historical stock prices to estimate expected volatility and the Company’s correlation to the Russell 3000 Index.peer group. The risk-free rate was determined using the same methodology as the option valuations as discussed above. The Company’s closing stock price on the grant date was used to estimate the fair value of the ROICEBITDA Growth PSUs. The Company will adjust the expense of the ROICEBITDA Growth PSUs based upon its estimate of the number of shares that will ultimately vest at each interim date during the vesting period.


During the ninethree months ended September 30, 2017,December 31, 2022, the Company reissued the following number of shares from treasury stock: 3,366 shares related to the exercise of stock options, 15,80631,140 shares related to the release of RSUs which vested 12,946 shares related to the release of PSUs which vested and 5,424936 shares related to stock payments.payments. In fiscal 2022, the Company issued 117,390 net shares from treasury stock. The Company withheld a total of 9,853 shares with a fair value of $0.4 million related to the vesting of RSUs, PSUs, and stock payments during the three months ended December 31, 2022. The fair value of the shares were valued at the closing price at the vesting date and represent the employee tax withholding for the employee’s compensation. The Company recognized a tax deficiencyexpense of $0.6$0.1 million from its equity compensation awards as an increase to income tax expense during the first ninethree months of 2017.ended December 31, 2022. During the first ninethree months of both 2017ended December 31, 2022 and 2016,2021, the Company recorded $3.8$10.6 million and $4.7 million (includes $1.4 million paid in cash), respectively, of compensation expense pursuant to its stock-based compensation plans. No amounts have been capitalized. The following table summarizes stock-based compensation activity during the ninethree months ended September 30, 2017:December 31, 2022:
 Stock OptionsRSUs
PSUs(a)
 NumberWeighted-average
exercise price		NumberWeighted-average
fair value		NumberWeighted-average
fair value
Outstanding at September 30, 2022774,580 $60.68 208,735 $63.02 331,359 $71.51 
Granted— — 221,151 38.14 182,422 68.29 
Exercised(b)
— — — — — — 
Released from restriction(b)
— — (31,755)67.61 — — 
Cancelled/expired(13,241)62.57 (4,496)46.27 — — 
Outstanding at December 31, 2022761,339 $60.64 393,635 $48.86 513,781 $70.37 
  Stock Options RSUs 
PSUs(a)
  Number 
Weighted-average
exercise price
 Number 
Weighted-average
fair value
 Number 
Weighted-average
fair value
Outstanding at December 31, 2016 442,755
 $80.07
 63,780
 $80.25
 89,011
 $89.43
Granted 227,351
 68.00
 34,635
 68.00
 58,878
 73.08
Exercised(b)
 (3,366) 76.03
 —
 —
 —
 —
Released from restriction(b)
 —
 —
 (15,806) 84.77
 (12,946) 105.77
Cancelled/expired (80,606) 76.05
 (9,906) 71.54
 (19,416) 88.18
Outstanding at September 30, 2017 586,134
 $75.97
 72,703
 $74.62
 115,527
 $79.47
(a)Until the performance period is completed, PSUs are included in the table at the target level at their grant date and at that level represent one share of common stock per PSU.

(a)Until they vest, PSUs are included in the table at the target level at their grant date and at that level represent one share of common stock per PSU. The final performance period for the 2014 PSU grant ended in 2016. The Company cancelled 6,900 PSUs in 2017 related to the 2014 PSU grant.
(b)Common stock issued for exercised options and for vested and earned RSUs and PSUs was issued from treasury stock.

(b)Common stock issued for exercised options and for vested and earned RSUs and PSUs was issued from treasury stock.

Accumulated Other Comprehensive Income (Loss)Loss (“AOCL”)

The Company’s comprehensive income (loss) is comprised of net earnings (loss), net amortization of the unrealized loss of the pension obligation, the change in the unrealized gain in other postretirement benefits, the change in the unrealized gain (loss) on natural gas and foreign currency swap cash flow hedges and foreign currency translation adjustments.CTA. The components of and changes in accumulated other comprehensive income (loss) (“AOCI”) as of and for the three and nine months ended September 30, 2017, and 2016,AOCL are as follows (in millions):
Three Months Ended December 31, 2022(a)
Losses on Cash Flow HedgesDefined Benefit PensionOther Post-Employment BenefitsForeign
Currency		Total
Beginning balance$(1.6)$(2.7)$1.3 $(112.3)$(115.3)
Other comprehensive (loss) income before reclassifications(b)
(2.4)— — 11.7 9.3 
Amounts reclassified from AOCL(0.4)0.1 — — (0.3)
Net current period other comprehensive (loss) income(2.8)0.1 — 11.7 9.0 
Ending balance$(4.4)$(2.6)$1.3 $(100.6)$(106.3)

17
Three Months Ended September 30, 2017(a)
Gains and
(Losses) on
Cash Flow
Hedges
 
Defined
Benefit
Pension
 
Foreign
Currency
 Total
Beginning balance$(0.3) $(3.5) $(93.6) $(97.4)
Other comprehensive income (loss) before reclassifications(b)
(0.5) —
 46.1
 45.6
Amounts reclassified from accumulated other comprehensive loss(0.2) —
 —
 (0.2)
Net current period other comprehensive income (loss)(0.7) —
 46.1
 45.4
Ending balance$(1.0) $(3.5) $(47.5) $(52.0)

Three Months Ended September 30, 2016(a)
Gains and
(Losses) on
Cash Flow
Hedges
 
Defined
Benefit
Pension
 
Foreign
Currency
 Total
Beginning balance$(0.2) $(3.6) $(71.8) $(75.6)
Other comprehensive income (loss) before reclassifications(b)
(0.3) —
 (3.9) (4.2)
Amounts reclassified from accumulated other comprehensive loss0.2
 —
 —
 0.2
Net current period other comprehensive income (loss)(0.1) —
 (3.9) (4.0)
Ending balance$(0.3) $(3.6) $(75.7) $(79.6)
Nine Months Ended September 30, 2017(a)
Gains and
(Losses) on
Cash Flow
Hedges
 
Defined
Benefit
Pension
 
Foreign
Currency
 Total
Beginning balance$0.6
 $(3.7) $(101.8) $(104.9)
Other comprehensive income (loss) before reclassifications(b)
(1.4) —
 54.3
 52.9
Amounts reclassified from accumulated other comprehensive loss(0.2) 0.2
 —
 —
Net current period other comprehensive income (loss)(1.6) 0.2
 54.3
 52.9
Ending balance$(1.0) $(3.5) $(47.5) $(52.0)
Nine Months Ended September 30, 2016(a)
Gains and
(Losses) on
Cash Flow
Hedges
 
Defined
Benefit
Pension
 
Foreign
Currency
 Total
Beginning balance$(1.6) $(3.8) $(102.9) $(108.3)
Other comprehensive income (loss) before reclassifications(b)
(0.1) —
 27.2
 27.1
Amounts reclassified from accumulated other comprehensive loss1.4
 0.2
 —
 1.6
Net current period other comprehensive income (loss)1.3
 0.2
 27.2
 28.7
Ending balance$(0.3) $(3.6) $(75.7) $(79.6)

(a)With the exception of the cumulative foreign currency translation adjustment, for which no tax effect is recorded, the changes in the components of accumulated other comprehensive income (loss) presented in the tables above are reflected net of applicable income taxes.COMPASS MINERALS INTERNATIONAL, INC.
(b)The Company recorded foreign exchange (gains) losses of $(22.0) million and $(20.6) million in the three and nine months ended September 30, 2017, respectively, and $3.8 million and $(22.9) million in the three and nine months ended September 30, 2016, respectively, in accumulated other comprehensive loss related to intercompany notes which were deemed to be of long-term investment nature.

Three Months Ended December 31, 2021(a)
Gains and (Losses) on Cash Flow HedgesDefined Benefit PensionForeign
Currency		Total
Beginning balance$3.1 $(5.4)$(108.2)$(110.5)
Other comprehensive loss before reclassifications(b)
(0.9)— (3.8)(4.7)
Amounts reclassified from AOCL(1.1)0.1 — (1.0)
Net current period other comprehensive (loss) income(2.0)0.1 (3.8)(5.7)
Ending balance$1.1 $(5.3)$(112.0)$(116.2)
(a)With the exception of the CTA, for which no tax effect is recorded, the changes in the components of AOCL presented in the tables above are reflected net of applicable income taxes.
(b)The Company recorded foreign exchange (loss) gain of $(1.3) million inthe three months ended December 31, 2022, and $1.2 million in the three months ended December 31, 2021, in AOCL related to intercompany notes which were deemed to be of a long-term investment nature.

The amounts reclassified from AOCIAOCL to expense (income) expense for the three and nine months ended September 30, 2017,December 31, 2022 and 2016,2021, are shown below (in millions):
Amount Reclassified from AOCL
 Three Months Ended
December 31,		Line Item Impacted in the
Consolidated Statements of Operations
20222021
Losses on cash flow hedges:
Natural gas instruments$(0.5)$(1.5)Product cost
Income tax expense0.1 0.4 
Reclassifications, net of income taxes(0.4)(1.1)
Amortization of defined benefit pension: 
Amortization of loss0.1 0.1 Product cost
Income tax benefit— — 
Reclassifications, net of income taxes0.1 0.1  
Amortization of other post-employment benefits:
Amortization of loss— — Product cost
Income tax benefit— — 
Reclassifications, net of income taxes— — 
Total reclassifications, net of income taxes$(0.3)$(1.0) 

13.    Derivative Financial Instruments:
 Amount Reclassified from AOCI  
 Three Months Ended
September 30, 2017		 Nine Months Ended
September 30, 2017		 
Line Item Impacted in the
Consolidated Statement of Operations
Gains and (losses) on cash flow hedges:     
Natural gas instruments$0.2
 $0.2
 Product cost
Foreign currency swaps(0.5) (0.5) Interest expense
Income tax expense (benefit)0.1
 0.1
  
Reclassifications, net of income taxes(0.2) (0.2)  
Amortization of defined benefit pension: 
    
Amortization of loss$—
 $0.2
 Product cost
Income tax expense (benefit)—
 —
  
Reclassifications, net of income taxes—
 0.2
  
Total reclassifications, net of income taxes$(0.2) $—
  


 Amount Reclassified from AOCI  
 Three Months Ended
September 30, 2016		 Nine Months Ended
September 30, 2016		 
Line Item Impacted in the
Consolidated Statement of Operations
Gains and (losses) on cash flow hedges:     
Natural gas instruments$0.3
 $2.2
 Product cost
Income tax expense (benefit)(0.1) (0.8)  
Reclassifications, net of income taxes0.2
 1.4
  
Amortization of defined benefit pension: 
    
Amortization of loss$—
 $0.2
 Product cost
Income tax expense (benefit)—
 —
  
Reclassifications, net of income taxes—
 0.2
  
Total reclassifications, net of income taxes$0.2
 $1.6
  

11.Derivative Financial Instruments:
 
The Company is subject to various types of market risks, including interest rate risk, foreign currency exchange rate transaction and translation risk and commodity pricing risk. Management may take actions to mitigate the exposure to these types of risks, including entering into forward purchase contracts and other financial instruments. Currently, theThe Company manages a portion of its commodity pricing risks and foreign currency exchange rate risks by using derivative instruments. From time to time, the Company may enter into foreign exchange contracts to mitigate foreign exchange risk. The Company does not seek to engage in trading activities or take speculative positions with any financial instrument arrangement. The Company has entered into natural gas derivative instruments and foreign currency derivative instruments with counterparties it views as creditworthy. However, the Company does attempt to mitigate its counterparty credit risk exposures by, among other things, entering into master netting agreements with some of these counterparties.Thecounterparties. The Company records derivative financial instruments as either assets or liabilities at fair value in the consolidated balance sheets.its Consolidated Balance Sheets. The assets and liabilities recorded as of December 31, 2022 and September 30, 2022 were not material.


Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the derivative instrument and the related change in value of the underlying hedged item. Depending on the exposure being hedged, the Company must designate the hedging instrument as a fair value hedge, a cash flow hedge or a net investment in foreign operations hedge. For the qualifying derivative instruments that have been designated as hedges, the effective portion of the change in fair value is recognized through earnings when the underlying transaction being hedged affects earnings, allowing a derivative’s gains and losses to offset related results from the hedged item in the statementsConsolidated Statements of operations.Operations. Any
18
COMPASS MINERALS INTERNATIONAL, INC.
ineffectiveness related to these hedges was not material for any of the periods presented. For derivative instruments that have not been designated as hedges, the entire change in fair value is recorded through earnings in the period of change.


Natural Gas Derivative Instruments


Natural gas is consumed at several of the Company’s production facilities, and a changechanges in natural gas prices impactsimpact the Company’s operating margin. The Company’s objective isCompany seeks to reduce the earnings and cash flow impacts of changes in market prices of natural gas by fixing the purchase price of up to 90% of its forecasted natural gas usage. It is the Company’s policy to consider hedging portions of its natural gas usage up to 36 months in advance of the forecasted purchase. As of September 30, 2017,December 31, 2022, the Company had entered into natural gas derivative instruments to hedge a portion of its natural gas purchase requirements through December 2019.September 2024. As of December 31, 2022 and September 30, 2017, and December 31, 2016,2022, the Company had agreements in place to hedge forecasted natural gas purchases of 3.33.1 million and 2.3 and 3.8 million MMBtus, respectively. All natural gas derivative instruments held by the Company as of December 31, 2022 and September 30, 2017, and December 31, 2016,2022 qualified and were designated as cash flow hedges. As of September 30, 2017,December 31, 2022, the Company expects to reclassify from accumulated other comprehensive lossAOCL to earnings during the next twelve months $0.6$3.7 million of net losses on derivative instruments related to its natural gas hedges.
Foreign Currency Swaps not Designated as Hedges

In conjunction with the acquisition of Produquímica, the Company assumed U.S. dollar-denominated debt which was previously held by Produquímica. Prior Refer to the acquisition, Produquímica entered into foreign currency swap agreements whereby Produquímica agreed to swap interest and principal payments on the loans denominated in U.S. dollars for principal and interest payments denominated in Brazilian Reais, Produquímica’s functional currency. The objective of the swap agreements is to mitigate the foreign currency fluctuation risk related to holding debt denominated in a currency other than Produquímica’s functional currency. None of the swap agreements relating to the debt assumed in conjunction with the acquisition of Produquímica are designated as hedges.


As of September 30, 2017, and December 31, 2016, the Company had swap agreements in place to economically hedge $22.4 million and $119.6 million, respectively, of loans denominated in currencies other than Produquímica’s functional currency. During the three and nine months ended September 30, 2017, the Company recognized losses of $4.9 million and $10.2 million, respectively, in its consolidated statement of operationsNote 14 for the change inestimated fair value of the swap agreements not designatedCompany’s natural gas derivative instruments as hedges.

Foreign Currency Swaps Designated as Hedges

In September 2017, the Company entered into new U.S. dollar-denominated debt instruments to provide funds for its operations in Brazil (see Note 7 for more information). Concurrently, the Company entered into additional foreign currency swap agreements whereby the Company agreed to swap interestof December 31, 2022 and principal payments on loans denominated in U.S. dollars for principal and interest payments denominated in Brazilian Reais, Produquímica’s functional currency. The objective of the swap agreements is to mitigate the foreign currency fluctuation risk related to holding debt denominated in a currency other than Produquímica’s functional currency. As of September 30, 2017, the Company had swap agreements in place to hedge $35.6 million of loans denominated currencies other than Produquímica’s functional currency. Payments on these loans are due on various dates extending through September 2019. As of September 30, 2017, these foreign currency swap derivative instruments qualified and were designated as cash flow hedges. As of September 30, 2017, the Company expects to reclassify from accumulated other comprehensive loss to earnings during the next twelve months $0.1 million of net losses on derivative instruments related to its foreign currency swap agreements.2022.


The following tables present the fair value of the Company’s hedged items as of September 30, 2017, and December 31, 2016derivatives (in millions):
 Asset DerivativesLiability Derivatives
Derivatives designated as hedging instruments:Consolidated Balance Sheet LocationDecember 31, 2022Consolidated Balance Sheet LocationDecember 31, 2022
Commodity contractsOther current assets$1.6 Accrued expenses and other current liabilities$5.2 
Commodity contractsOther assets0.1 Other noncurrent liabilities0.8 
Total derivatives designated as hedging instruments(a)
$1.7 $6.0 
(a)The Company has master netting agreements with its commodity hedge counterparties and accordingly has netted in its Consolidated Balance Sheets $1.7 million of its commodity contracts that are in receivable positions against its contracts in payable positions.

 Asset DerivativesLiability Derivatives
Derivatives designated as hedging instruments:Consolidated Balance Sheet LocationSeptember 30, 2022Consolidated Balance Sheet LocationSeptember 30, 2022
Commodity contractsOther current assets$2.7 Accrued expenses and other current liabilities$3.3 
Commodity contractsOther assets0.2 Other noncurrent liabilities0.7 
Total derivatives designated as hedging instruments(a)
$2.9 $4.0 
(a)The Company has master netting agreements with its commodity hedge counterparties and accordingly has netted in its Consolidated Balance Sheets $2.9 million of its commodity contracts that are in receivable positions against its contracts in payable positions.

14.    Fair Value Measurements:
  Asset Derivatives Liability Derivatives
Derivatives designated as hedging instruments: Balance Sheet Location September 30, 2017 Balance Sheet Location September 30, 2017
Commodity contracts Other current assets $0.1
 Accrued expenses $0.7
Commodity contracts Other assets —
 Other noncurrent liabilities 0.2
Swap contracts Other current assets —
 Accrued expenses 0.1
Swap contracts Other assets —
 Other noncurrent liabilities 0.1
Total derivatives designated as hedging instruments(a)
   0.1
   1.1
         
Derivatives not designated as hedging instruments:        
Swap contracts Other current assets $—
 Accrued expenses $7.0
Swap contracts Other assets —
 Other noncurrent liabilities —
Total derivatives not designated as hedging instruments   —
   7.0
Total derivatives(b)
   $0.1
   $8.1

(a)The Company has master netting agreements with its commodity hedge counterparties and accordingly has netted in its consolidated balance sheets approximately $0.1 million of its commodity contracts that are in receivable positions against its contracts in payable positions.
(b)The Company has commodity hedge and foreign currency swap agreements with three counterparties each, respectively. Amounts recorded as assets for the Company’s commodity contracts are receivable from three counterparties, and the amounts recorded as liabilities for the Company’s commodity contracts are payable to two counterparties. The amounts recorded as liabilities for the Company’s swap contracts are payable to two counterparties. There is also an immaterial amount receivable from one counterparty.


  Asset Derivatives Liability Derivatives
Derivatives designated as hedging instruments: Balance Sheet Location December 31, 2016 Balance Sheet Location December 31, 2016
Commodity contracts Other current assets $1.2
 Accrued expenses $0.3
Commodity contracts Other assets 0.1
 Other noncurrent liabilities 0.1
Total derivatives designated as hedging instruments(a)
   1.3
   0.4
         
Derivatives not designated as hedging instruments:        
Swap contracts Other current assets $—
 Accrued expenses $25.8
Swap contracts Other assets —
 Other noncurrent liabilities —
Total derivatives not designated as hedging instruments   —
   25.8
Total derivatives(b)
   $1.3
   $26.2

(a)The Company has master netting agreements with its commodity hedge counterparties and accordingly has netted in its consolidated balance sheets approximately $0.4 million of its commodity contracts that are in a payable position against its contracts in receivable positions.
(b)The Company has commodity hedge and foreign currency swap agreements with two and five counterparties, respectively. Amounts recorded as assets for the Company’s commodity contracts are receivable from both counterparties, and amounts recorded as liabilities for the Company’s swap contracts are payable to all five counterparties. 

12.Fair Value Measurements:


The Company’s financial instruments are measured and reported at their estimated fair value.values. Fair value is the price that would be received upon the sale ofto sell an asset or paid to transfer a liability in an orderly transaction. When available, the Company uses quoted prices in active markets to determine the fair values for its financial instruments (Level 1 inputs) or, absent quoted market prices, observable market-corroborated inputs over the term of the financial instruments (Level 2 inputs). The Company does not have any unobservable inputs that are not corroborated by market inputs (Level 3 inputs) other than those described in Note 2..
 
The Company holds marketable securities associated with its defined contribution and pre-tax savings plans, which are valued based on readily available quoted market prices. The Company also held short-term investments which were classified as trading securities with any gains or losses recognized through earnings. The Company sold these investments during the first quarter of 2017. The Company utilizes derivative instruments to manage its risk of changes in natural gas prices and its risk of changes in foreign currency exchange rates (see Note 11)13). The fair valuevalues of the natural gas and foreign currency swap derivative instruments are determined using market data of forward prices for all of the Company’s contracts. 


19
COMPASS MINERALS INTERNATIONAL, INC.
The estimated fair values for each type of instrument are presented below (in millions):
 December 31,
2022		Level OneLevel TwoLevel Three
Asset Class:
Mutual fund investments in a non-qualified savings plan(a)
$2.5 $2.5 $— $— 
Total Assets$2.5 $2.5 $— $— 
Liability Class:    
Derivatives - natural gas instruments, net$(4.3)$— $(4.3)$— 
Liabilities related to non-qualified savings plan(2.5)(2.5)— — 
Total Liabilities$(6.8)$(2.5)$(4.3)$— 
 September 30,
2017		 Level One Level Two Level Three
Asset Class:       
Mutual fund investments in a non-qualified retirement plan(a)
$2.1
 $2.1
 $—
 $—
Total Assets$2.1
 $2.1
 $—
 $—
Liability Class: 
  
  
  
Liabilities related to non-qualified retirement plan$(2.1) $(2.1) $—
 $—
Derivatives – natural gas instruments, net(0.8) —
 (0.8) —
Derivatives – foreign currency swaps, net(7.2) —
 (7.2) —
Total Liabilities$(10.1) $(2.1) $(8.0) $—
(a)Includes mutual fund investments of approximately 25% in common stock of large-cap U.S. companies, 5% in common stock of small to mid-cap U.S. companies, 10% in international companies, 15% in bond funds, 5% in short-term investments and 40% in blended funds.

(a)Includes mutual fund investments of approximately 30% in common stock of large-cap U.S. companies, 15% in common stock of small to mid-cap U.S. companies, 5% in international companies, 10% in bond funds, 20% in short-term investments and 20% in blended funds.



 September 30,
2022		 
Level One		 
Level Two		 
Level Three
Asset Class:
Mutual fund investments in a non-qualified savings plan(a)
$1.8 $1.8 $— $— 
Total Assets$1.8 $1.8 $— $— 
Liability Class:    
Derivatives – natural gas instruments, net$(1.1)$— $(1.1)$— 
Liabilities related to non-qualified savings plan(1.8)(1.8)— — 
Total Liabilities$(2.9)$(1.8)$(1.1)$— 
(a)Includes mutual fund investments of approximately 30% in the common stock of large-cap U.S. companies, 5% in the common stock of small to mid-cap U.S. companies, 10% in the common stock of international companies, 15% in bond funds, 5% in short-term investments and 35% in blended funds.
 December 31,
2016		 
 
Level One
 
 
Level Two
 
 
Level Three
Asset Class:       
Mutual fund investments in a non-qualified savings plan(a)
$1.8
 $1.8
 $—
 $—
Derivatives – natural gas instruments, net0.9
 —
 0.9
 —
Trading securities1.8
 —
 1.8
 —
Total Assets$4.5
 $1.8
 $2.7
 $—
Liability Class: 
  
  
  
Liabilities related to non-qualified savings plan$(1.8) $(1.8) $—
 $—
Derivatives – foreign currency swaps, net(25.8) —
 (25.8) —
Total Liabilities$(27.6) $(1.8) $(25.8) $—


(a)Includes mutual fund investments of approximately 25% in the common stock of large-cap U.S. companies, 10% in the common stock of small to mid-cap U.S. companies, 5% in the common stock of international companies, 5% in bond funds, 40% in short-term investments and 15% in blended funds.

Cash and cash equivalents, accounts receivablereceivables (net of allowance for bad debts)doubtful accounts) and payablesaccounts payable are carried at cost, which approximates fair value due to their liquid and short-term nature. The Company’s investments related to its nonqualified retirement plan of $2.1$2.5 million at December 31, 2022 and $1.8 million at September 30, 2017, and December 31, 2016, respectively,2022, are stated at fair value based on quoted market prices. As of December 31, 2022 and September 30, 2017,2022, the estimated amount a third-party would pay forfair value of the Company’s fixed-rate 4.875% senior notesSenior Notes due July 2024, based on available trading information totaled $245.6(Level 2), totaled $239.9 million (Level 2)and $235.9 million, respectively, compared with the aggregate principal amount at maturity of $250.0 million. The estimated amount a third-party would pay atAs of December 31, 2022 and September 30, 2017, for2022, the estimated fair value of the Company’s fixed-rate 6.75% Senior Notes due December 2027, based on available trading information (Level 2), totaled $479.4 million and $468.9 million, respectively, compared with the aggregate principal amount at maturity of $500.0 million. The fair value at December 31, 2022 and September 30, 2022 of amounts outstanding under the Company’s term loans and revolving credit facility, based upon available bid information received from the Company’sCompany’s lender totaled $974.7 million (Level 2), totaled approximately $16.8 million and $158.5 million, respectively, compared with the aggregate principal balanceamount at maturity of $990.7 million. The loans assumed in the Produquímica acquisition have floating rates$16.9 million and their fair value approximates their carrying value.$168.4 million, respectively.


20
13.Earnings per Share:COMPASS MINERALS INTERNATIONAL, INC.
15.    Earnings per Share:
 
The Company calculates earnings per share using the two-class method. The two-class method requires allocating the Company’s net earnings to both common shares and participating securities. The following table sets forth the computation of basic and diluted earnings per common share (in millions, except for share and per-share data):
 Three Months Ended
December 31,
 20222021
Numerator:
Net (loss) earnings from continuing operations$(0.3)$7.9 
Less: net earnings allocated to participating securities(a)
(0.1)(0.1)
Net (loss) earnings from continuing operations available to common stockholders(0.4)7.8 
Net loss from discontinued operations available to common stockholders— (5.5)
Net (loss) earnings available to common stockholders$(0.4)$2.3 
Denominator (in thousands):
Weighted-average common shares outstanding, shares for basic earnings per share39,751 34,060 
Weighted-average awards outstanding(b)
— 29 
Shares for diluted earnings per share39,751 34,089 
Basic net (loss) earnings from continuing operations per common share$(0.01)$0.23 
Basic net loss from discontinued operations per common share— (0.16)
Basic net (loss) earnings per common share$(0.01)$0.07 
Diluted net (loss) earnings from continuing operations per common share$(0.01)$0.23 
Diluted net loss from discontinued operations per common share— (0.16)
Diluted net (loss) earnings per common share$(0.01)$0.07 
(a)Weighted participating securities include RSUs and PSUs that receive non-forfeitable dividends and consist of 514,000 weighted participating securities for the three months ended December 31, 2022, and 430,000 weighted participating securities for the three months ended December 31, 2021.
(b)For the calculation of diluted net earnings per share, the Company uses the more dilutive of either the treasury stock method or the two-class method to determine the weighted-average number of outstanding common shares. In addition, the Company had 1,272,000 weighted-average equity awards outstanding for the three months ended December 31, 2022, and 1,097,000 weighted-average equity awards outstanding for the three months ended December 31, 2021, that were anti-dilutive.

16.    Related Party Transactions:

As discussed in Note 12, on October 18, 2022, KII, through its KM&T subsidiary, purchased common stock representing an ownership interest of approximately 17% of the outstanding common stock of the Company. As part of the Stock Purchase Agreement, KM&T appointed two members to the Company’s board of directors, effective November 13, 2022. In addition, the companies are currently exploring value creation opportunities by leveraging the capabilities of select KII operating subsidiaries.

During the three months ended December 31, 2022 and 2021, the Company recorded SOP sales of approximately $0.9 million and $0.7 million, respectively, to certain subsidiaries of KII. As of December 31, 2022 and September 30, 2022, the Company had approximately $0.5 million and $0.4 million, respectively, of Receivables from related parties on its Consolidated Balance Sheets. Additionally, the Company has recently engaged a subsidiary of KII to provide engineering services for the Company’s lithium development project for which it capitalized approximately $0.5 million into Property, Plant and Equipment, net during the quarter ended December 31, 2022 of which $0.3 million was included in Accounts Payable as of December 31, 2022.

On December 20, 2022, the Company paid a cash dividend to its stockholders of record at the close of business on December 9, 2022 in the amount of $0.15 per share, or $6.3 million in the aggregate. KM&T received approximately $1.0 million in respect to its common shares.

21
 Three months ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Numerator:       
Net earnings$32.0
 $9.1
 $47.1
 $65.1
Less: net earnings allocated to participating securities(a)
(0.2) (0.1) (0.3) (0.3)
Net earnings available to common shareholders$31.8
 $9.0
 $46.8
 $64.8
        
Denominator (in thousands): 
  
  
  
Weighted-average common shares outstanding, shares for basic earnings per share33,825
 33,786
 33,817
 33,772
Weighted-average awards outstanding(b)
—
 3
 —
 3
Shares for diluted earnings per share33,825
 33,789
 33,817
 33,775
Net earnings per common share, basic$0.94
 $0.27
 $1.38
 $1.92
Net earnings per common share, diluted$0.94
 $0.27
 $1.38
 $1.92

(a)Weighted participating securities include RSUs and PSUs that receive non-forfeitable dividends and consist of 169,000 and 165,000 weighted participating securities for the three and nine months ended September 30, 2017, respectively, and 148,000 weighted participating securities for both the three and nine months ended September 30, 2016.COMPASS MINERALS INTERNATIONAL, INC.
(b)For the calculation of diluted earnings per share, the Company uses the more dilutive of either the treasury stock method or the two-class method to determine the weighted-average number of outstanding common shares. In addition, the Company had 695,000 and 637,000 weighted-average equity awards outstanding for the three and nine months ended September 30, 2017, respectively, and 547,000 and 509,000 weighted-average equity awards outstanding for the three and nine months ended September 30, 2016, respectively, which were anti-dilutive and therefore not included in the diluted earnings per share calculation.



Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
 
Forward-looking statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following: risks related to our mining and industrial operations; geological conditions; dependency on a limited number of key production and distribution facilities and critical equipment; weather conditions; uncertainties in estimating our economically recoverable reserves and resources; the inability to fund necessary capital expenditures or successfully complete capital projects; any inability to successfully implement our restructuring plan;strikes, other forms of work stoppage or slowdown or other union activities; supply constraints or price increases for energy and raw materials used in our production processes; weather conditions; climate change; our indebtedness and abilityinability to pay our indebtedness; restrictions in our debt agreements that may limit our ability to operate our business or require accelerated debt payments; tax liabilities; financial assurance requirements imposed on us; the inability of our customers to access credit or a default by our customers of trade credit extended by us or financing we have guaranteed; restrictions on or ability to payus; our payment of any dividends; financial assurance requirements; the impact of competition on the sales of our products; conditions in the agricultural sector and supply and demand imbalances for competing plant nutrition products;inflation risks; increasing costs or a lack of availability of transportation services; strikes, other formsthe seasonal demand for our products; risks associated with our international operations and sales, including changes in currency exchange rates; the impact of work stoppage or slowdown or other union activities;anticipated changes in potash product prices and customer application rates; conditions in the loss of key personnel;sectors where we sell products and supply and demand imbalances for competing products; our rights and governmental authorizations to mine and operate our properties; our abilityrisks related to expand our business through acquisitions, integrate acquired businesses and realize anticipated benefits from acquisitions; compliance with foreign and U.S. laws and regulations applicable to our international operations;unanticipated litigation or investigations or pending litigation or investigations or other contingencies; compliance with environmental, health and safety laws and regulations; environmental liabilities; the abilitycompliance with foreign and United States (“U.S.”) laws and regulations related to access our computer systemsimport and information technology or the inability to protect confidential data; misappropriation or infringement claims relating to intellectual property;export requirements and anti-corruption laws; changes in laws, industry standards and regulatory requirements; product liability claims and product recalls; misappropriation or infringement claims relating to intellectual property; inability to obtain required product registrations or increased regulatory requirements; our ability to successfully implement our strategies; plans to develop our lithium resource, including market entry and market changes from potential competing technologies; the useful life of our mine properties; our expectation of extending the Goderich mineral lease; conversion of mineral resources into mineral reserves; risks related to labor shortages and the loss of key personnel; a compromise of our computer systems, information technology or operations technology or the inability to protect confidential or proprietary data; climate change and related laws and regulations; our ability to expand our business through acquisitions and investments, realize anticipated benefits from acquisitions and investments and integrate acquired businesses; outbreaks of contagious disease or similar public health threats; domestic and international general business and economic conditions; and other risks referenced from time to time in this report and our other filings with the Securities and Exchange Commission (the “SEC”), including thePart I, Item 1A, “Risk Factors” section of our Annual Report on Form 10-K for the yearannual period ended December 31, 2016.September 30, 2022.
 
In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” the negative of these terms or other comparable terminology. Forward-looking statements include without limitation statements about our expected outlook, including expected bid volumes, sales volumes cost reductions and restructuring charges;costs; existing or potential capital expenditures; capital projects and investments; the industry and our competition; projected sources of cash flow; potential legal liability; proposed legislation and regulatory action; the seasonal distribution of working capital requirements; our reinvestment of foreign earnings outside the U.S.; payment of future dividends and ability to reinvest in our business; our ability to optimize cash accessibility, and minimize tax expense and meet debt service requirements; capital expenditures;future tax payments, tax refunds and valuation allowances; leverage ratios; ability to obtain a waiver or amendment to our credit agreement; outcomes of matters with taxing authorities; the effects of currency fluctuations and inflation, including our ability to recover inflation-based cost increases; the seasonality of our business.business; the effects of climate change; and the impact of the global economy, COVID-19 pandemic and the war in Ukraine on us. These forward-looking statements are only predictions. Actual events or results may differ materially.
 
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We undertake no duty to update any of the forward-looking statements after the date hereof or to reflect the occurrence of unanticipated events.
 
Unless the context requires otherwise, references to the “Company,” “Compass Minerals,” “our,” “us” and “we” refer to Compass Minerals International, Inc. (“CMI,” the parent holding company) and its consolidated subsidiaries. Except where otherwise noted, references to North America include only the continental United States (the “U.S.”)U.S. and Canada, and references to the United Kingdom (the “U.K.(“U.K.”) include only England, Scotland and Wales. Except for lithium quantities which are stated in metric tons or
22
COMPASS MINERALS INTERNATIONAL, INC.
where otherwise noted, all references to tons refer to “short tons” and all amounts are in U.S. dollars. One short ton equals 2,000 pounds and one metric ton equals 2,204.6 pounds. Compass Minerals and Protassium+ and combinations thereof, are trademarks of CMI or its subsidiaries in the U.S. and other countries. 

Critical Accounting EstimatesDiscontinued Operations


PreparationOn March 16, 2021, the Board of the Directors approved a plan to sell our South America chemicals and specialty plant nutrition businesses, our investment in Fermavi and our North America micronutrient product business (collectively, the “Specialty Businesses”) with the goal of reducing our leverage and enabling increased focus on optimizing our core businesses.

As described further in Item 1, Note 2 to our Consolidated Financial Statements, we sold our South America specialty plant nutrition business, a component of our consolidatedNorth America micronutrient business, our Fermavi investment and our South America chemicals business, respectively.

We believe these dispositions were conducted through a single disposal plan representing a strategic shift that has had a material effect on our operations and financial statementsresults. Consequently, the Specialty Businesses qualify for presentation as discontinued operations in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).The dispositions were completed during fiscal 2022; accordingly, the results of operations of the Specialty Businesses are presented as discontinued operations in the Consolidated Statements of Operations for the three months ended December 31, 2021.

Unless otherwise indicated, the information and amounts provided in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” pertain to continuing operations.

Critical Accounting Estimates

Preparation of our consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Management believes the most complex and sensitive judgments result primarily from the need to make estimates about matters that are inherently uncertain. Management’sPart II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 8, Note 2 to the consolidated financial statementsConsolidated Financial Statements included in our Annual Report on Form 10-K for the yearannual period ended December 31, 2016,September 30, 2022, describe the significant accounting estimates and policies used in preparation of our consolidated financial statements. For a further description of our critical accounting policies, see Item 1, Note 1 of our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Actual results in these areas could differ from management’s estimates.



Company Overview


Compass Minerals is a leading producer of essential minerals, including salt, sulfate of potash (“SOP”) specialty fertilizer and magnesium chloride. As of September 30, 2017,December 31, 2022, we operated 22operated 12 production and packaging facilities, including:
•The largest rock salt mine in the world in Goderich, Ontario,Ontario, Canada;
•The largest dedicated rock salt mine in the U.K. in Winsford, Cheshire;
•A solar evaporation facility located innear Ogden, Utah, which is both the largest SOPsulfate of potash specialty fertilizer production site and the largest solar salt production site in the Western Hemisphere; and
•Several mechanical evaporation facilities producing essential agricultural nutrients and specialty chemicals in Brazil.

Our salt business produces and sells sodium chloride and magnesium chloride, which are used for highway deicing, dust control, consumer deicing, water conditioning, consumer and industrial salt.

Our Salt segment provides highway deicing salt to customers in North America and the U.K. as well as consumer deicing and water conditioning products, ingredients used in consumer and commercial food preparation, and other salt-based products for consumer, industrial, chemical and agricultural and industrial applications. Our solar evaporation facility located in Ogden, Utah, is both the largest SOP production site and the largest solar salt production siteapplications in North America. In addition,the U.K., we operate a records management business utilizing excavated areas of our Winsford salt mine with one other location in London, U.K., which provides services to businesses throughout the U.K. TheEngland.

Our Plant Nutrition Southsegment produces and markets SOP products in various grades worldwide to distributors and retailers of crop inputs, as well as growers and for industrial uses. We market our SOP under the trade name Protassium+. 

Additionally, we are pursuing development of a sustainable lithium brine resource in Ogden, UT to support the North American battery market and we are a minority owner of Fortress North America, segment represents the results of Produquímica Indústria e Comércio S.A. (“Produquímica”), which was acquired in October 2016. This segment operates two primary businesses in Brazil – agricultural productivity and chemical solutions.LLC, a next-generation fire retardant company.


23
COMPASS MINERALS INTERNATIONAL, INC.
Consolidated Results of Continuing Operations


The following is a summary of our consolidated results of continuing operations for the three and nine months ended September 30, 2017,December 31, 2022 and September 30, 2016,2021, respectively. The following discussion should be read in conjunction with the information contained in our consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q.


THREE AND NINE MONTHS ENDED SEPTEMBER 30DECEMBER 31
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* Refer to “—Sensitivity Analysis Related“—Reconciliation of Net (Loss) Earnings from Continuing Operations to EBITDA and Adjusted EBITDA”EBITDA” for a reconciliation to the most directly comparable U.S. GAAP financial measure and the reasons we use this non-GAAP measure.



Commentary: Three Months Ended December 31, 2022 Compared to Three Months Ended December 31, 2021
COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017
•Total sales increased 62%6%, or $111.1$20.9 million, primarily due to the acquisition of Produquímica, which washigher Salt segment sales, partially offset by a decrease in Plant Nutrition segment sales. The increase in Salt sales reflected higher average sales prices and sales volumes, while the decrease in Plant Nutrition sales was attributable to lower sales volumes.
•Operating earnings increased 37%, or $7.5 million, to $27.9 million, reflecting higher Salt and Plant Nutrition North America segment sales.
Operating earnings increased 61%, or $11.9 million, due to the inclusion of Produquímica in our operating results. This increase was partially offset by a decline inearnings. Both Salt and Plant Nutrition North America segment operating earnings.earnings increased due primarily to higher average sales prices, which were partially offset by higher per-unit product and distribution costs.
•Earnings before interest, taxes, depreciation and amortization (“EBITDA”)* adjusted for items management believes are not indicative of our ongoing operating performance (“Adjusted EBITDA”)* increased 68%6%, or $27.9$3.4 million.
•Diluted net earnings per share increased 248%declined $0.24 to a loss of $0.01 per share.

24
COMPASS MINERALS INTERNATIONAL, INC.
THREE MONTHS ENDED DECEMBER 31
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Commentary: Three Months Ended December 31, 2022 Compared to Three Months Ended December 31, 2021
Gross Profit: Increased 17%, or $0.67.$10.1 million; Gross Margin increased 2 percentage points to 20%

COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017
Total sales•Salt segment gross profit increased 30%, or $211.7$9.1 million primarily due to the acquisition of Produquímica. This increasehigher average sales prices, which was partially offset by a decrease inhigher per-unit logistics and product costs (see Salt operating results).
•The gross profit of the Plant Nutrition segment sales.
Operating earnings decreased 28%, or $30.5increased $1.0 million due to lower Salt segment operating earnings, partially offset by an increase in Plant Nutrition North America operating earnings and the inclusion of Produquímica in our operating results.
Adjusted EBITDA* increased 1%, or $2.5 million.
Diluted earnings per share decreased 28%, or $0.54.

THREE AND NINE MONTHS ENDED SEPTEMBER 30
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COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017
Gross Profit: Increased 68%, or $30.9 million; Gross Margin increased 1 percentage point
The plant nutrition business, on a combined basis, contributed $37.0 million to the increase in gross profit due to the inclusion of Produquímica in our operating results.
A $6.2 million decrease in Salt segment gross profit partially offset the plant nutrition business’ increase. The decrease was primarily due to lower consumer and industrialhigher average sales volumes, higher per-unit shipping costs and restructuring costs.
COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017
Gross Profit: Increased 7%, or $13.5 million; Gross Margin decreased 5 percentage points
The plant nutrition business, on a combined basis, contributed $69.4 million to the increase in gross profit primarily due to the inclusion of Produquímica in our operating results.
Gross profit for Plant Nutrition North America was favorably impacted by slightly higher sales volumes and lower per-unit product costs,prices, which were partially offset by higher per-unit product costs, lower average sales pricesvolumes and higher per-unit shipping and handlinglogistics costs during the period.(see Plant Nutrition operating results).
A $56.0 million decrease in Salt segment gross margin partially offset the plant nutrition business’ increase. The decrease resulted from lower sales and increased per unit product costs.



OTHER EXPENSES AND INCOME


COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017Commentary: Three Months Ended December 31, 2022 Compared to Three Months Ended December 31, 2021
SG&A: Increased $19.0 million, which represented a 1.1 percentage point$2.6 million; 11.9% of sales increase to 15.4% from 14.3%in both periods
•The increase in SG&A expense was primarily due to an increase in corporate and Salt incentive compensation, which was partially offset by lower legal expenses due to higher costs in the inclusion of Produquímica in our operating results in 2017 and approximately $1 million in higher corporate depreciationprior period related to a significant software system upgrade. In addition, we incurred charges of approximately $2the recently completed SEC investigation.

Interest Income: Increased $0.8 million related to ongoing restructuring activities impacting our Salt and Plant Nutrition North America segments as well as corporate SG&A.

Interest Expense: Increased $8.1from $0.3 million to $13.5$1.1 million
•The increase wasin interest income is primarily due to a higher cash balance during the current period resulting from proceeds received from the private placement of our common stock.

Interest Expense: Unchanged at $13.9 million
•Interest expense was $13.9 million in both periods as lower debt levels in the current period were offset by higher aggregate debt level driven by the acquisition of Produquímica.interest rates.


Net (earnings) loss in equity investee: Increased(Gain) Loss on Foreign Exchange: Changed $2.9 million from a lossgain of $0.4 million to earningsa loss of $0.4$2.5 million
The $0.4 million of earnings in the current period represents our share of Fermavi Eletroquímica Ltda.’s (“Fermavi”) net earnings. As a result of the full acquisition of Produquímica, we hold a 50% interest in Fermavi, which was previously held by Produquímica.
The $0.4 million loss for the prior period represented our share of Produquímica’s net loss based on our initial 35% equity interest in Produquímica prior to the full acquisition.

Other (Income) Expense: Decreased $2.7 million from an expense of $1.5 million to income of $1.2 million
•We realized foreign exchange gainslosses of $1.1$2.5 million in the thirdfirst quarter of 2017 and foreign exchange lossesfiscal 2023 compared to gains of $1.1$0.4 million in the thirdsame quarter of 2016. In addition, interest incomethe prior fiscal year, primarily reflecting changes in translating our intercompany loans from Canadian dollars to U.S. dollars.

Net Loss in Equity Investees: Increased $0.5 million to $0.9 million
•We realized a net loss in equity investees of $0.9 million for the three months ended December 31, 2022 compared to $0.4 million in the quarter increased by $0.8 million.prior-year period due to our share of losses related to our equity investments as these development stage businesses position themselves for commercialization.


Income Tax (Benefit) Expense: Decreased $15.6Changed $13.1 million from a benefit of $1.2 million to an expense of $3.1$11.9 million to a benefit of $12.5 million
The decrease was•Income tax expense increased primarily due to valuation allowance expense recorded in the three months ended December 31, 2022, higher pretax book income in the three months ended December 31, 2022 as compared to the three months ended December 31, 2021 and an income tax benefit recorded in the three months ended December 31, 2021 on the release of approximately $17 million of valuation allowances relateda domestic tax reserve.
25
COMPASS MINERALS INTERNATIONAL, INC.
•Our effective tax rate increased from a negative 18% in the prior fiscal year to our Brazil business duringa positive 103% in the thirdfirst quarter of which approximately $13 million was accounted for as a discrete item and approximately $4 million resulted from adjustments madefiscal 2023 primarily reflecting valuation allowance expense in the three months ended December 31, 2022. See Item 1, Note 8 to our annual effective tax rate.the Consolidated Financial Statements.
•Our income tax provision in both periodsfor the three months ended December 31, 2022 and 2021 differs from the U.S. statutory rate primarily due to U.S. statutory depletion, domestic manufacturing deductions, state income taxes, base erosion and anti-abuse tax, nondeductible executive compensation and foreign income, mining and withholding taxestaxes. Additionally, the income tax provision for the three months ended December 31, 2022 included valuation allowance expense and the income tax provision for the three months ended December 31, 2021 included interest expense recognition differences for tax and financial reporting purposes.
Our effective tax rate declined
Net Loss from 25%Discontinued Operations: $5.5 million in the thirdfirst quarter of 2016 to (64)% in the third quarter of 2017, reflecting the release of the Brazilian valuation allowances.fiscal 2022

COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017
SG&A: Increased $44.0 million, which represented a 2.2 percentage points of sales increase to 13.7%•The net loss from 11.5%
The increase in SG&A expense was primarily due to the inclusion of Produquímica in our operating results in 2017, approximately $1 million in higher corporate depreciation related to a significant software system upgrade. In addition, we incurred charges of approximately $2 million related to ongoing restructuring activities impacting our Salt and Plant Nutrition North America segments as well as corporate SG&A.

Interest Expense: Increased $22.7 million to $39.5 million
The increase was primarily due to our higher aggregate debt level driven by the acquisition of Produquímica, which was partially offset by lower interest rates due to the refinancing of our term loans and revolving credit facility in April 2016.

Net (earnings) loss in equity investee: Increased from a loss of $1.7 million to earnings of $0.6 million
The $0.6 million of earnings in the current period represents our share of Fermavi’s net earnings, and the $1.7 million lossdiscontinued operations for the prior period representedincludes the results from our share of Produquímica’s netchemicals business in South America and impairment loss based on ourrecognized prior 35% equity interest in Produquímica.

Other Expense: Decreased $1.1 million to $0.5 million
The decrease in other expense was primarily due to an increase in interest income, which was partially offset by foreign exchange losses. Additionally, the comparative 2016 period included $2.1 million of expenses incurred related to the refinancingApril 20, 2022 sale date.
•The prior period loss of our term loansthe South America chemicals business included a $3.1 million foreign currency exchange loss and revolving credit facility.

Income Tax (Benefit) Expense: Decreased $31.8 million from an expenseimpairment loss to record the net assets of $24.1 millionthe South America chemical business at fair value less cost to a benefit of $7.7 million
The decrease was primarily duesell which reflected the foreign currency translation adjustment. Refer to Item 1, Note 2 to the release of $18 million of Brazilian valuation allowances and lower pre-tax income.Consolidated Financial Statements for additional details.

Our income tax provision in both periods differs from the U.S. statutory rate primarily due to U.S. statutory depletion, domestic manufacturing deductions, state income taxes, foreign income, mining and withholding taxes and interest expense recognition differences for tax and financial reporting purposes.
Our effective tax rate declined from 27% in the first nine months of 2016 to (20)% in the first nine months of 2017, reflecting the release of Brazilian valuation allowances.


Operating Segment Performance


The following financial results represent consolidated financial information with respect to sales fromthe operations of our Salt Plant Nutrition North America and Plant Nutrition South America segments. The results of operations of the consolidated records management business and other incidental revenues, include sales of $2.5$2.7 million and $2.4$3.0 million for the third quarter of 2017three months ended December 31, 2022 and 2016, respectively, and $7.4 million and $7.5 million for the first nine months of 2017 and 2016,2021, respectively. These revenues are not material to our consolidated financial results and are not included in the following operating segment financial data.


THREE AND NINE MONTHS ENDED SEPTEMBER 30Salt
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 3Q 2017 3Q 2016 2017 YTD 2016 YTD
Salt Sales (in millions)$124.7
 $135.7
 $508.5
 $546.9
Salt Operating Earnings (in millions)$22.5
 $30.0
 $78.6
 $136.0
Salt Sales Volumes (thousands of tons)       
Highway deicing1,157
 1,162
 5,596
 5,944
Consumer and industrial446
 534
 1,412
 1,458
Total tons sold1,603
 1,696
 7,008
 7,402
Average Salt Sales Price (per ton)       
Highway deicing$49.04
 $48.23
 $53.07
 $56.15
Consumer and industrial$152.39
 $149.44
 $149.83
 $146.23
Combined$77.79
 $80.05
 $72.56
 $73.89

COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017DECEMBER 31

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QTD 2022QTD 2021
Salt Sales (in millions)
$308.1 $273.9 
Salt Operating Earnings (in millions)
$47.1 $39.4 
Salt Sales Volumes (thousands of tons)
Highway deicing2,901 2,807 
Consumer and industrial620 633 
Total tons sold3,521 3,440 
Average Salt Sales Price (per ton)
Highway deicing$65.60 $58.34 
Consumer and industrial$190.04 $174.00 
Combined$87.51 $79.63 
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COMPASS MINERALS INTERNATIONAL, INC.
Commentary: Three Months Ended December 31, 2022 Compared to Three Months Ended December 31, 2021
•Salt sales decreased 8%increased 12%, or $11.0$34.2 million, primarily due to lower consumer and industrial sales volumes.
higher Salt average sales prices decreased 3% dueand highway deicing sales volumes.
•Average sales prices increased 10% and contributed $31.0 million to product sales mix, as consumer and industrial products which have a higher average sales price were a lower proportion of total salesthe increase in the current period.Salt sales.
•Highway deicing average sales prices increased 2%,12% primarily as a result of product sales mix partially offset by lower North Americandue to higher highway deicing bidcontracted sales prices for the 2016-2017fiscal 2023 winter season. Consumerseason while consumer and industrial average sales prices increased 2% due9%. We have sought to price increases introduced last year as well as an improvement in productincrease sales mix.prices to offset the impact of inflation on costs.
•Salt sales volumes decreased 5%increased 2%, or 93,00081,000 tons, and which contributed approximately $13$3.2 million to the decline in Salt segment sales.sales increase. Highway deicing sales volumes increased 3%, primarily as higher sales volumes in North America were essentially flat.partially offset by lower U.K. sales volumes in the first quarter of 2023. Consumer and industrial sales volumes decreased 16%2%.
•Salt operating earnings increased 20%, or $7.7 million, primarily due to lower pre-season ordershigher average sales prices, which was partially offset by higher per-unit logistics and product costs. Higher fuel costs and inflationary pressures for packaged deicing products.energy and certain materials and supplies were only partially recovered through increased sales prices during the period.
Salt operating earnings
Plant Nutrition

THREE MONTHS ENDED DECEMBER 31

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QTD 2022QTD 2021
Plant Nutrition Sales (in millions)
$41.6 $54.6 
Plant Nutrition Operating Earnings (in millions)
$11.0 $9.5 
Plant Nutrition Sales Volumes (thousands of tons)
45 83 
Plant Nutrition Average Sales Price (per ton)
$924 $660 
Commentary: Three Months Ended December 31, 2022 Compared to Three Months Ended December 31, 2021
•Plant Nutrition sales decreased 25%24%, or $7.5$13.0 million due to lower sales as well as increased logistics costs and approximately $2 million of restructuring costs applicable to the Salt segment.

COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017
Salt sales decreased 7%, or $38.4 million, due to lower highway deicing average sales prices and highway deicing and consumer and industrial sales volumes, which were partially offset by an increase in consumer and industrialhigher average sales prices.
Salt average•Plant Nutrition sales price decreased 2%volumes were lower year over year due to lower demand due to a combination of drought conditions in California and uncertainty about future fertilizer prices causing users to cancel or delay purchases. The decline in sales volumes contributed approximately $12$25.1 million to the decrease in Salt segment sales. The decrease in average sales price was due to a decrease in highway deicing average sales prices, partially offset by an increase in consumer and industrial products average sales prices.
Highway deicing average sales prices decreased 5%, primarily as a result of lower North American highway deicing bid prices for the 2016-2017 winter season. Consumer and industrial•Plant Nutrition average sales prices increased 2% due to price increases introduced last year as well as an improvement in product sales mix.
Salt sales volumes decreased 5%40%, or 394,000 tons, and contributed approximately $26 million to the decline in Salt segment sales. Highway deicing sales volumes decreased 6% primarily due to the carryover impact of two consecutive mild winters. Consumer and industrial sales volumes decreased 3%.
Salt operating earnings decreased 42%, or $57.4 million, primarily due to lower sales and higher per-unit product costs due to sales of higher-cost 2016 inventory sold during the period.
We experienced lower mine operating rates throughout 2016 and unplanned downtime at our Goderich mine in the fourth quarter of 2016, which increased 2017 per-unit product costs.
In addition, we incurred restructuring costs related to our cost savings initiatives of approximately $3 million during the period in the Salt segment and unfavorable logistics costs contributed to the decline in Salt segment operating earnings.


THREE AND NINE MONTHS ENDED SEPTEMBER 30
cmp-2017093_chartx23802.jpgcmp-2017093_chartx25017.jpg
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cmp-2017093_chartx27932.jpg
 3Q 2017 3Q 2016 2017 YTD 2016 YTD
Plant Nutrition North America Sales (in millions)$40.3
 $41.5
 $140.0
 $140.4
Plant Nutrition North America Operating Earnings (in millions)$2.3
 $2.5
 $17.5
 $12.5
Plant Nutrition North America Sales Volumes (thousands of tons)65
 70
 222
 218
Plant Nutrition North America Average Sales Price (per ton)$626
 $591
 $631
 $645

COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017
Plant Nutrition North America sales decreased 3%, or $1.2 million.
Plant Nutrition North America sales volumes decreased 7%, or 5,000 tons, and contributed approximately $3 million to the decrease in Plant Nutrition North America sales. The decrease in sales volumes was primarily driven by reduced SOP sales volumes due to the impact of hurricane activity in the southeastern U.S.
The 6% increase in Plant Nutrition North America average sales price partially offset the decrease in Plant Nutrition

North America sales by approximately $2$12.1 million. The increase in averageAverage sales price was impacted by an increase in higher-priced micronutrient sales and reduced lower-priced export sales compared toprices increased from the prior year.period due to global supply and demand dynamics for fertilizer products which resulted in steadily increasing prices throughout fiscal 2022.
•Plant Nutrition North America operating earnings decreased 8%, or $0.2increased $1.5 million to $11.0 million primarily due to approximately $1 million of restructuringsignificantly higher average sales prices, which were partially offset by higher per-unit product costs and higher depreciation expense associated with commissioning new capital projectsprimarily due to lower production volumes at our Ogden facility which were mostly offset by the impact of an increase in average sales prices.as well as higher energy and other input costs, and higher per-unit logistics costs.

27
COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017
COMPASS MINERALS INTERNATIONAL, INC.

Plant Nutrition North America sales were essentially flat.Outlook
Plant Nutrition North America
•Salt segment sales volumes increased 2%, or 4,000 tons, asfor the North American SOP market was more stable during the nine months ended September 30, 2017.
The 2% decrease in Plant Nutrition North America average sales price offset the effect of the increase in Plant Nutrition North America sales volumes.
Plant Nutrition North America operating earnings increased 40%, or $5.0fiscal year is expected to range from 11.35 million primarily due to a reduction in per-unit product costs, the impact of which was partially offset by unfavorable logistics12.2 million tons. EBITDA is expected to range from $215 million to $255 million, although higher energy costs and approximately $1 million of restructuring costs.

PLANT NUTRITION SOUTH AMERICA SEGMENT RESULTS
 3Q 2017 2017 YTD
Plant Nutrition South America Sales$123.2
 $250.6
Plant Nutrition South America Operating Earnings$21.4
 $24.0
Plant Nutrition South America Sales Volumes (thousands of tons)   
Agricultural productivity163
 302
Chemical solutions70
 214
Total tons sold233
 516
Average Plant Nutrition South America Sales Price (per ton)   
Agricultural productivity$604
 $580
Chemical solutions$354
 $353
Combined$529
 $486

COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30, 2017
Plant Nutrition South America sales were $123.2 million for the third quarter. Plant Nutrition South America’s operating results are impacted by seasonality. Sales volumes are usually higherunplanned downtime, among other causes, in the third and fourth quarter and lower in the first and second quarters. See “—Seasonality” for more information.
Plant Nutrition South America average sales price was $529 per ton.

COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30, 2017
Plant Nutrition South America sales were $250.6 million for the first nine months of 2017. Plant Nutrition South America’s operating results are impacted by seasonality. Sales volumes are usually higher in the third and fourth quarter and lower in the first and second quarters. See “—Seasonality” for more information.
Plant Nutrition South America average sales price was $486 per ton.

Outlook
The annual bidding process forour North American highway deicing contracts is now complete. Dueoperations may pressure EBITDA to the mild winter weatherlower end of the range.
•Plant Nutrition segment product demand was adversely impacted during the first fiscal quarter by drought conditions in California, our North American servedlargest market we expectfor SOP. Recent significant rainfall and flooding in California may impact fertilizer application rates. Additionally, in January 2023 our Ogden facility experienced a contraction of awarded bid volumes when comparedtemporary increase in natural gas costs due to the 2016-2017 bid season of approximately 3%. We expect Saltpipeline supply and demand issues. Accordingly, Plant Nutrition segment sales volumes and EBITDA are now expected to range from 10.6205,000 to 270,000 tons and $30 million to 11.0$60 million, tonsrespectively, in 2017.fiscal year 2023.
We expect Plant Nutrition North America sales volumes•Fiscal year 2023 capital expenditures are expected to range from 320,000a total of $165 million to 340,000 tons in 2017.
Our Plant Nutrition South America business has been negatively impacted by the delayed start$220 million. This amount includes $75 million to the planting season in Brazil. As a result, we expect Plant Nutrition South America sales volumes to range from 750,000 to 800,000 tons in 2017.

In July 2017, we initiated a restructuring plan to reduce ongoing costs and further streamline the organization. These initiatives resulted in a charge of $4.3$120 million in the third quarter of 2017. We continue to actively pursue additional cost reductions in all areasconnection with advancing phase-one of our business and may incur additional charges in 2017 as a result of these activities.lithium development.


Liquidity and Capital Resources
 
Historically, our cash flows from operating activities have generally been adequate to fund our basic operating requirements, ongoing debt service and sustaining investment in our property, plant and equipment. We have also used cash generated from operations to fund capital expenditures, which strengthen our operational position, pay dividends, fund smaller acquisitions and repay our debt. To a certain extent, our ability to meet our short- and long-term liquidity and capital needs is subject to general economic, financial, competitive legislative, regulatory,and weather conditions, effects of climate change, geological variations in our mine deposits and other factors that are beyond our control. Historically, our working capital requirements have been the highest in the fourthfirst fiscal quarter (ending December 31) and lowest in the second quarter. As a result of the Produquímica acquisition (described in Note 2 to our consolidated financial statements), we expect a less seasonal distribution of working capital requirements.third fiscal quarter (ending June 30). When needed, we may fund short-term working capital requirements by accessing our $300 million revolving credit facility.facility and our $100 million revolving accounts receivable financing facility (our “AR Facility”).


We have been able to manage our cash flows generated and used across Compass Minerals to permanently reinvest earnings in our foreign jurisdictions or efficiently repatriate those funds to the U.S. As of September 30, 2017, weDecember 31, 2022, we had $36.9$15.4 million of cash and cash equivalents (in our consolidated balance sheets) that was either held directly or indirectly by foreign subsidiaries. As a result of U.S. tax reform, we revised our permanently reinvested assertion, expecting to repatriate approximately $150 million of unremitted foreign earnings from Canada. In fiscal 2022, we revised our permanently reinvested assertion, expecting to repatriate an additional approximately $10 million of unremitted foreign earnings from our U.K. operations. During the first quarter of fiscal 2023, $89.2 million was repatriated from Canada. Net income tax expense of $3.8 million has been recorded for foreign withholding tax, state income tax and foreign exchange losses on these changes in assertion as of December 31, 2022, consisting of a tax benefit of $0.7 million recorded in the first quarter of fiscal year 2023, a $0.2 million tax benefit recorded in fiscal 2022 and tax expense of $4.7 million recorded in years prior to fiscal 2022. Due to our ability to generate adequate levels of domesticU.S. cash flow on an annual basis, it is our current intention to permanentlycontinue to reinvest the remaining undistributed earnings of our foreign earnings outside of the U.S. However, if we were to repatriate our foreign earnings to the U.S., we may be required to accrue and pay U.S. taxes in accordance with the applicable U.S. tax rules and regulations as a result of the repatriation.subsidiaries indefinitely. We review our tax circumstances on a regular basis with the intent of optimizing cash accessibilityaccessibility and minimizing tax expense.


In addition, the amountamount of permanently reinvested earnings is influenced by, among other things, the profits generated by our foreign subsidiaries and the amount of investment in those same subsidiaries. The profits generated by our domesticU.S. and foreign subsidiaries are impacted by the transfer price charged on the transfer of our products between them. As discussed in Note 6Canadian provincial taxing authorities continue to challenge our consolidated financial statements, our calculated transfer price onprices of certain products between oneitems. The final resolution of our foreign subsidiaries and a domestic subsidiary has been challenged by Canadian federal and provincial governments.these challenges may not occur for several years. We currently expect the outcome of these matters will not have a material impact on our results of operations. However, it is possible the resolution could materially impact the amount of earnings attributable to our domestic and foreign subsidiaries, which could impact the amount of permanently reinvested foreign earnings as well as future cash flows fromearnings. See Item 1, Note 8 of our domestic operations. See Note 6 to our consolidated financial statementsConsolidated Financial Statements for a discussion regarding our Canadian tax reassessments.


In April 2016, we entered into a credit agreementManagement assesses the available positive and negative evidence to refinance our existing $471 million term loans and $125 million revolving credit facility with a new $400 million senior secured term loan and a $300 million senior secured revolving credit facility, which both mature July 1, 2021. The new term loan and revolving credit facility bear interest at LIBOR plus 1.75% based on our current leverage ratio and credit rating. In connection with this transaction, we paid $5.8 millionestimate whether sufficient future taxable income will be generated to permit use of refinancing fees in 2016 ($1.4 million was recorded as an expense and $4.4 million was capitalized as deferred financing costs) and wrote-off $0.1 million ofthe existing deferred financing costs relatedtax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred in the U.S. over the three-year period ended December 31, 2022. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future income. On the previous term loans and revolving credit facility.

In September 2016, we amended our credit agreement to increase our senior secured term loan by $450 million. This additional tranche will mature July 1, 2021, and bears interest at LIBOR plus 2.0%. In connection with this transaction, we incurred $2.2 million of financing fees ($0.7 million was recorded as an expense and $1.5 million was capitalized as deferred financing costs). Proceedsbasis of this additional tranche were usedevaluation, during the three months ended December 31, 2022, a valuation allowance of $6.1 million has been recorded to fundrecognize only the acquisition of the remaining 65% of Produquímica’s equity in October 2016.

In September 2017, we entered into an amendment to our credit agreement to increase the maximum allowed leverage ratio under the credit agreement through September 2018. In connection with this amendment, we paid fees totaling $0.6 million ($0.1 million was recorded as an expense and $0.5 million was capitalized as deferred financing costs).

In September 2017, we refinanced $32.1 million of our Brazilian loans using the proceeds from $41.1 million of new loans. The new loans bear interest rates ranging from 116.25% and 118% of CDI, an overnight inter-bank lending rate in Brazil, and mature in September 2019. No material fees were paid in connection with these transactions. A portion of the loansU.S. deferred tax assets that are denominated in U.S. dollars and a portionmore likely than not to be realized. The amount of the loansdeferred tax assets considered realizable, however, could be adjustedif estimates of future taxable income during the carryforward period are denominatedincreased or reduced or if objective negative evidence in Brazilian Reais. In September 2017, we also entered into foreign currency swap agreements whereby we agreedthe form of cumulative losses is no longer present and additional weight is given to swap interest and principal payments onsubjective evidence such as our projections for income. We expect additional valuation allowances will be required through the loans denominatedremainder of the fiscal year assuming our earnings are in U.S. dollars for principal and interest payments denominated in Brazilian Reais, Produquímica’s functional currency. See Note 11 toline with our consolidated financial statements for a discussion of our foreign currency swap agreements.current expectations.

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COMPASS MINERALS INTERNATIONAL, INC.

Cash and cash equivalents of $39.1 million as of September 30, 2017, decreased $38.3 million from December 31, 2016.2022 was $146.1 million. We generated $126.7$2.1 million of operating cash flows during the three months ended December 31, 2022, net of increases in our working capital. During the first nine months of 2017. In the first nine months of 2017,period ended December 31, 2022, we used cash on hand, and cash flows from operations and cash proceeds from the private placement to fund capital expenditures of $81.0$19.9 million, pay down net debt of $116.1 million and pay dividends on our common stock of $73.3$6.3 million. Cash and cash equivalents of $146.1 million increased $100.0 million from September 30, 2022. Cash flows from operating activities totaled $2.1 million during the three months ended December 31, 2022, including net loss from continuing operations of $0.3 million, depreciation, depletion and amortization of $23.9 million, and a net working capital increase of $31.3 million driven primarily by the seasonality of our Salt business. Our working capital increase primarily reflects higher accounts receivable balances as the winter season begins in the latter half of the first quarter and sales that occurred late in the quarter have not been collected.


Indebtedness

As of September 30, 2017,December 31, 2022, we had $1.34 billion$839.8 million of outstanding indebtedness, consisting of $250.0 million outstanding under our 4.875% Senior Notes $990.7due 2024, $500.0 million outstanding under our 6.75% Senior Notes due 2027, $16.9 million of borrowings outstanding under our senior secured credit facilities (consistingunder the Credit Agreement, consisting entirely of term loans, and a revolving$72.9 million of outstanding loans under the accounts receivable financing facility (see Item 1, Note 9 of our Consolidated Financial Statements for more detail regarding our debt). Outstanding letters of credit facility), including $151.2totaling $13.5 million borrowed againstas of December 31, 2022, reduced available borrowing capacity under our revolving credit facility to $286.5 million. During the quarter ended December 31, 2022, we paid off the outstanding revolving credit facility balance utilizing proceeds from a private placement of common stock. Refer to Item 1, Note 12 of our Consolidated Financial Statements for additional details of the private placement transaction.

In November 2022, we entered into the third amendment to the Credit Agreement, principally to affect a transition from the London Inter-Bank Offered Rate to the Secured Overnight Financing Rate pricing benchmark provisions.

In January 2023, certain of our U.S. subsidiaries entered into the second amendment to the AR Securitization Facility with PNC Bank, which temporarily eases the restrictions of certain covenants contained in the agreement through March 2023. The amendment made certain adjustments to the financial tests including: (i) the default ratio and $96.0 million(ii) the delinquency ratio to make compliance with such tests more likely.

In the future, including during fiscal 2023, we may borrow amounts under the revolving credit facility or enter into additional financing to fund our working capital requirements, potential acquisitions and capital expenditures and for other general corporate purposes.

Our ability to make scheduled interest and principal payments on our indebtedness, to refinance our indebtedness, to fund planned capital expenditures and to fund acquisitions will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, climate-related, regulatory and other factors that are beyond our control. Based on our current level of debt related to Produquímica. We had $8.2 million of outstanding letters of credit as of September 30, 2017, which reducedoperations, we believe that cash flow from operations and available cash, together with available borrowings under our revolving credit facility, borrowing availabilitywill be adequate to $140.6 million.meet our liquidity needs over the next 12 months.

Our debt service obligations could, under certain circumstances, materially affect our financial condition and impairprevent us from fulfilling our ability to operate our business or pursue our business strategies.debt obligations. As a holding company, CMI’s investments in its operating subsidiaries constitute substantially all of its assets. Consequently, our subsidiaries conduct substantially all of our consolidated operating activities and own substantially all of our operating assets. The principal source of the cash needed to pay our obligations is the cash generated from our subsidiaries’ operations and their borrowings. Our subsidiaries are not obligated to make funds available to CMI. Furthermore, we must remain in compliance with the terms of the Credit Agreement governing our credit agreement governing our term loans and revolving credit facility,facilities, including the consolidated total net leverage ratio and interest coverage ratio, in order to make payments on our debt or pay dividends to our stockholders. We must also comply with the terms of our indenture governing our senior notes. 4.875% Senior Notes due July 2024 and our 6.75% Senior Notes due December 2027, which limit the amount of dividends we can pay to our stockholders.

Pursuant to the terms of the second amendment to its Credit Agreement, the maximum allowed consolidated total net leverage ratio (as defined and calculated under the terms of the Credit Agreement and discussed further below) was 5.0x for the quarter ended December 31, 2022, which steps down to 4.75x in the quarter ending March 31, 2024, and to 4.5x for the fiscal quarter ended June 30, 2024 and thereafter. The consolidated total net leverage ratio represents the ratio of (a) consolidated total net debt to (b) consolidated adjusted EBITDA. Consolidated total net debt includes the aggregate principal amount of total debt, net
29
COMPASS MINERALS INTERNATIONAL, INC.
of unrestricted cash not to exceed $50.0 million. As of December 31, 2022, our consolidated total net leverage ratio was approximately 3.8x.

Although we are in compliance with our debt covenants as of September 30, 2017,December 31, 2022, we can make no assurance that we will remain in compliance with these ratios nor can we make any assurance that the agreements governing the current and future indebtedness of our subsidiaries will permit our subsidiaries to provide us with sufficient dividends, distributions or loans to fund scheduled interest payments on our debt when due. If we consummate an additional acquisition, our debt service requirements could increase.ratios. Furthermore, we may need to refinance all or a portion of our indebtedness on or before maturity; however, we cannot provide assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.
 
See Notes 6Capital Allocations

Principally due to the nature of our deicing business, our cash flows from operations have historically been seasonal, with the majority of our cash flows from operations generated during the first half of the calendar year. When we have not been able to meet our short-term liquidity or capital needs with cash from operations, whether as a result of the seasonality of our business or other causes, we have met those needs with borrowings under our revolving credit facility. We expect to meet the ongoing requirements for debt service, any declared dividends and 8capital expenditures from these sources. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our consolidated financial statements for a discussion regarding labor,control.

We manage our capital allocation considering our long-term strategic objectives and required spending to sustain our business.During the first quarter of fiscal 2021, we reduced our dividend by approximately 80% to provide additional liquidity and align our capital allocation policy with our corporate strategy. While our equipment and facilities are generally not impacted by rapid technology changes, our operations require refurbishments and replacements to maintain structural integrity and reliable production and shipping capabilities. When possible, we incorporate efficiency, environmental and litigation matters.safety improvement capabilities into our routine capital projects and we plan the timing of larger projects to balance with our liquidity and capital resources. Changes in our operating cash flows may affect our future capital allocation and spending.


During fiscal 2023, we expect to spend between $90 million and $100 million of sustaining capital in our Salt and Plant Nutrition businesses. Additionally, we continued to develop our recently identified lithium resource at our Ogden facility and have spent approximately $2.4 million of capital thus far in fiscal 2023 towards the development phase of this sustainable lithium development project. For the full year of fiscal 2023, we have allocated between $75 million and $120 million for further development. We expect to achieve market entry with a lithium product by 2025 and expect significant capital and other expenditures would be required to achieve this market entry; however, the full amount of this expenditure is currently unknown and will depend on a number of factors, including the outcome of further engineering and design plans. For more information, refer to Part I, Item 1A, “Risk Factors” in our Form 10-K for the for the annual period ended September 30, 2022.

On October 18, 2022, we received aggregate net proceeds of approximately $240.7 million, net of transaction costs, from Koch Minerals & Trading, LLC (“KM&T”) as part of a strategic equity partnership. We expect to use approximately $200 million of the proceeds from the private placement to advance the first development phase of the lithium project. We used the remaining $40.7 million of proceeds to reduce debt.

In connection with our strategy to strengthen and grow its essential minerals businesses, during the first and second quarters of fiscal 2022, we made $45 million equity investments in Fortress North America, LLC (“Fortress”), building upon a previous $5 million investment. As of December 31, 2022, we have invested $50 million in Fortress in exchange for an ownership interest of approximately 45%. Fortress is a development stage company that intends to achieve commercialization of its magnesium chloride-based fire-retardant products to help combat wildfires. We may make further investments or make other acquisitions to grow our business.

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COMPASS MINERALS INTERNATIONAL, INC.
The table below provides a summary of our cash flows by category:
category, including cash flows from discontinued operations:
NINETHREE MONTHS ENDED SEPTEMBER 30, 2017DECEMBER 31, 2022NINETHREE MONTHS ENDED SEPTEMBER 30, 2016DECEMBER 31, 2021
Operating Activities:
Activities:
Net cash provided by operating activities were $2.1 millionNet cash used in operating activities were $14.3 million
» Net earnings were $47.1loss was $0.3 million.» Net earnings were $65.1$2.4 million.
» Non-cash depreciation and amortization expense was $89.1$23.9 million.» Non-cash depreciation and amortization expense was $62.7$28.3 million.
» Working capital items were a source of operating cash flows of $1.1 million.» Working capital items were a use of operating cash flows of $23.3$31.3 million.» Working capital items were a use of operating cash flows of $58.7 million.
» Non-cash net loss in equity investees was $0.9 million.» Non-cash net loss in equity investees was $0.4 million.
Investing Activities:
Net cash flows used in investing activities were $20.1 millionNet cash flows used in investing activities were $41.2 million
» Net cash flows used byin investing activities included $81.0$19.9 million of capital expenditures.» Net cash flows used byin investing activities included $148.7equity method investments of $28.2 million.
» Included $14.5 million of capital expenditures and an additional investment in Produquímica.expenditures.
Financing Activities:
Net cash flows provided by financing activities were $117.7 million
Net cash flows provided by financing activities were $63.3 million
» Included net payments on our debt of $116.1 million.» Included net proceeds from the issuance of debt of $68.8 million.
» Included net proceeds from private placement of common stock of $240.7 million.» Net cash flows usedprovided by financing activities includedwere partially offset by the payment of dividends of $73.3$5.3 million.

» In addition, we had net borrowings on our debt of $2.9 million.

» We also paid $12.8 million for the final payment related to the Produquímica acquisition.
» Net cash flows used by financing activities includedIncluded the payment of dividends of $70.5$6.3 million.

» In addition, we had net borrowings on our debt of $493.0 million, payments of $7.3 million related to the refinancing of our credit facility in April and September 2016 and $0.7 million in proceeds received from stock option exercises.


As mentioned above, our Salt segment’s business is seasonal and our Salt segment results and working capital needs are heavily impacted by the severity and timing of the winter weather, which generally occurs from December through March of each year. Customers tend to replenish their inventory prior to the start of the winter season and following snow events, consequently the number and timing of snow events during the winter season will impact the amount of our accounts receivable and inventory at the end of each quarter. Our cash flows during the three months ended December 31 of each year reflect the seasonal increase in accounts receivable due to the beginning of the winter season.
Sensitivity Analysis Related
Other Matters

See Item 1, Notes 8 and 10 of our Consolidated Financial Statements for a discussion regarding labor, environmental and litigation matters.

Reconciliation of Net (Loss) Earnings from Continuing Operations to EBITDA and Adjusted EBITDA
 
Management uses a variety of measures to evaluate our performance. While our consolidated financial statements, taken as a whole, provide an understanding of our overall results of operations, financial condition and cash flows, we analyze components of the consolidated financial statements to identify certain trends and evaluate specific performance areas. In addition to using U.S. GAAP financial measures, such as gross profit, net earnings and cash flows generated by operating activities, management uses EBITDA and Adjusted EBITDA. We have presented Adjusted EBITDA for both continuing operations and consolidated including discontinued operations for comparability purposes (see Item 1, Note 2 to our Consolidated Financial Statements for a discussion of discontinued operations). Both EBITDA and Adjusted EBITDA are non-GAAP financial measures used to evaluate the operating performance of our core business operations because our resource allocation, financing methods, cost of capital and income tax positions are managed at a corporate level, apart from the activities of the operating segments, and our operating facilities

are located in different taxing jurisdictions, which can cause considerable variation in net earnings. We also use these measuresEBITDA and Adjusted EBITDA to assess our operating performance and return on capital against other companies, and to evaluate potential acquisitions or other capital projects. These measuresEBITDA and Adjusted EBITDA are not calculated under U.S. GAAP and should not be considered in isolation or as a substitute for net earnings, cash flows or other financial data prepared in accordance with U.S. GAAP or as a measure of our overall profitability or liquidity.

EBITDA and Adjusted EBITDA exclude interest expense, income taxes and depreciation and amortization, each of which are an essential element of our cost structure and cannot be eliminated. Furthermore, Adjusted EBITDA excludes other cash and
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COMPASS MINERALS INTERNATIONAL, INC.
non-cash items, including restructuring costsstock-based compensation, interest income, (gain) loss on foreign exchange, other (income) expense, net and other (income) expense.infrequent items that management does not consider indicative of normal operations. Our borrowings are a significant component of our capital structure and interest expense is a continuing cost of debt. We are also required to pay income taxes, a required and ongoing consequence of our operations. We have a significant investment in capital assets and depreciation and amortization reflect the utilization of those assets in order to generate revenues. Our employees are vital to our operations and we utilize various stock-based awards to compensate and incentivize our employees. Consequently, any measure that excludes these elements has material limitations. While EBITDA and Adjusted EBITDA are frequently used as measures of operating performance, these terms are not necessarily comparable to similarly titled measures of other companies due to the potential inconsistencies in the method of calculation. 


The calculation of EBITDA and Adjusted EBITDA as used by management is set forth in the table below (in millions):
 Three Months Ended
December 31,
 20222021
Net (loss) earnings from continuing operations$(0.3)$7.9 
Interest expense13.9 13.9 
Income tax expense (benefit)11.9 (1.2)
Depreciation, depletion and amortization23.9 28.3 
EBITDA from continuing operations49.4 48.9 
Adjustments to EBITDA from continuing operations:
Stock-based compensation - non cash10.6 3.2 
Interest income(1.1)(0.3)
Loss (gain) on foreign exchange2.5 (0.4)
Executive transition costs(a)
— 3.8 
Accrued loss and legal costs related to SEC investigation(b)
0.3 3.1 
Other expense, net0.1 0.1 
Adjusted EBITDA from continuing operations61.8 58.4 
Adjusted EBITDA from discontinued operations— 8.6 
Adjusted EBITDA including discontinued operations$61.8 $67.0 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Net earnings$32.0
 $9.1
 $47.1
 $65.1
Interest expense13.5
 5.4
 39.5
 16.8
Income tax (benefit) expense(12.5) 3.1
 (7.7) 24.1
Depreciation, depletion and amortization32.7
 21.8
 89.1
 62.7
EBITDA65.7
 39.4
 168.0
 168.7
Adjustments to EBITDA: 
  
    
Restructuring charges4.3
 —
 4.3
 —
Other (income) expense, net(1.2) 1.5
 0.5
 1.6
Adjusted EBITDA$68.8
 $40.9
 $172.8
 $170.3
(a)We incurred severance and other costs related to executive transition.
(b)We recognized costs, net of reimbursements, related to the settled SEC investigation during the three months ended December 31, 2022 and 2021.

Recent Accounting Pronouncements
 
SeePart 1, Note 1 to of our consolidated financial statementsConsolidated Financial Statements for a discussion of recent accounting pronouncements.


Effects of Currency Fluctuations and Inflation
 
Our operations outside of the U.S. are conducted primarily in Canada Brazil and the U.K. Therefore, our results of operations are subject to both currency transaction risk and currency translation risk. We incur currency transaction risk whenever we or one of our subsidiaries enterenters into either a purchase or sales transaction using a currency other than the local currency of the transacting entity. With respect to currency translation risk, our financial condition and results of operations are measured and recorded in the relevant local currency and then translated into U.S. dollars for inclusion in our historical consolidated financial statements. Exchange rates between these currencies and the U.S. dollar have fluctuated significantly from time to time and may do so in the future. The majority of revenues and costs are denominated in U.S. dollars, with Canadian dollars Brazilian Reais and British pounds sterling also being significant. Significant changes in the value of the Canadian dollar Brazilian Reais or British pound sterling relative to the U.S. dollar could have a material adverse effect on our financial condition.condition and our ability to meet interest and principal payments on U.S. dollar-denominated debt, including borrowings under our senior secured credit facilities.


AlthoughWe are experiencing increases in logistics costs, prices for energy and other costs that have only been partially recovered through price increases for our products. During the three months ended December 31, 2022, we estimate that the impact of inflation has not had a significant impact on our operations, ourincreased logistics costs by approximately $6 million to $8 million for the three months ended December 31, 2022) and product costs by approximately $3 million to $5 million for the three months ended December 31, 2022). Our efforts to recover inflation-based cost increases due to inflationfrom our customers may be hampered as a result of the structure of our contracts and the
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COMPASS MINERALS INTERNATIONAL, INC.
contract bidding process as well as the competitive industries, economic conditions and countries in which we operate. For more information, see Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the annual period ended September 30, 2022.


Seasonality


We experience a substantial amount of seasonality in our sales. Our sales, ofincluding our salt deicing products are seasonal.product sales. Consequently, our Salt segment sales and operating income are generally higher in the first and fourthsecond fiscal quarters (ending December 31 and March 31) and lower during the secondthird and thirdfourth fiscal quarters of each year.year (ending June 30 and September 30). 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 product is used. Following industry practice in North America and the U.K., we seek to stockpile sufficient quantities of deicing salt inthroughout the second,first, third and fourth fiscal quarters (ending December 31, June 30 and September 30) to meet the estimated requirements for the winter season.

Our plant nutrition business is also seasonal. The strongest demand for our Plant Nutrition South America products in Brazil typically occurs during the spring planting season. As a result, we and our 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 season. seasons (which are typically spring and autumn, but can also vary due to weather and other factors).

Climate Change

The seasonalitypotential impact of thisclimate change on our operations, product demand resultsand the needs of our customers remains uncertain. Significant changes to weather patterns, a reduction in average snowfall or regional drought within our sales volumesserved markets or at our Ogden facility could negatively impact customer demand for our products and net salesour costs, as well as our ability to produce our products. For example, prolonged periods of mild winter weather could reduce the demand for our deicing products. Drought or flood conditions could similarly impact demand for our SOP products, as well as continue to impact the amount and quality of feedstock used to produce SOP at our Ogden facility due to changes in brine levels, mineral concentrations or other factors, which could have a material impact on our Plant Nutrition South America segment usually beingresults of operations. Climate change could also lead to disruptions in the highest duringproduction or distribution of our products due to major storm events or prolonged adverse conditions, changing temperature levels, lake level fluctuations or flooding from sea level changes. Climate change or governmental initiatives to address climate change may necessitate capital expenditures in the thirdfuture, although capital expenditures for climate-related projects are not expected to be material in fiscal 2023. For more information, see Part I, Item 1A, “Risk Factors” and fourth quartersPart I, Item 1 “Business—Environmental, Health and Safety and Other Regulatory Matters” in our Annual Report on Form 10-K for the annual period ended September 30, 2022.

Global Economy

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of each year (asfinancial markets. We have continued producing and delivering essential products that support critical industries such as transportation, agriculture, chemical, food, pharmaceutical and animal nutrition. We have instituted several measures in response to the spring planting season beginsCOVID-19 pandemic and have experienced negative impacts to our business from COVID-19, but our results of operations for the three months ended December 31, 2022, and 2021, were not materially affected by COVID-19, although the recent supply chain shortages and cost increases may be linked to COVID-19. Also, while we have no operations in Russia or Ukraine, we are continuing to monitor any broader impact from the current war in Ukraine, particularly with respect to energy costs and implications on global fertilizer market supply and demand conditions. The ultimate impact that any infectious outbreak or the war in Ukraine will have on our future results is unknown at this time. For more information, see Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the annual period ended September in Brazil).30, 2022.


Item 3.    Quantitative and Qualitative Disclosures About Market Risk


Our business is subject to various types of market risks that include interest rate risk, foreign currency exchange rate risk and commodity pricing risk. Management has taken actions to mitigate our exposure to commodity pricing and foreign currency exchange rate risk rate by entering into natural gas derivative instruments and foreign currency swaps.contracts. We may take further actions to mitigate our exposure to interest rates, exchange rates and changes in the cost of fuel consumed at our production locations or the cost of transporting our products due to variations in our contracted carriers’ cost of fuel, which is typically diesel fuel. However, there can be no assurance that our hedging activities will eliminate or substantially reduce these risks. We do not enter into any financial instrument arrangements for speculative purposes. Our market risk exposure related to these items has not changed materially since December 31, 2016.September 30, 2022.


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COMPASS MINERALS INTERNATIONAL, INC.
Item 4.    Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures


AsThe Company maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the endtime periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our President and Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the period covered bydesired control objectives. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation of the effectiveness of the design and operation of the Company’sour disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”))Act) was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’sour disclosure controls and procedures were effectiveineffective as of December 31, 2022, due to the material weaknesses described below.

1.During the fourth quarter ended September 30, 2017, to ensure that information required to be disclosed2022, the Company identified a material weakness in the reports it filesdesign and submitsoperating effectiveness of information technology general controls (“ITGCs”) related to certain systems that support the Company’s internal controls over financial reporting. Specifically, the Company did not maintain effective controls over privileged user access to certain systems. Automated and manual business process controls were therefore also deemed ineffective because they could have been adversely impacted by the ineffective ITGCs.
2.    During the fourth quarter ended September 30, 2022, the Company identified a material weakness in the design and operating effectiveness of controls related to the sales process. Specifically, the Company did not maintain effective controls over pricing and order entry.
3.    During the fourth quarter ended September 30, 2022, a material weakness was identified in the design and operating effectiveness of controls related to the existence of inventory held at certain locations.

A material weakness, as defined in Rule 12b-2 under the Exchange Act, is recorded, processed, summarized and reported within the time periods specifieda deficiency, or a combination of deficiencies, in the SEC’s rules and forms.

For this purpose, disclosure controls and procedures include controls and procedures designed to ensureinternal control over financial reporting, such that informationthere is a reasonable possibility that is required to be disclosed under the Exchange Act is accumulated and communicated toa material misstatement of the Company’s management, including theannual or interim consolidated financial statements will not be prevented or detected on a timely basis. Notwithstanding such material weaknesses in internal control over financial reporting, our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure.

The scope of management’s evaluation did not include any disclosure controls or procedures (to the extenthave concluded that they are subsumed by internal control over financial reporting) of Produquímica, which the Company acquired on October 3, 2016. Produquímica represented approximately 34% of total assets as of December 31, 2016, and 10% of total revenues and 2% of net earnings for the year ended December 31, 2016. Further discussion of this acquisition can be found in Note 2 to the Company’s consolidated financial statements.statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Remediation of Material Weaknesses

The Company is continuing to assess and is in the process of enhancing the design of certain internal controls over the sales and inventory processes and ITGCs related to privileged access in accordance with the remediation plans for the material weaknesses. The Company has increased the frequency of its privileged access reviews and improved management review attributes. Further enhancement of review control attributes and ITGC considerations related to key inventory and sales systems are underway. These enhanced controls continue to be implemented and will be tested for effectiveness in future periods.

Changes in Internal Control Over Financial Reporting


There has beenOther than the matters noted above, there were no changechanges in the Company’s internal control over financial reporting during the most recently completed fiscal quarter that hashave materially affected, or isare reasonably likely to materially affect, the Company’s internal control over financial reporting.

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COMPASS MINERALS INTERNATIONAL, INC.
PART II. OTHER INFORMATION


Item 1.    Legal Proceedings
 
We are involved in the legal proceedings described in Note 6 andPart I, Item 1, Note 8 to and Part I, Item 1, Note 10 of our consolidated financial statementsConsolidated Financial Statements and, from time to time, various routine legal proceedings and claims arising from the ordinary course of our business. These primarily involve tax assessments, disputes with former employees and contract labor, commercial claims, product liability claims, personal injury claims and workers’ compensation claims. Management cannot predict the outcome of legal proceedings and claims with certainty. Nevertheless, management believes that the outcome of legal proceedings and claims, which are pending or known to be threatened, even if determined adversely, will not, either individually or in the aggregate, have a material adverse effect on our results of operations, cash flows or financial condition.condition, except as otherwise described in Part I, Item 1, Note 8 and Part I, Item 1, Note 10 of our Consolidated Financial Statements. There have been no material developments since December 31, 2016,September 30, 2022 with respect to our legal proceedings, except as described in Note 6 andPart I, Item 1, Note 8 to and Part I, Item 1, Note 10 of our consolidated financial statements.Consolidated Financial Statements.


Item 1A.    Risk Factors


For a discussion of the risk factors applicable to Compass Minerals, please refer to Part I, Item 1A.1A, “Risk Factors” in our Annual Report on Form 10-K for the yearannual period ended December 31, 2016. There have been no materialSeptember 30, 2022, as updated and supplemented by the discussion below.

Operations at our Ogden, Utah, facility are dependent on ambient brine from the Great Salt Lake, and changes in lake brine levels or any limitations on our continued ability to access ambient lake brine in the Great Salt Lake could adversely affect us.

Our Ogden facility produces SOP, salt and magnesium chloride products from the high mineral concentrations within the ambient lake brine in the Great Salt Lake. In addition, we are developing our riskidentified lithium resource at our Ogden facility and the Great Salt Lake. Our ability to produce SOP, salt and magnesium chloride, as well as any future production of lithium, at our Ogden facility, is dependent upon, among other matters, sufficient lake elevations in the Great Salt Lake and our continued ability to maintain, renew or acquire the permits, licenses and approvals required to access ambient lake brine in the Great Salt Lake.

In recent years, sustained drought (as a result of climate change or otherwise) has lowered lake levels and increased mineral concentrations in the Great Salt Lake. If this continues, lower lake levels could impact mineral composition and our mineral harvesting process, amount and timing. Lake level fluctuations and other factors, as disclosedincluding state or federal actions to manage the salinity of the Great Salt Lake, could alter north arm lake levels and may disrupt our evaporation production cycle, impact our access to ambient lake brine in such Annual Report.the Great Salt Lake or increase our related capital expenditures and production costs.

The expansion of existing operations or production capacity at our Ogden facility, or preservation of existing rights in some cases, is also predicated upon securing any necessary permits, licenses and approvals. For example, we may require additional permits, licenses and approvals to continue diverting water from the Great Salt Lake to further expand our production capacity at our Ogden facility and continue the development of our identified lithium resource.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
 
None.On September 14, 2022, we entered into a Stock Purchase Agreement with Koch Minerals & Trading, LLC (“KM&T”), a subsidiary of Koch Industries, Inc., pursuant to which we agreed to issue and sell 6,830,700 shares of our common stock at a purchase price of $36.87 for aggregate net proceeds of approximately $240.7 million, net of transaction costs. On October 18, 2022, we closed the direct private placement with KM&T, through its affiliate KM&T Investment Holdings, LLC, resulting in their ownership of approximately 17% of our outstanding common stock. We expect to use approximately $200 million of the proceeds from the private placement to advance the first development phase of our sustainable lithium development project at our Ogden site. We used the remaining $40.7 million of proceeds to reduce debt. As part of the Stock Purchase Agreement, KM&T has appointed two members to our board of directors, effective November 13, 2022. Refer to Part I, Item 1, Note 16 for additional details.


The issuance of the shares was exempt from registration pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Investor
35
COMPASS MINERALS INTERNATIONAL, INC.
represented to the Company that it is an “accredited investor” as defined in Rule 501 of the Securities Act and that the shares are being acquired solely for investment and with no intention to distribute, and appropriate legends will be affixed to any certificates evidencing any shares.

Perella Weinberg Partners LP acted as sole financial advisor to Compass Minerals in the transaction and Cleary Gottlieb Steen & Hamilton LLP acted as our legal advisor. Jones Day acted as legal advisor for KM&T.

Item 3.    Defaults Upon Senior Securities
 
None.
 
Item 4.    Mine Safety Disclosures
 
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is includedincluded in Exhibit 95 to this Quarterly Report on Form 10-Q.
 
Item 5.    Other Information
 
None.
 
Item 6.    Exhibits

The Exhibit Index attached to this Quarterly Report on Form 10-Q is incorporated herein by reference.
Exhibit
No.		Exhibit Description
10.1*
Summary of Non-Employee Director Compensation, as of January 1, 2023.
10.2*
Second Amendment, dated January 31, 2023, to the Receivables Financing Agreement, dated June 30, 2020, among Compass Minerals Receivables LLC, Compass Minerals America Inc., PNC Bank, National Association, the lenders party thereto and PNC Capital Markets, LLC.
31.1*
Section 302 Certifications of Kevin S. Crutchfield, President and Chief Executive Officer.
31.2*
Section 302 Certifications of Lorin Crenshaw, Chief Financial Officer.
32**
Certification Pursuant to 18 U.S.C. §1350 of Kevin S. Crutchfield, President and Chief Executive Officer, and Lorin Crenshaw, Chief Financial Officer.
95*
Mine Safety Disclosures.
101**The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements.
104Cover Page Interactive Data File (contained in Exhibit 101).
*    Filed herewith
**    Furnished herewith

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COMPASS MINERALS INTERNATIONAL, INC.
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.
 
COMPASS MINERALS INTERNATIONAL, INC.
Date: October 31, 2017By:/s/ James D. Standen
James D. Standen
Chief Financial Officer
(Principal Financial and Accounting Officer)


EXHIBIT INDEX
Exhibit
No.
Exhibit Description
10.1
Amendment No. 2, dated September 15, 2017 to the Credit Agreement, dated April 20, 2016, among Compass Minerals International, Inc., Compass Minerals Canada Corp., Compass Minerals UK Limited, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (incorporated herein by reference to Exhibit 10.1 to Compass Minerals International Inc.’s Current Report on Form 8-K filed on September 18, 2017).
31.1*
Section 302 Certifications of Francis J. Malecha, President and Chief Executive Officer.
31.2*
Section 302 Certifications of James D. Standen, Chief Financial Officer.
32**
Certification Pursuant to 18 U.S.C. §1350 of Francis J. Malecha, President and Chief Executive Officer, and James D. Standen, Chief Financial Officer.
95*
Mine Safety Disclosures.
101**
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in Extensive Business Reporting Language (XBRL): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statements of comprehensive income, (iv) consolidated statement of stockholders’ equity, (v) consolidated statements of cash flows, and (vi) the notes to the consolidated financial statements.

*Date: February 7, 2023Filed herewithBy:
/s/ Lorin Crenshaw
**Furnished herewithLorin Crenshaw
Chief Financial Officer
(Principal Financial Officer)


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