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~~June 30, ~~2018~~2019

¨☐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

Compass Minerals International, Inc.

(Exact name of registrant as specified in its charter)



Delaware	36-3972986
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

9900 West 109th Street

Suite 100

Overland Park, KS66210

~~(913)~~ (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 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 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, 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.Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $0.01 par value	CMP	The 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 and post 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 filerþ	☑	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. ¨☐

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).~~

~~Yes:~~ ¨ ~~No:~~ þ



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).	Yes	☐	No	☑

The number of shares outstanding of the registrant’s common stock, $0.01 par value per share, as of ~~October 29, 2018,~~August 2, 2019, was ~~33,851,631~~33,883,848 shares.

COMPASS MINERALS INTERNATIONAL, INC.

TABLE OF CONTENTS



		Page

	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of ~~September~~June 30, ~~2018~~2019 (unaudited) and December 31, ~~2017~~2018	2

	Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ (unaudited)	3

	Consolidated Statements of Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ (unaudited)	4

	Consolidated ~~Statement~~Statements of Stockholders’ Equity for the ~~nine~~three and six months ended ~~September~~June 30, 2019 and 2018 (unaudited)	5

	Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ (unaudited)	5

	Notes to Consolidated Financial Statements (unaudited)	6

	~~Notes to Consolidated Financial Statements (unaudited)~~Item 2.	7

~~Item 2.~~	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2623

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4034

Item 4.	Controls and Procedures	4034

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4135

Item 1A.	Risk Factors	4135

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4135

Item 3.	Defaults Upon Senior Securities	4135

Item 4.	Mine Safety Disclosures	4135

Item 5.	Other Information	4135

Item 6.	Exhibits	4236

SIGNATURES		4337

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

COMPASS MINERALS INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)


	(Unaudited)						(Unaudited)
	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	36.1		$	36.6		$	20.4		$	27.0
Receivables, less allowance for doubtful accounts of $9.8 in 2018 and $10.9 in 2017	213.0			344.5
Receivables, less allowance for doubtful accounts of $10.5 in 2019 and $9.9 in 2018							178.5			311.6
Inventories	312.0			289.9			309.0			266.6
Other	84.0			66.5			117.3			116.0
Total current assets	645.1			737.5			625.2			721.2
Property, plant and equipment, net	1,067.1			1,138.1			1,051.5			1,052.0
Intangible assets, net	120.4			143.6			111.3			115.9
Goodwill	345.2			405.0			356.4			350.8
Investment in equity method investee	24.3			24.6			24.5			24.5
Other	150.9			122.2			152.0			103.5
Total assets	$	2,353.0		$	2,571.0		$	2,320.9		$	2,367.9

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	28.2		$	32.1		$	72.8		$	43.5
Accounts payable	137.3			123.5			98.7			111.3
Accrued expenses	46.4			54.4
Accrued salaries and wages	28.5			23.9			26.2			31.8
Income taxes payable	7.0			25.9			1.1			32.1
Accrued interest	5.5			8.2			12.5			9.7
Accrued expenses and other current liabilities							65.1			54.9
Total current liabilities	252.9			268.0			276.4			283.3
Long-term debt, net of current portion	1,312.0			1,330.4			1,275.9			1,321.2
Deferred income taxes, net	112.2			127.0			95.0			100.8
Other noncurrent liabilities	144.7			151.0			150.7			122.4
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock: $0.01 par value, 200,000,000 authorized shares; 35,367,264 issued shares	0.4			0.4			0.4			0.4
Additional paid-in capital	106.3			102.5			114.1			110.1
Treasury stock, at cost — 1,516,265 shares at September 30, 2018 and 1,539,763 shares at December 31, 2017	(2.9		)	(2.9		)
Treasury stock, at cost — 1,484,303 shares at June 30, 2019 and 1,513,808 shares at December 31, 2018							(3.2		)	(2.9		)
Retained earnings	616.9			672.5			589.8			643.5
Accumulated other comprehensive loss	(189.5		)	(77.9		)	(178.2		)	(210.9		)
Total stockholders’ equity	531.2			694.6			522.9			540.2
Total liabilities and stockholders’ equity	$	2,353.0		$	2,571.0		$	2,320.9		$	2,367.9

The accompanying notes are an integral part of the consolidated financial statements.

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 June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Sales	$	322.5		$	290.7		$	1,007.1		$	906.5		$	245.2		$	246.7		$	648.9		$	684.6
Shipping and handling cost	51.9			45.5			221.8			179.8			48.0			49.8			160.9			169.9
Product cost	199.2			169.1			606.0			524.1			151.4			154.4			369.6			406.8
Gross profit	71.4			76.1			179.3			202.6			45.8			42.5			118.4			107.9
Selling, general and administrative expenses	38.8			44.7			117.3			123.8			41.7			39.7			81.1			78.5
Operating earnings	32.6			31.4			62.0			78.8			4.1			2.8			37.3			29.4

Other expense (income):
Interest expense	15.9			13.5			44.5			39.5			16.8			14.9			33.0			28.6
Net earnings in equity investee	(0.6		)	(0.4		)	(0.9		)	(0.6		)	(0.1		)	(0.4		)	—			(0.3		)
Other, net	2.8			(1.2		)	(0.4		)	0.5			3.6			1.0			8.0			(3.2		)
Earnings before income taxes	14.5			19.5			18.8			39.4
Income tax expense (benefit)	1.7			(12.5		)	1.0			(7.7		)
Net earnings	$	12.8		$	32.0		$	17.8		$	47.1
(Loss) earnings before income taxes													(16.2		)	(12.7		)	(3.7		)	4.3
Income tax (benefit) expense													(4.4		)	(5.1		)	0.5			(0.7		)
Net (loss) earnings													$	(11.8	)	$	(7.6	)	$	(4.2	)	$	5.0

Basic net earnings per common share	$	0.37		$	0.94		$	0.52		$	1.38
Diluted net earnings per common share	$	0.37		$	0.94		$	0.51		$	1.38
Basic net (loss) earnings per common share													$	(0.36	)	$	(0.23	)	$	(0.14	)	$	0.14
Diluted net (loss) earnings per common share													$	(0.36	)	$	(0.23	)	$	(0.14	)	$	0.14

Weighted-average common shares outstanding (in thousands):
Basic	33,851			33,825			33,846			33,817			33,883			33,850			33,878			33,843
Diluted	33,851			33,825			33,846			33,817			33,883			33,850			33,878			33,843

Cash dividends per share	$	0.72		$	0.72		$	2.16		$	2.16

The accompanying notes are an integral part of the consolidated financial statements.

COMPASS MINERALS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in millions)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Net earnings	$	12.8		$	32.0		$	17.8		$	47.1
Net (loss) earnings													$	(11.8	)	$	(7.6	)	$	(4.2	)	$	5.0
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, 2018, and 2017, respectively	—			—			0.1			0.2
Unrealized gain (loss) on cash flow hedges, net of tax of $(0.1) in both the three and nine months ended September 30, 2018, respectively, and $0.4 and $0.9 in the three and nine months ended September 30, 2017, respectively.	0.3			(0.7		)	0.5			(1.6		)
Unrealized gain from change in pension obligations, net of tax of $(0.0) in both the three and six months ended June 30, 2019 and 2018, respectively													0.1			—			0.2			0.1
Unrealized (loss) gain on cash flow hedges, net of tax of $0.1 in the both the three and six months ended June 30, 2019 and $(0.3) and $(0.2) in the three and six months ended June 30, 2018, respectively													(0.4		)	0.7			(0.3		)	0.2
Cumulative translation adjustment	(8.9		)	46.1			(112.0		)	54.3			18.3			(88.7		)	32.8			(103.1		)
Comprehensive income (loss)	$	4.2		$	77.4		$	(93.6	)	$	100.0		$	6.2		$	(95.6	)	$	28.5		$	(97.8	)

The accompanying notes are an integral part of the consolidated financial statements.

COMPASS MINERALS INTERNATIONAL, INC.

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ EQUITY

For the ~~nine~~three and six months ended ~~September~~June 30, 2019 and 2018

(Unaudited, in millions)

Common
Stock

Additional
Paid-In
Capital

Treasury
Stock

Retained
Earnings

Accumulated
Other
Comprehensive
Loss
Total
Balance, December 31, 2017 $ 0.4
$ 102.5
$ (2.9 ) $ 672.5
$ (77.9 ) $ 694.6
Comprehensive income (loss)

17.8
(111.4 ) (93.6 )
Stranded tax effect from tax reform

0.2
(0.2 ) —
Dividends on common stock

0.2

(73.6 )

(73.4 )
Stock-based compensation

3.6

3.6
Balance, September 30, 2018 $ 0.4
$ 106.3
$ (2.9 ) $ 616.9
$ (189.5 ) $ 531.2



	Common Stock		Additional Paid-In Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance, December 31, 2018	$	0.4	$	110.1	$	(2.9	)	$	643.5		$	(210.9	)	$	540.2
Comprehensive income								7.6			14.7			22.3
Cumulative effect of change in accounting principle								(0.1		)				(0.1		)
Dividends on common stock ($0.72 per share)			0.1					(24.6		)				(24.5		)
Shares issued for stock units, net of shares withheld for taxes					(0.2		)							(0.2		)
Stock-based compensation			1.1											1.1
Balance, March 31, 2019	$	0.4	$	111.3	$	(3.1	)	$	626.4		$	(196.2	)	$	538.8
Comprehensive (loss) income								(11.8		)	18.0			6.2
Dividends on common stock ($0.72 per share)			0.1					(24.8		)				(24.7		)
Shares issued for stock units, net of shares withheld for taxes					(0.1		)							(0.1		)
Stock-based compensation			2.7											2.7
Balance, June 30, 2019	$	0.4	$	114.1	$	(3.2	)	$	589.8		$	(178.2	)	$	522.9



	Common Stock		Additional Paid-In Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance, December 31, 2017	$	0.4	$	102.5	$	(2.9	)	$	672.5		$	(77.9	)	$	694.6
Comprehensive income (loss)								12.6			(14.8		)	(2.2		)
Stranded tax effect from tax reform								0.2			(0.2		)	—
Dividends on common stock ($0.72 per share)			0.1					(24.5		)				(24.4		)
Stock-based compensation			1.1											1.1
Balance, March 31, 2018	$	0.4	$	103.7	$	(2.9	)	$	660.8		$	(92.9	)	$	669.1
Comprehensive loss								(7.6		)	(88.0		)	(95.6		)
Dividends on common stock ($0.72 per share)								(24.6		)				(24.6		)
Stock-based compensation			1.6											1.6
Balance, June 30, 2018	$	0.4	$	105.3	$	(2.9	)	$	628.6		$	(180.9	)	$	550.5

The accompanying notes are an integral part of the consolidated financial statements.

COMPASS MINERALS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2018			2017			2019			2018
Cash flows from operating activities:
Net earnings	$	17.8		$	47.1
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
Net (loss) earnings							$	(4.2	)	$	5.0
Adjustments to reconcile net (loss) earnings to net cash flows provided by operating activities:
Depreciation, depletion and amortization	103.6			89.1			68.9			69.6
Finance fee amortization	1.6			1.7			1.4			1.1
Stock-based compensation	3.6			3.8			3.4			2.7
Deferred income taxes	(0.3		)	(11.9		)	(9.8		)	1.8
Net earnings in equity method investee	(0.9		)	(0.6		)	—			(0.3		)
Gain on settlement of acquisition-related contingent consideration	—			(1.9		)
Unrealized foreign exchange loss (gain)	9.5			(2.0		)
Unrealized foreign exchange (gain) loss							(0.3		)	7.5
Other, net	3.2			0.3			1.4			1.5
Changes in operating assets and liabilities:
Receivables	116.2			116.6			136.6			155.7
Inventories	(61.1		)	(49.0		)	(39.5		)	5.2
Other assets	(36.0		)	(20.2		)	9.2			(27.2		)
Accounts payable and accrued expenses	8.3			(44.2		)
Accounts payable and accrued expenses and other current liabilities							(52.1		)	(41.9		)
Other liabilities	(0.1		)	(0.2		)	(11.8		)	0.9
Net cash provided by operating activities	165.4			128.6			103.2			181.6
Cash flows from investing activities:
Capital expenditures	(72.2		)	(81.0		)	(49.8		)	(52.1		)
Other, net	(2.3		)	(3.8		)	(1.0		)	(1.5		)
Net cash used in investing activities	(74.5		)	(84.8		)	(50.8		)	(53.6		)
Cash flows from financing activities:
Proceeds from revolving credit facility borrowings	348.4			183.5			172.9			249.3
Principal payments on revolving credit facility borrowings	(333.3		)	(137.9		)	(199.1		)	(322.2		)
Proceeds from issuance of long-term debt	36.2			52.9			20.1			16.8
Principal payments on long-term debt	(62.6		)	(95.6		)	(11.8		)	(11.2		)
Acquisition-related contingent consideration payment	—			(14.7		)
Dividends paid	(73.4		)	(73.3		)	(49.2		)	(49.0		)
Deferred financing costs	(0.3		)	(0.7		)	—			(0.3		)
Proceeds received from stock option exercises	—			0.3
Shares withheld to satisfy employee tax obligations							(0.3		)	—
Other, net	(0.7		)	0.9			(0.6		)	(0.5		)
Net cash used in financing activities	(85.7		)	(84.6		)	(68.0		)	(117.1		)
Effect of exchange rate changes on cash and cash equivalents	(5.7		)	2.5			9.0			(6.7		)
Net change in cash and cash equivalents	(0.5		)	(38.3		)	(6.6		)	4.2
Cash and cash equivalents, beginning of the year	36.6			77.4			27.0			36.6
Cash and cash equivalents, end of period	$	36.1		$	39.1		$	20.4		$	40.8


Supplemental cash flow information:
Interest paid, net of amounts capitalized	$	41.4	$	33.5	$	27.8	$	23.1
Income taxes paid, net of refunds	$	32.3	$	22.9	$	44.9	$	27.1

The accompanying notes are an integral part of the consolidated financial statements.

COMPASS MINERALS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.	Accounting Policies and Basis of Presentation:

Compass Minerals International, Inc. (“CMI”), through its subsidiaries (collectively, the “Company”), is a leading producer of essential minerals that solve nature’s challenges, including salt for winter roadway safety and other consumer, industrial and agricultural uses, specialty plant nutrition minerals that improve the quality and yield of crops, and specialty chemicals for water treatment and other industrial processes. The Company’s principal products are salt, consisting of sodium chloride and magnesium chloride; plant nutrients, consisting of sulfate of potash (“SOP”), secondary nutrients and micronutrients; and specialty chemicals. The Company also provides records management services to businesses located in the United Kingdom (the “U.K.”). The Company’s production sites are located in the United States (“U.S.”), Canada, Brazil and the ~~United Kingdom (the “U.K.”).~~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 subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company uses the equity method of accounting for equity securities when it has significant influence or when it has more than a minor ownership interest or more than minor influence over an investee’s operations but does not have a controlling financial interest. Initial investments are recorded at cost (including certain transaction costs) and are adjusted by the Company’s share of the investees’ undistributed earnings and losses.

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 financial statements. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, ~~2017,~~2018, 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.

The Company experiences a substantial amount of seasonality in its sales with respect to its deicing salt products. As a result, sales and operating ~~income~~earnings 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 results 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 ~~sales~~operating income 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).

Significant Accounting Policies

The Company’s significant accounting policies are detailed in “Note 2 – Summary of Significant Accounting Policies” within Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. Significant changes to these accounting policies as a result of adopting ASU ~~2014-09,~~ ~~Revenue from Contracts with Customers~~2016-02, Leases (Topic ~~606)~~842), can be found in “Note 23 – ~~Revenues.~~Leases.”

Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (the “FASB”) issued guidance to require customers in a cloud computing arrangement that is a service contract to follow the internal use software guidance to determine which implementation costs to

capitalize as assets. The capitalized implementation costs related to these arrangements are required to be amortized over the term of the hosting arrangement. The guidance also clarifies the presentation requirements for these costs in an entity’s financial statements. The guidance is effective for periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently assessing the impact this guidance will have on its consolidated financial statements.

In February 2018, the FASB issued guidance to address income tax accounting treatment of tax effects within accumulated other comprehensive income (“AOCI”) due to the enactment of the U.S. Tax Cuts and Jobs Act (the “Act”). This guidance allows entities to elect to reclassify tax effects of the change in U.S. income tax rates from AOCI to retained earnings. The guidance is effective for periods beginning after December 15, 2018, although early adoption is permitted. The Company early adopted this standard in the first quarter of 2018 and has elected to reclassify to retained earnings the effect of the change in the U.S. income tax rate on items remaining in AOCI as of the enactment date of the Act. In the first quarter of 2018, the Company reclassified $0.2 million to retained earnings from AOCI as a result of the Company’s cash flow hedges. See the Consolidated Statement of Stockholders’ Equity for details on the reclassification.

In August 2017, the FASB issued guidance which amends the current hedge accounting model and requires certain new or modified disclosures to enable entities to better portray the economics of their risk management activities in their financial statements. The modifications include a tabular disclosure related to the effect on the income statement of fair value and cash flow hedges and eliminate the requirement to disclose the ineffective portion of the change in fair value of hedging instruments. The amendments also require new tabular disclosures related to cumulative basis adjustments for fair value hedges. The guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, although early adoption is permitted. The Company is currently assessing the impact this guidance will have on its consolidated financial statements.

In March 2017, the FASB issued guidance on the presentation of net periodic pension and postretirement benefit costs in the income statement and on the components eligible for capitalization. This guidance requires that an entity report the service cost component of the net periodic benefit costs in the same income statement line item as other compensation costs arising from services rendered by employees during the period. The non-service-cost components of net periodic benefit costs are to be presented in the income statement separately from the service cost components and outside a subtotal of income from operations. The guidance also allows for the capitalization of the service cost components, when applicable. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company adopted this guidance in the first quarter of 2018. The impact of the adoption was not material to the Company’s consolidated financial statements.

In January 2017, 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 amount of goodwill. All other goodwill impairment guidance remains largely unchanged. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company is currently evaluating the impact ~~of adopting~~ this guidance will have on its consolidated financial statements.

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. The Company adopted this guidance in the first quarter of 2018 using the retrospective transition method, as required by the guidance. Adoption of this guidance did not have a material impact on the Company’s Consolidated Statements of Cash Flows.

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 will have on its 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 and 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 continuing its assessment of the impact that the guidance will have on the consolidated financial statements by analyzing all potential leases, documenting leasing procedures, designing new controls for leases and implementation of new software.

2. ~~Revenues:~~Revenue Recognition:

In May 2014, the FASB issued new revenue recognition guidance. The guidance provides a single, comprehensive model for recognizing revenue from contracts with customers. The new revenue recognition model supersedes existing 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 Company adopted the guidance effective January 1, 2018 using the modified retrospective transition method, which requires the cumulative effect of adoption, if any, to be recognized as an adjustment to opening retained earnings in the period of adoption. The Company’s revenue arrangements generally consist of a single performance obligation to transfer promised goods or services. As a result, the Company did not identify any material differences in the amount and timing of revenue recognition for its revenue streams. Accordingly, the Company did not record any transition adjustment upon adoption of the new guidance.

Substantially all of the Company’s revenue will continue to be recognized at a point in time when control of the goods transfers to the customer. The adoption of the guidance resulted in expanded disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers.

~~Revenue Recognition~~

Nature of Products and Services

The Company’s Salt segment products include salt and magnesium chloride for use in road deicing and dust control, food processing, water softeners, and agricultural and industrial applications. The Company’s plant nutrition products include SOP, secondary nutrients, micronutrients and ~~magnesium chloride for agricultural purposes and~~ chemicals for the industrial chemical industry. In the U.K., the Company operates a records management business utilizing excavated areas of the Winsford salt mine with one other location in London, England.

Identifying the Contract

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

Identifying the Performance Obligations

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

Identifying and Allocating the Transaction Price

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

When Performance Obligations Are Satisfied

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

~~Practical Expedients and Accounting Policy Elections~~

Upon adoption of the guidance, the Company elected (i) to exclude disclosures of transaction prices allocated to remaining performance obligations when the Company recognized such revenue for all periods prior to the date of initial application of the new guidance, (ii) not to adjust the amount of consideration for the effects of a significant financing component when the Company expects, at contract inception, that the period between the Company's transfer of a product or service to a customer and when the customer pays for that product or service will be one year or less, (iii) to expense costs to obtain a contract as incurred for costs when the Company expects that the amortization period would have been one year or less, (iv) not to recast revenue for customer contracts that begin and end in the same fiscal period, and (v) not to assess whether promised goods or services are performance obligations if they are immaterial in the context of the customer contract.

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


3.	~~Acquisition:~~Leases:

~~Background and Financing~~

On December 16, 2015, Compass Minerals do Brasil Ltda., a wholly owned subsidiary of the Company (“Compass Minerals Brazil”), entered into (i) a subscription agreement and other covenants (as amended, the “Subscription Agreement”) with certain Produquímica shareholders and Produquímica and (ii) a share purchase and sale agreement and other covenants (the “Purchase Agreement”) with certain Produquímica shareholders 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, or $114.1 million U.S. dollars at closing, and paid additional consideration of $4.7 million in 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,In February 2016, the ~~Company acquired~~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 ~~remaining 65% of~~underlying asset (“ROU asset”) and a lease liability which represents a lessee’s obligation to make lease payments for the ~~issued~~right to use the asset. In addition, the guidance requires expanded qualitative and ~~outstanding capital stock of Produquímica.~~

quantitative disclosures. 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 8~~ ~~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~~has adopted this 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 closing 20.6
Fair value of contingent consideration 31.4
Fair value of 35% equity investment 178.7
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 millionbeginning in the first quarter of ~~2017,~~2019, using a modified retrospective transition method, which ~~was included as a component~~requires the cumulative effect of ~~operating earnings~~this change in ~~the Company’s Plant Nutrition South America segment.~~

~~Prior~~accounting of $0.1 million to ~~the acquisition closing date, the Company accounted for its 35% interest in Produquímica~~be recorded as an ~~equity method investment.~~adjustment to beginning retained earnings. Prior year consolidated financial statements were not recast under the new guidance and therefore, these amounts are not presented below. The ~~acquisition-date fair~~Company elected the package of transition provisions available for existing contracts, which allowed entities to carryforward the historical assessment of whether the contract contained a lease and the lease classification.

The Company enters into leases for warehouses and depots, rail cars, vehicles, mobile equipment, office space and certain other types of property and equipment. The Company determines whether an arrangement is or contains a lease at the inception of the contract. The ROU asset and lease liability are recognized based on the present value of the ~~previously held equity investment was $178.7 million~~future minimum lease payments over the estimated lease term. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company estimates its incremental borrowing rate for each lease based upon the estimated lease term, the type of asset and ~~is included~~the location of the leased asset. The most significant judgments in the ~~consideration transferred. To measure the acquisition closing date fair value~~application of the ~~equity interest,~~FASB guidance include whether a contract contains a lease and the lease term.

Leases with an initial term of 12 months or less are not recorded on the Company’s Consolidated Balance Sheets. The Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. Many of the Company’s leases include one or more options to renew and extend the initial lease term. The exercise of lease renewal options is generally at the Company’s discretion. The lease term includes renewal periods in only those instances in which the Company ~~utilized~~determines it is reasonably assured of renewal.

The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a ~~market-based approach which relied on Level 3 inputs (see~~ ~~Note 13~~ ~~for a discussion~~transfer of title or purchase option reasonably certain of exercise. In these instances, the assets are depreciated over the useful life of the ~~levels in the fair value hierarchy).~~ asset.

The Company ~~recognized a $59.3 million non-cash gain during~~has elected the ~~fourth quarter~~practical expedient available under the FASB guidance to not separate lease and nonlease components on all 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 was allocated on a preliminary basis to Produquímica’s assets and liabilities based upon their estimated fair value as~~lease categories. As such, many of the ~~closing date~~Company’s leases include variable payments for services (such as handling or storage) or payments based on the usage 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 asasset. In addition, certain of the ~~acquisition date. These adjustments resulted 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~~Company’s lease agreements include rental payments that are adjusted periodically for inflation. The Company’s lease agreements do not contain any material residual value guarantees or any material restrictive covenants. The Company’s sublease 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.is immaterial.

~~Based upon the final purchase price and the updated valuation, the final purchase price allocation 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 receivable 89.4
Inventories 77.1
Other current assets 13.7
Property, plant and equipment 189.4
Intangible assets 81.2
Investment in equity method investee 24.5
Other noncurrent assets 6.9
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 assets 195.1
Goodwill 352.7
Total fair value of business combination $ 547.8

The ~~total purchase price in excess~~Company’s Consolidated Balance Sheets includes the following (in millions):



	Consolidated Balance Sheets Location	June 30, 2019
Assets
Operating lease assets	Other assets	$	43.5
Finance lease assets	Property, plant and equipment, net	6.4
Total leased assets		$	49.9
Liabilities
Current liabilities:
Operating	Accrued expenses and other current liabilities	$	15.4
Finance	Accrued expenses and other current liabilities	1.3
Noncurrent liabilities:
Operating	Other noncurrent liabilities	28.3
Finance	Other noncurrent liabilities	6.8
Total lease liabilities		$	51.8

The Company’s components of lease cost are as follows (in millions):



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Finance lease cost:
Amortization of lease assets	$	0.3	$	0.6
Interest on lease liabilities	0.1		0.3
Operating lease cost	4.9		9.7
Variable lease cost^(a)	3.9		10.0
Net lease cost	$	9.2	$	20.6


(a)	Short-term leases are immaterial and included in variable lease cost.

Maturities of lease liabilities under the ~~net identifiable assets has been recognized~~new guidance (“Topic 842”) are as goodwill in the amount of $352.7 million and has been assigned to the Company’s 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.follows (in millions):



Topic 842
June 30, 2019	Operating Leases			Finance Leases			Total
2019	$	9.5		$	0.9		$	10.4
2020	12.6			1.7			14.3
2021	7.2			1.3			8.5
2022	4.6			1.1			5.7
2023	3.7			1.1			4.8
After 2023	14.1			4.5			18.6
Total lease payments	51.7			10.6			62.3
Less: Interest	(8.0		)	(2.5		)	(10.5		)
Present value of lease liabilities	$	43.7		$	8.1		$	51.8

The ~~Company determined that~~Company’s annual aggregate future minimum annual rental payments under the ~~book value~~previous guidance (“Topic 840”) as of ~~the accounts receivable included in the purchase price allocation approximates their fair value due~~December 31, 2018 were as follows (in millions):



Topic 840
December 31, 2018	Operating Leases		Finance Leases		Total
2019	$	16.4	$	2.3	$	18.7
2020	10.6		1.8		12.4
2021	5.7		1.3		7.0
2022	4.4		1.1		5.5
2023	3.6		1.1		4.7
After 2023	14.3		4.6		18.9
Total lease payments	$	55.0	$	12.2	$	67.2

Supplemental lease term and discount rate information related to ~~their short-term nature. The gross contractual amounts of the receivables exceeded their fair values 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 13~~ ~~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:~~leases is as follows:

Estimated Fair Value
(in millions)
Weighted-Average Amortization Period
(in years)
Trade names $ 36.9
11.0
Developed technology 37.5
5.3
Customer relationships 6.8
13.5
Total identifiable intangible assets $ 81.2
8.6



	June 30, 2019
Weighted-average remaining lease term (years)
Operating leases	6.2
Finance leases	7.4
Weighted-average discount rate
Operating leases	4.7	%
Finance leases	7.6	%

Supplemental cash flow information related to leases is as follows (in millions):

~~Impact on Operating Results~~



	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	9.8
Operating cash flows from finance leases	0.3
Financing cash flows from finance leases	0.6
Leased assets obtained in exchange for new operating lease liabilities	2.6
Leased assets obtained in exchange for new finance lease liabilities	0.1

Produquímica contributed sales of $141.2 million and $278.6 million during the three and nine months ended September 30, 2018, respectively, and sales of $123.2 million and $250.6 million during the three and nine months ended September 30, 2017 respectively. Produquímica contributed net income of $18.9 million and $12.1 million during the three and nine months ended September 30, 2018, respectively, and net income of $29.5 million and $20.7 million, during the three and nine months ended September 30, 2017 respectively.


4.	Inventories:

Inventories consist of the following (in millions):



	June 30, 2019		December 31, 2018
Finished goods	$	244.6	$	202.2
Raw materials and supplies	64.4		64.4
Total inventories	$	309.0	$	266.6

September 30,
2018 December 31,
2017
Finished goods $ 244.1
$ 208.4
Raw materials and supplies 67.9
81.5
Total inventories $ 312.0
$ 289.9


5.	Property, Plant and Equipment, Net:

Property, plant and equipment, net, consists of the following (in millions):



	June 30, 2019			December 31, 2018
Land, buildings and structures, and leasehold improvements	$	605.5		$	580.7
Machinery and equipment	1,004.5			983.2
Office furniture and equipment	57.7			54.4
Mineral interests	170.1			168.1
Construction in progress	135.1			118.3
	1,972.9			1,904.7
Less accumulated depreciation and depletion	(921.4		)	(852.7		)
Property, plant and equipment, net	$	1,051.5		$	1,052.0

September 30,
2018 December 31,
2017
Land, buildings and structures, and leasehold improvements $ 561.7
$ 552.5
Machinery and equipment 983.2
942.3
Office furniture and equipment 53.9
53.1
Mineral interests 171.0
173.1
Construction in progress 148.2
213.4
1,918.0
1,934.4
Less accumulated depreciation and depletion (850.9 ) (796.3 )
Property, plant and equipment, net $ 1,067.1
$ 1,138.1


6.	Goodwill and Intangible Assets, Net:

Amounts related to the Company’s amortization of intangible assets are as follows (in millions):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Aggregate amortization expense	$	3.4	$	3.8	$	7.0	$	7.9

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Aggregate amortization expense $ 3.5
$ 4.1
$ 11.4
$ 12.2

Amounts related to the Company’s goodwill are as follows (in millions):



	June 30, 2019		December 31, 2018
Goodwill - Plant Nutrition North America Segment	$	55.0	$	52.6
Goodwill - Plant Nutrition South America Segment	295.6		292.3
Other	5.8		5.9
Total	$	356.4	$	350.8

September 30,
2018 December 31,
2017
Goodwill - Plant Nutrition North America Segment $ 55.6
$ 57.3
Goodwill - Plant Nutrition South America Segment 283.7
341.6
Other 5.9
6.1
Total $ 345.2
$ 405.0

The change in goodwill between December 31, ~~2017~~2018 and ~~September~~June 30, ~~2018~~2019, was due to the impact from translating foreign-denominated amounts to U.S. dollars.


7.	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), foreign income, ~~tax rate differentials, foreign~~ mining and withholding taxes, global intangible low-taxed income and interest expense recognition differences for book and tax purposes. The Company’s effective rate is impacted by permanent tax deductions which have a less favorable impact as pretax income increases.

During the nine months ended September 30, 2017, the Company determined it is more likely than not that a portion of its Brazilian deferred tax assets acquired in connection with the acquisition of Produquímica will be used to reduce taxable income. For the nine months ended 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 2017, and approximately $13 million as a discrete income tax benefit.

The Company has recorded a one-time mandatory tax on unremitted foreign earnings of $55.2 million (recorded in the fourth quarter of 2017) offset by $8.6 million ($8.4 million recorded in the fourth quarter of 2017) of benefit related to the remeasurement of the Company’s deferred tax liabilities at the new income tax rate in accordance with the Act (which is commonly referred to as “U.S. tax reform”), enacted on December 22, 2017. The Company believes the $46.6 million net charge represents a reasonable estimate; however, this amount is provisional and additional work is necessary to do a more detailed analysis of historical foreign earnings as well as any potential corresponding adjustments. The estimate will be finalized with the filing of the Company’s U.S. tax return due on December 15, 2018.

~~In addition, the Company is still evaluating the accounting policy elections regarding the Global Intangible Low-Taxed Income provisions of the Act as of September 30, 2018.~~

The Company had ~~$29.1~~$33.6 million and ~~$46.1~~$27.2 million as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, of gross foreign federal net operating loss (“NOL”) carryforwards that have no expiration date. In addition, the Company had ~~$5.7~~$0.8 million and $1.2 million of gross foreign federal NOL carryforwards as of June 30, 2019 and ~~$0.7~~December 31, 2018, respectively, which expire beginning in 2033 and $0.1 million and $0.2 million of net operating tax-effected ~~provincial~~state NOL carryforwards as of June 30, 2019 and December 31, ~~2017~~2018, respectively, which expire beginning in ~~2033.~~2027.

Canadian provincial tax authorities have challenged tax positions claimed by one of the Company’s Canadian subsidiaries and have issued tax reassessments for years ~~2002-2013.~~2002-2014. The reassessments are a result of ongoing audits and total ~~$113.3~~$126.3 million, including interest, through ~~September~~June 30, ~~2018.~~2019. The Company disputes these reassessments and will continue to work with the appropriate authorities in Canada to resolve the dispute. There is a reasonable possibility that the ultimate resolution of this dispute, and any related disputes for other open tax years, may be materially higher or lower than the amounts the Company has reserved for such disputes. In connection with this dispute, local regulations require the Company to post security with the tax authority until the

dispute is resolved. The Company has posted collateral in the form of ~~a $73.1~~an $80.9 million performance bond and has paid ~~$38.3~~$37.9 million to the Canadian tax authorities (most of which is recorded in other assets in ~~its~~the Consolidated Balance Sheets) ~~and the remaining balance of $1.9 million, which is necessary to proceed with future appeals or litigation, is expected to be addressed later this year.~~.

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.

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~~June 30, ~~2018,~~2019, the Company believes it has adequately reserved for these reassessments.

Additionally, the Company has other uncertain tax positions as well as assessments and disputed positions with taxing authorities in its various jurisdictions, which are consistent with those matters disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

~~Settlement~~Settlements

In the fourth quarter of 2017, the Company, the Canadian Revenue Authority (“CRA”) and the U.S. Internal Revenue Service (“IRS”) reached a settlement agreement on transfer pricing issues for the Company’s 2007-2012 tax years. As a result of this settlement agreement, the Company recognized $13.8 million of tax expense in its 2017 Consolidated Statements of Operations related to the Company’s Canadian tax positions for the years 2007-2016. ~~The~~During 2018, in accordance with the settlement agreement, ~~resulted in intercompany cash payments from~~ the Company’s U.S. subsidiary made intercompany cash payments of $85.7 million to its Canadian subsidiary ~~of $85.7 million during the first quarter of 2018.~~

~~In connection with this settlement, the Company made $18.4 million of~~and tax payments to Canadian taxing authorities of $17.5 million. Tax payments of $5.7 million were made during the first and second quarters of 2019, leaving an outstanding balance of $1.3 million as of June 30, 2019. Corresponding tax refunds of $3.4 million have been received as of June 30, 2019 from U.S. taxing authorities, with the remaining refund of approximately $19.5 million expected in late 2019 (recorded in other current assets in the Consolidated Balance Sheets).

In the fourth quarter of 2018, the Company, the CRA and the IRS reached a settlement agreement on transfer pricing and management fees as part of an advanced pricing agreement that covers tax years 2013-2021. The tax expense was previously recognized in 2017. During the second quarter of ~~2018~~2019, in accordance with the ~~remaining balance~~settlement agreement, the Company’s U.S. subsidiary made intercompany cash payments of ~~$4.3~~$106.1 million to ~~be paid in~~its Canadian subsidiary and tax payments to Canadian taxing authorities of $29.9 million. Corresponding tax refunds of $2.3 million were received during the ~~fourth quarter~~first and second quarters of ~~2018. The Company has a corresponding tax refund due~~2019 from U.S. taxing authorities, ~~of $22.8 million. This refund is~~with the remaining $58.9 million expected in late ~~2018~~2019 or early ~~2019. Additionally, the reassessed Canadian tax, penalties and interest for the Company for years 2007 and 2008 of approximately $34.2 million are effectively resolved.~~2020 (recorded in other current assets in its Consolidated Balance Sheets).


8.	Long-term Debt:

Long-term debt consists of the following (in millions):



	June 30, 2019			December 31, 2018
Term Loans due July 2021	$	824.6		$	828.9
Revolving Credit Facility due July 2021	170.8			197.0
4.875% Senior Notes due July 2024	250.0			250.0
Banco Rabobank Loan due November 2019	18.3			18.1
Banco Itaú Loans due May 2019 to April 2020	0.3			0.8
Financiadora de Estudos e Projetos Loan due November 2023	8.5			9.3
Banco Santander Loan due September 2019	7.8			—
Banco Itaú Loan due March 2019	—			2.5
Banco Scotiabank Loan due September 2019	10.3			10.3
3.7% Banco Itaú loan due March 2020	15.4			15.4
Banco Santander loan due September 2020	20.9			20.6
Banco Santander loan due October 2020	16.9			16.8
Banco Santander loan due July 2019	10.4			—
Other	—			1.7
	1,354.2			1,371.4
Less unamortized debt issuance costs	(5.5		)	(6.7		)
Total debt	1,348.7			1,364.7
Less current portion	(72.8		)	(43.5		)
Long-term debt	$	1,275.9		$	1,321.2

September 30,
2018 December 31,
2017
Term Loans due July 2021 $ 831.0
$ 837.4
Revolving Credit Facility due July 2021 184.2
168.9
4.875% Senior Notes due July 2024 250.0
250.0
Rabobank Loan due November 2019 17.5
21.1
Banco Itaú Loans due May 2019 to April 2020 0.9
1.9
Financiadora de Estudos e Projetos Loan due November 2023 9.5
13.1
Banco do Brasil Loan due February 2018 —
0.2
Banco Santander Loan due September 2019 —
19.6
Banco Santander Loan due November 2019 —
24.1
Banco Itaú Loan due March 2019 5.0
12.4
3.7% Banco Itaú Loan due March 2020 15.5
—
Banco Scotiabank Loan due September 2019 10.3
20.5
Banco Santander Loan due September 2020 20.0
—
Other 2.0
—

1,345.9
1,369.2
Less unamortized debt issuance costs (5.7 ) (6.7 )
Total debt 1,340.2
1,362.5
Less current portion (28.2 ) (32.1 )
Long-term debt $ 1,312.0
$ 1,330.4

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 the second half of 2017, the Company refinanced $54.3 million of its Brazilian loans using proceeds from approximately $87 million of new loans. The new variable rate loans bear interest rates ranging from 108.7% and 118% of CDI, an overnight inter-bank lending rate in Brazil, and mature in September and November 2019. In the first quarter of ~~2018,~~2019, the Company entered into ~~a new U.S. dollar denominated loan~~two Brazilian reais-denominated loans totaling $18.0 million which ~~matures~~mature in ~~March 2020. No material fees were paid in connection with these transactions. A portion~~July and September of the loans are denominated in U.S. dollars and a portion of the loans are denominated in Brazilian reais. The Company has also entered into foreign currency 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 12~~ ~~for further discussion).~~

~~During the the third quarter of 2018, the Company paid off approximately $36 million of its Brazilian loans and entered into a new $20.0 million Brazilian loan.~~2019, respectively. The new ~~variable rate loan bears~~loans bear interest ~~of 117.5%~~at 123% and 128% of CDI, and matures in September 2020. In the third quarter of 2018, the Company sold approximately $9.2 million of receivables for $8.6 million in cash. The proceeds of this transaction were used to refinance the aforementioned Brazilian loans. The Company is contingently liable for up to 20% of the receivables balance if the banks are unable to collect on these accounts.respectively.

As of ~~September~~June 30, ~~2018,~~2019, the term loans and revolving credit facility under the Company’s credit agreement were secured by substantially all existing and future U.S. assets, the Goderich mine in Ontario, Canada and capital stock of certain subsidiaries.


9.	Commitments and Contingencies:

The Company was involved in proceedings alleging unfair labor practices at its Cote Blanche, Louisiana mine. This matter arose out of a labor dispute between the Company and 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 and 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 connection 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.

In March 2017, the Company reached a settlement with the United Steelworkers Union and the NLRB with respect to this matter. 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 loss in its consolidated financial statements in 2017.

~~On July 16, 2018, the Company’s unionized employees at its Goderich mine ratified a three-year collective bargaining agreement, ending a strike that began on April 27, 2018.~~

The Wisconsin Department of Agriculture, Trade and Consumer Protection (“DATCP”) and the Wisconsin Department of Natural Resources (“DNR”) have information indicating that agricultural chemicals are present within the subsurface area of the Company’s Kenosha, Wisconsin plant. The agricultural chemicals were used by previous owners and operators of the site. None of the identified chemicals have been used in association with the Company’s operations since it acquired the property in 2002. DATCP and DNR have directed the Company to conduct further investigations into the environmental conditions at the Kenosha plant. The Company continues on-property investigations and has provided the findings to DATCP and DNR as they have become available. All investigations and mitigation activities to date, and any potential future remediation work, are being conducted under the Wisconsin Agricultural Chemical Cleanup Program, which provides for reimbursement of some of the costs.

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 7, the Company’s Brazilian subsidiaries are party to administrative tax proceedings and claims which totaled ~~$15.4~~$16.4 million and ~~$18.1~~$15.9 million as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, 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 assumed liabilities for labor-related matters in connection with the 2016 acquisition of Produquímica Indústria e Comércio S.A. (which is now known as Compass Minerals América do Sul Indústria e Comércio S.A.), which are primarily related to compensation, labor benefits and consequential tax claims that totaled ~~$7.9~~$6.9 million and ~~$10.5~~$7.8 million as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The Company believes the maximum exposure for these other labor matters totaled approximately ~~$31~~$29 million and ~~$41~~$31 million as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

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 proceedings 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.


10.	Operating Segments:

The Company’s reportable segments are strategic business units that offer different products and services, and each business requires different technology and marketing strategies. The Company has three reportable segments: Salt, Plant Nutrition North America and Plant Nutrition South America. The Salt segment produces and markets salt, consisting of sodium chloride and magnesium chloride, for use in road deicing for winter roadway safety and for dust control, food processing, water softeners and other consumer, agricultural and industrial applications. Plant nutrients, including SOP, secondary nutrients ~~micronutrients~~ and ~~magnesium chloride for agricultural purposes~~micronutrients are produced and marketed through the Plant Nutrition North America segment. The Plant Nutrition South America segment operates two primary businesses in Brazil – agricultural productivity and chemical solutions. ~~See~~ ~~Note 3~~ ~~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. The chemical solutions division manufactures and markets specialty chemicals for the industrial chemical industry.

Segment information is as follows (in millions):


Three Months Ended September 30, 2018	Salt		Plant Nutrition North America		Plant Nutrition South America		Corporate & Other^(a)			Total
Three Months Ended June 30, 2019												Salt		Plant Nutrition North America		Plant Nutrition South America		Corporate & Other^(a)			Total
Sales to external customers	$	137.0	$	41.7	$	141.2	$	2.6		$	322.5	$	112.6	$	48.1	$	82.1	$	2.4		$	245.2
Intersegment sales	—		1.1		1.1		(2.2		)	—		—		2.6		1.1		(3.7		)	—
Shipping and handling cost	41.2		5.0		5.7		—			51.9		37.6		6.5		3.9		—			48.0
Operating earnings (loss)	12.1		2.3		31.2		(13.0		)	32.6		14.6		4.6		1.7		(16.8		)	4.1
Depreciation, depletion and amortization	13.7		12.8		5.0		2.5			34.0		14.8		10.9		5.4		2.8			33.9
Total assets (as of end of period)	918.5		594.5		705.4		134.6			2,353.0		905.2		565.3		731.5		118.9			2,320.9



Three Months Ended June 30, 2018	Salt		Plant Nutrition North America		Plant Nutrition South America		Corporate & Other^(a)			Total
Sales to external customers	$	121.1	$	51.8	$	71.1	$	2.7		$	246.7
Intersegment sales	—		2.2		1.1		(3.3		)	—
Shipping and handling cost	39.4		6.2		4.2		—			49.8
Operating earnings (loss)	12.5		4.2		0.7		(14.6		)	2.8
Depreciation, depletion and amortization	14.1		13.0		5.6		2.6			35.3
Total assets (as of end of period)	830.7		584.2		726.2		133.2			2,274.3


Three Months Ended September 30, 2017	Salt		Plant Nutrition North America		Plant Nutrition South America		Corporate & Other^(a)			Total
Six Months Ended June 30, 2019												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	$	419.0	$	85.3	$	139.8		$	4.8		$	648.9
Intersegment sales	—		1.5		—		(1.5		)	—		—		3.1		2.6			(5.7		)	—
Shipping and handling cost	34.9		4.8		5.8		—			45.5		141.3		12.5		7.1			—			160.9
Operating earnings (loss)	22.5		2.3		21.4		(14.8		)	31.4		66.9		3.0		(0.9		)	(31.7		)	37.3
Depreciation, depletion and amortization	13.5		9.2		7.5		2.5			32.7		30.1		22.5		11.0			5.3			68.9
Total assets (as of end of period)	948.7		593.1		844.2		60.8			2,446.8



Six Months Ended June 30, 2018	Salt		Plant Nutrition North America		Plant Nutrition South America		Corporate & Other^(a)			Total
Sales to external customers	$	437.0	$	104.7	$	137.4	$	5.5		$	684.6
Intersegment sales	—		2.4		1.5		(3.9		)	—
Shipping and handling cost	148.9		12.6		8.4		—			169.9
Operating earnings (loss)	46.6		9.1		1.5		(27.8		)	29.4
Depreciation, depletion and amortization	28.8		24.3		11.5		5.0			69.6

Nine Months Ended September 30, 2018 Salt Plant
Nutrition North America Plant
Nutrition South America
Corporate
& Other^(a)
Total
Sales to external customers $ 574.0
$ 146.4
$ 278.6
$ 8.1
$ 1,007.1
Intersegment sales —
3.5
2.6
(6.1 ) —
Shipping and handling cost 190.1
17.6
14.1
—
221.8
Operating earnings (loss)
58.7
11.4
32.7
(40.8 ) 62.0
Depreciation, depletion and amortization 42.5
37.1
16.5
7.5
103.6

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)
78.6
17.5
24.0
(41.3 ) 78.8
Depreciation, depletion and amortization 39.1
26.7
18.2
5.1
89.1

Disaggregated revenue by product type is as follows (in millions):


Three Months Ended September 30, 2018	Salt		Plant Nutrition North America			Plant Nutrition South America			Corporate & Other^(a)		Total
Three Months Ended June 30, 2019													Salt		Plant Nutrition North America			Plant Nutrition South America			Corporate & Other^(a)		Total
Highway Deicing Salt	$	64.0	$	—		$	—		$	—	$	64.0	$	46.9	$	—		$	—		$	—	$	46.9
Consumer & Industrial Salt	73.0		—			—			—		73.0		65.7		—			—			—		65.7
SOP and Specialty Plant Nutrients	—		42.8			119.4			—		162.2		—		50.7			61.9			—		112.6
Industrial Chemicals	—		—			22.9			—		22.9		—		—			21.3			—		21.3
Eliminations & Other	—		(1.1		)	(1.1		)	2.6		0.4		—		(2.6		)	(1.1		)	2.4		(1.3		)
Sales to external customers	$	137.0	$	41.7		$	141.2		$	2.6	$	322.5	$	112.6	$	48.1		$	82.1		$	2.4	$	245.2



Three Months Ended June 30, 2018	Salt		Plant Nutrition North America			Plant Nutrition South America			Corporate & Other^(a)		Total
Highway Deicing Salt	$	60.6	$	—		$	—		$	—	$	60.6
Consumer & Industrial Salt	60.5		—			—			—		60.5
SOP and Specialty Plant Nutrients	—		54.0			49.2			—		103.2
Industrial Chemicals	—		—			23.0			—		23.0
Eliminations & Other	—		(2.2		)	(1.1		)	2.7		(0.6		)
Sales to external customers	$	121.1	$	51.8		$	71.1		$	2.7	$	246.7


Nine Months Ended September 30, 2018	Salt		Plant Nutrition North America			Plant Nutrition South America			Corporate & Other^(a)		Total
Six Months Ended June 30, 2019													Salt		Plant Nutrition North America			Plant Nutrition South America			Corporate & Other^(a)		Total
Highway Deicing Salt	$	360.0	$	—		$	—		$	—	$	360.0	$	265.6	$	—		$	—		$	—	$	265.6
Consumer & Industrial Salt	214.0		—			—			—		214.0		153.4		—			—			—		153.4
SOP and Specialty Plant Nutrients	—		149.9			208.5			—		358.4		—		88.4			98.5			—		186.9
Industrial Chemicals	—		—			72.7			—		72.7		—		—			43.9			—		43.9
Eliminations & Other	—		(3.5		)	(2.6		)	8.1		2.0		—		(3.1		)	(2.6		)	4.8		(0.9		)
Sales to external customers	$	574.0	$	146.4		$	278.6		$	8.1	$	1,007.1	$	419.0	$	85.3		$	139.8		$	4.8	$	648.9



Six Months Ended June 30, 2018	Salt		Plant Nutrition North America			Plant Nutrition South America			Corporate & Other^(a)			Total
Highway Deicing Salt	$	296.0	$	—		$	—		$	—		$	296.0
Consumer & Industrial Salt	141.0		—			—			—			141.0
SOP and Specialty Plant Nutrients	—		107.1			89.1			—			196.2
Industrial Chemicals	—		—			49.8			—			49.8
Eliminations & Other	—		(2.4		)	(1.5		)	5.5			1.6
Sales to external customers	$	437.0	$	104.7		$	137.4		$	5.5	��	$	684.6


(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.

The Company’s revenue by geographic area is as follows (in millions):



Revenue	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
United States^(a)	$	128.3	$	366.6
Canada	27.9		115.3
Brazil	79.0		134.7
United Kingdom	5.7		23.0
Other	4.3		9.3
Total revenue	$	245.2	$	648.9


Revenue	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018		Three Months Ended June 30, 2018		Six Months Ended June 30, 2018
United States^(a)	$	126.0	$	498.5	$	136.6	$	378.7
Canada	33.4		157.0		28.3		119.1
Brazil	136.3		270.3		68.5		134.1
United Kingdom	17.3		64.0		9.9		46.6
Other	9.5		17.3		3.4		6.1
Total Revenue	$	322.5	$	1,007.1
(a) United States sales exclude product sold to foreign customers at U.S. ports.
Total revenue					$	246.7	$	684.6


(a)	United States sales exclude product sold to foreign customers at U.S. ports.


11.	Stockholders’ Equity and Equity Instruments:

In May 2015, the Company’s stockholders approved the 2015 Incentive Award Plan ~~(the~~(as amended, the “2015 Plan”), which authorizes the issuance of 3,000,000 shares of Company common stock. Since the date the 2015 Plan was approved, the Company ceased

issuing equity awards under the 2005 Incentive Award Plan ~~(the~~(as amended, the “2005 Plan”). The 2005 Plan and 2015 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 the compensation committee of the Company’s board of directors, with the amount and terms communicated to employees shortly thereafter.

Options

~~Substantially all~~Most 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 ~~input~~fair value and inputs used to calculate fair value for options granted in ~~2018~~2019 are included in the table below:




Fair value of options granted	$~~8.77~~9.15
Exercise price	$~~59.61~~54.15
Expected term (years)	4.5
Expected volatility	~~22.9%~~28.0%
Dividend yield	~~3.6%~~4.1%
Risk-free rate of return	~~2.5%~~2.3%

RSUs

~~Substantially all of~~Typically, the RSUs granted under the ~~2005 Plan and~~ 2015 Plan vest after three years of ~~service, entitling~~service. 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~~The PSUs granted under the ~~2005 Plan and~~ 2015 Plan are either total shareholder return PSUs (“TSR PSUs”) or return on invested capital PSUs (“ROIC 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 shareholder return to the total shareholder return for each company comprising the Russell 3000 Index (for TSR PSUs granted in 2017 and earlier) or the Company’s peer group (for TSR PSUs granted in ~~2018)~~2018 and later) over the three-year performance period and may range from 0% to 150% of the target number of shares based upon the attainment of these market conditions. The actual number of shares of common stock that may be earned with respect to ROIC PSUs is calculated based on the average of the Company’s annual return on invested capital for each year in the three-year performance period and may range from 0% to 200% 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 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.

To estimate the fair value of the TSR PSUs on the grant date, 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 or the Company’s peer group

depending on the year granted. This model uses historical stock prices to estimate expected volatility and the Company’s correlation to the Russell 3000 Index or 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 ROIC PSUs.

The Company will adjust the expense of the ROIC PSUs based upon its estimate of the number of shares that will ultimately vest at each interim date during the vesting period.

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, the Company reissued the following number of shares from treasury stock: no shares related to the exercise of stock options, ~~15,080~~32,630 shares related to the release of RSUs which vested, ~~2,753~~no shares related to the release of PSUs which vested and ~~5,665~~6,138 shares related to stock payments. In ~~2017,~~2018, the Company issued ~~38,197~~25,955 shares from treasury stock. The Company withheld 9,263 shares with a fair value of $0.3 million related to the vesting of RSUs during the first six months of 2019. 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 deficiency of $0.5 million from its equity compensation awards as an increase to income tax expense during the first ~~nine~~six months of ~~2018.~~2019. During the first ~~nine~~six months of ~~2018~~2019 and ~~2017,~~2018, the Company recorded ~~$3.6~~$3.4 million and ~~$3.8~~$2.7 million, 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 ~~nine~~six months ended ~~September~~June 30, ~~2018:~~2019:


	Stock Options				RSUs				PSUs^(a)				Stock Options				RSUs				PSUs^(a)
	Number		Weighted-average exercise price		Number		Weighted-average fair value		Number		Weighted-average fair value		Number		Weighted-average exercise price		Number		Weighted-average fair value		Number		Weighted-average fair value
Outstanding at December 31, 2017	562,877		$	75.89	70,856		$	74.63	112,036		$	79.48
Outstanding at December 31, 2018													708,746		$	70.76	83,308		$	65.75	126,638		$	69.06
Granted	250,514		59.61		42,013		60.28		67,235		64.30		369,716		54.15		165,895		49.57		123,003		56.88
Exercised^(b)	—		—		—		—		—		—		—		—		—		—		—		—
Released from restriction^(b)	—		—		(15,080	)	89.58		(2,753	)	78.92		—		—		(32,630	)	66.95		—		—
Cancelled/expired	(64,620	)	74.42		(6,652	)	67.68		(38,496	)	90.18		(65,422	)	73.05		(2,745	)	61.42		(28,802	)	73.11
Outstanding at September 30, 2018	748,771		$	70.57	91,137		$	66.04	138,022		$	69.12
Outstanding at June 30, 2019													1,013,040		$	64.55	213,828		$	53.06	220,839		$	61.75


(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. ~~In 2018, the Company cancelled 25,897 PSUs as their market and performance conditions were not satisfied.~~


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

Other Comprehensive Income (Loss)

The Company’s comprehensive income (loss) is comprised of net earnings, net amortization of the unrealized loss of the pension obligation, the change in the unrealized gain (loss) on natural gas and foreign currency cash flow hedges and foreign currency translation adjustments. The components of and changes in accumulated other comprehensive ~~income (loss)~~loss (“AOCL”) as of and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, are as follows (in millions):


Three Months Ended September 30, 2018^(a)	Gains and (Losses) on Cash Flow Hedges			Defined Benefit Pension			Foreign Currency			Total
Three Months Ended June 30, 2019^(a)													Gains and (Losses) on Cash Flow Hedges			Defined Benefit Pension			Foreign Currency			Total
Beginning balance	$	(0.9	)	$	(3.8	)	$	(176.2	)	$	(180.9	)	$	(0.6	)	$	(4.4	)	$	(191.2	)	$	(196.2	)

Other comprehensive income (loss) before reclassifications^(b)	1.6			—			(8.9		)	(7.3		)
Other comprehensive (loss) income before reclassifications^(b)													(0.3		)	—			18.3			18.0
Amounts reclassified from accumulated other comprehensive loss	(1.3		)	—			—			(1.3		)	(0.1		)	0.1			—			—
Net current period other comprehensive income (loss)	0.3			—			(8.9		)	(8.6		)
Net current period other comprehensive (loss) income													(0.4		)	0.1			18.3			18.0
Ending balance	$	(0.6	)	$	(3.8	)	$	(185.1	)	$	(189.5	)	$	(1.0	)	$	(4.3	)	$	(172.9	)	$	(178.2	)



Three Months Ended June 30, 2018^(a)	Gains and (Losses) on Cash Flow Hedges			Defined Benefit Pension			Foreign Currency			Total
Beginning balance	$	(1.6	)	$	(3.8	)	$	(87.5	)	$	(92.9	)
Other comprehensive income (loss) before reclassifications^(b)	0.7			—			(88.7		)	(88.0		)
Amounts reclassified from accumulated other comprehensive loss	—			—			—			—
Net current period other comprehensive income (loss)	0.7			—			(88.7		)	(88.0		)
Ending balance	$	(0.9	)	$	(3.8	)	$	(176.2	)	$	(180.9	)


Three Months Ended September 30, 2017^(a)	Gains and (Losses) on Cash Flow Hedges			Defined Benefit Pension			Foreign Currency			Total
Six Months Ended June 30, 2019^(a)													Gains and (Losses) on Cash Flow Hedges			Defined Benefit Pension			Foreign Currency			Total
Beginning balance	$	(0.3	)	$	(3.5	)	$	(93.6	)	$	(97.4	)	$	(0.7	)	$	(4.5	)	$	(205.7	)	$	(210.9	)

Other comprehensive income (loss) before reclassifications^(b)	(0.5		)	—			46.1			45.6
Other comprehensive (loss) income before reclassifications^(b)													(0.1		)	—			32.8			32.7
Amounts reclassified from accumulated other comprehensive loss	(0.2		)	—			—			(0.2		)	(0.2		)	0.2			—			—
Net current period other comprehensive income (loss)	(0.7		)	—			46.1			45.4
Net current period other comprehensive (loss) income													(0.3		)	0.2			32.8			32.7
Ending balance	$	(1.0	)	$	(3.5	)	$	(47.5	)	$	(52.0	)	$	(1.0	)	$	(4.3	)	$	(172.9	)	$	(178.2	)

Nine Months Ended September 30, 2018^(a)
Gains and
(Losses) on
Cash Flow
Hedges

Defined
Benefit
Pension

Foreign
Currency
Total
Beginning balance $ (0.9 ) $ (3.9 ) $ (73.1 ) $ (77.9 )

Other comprehensive income (loss) before reclassifications^(b)
1.5
—
(112.0 ) (110.5 )
Amounts reclassified from accumulated other comprehensive loss (1.0 ) 0.1
—
(0.9 )
Net current period other comprehensive income (loss) 0.5
0.1
(112.0 ) (111.4 )
Reclassification of stranded tax out of AOCI to retained earnings^(c)
(0.2 ) —
—
(0.2 )
Ending balance $ (0.6 ) $ (3.8 ) $ (185.1 ) $ (189.5 )



Nine Months Ended September 30, 2017^(a)	Gains and (Losses) on Cash Flow Hedges			Defined Benefit Pension			Foreign Currency			Total
Six Months Ended June 30, 2018^(a)													Gains and (Losses) on Cash Flow Hedges			Defined Benefit Pension			Foreign Currency			Total
Beginning balance	$	0.6		$	(3.7	)	$	(101.8	)	$	(104.9	)	$	(0.9	)	$	(3.9	)	$	(73.1	)	$	(77.9	)

Other comprehensive income (loss) before reclassifications^(b)	(1.4		)	—			54.3			52.9
Other comprehensive loss before reclassifications^(b)													(0.1		)	—			(103.1		)	(103.2		)
Amounts reclassified from accumulated other comprehensive loss	(0.2		)	0.2			—			—			0.3			0.1			—			0.4
Net current period other comprehensive income (loss)	(1.6		)	0.2			54.3			52.9			0.2			0.1			(103.1		)	(102.8		)
Reclassification of stranded tax out of AOCL to retained earnings^(c)													(0.2		)	—			—			(0.2		)
Ending balance	$	(1.0	)	$	(3.5	)	$	(47.5	)	$	(52.0	)	$	(0.9	)	$	(3.8	)	$	(176.2	)	$	(180.9	)


(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)~~loss presented in the tables above are reflected net of applicable income taxes.

(b)

The Company recorded foreign exchange gains (losses) of ~~$(7.9)~~$8.1 million and ~~$(55.9)~~$10.4 million in the three and ~~nine~~six months ended ~~September~~June 30, ~~2018, respectively,~~2019 and ~~$(22.0)~~$(43.6) million and ~~$(20.6)~~$(48.0) million in the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, in accumulated other comprehensive loss related to intercompany notes which were deemed to be of a long-term investment nature.


(c)	In the first quarter of 2018, the Company adopted guidance which allows entities to reclassify tax effects of the change in U.S. income tax rates from ~~AOCI~~accumulated other comprehensive loss to retained ~~earnings (see~~ ~~Note 1~~). earnings.

The amounts reclassified from ~~AOCI~~AOCL to expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, are shown below (in millions):



	Amount Reclassified from AOCI							Amount Reclassified from AOCL
	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018			Line Item Impacted in the Consolidated Statement of Operations	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019			Line Item Impacted in the Consolidated Statements of Operations
Gains and (losses) on cash flow hedges:
Gains (losses) on cash flow hedges:
Natural gas instruments	$	0.2		$	0.4		Product cost	$	(0.1	)	$	(0.2	)	Product cost
Foreign currency contracts	(2.2		)	(2.0		)	Interest expense	—			(0.1		)	Interest expense
Income tax expense (benefit)	0.7			0.6
Income tax expense								—			0.1
Reclassifications, net of income taxes	(1.3		)	(1.0		)		(0.1		)	(0.2		)
Amortization of defined benefit pension:
Amortization of loss	$	—		$	0.1		Product cost	$	0.1		$	0.2		Product cost
Income tax expense (benefit)	—			—
Income tax expense								—			—
Reclassifications, net of income taxes	—			0.1				0.1			0.2
Total reclassifications, net of income taxes	$	(1.3	)	$	(0.9	)		$	—		$	—




	Amount Reclassified from AOCL
	Three Months Ended June 30, 2018			Six Months Ended June 30, 2018			Line Item Impacted in the Consolidated Statements of Operations
Gains (losses) on cash flow hedges:
Natural gas instruments	$	0.2		$	0.2		Product cost
Foreign currency contracts	(0.3		)	0.2			Interest expense
Income tax expense (benefit)	0.1			(0.1		)
Reclassifications, net of income taxes	—			0.3
Amortization of defined benefit pension:
Amortization of loss	$	—		$	0.1		Product cost
Income tax expense	—			—
Reclassifications, net of income taxes	—			0.1
Total reclassifications, net of income taxes	$	—		$	0.4

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 contracts (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 ) $ —


12.	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, the Company manages a portion of its commodity pricing and foreign currency exchange rate risks by using derivative instruments. 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. The Company records derivative financial instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets.

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 statements of operations. Any 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 changes in natural gas prices impact the Company’s operating margin. The Company’s objective is 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~~June 30, ~~2018,~~2019, the Company had entered into natural gas derivative instruments to hedge a portion of its natural gas purchase requirements through December ~~2019.~~2021. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had agreements in place to hedge forecasted natural gas purchases of ~~1.4~~2.8 million and ~~2.6~~1.0 million MMBtus, respectively. All natural gas derivative instruments held by the Company as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 qualified and were designated as cash flow hedges. As of ~~September~~June 30, ~~2018,~~2019, the Company expects to reclassify from accumulated other comprehensive loss to earnings during the next twelve months ~~$0.5~~$0.9 million of net losses on derivative instruments related to its natural gas hedges.

Foreign Currency Derivatives Not Designated as Hedges

In February 2018, the Company entered into a forward instrument to swap currency denominated in Brazilian reais to Canadian dollars for the amounts borrowed under an intercompany note. The instrument ~~matures~~matured in November 2018 and iswas for a notional amount of approximately $19.9 million U.S. dollars. The objective of the instrument iswas to mitigate the foreign currency fluctuation risk related to holding debt denominated in a currency other than ~~Produquímica’s~~its Brazil subsidiary’s functional currency. The instrument is was

not designated as a hedge. During the ~~nine~~six months ended ~~September~~June 30, 2018, the Company recognized a net ~~gain~~loss of ~~$3.5~~$0.4 million in other expense in its Consolidated Statements of Operations for this agreement.

In the ~~third quarter~~latter half of 2018, the Company entered into non-deliverable forward contracts to fix $11.9 million of its net position in accounts receivable and accounts payable in Brazil that ~~are~~were U.S. dollar denominated. The objective of these instruments iswas to mitigate the foreign currency fluctuation risk related to the Company’s accounts receivable and payable denominated in a currency other than ~~Produquímica’s~~its Brazil subsidiary’s functional currency. These forward contracts ~~are~~were not designated as hedges. ~~During the three months ended September 30, 2018, the Company recognized a net loss of $0.3 million~~These forward contracts matured in ~~other expense in its Consolidated Statements of Operations for these forward contracts.~~December 2018.

Foreign Currency Derivatives Designated as Hedges

The Company has entered into U.S. dollar-denominated debt instruments to provide funds for its operations in ~~Brazil (see~~ ~~Note 8~~ ~~for more information).~~Brazil. The Company may also concurrently enter into foreign currency agreements whereby the Company agrees to swap interest and principal payments on loans denominated in U.S. dollars for principal and interest payments denominated in Brazilian reais, ~~Produquímica’s~~its Brazil subsidiary’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~~the Company’s Brazil subsidiary’s functional currency. As of ~~September~~June 30, ~~2018,~~2019, the Company had swap agreements in place to hedge ~~$30.8~~$26.0 million of loans denominated in currencies other than ~~Produquímica’s~~its Brazil subsidiary’s functional currency. Payments on these loans are due on various dates extending through March 2020. As of ~~September~~June 30, ~~2018,~~2019, these foreign currency derivative instruments qualified and were designated as cash flow hedges. As of ~~September~~June 30, ~~2018,~~2019, the Company expects to reclassify from accumulated other comprehensive loss to earnings during the next twelve months ~~$3.2~~$4.0 million of net gains on derivative instruments related to these foreign currency swap agreements.

The following tables present the fair value of the Company’s hedged items as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (in millions):

Asset Derivatives Liability Derivatives
Derivatives designated as hedging instruments: Balance Sheet Location September 30, 2018 Balance Sheet Location September 30, 2018
Commodity contracts Other current assets $ —
Accrued expenses $ 0.5
Commodity contracts Other assets —
Other noncurrent liabilities 0.2
Foreign currency contracts Other current assets 3.2
Accrued expenses —
Foreign currency contracts Other assets 3.1
Other noncurrent liabilities —
Total derivatives designated as hedging instruments^(a)
6.3
0.7

Derivatives not designated as hedging instruments:
Foreign currency contracts Other current assets $ 2.8
Accrued expenses $ —
Foreign currency contracts Other assets —
Other noncurrent liabilities —
Total derivatives not designated as hedging instruments 2.8
—
Total derivatives^(b)
$ 9.1
$ 0.7



	Asset Derivatives			Liability Derivatives
Derivatives designated as hedging instruments:	Consolidated Balance Sheets Location	June 30, 2019		Consolidated Balance Sheets Location	June 30, 2019
Commodity contracts	Other current assets	$	0.1	Accrued expenses and other current liabilities	$	0.9
Commodity contracts	Other assets	—		Other noncurrent liabilities	0.3
Swap contracts	Other current assets	4.0		Accrued expenses and other current liabilities	—
Total derivatives designated as hedging instruments^{(a) (b)}		$	4.1		$	1.2


(a)	The Company has master netting agreements with its commodity hedge counterparties and accordingly has netted in its Consolidated Balance Sheets an immaterial amount receivable from both counterparties.

(b)

The Company has both commodity hedge and foreign currency ~~contracts~~swap agreements with two ~~and three~~ counterparties ~~respectively.~~each. Amounts recorded as liabilities for the Company’s commodity contracts are payable to ~~two counterparties. The~~both counterparties, and amounts recorded as ~~receivables~~assets for the Company’s foreign currency ~~contracts~~swap agreements are receivable from ~~two counterparties. The amounts recorded as receivables for the Company’s forward contracts to hedge its net position in accounts receivable and accounts payable are due from~~ one counterparty.


	Asset Derivatives			Liability Derivatives			Asset Derivatives			Liability Derivatives
Derivatives designated as hedging instruments:	Balance Sheet Location	December 31, 2017		Balance Sheet Location	December 31, 2017		Consolidated Balance Sheets Location	December 31, 2018		Consolidated Balance Sheets Location	December 31, 2018
Commodity contracts	Other current assets	$	—	Accrued expenses	$	1.0	Other current assets	$	—	Accrued expenses and other current liabilities	$	0.6
Commodity contracts	Other assets	—		Other noncurrent liabilities	0.4
Foreign currency contracts	Other current assets	0.9		Accrued expenses	—
Foreign currency contracts	Other assets	0.4		Other noncurrent liabilities	—
Swap contracts							Other current assets	2.2		Accrued expenses and other current liabilities	—
Swap contracts							Other assets	2.3		Other noncurrent liabilities	—
Total derivatives designated as hedging instruments^(a)(b)		$	1.3		$	1.4		$	4.5		$	0.6


(a)	The Company has master netting agreements with its commodity hedge counterparties and accordingly has netted in its Consolidated Balance Sheets less than $0.1 million of its commodity contracts that are in a receivable position against its contracts in payable positions.


(b)	The Company has both commodity hedge and foreign currency ~~contracts~~swap agreements with two counterparties each. Amounts recorded as liabilities for the Company’s commodity contracts are payable to both counterparties, and amounts recorded as assets for the Company’s foreign currency ~~contracts~~swap agreements are receivable from both counterparties.


13.	Fair Value Measurements:

The Company’s financial instruments are measured and reported at their estimated fair values. Fair value is the price that would be received upon the sale of 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 3~~.

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 12). The fair values of the natural gas and foreign currency derivative instruments are determined using market data of forward prices for all of the Company’s contracts.

The estimated fair values for each type of instrument are presented below (in millions):


	September 30, 2018			Level One			Level Two			Level Three		June 30, 2019			Level One			Level Two			Level Three
Asset Class:
Mutual fund investments in a non-qualified retirement plan^(a)	$	2.0		$	2.0		$	—		$	—
Mutual fund investments in a non-qualified savings plan^(a)												$	1.9		$	1.9		$	—		$	—
Derivatives – foreign currency contracts, net	9.1			—			9.1			—		4.0			—			4.0			—
Total Assets	$	11.1		$	2.0		$	9.1		$	—	$	5.9		$	1.9		$	4.0		$	—
Liability Class:
Liabilities related to non-qualified retirement plan	$	(2.0	)	$	(2.0	)	$	—		$	—
Liabilities related to non-qualified savings plan												$	(1.9	)	$	(1.9	)	$	—		$	—
Derivatives – natural gas instruments, net	(0.7		)	—			(0.7		)	—		(1.1		)	—			(1.1		)	—
Total Liabilities	$	(2.7	)	$	(2.0	)	$	(0.7	)	$	—	$	(3.0	)	$	(1.9	)	$	(1.1	)	$	—


(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, 15% in short-term investments and 25% in blended funds.



	December 31, 2018			Level One			Level Two			Level Three
Asset Class:
Mutual fund investments in a non-qualified savings plan^(a)	$	1.8		$	1.8		$	—		$	—
Derivatives – foreign currency contracts, net	4.5			—			4.5			—
Total Assets	$	6.3		$	1.8		$	4.5		$	—
Liability Class:
Liabilities related to non-qualified savings plan	$	(1.8	)	$	(1.8	)	$	—		$	—
Derivatives – natural gas instruments, net	(0.6		)	—			(0.6		)	—
Total Liabilities	$	(2.4	)	$	(1.8	)	$	(0.6	)	$	—


(a)	Includes mutual fund investments of approximately 25% in common stock of large-cap U.S. companies, 20% in common stock of small to mid-cap U.S. companies, 5% in international companies, 15% in bond funds, 15% in short-term investments and 20% in blended funds.

December 31,
2017

Level One

Level Two

Level Three
Asset Class:
Mutual fund investments in a non-qualified savings plan^(a)
$ 2.2
$ 2.2
$ —
$ —
Derivatives – foreign currency contracts, net 1.3
—
1.3
—
Total Assets $ 3.5
$ 2.2
$ 1.3
$ —
Liability Class:

Liabilities related to non-qualified savings plan $ (2.2 ) $ (2.2 ) $ —
$ —
Derivatives – natural gas instruments, net (1.4 ) —
(1.4 ) —
Total Liabilities $ (3.6 ) $ (2.2 ) $ (1.4 ) $ —


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

Cash and cash equivalents, accounts receivable (net of allowance for bad debts) and payables 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~~savings plan of ~~$2.0~~$1.9 million and ~~$2.2~~$1.8 million at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, are stated at fair value based on quoted market prices. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the estimated amount a third party would pay for the Company’s fixed-rate 4.875% ~~senior notes~~Senior Notes due July 2024, based on available trading information (Level 2), totaled ~~$231.6~~$238.1 million and ~~$246.9~~$226.3 million, respectively, compared with the aggregate principal amount at maturity of $250.0 million. The estimated amount a third party would pay at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 for the amounts outstanding under the Company’s term loans and revolving credit facility, based upon available bid information received from the Company’s lender (Level 2), totaled ~~$1.0~~$986.4 million and $1.02 billion, ~~and $989.5 million,~~ respectively, compared with the aggregate principal balance of ~~$1.02 billion~~$995.4 million and ~~$1.01~~$1.03 billion, respectively. The Brazilian loans have floating rates and their fair value approximates their carrying value.


14.	Earnings per Share:

The Company calculates earnings (loss) 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 September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Numerator:
Net earnings	$	12.8		$	32.0		$	17.8		$	47.1
Less: amounts allocated to participating securities^(a)	(0.1		)	(0.2		)	(0.3		)	(0.3		)
Net earnings available to common shareholders	$	12.7		$	31.8		$	17.5		$	46.8
Net (loss) earnings													$	(11.8	)	$	(7.6	)	$	(4.2	)	$	5.0
Less: net earnings allocated to participating securities^(a)													(0.3		)	(0.1		)	(0.5		)	(0.2		)
Net (loss) earnings available to common shareholders													$	(12.1	)	$	(7.7	)	$	(4.7	)	$	4.8

Denominator (in thousands):
Weighted-average common shares outstanding, shares for basic earnings per share	33,851			33,825			33,846			33,817			33,883			33,850			33,878			33,843
Weighted-average awards outstanding^(b)	—			—			—			—			—			—			—			—
Shares for diluted earnings per share	33,851			33,825			33,846			33,817			33,883			33,850			33,878			33,843
Net earnings per common share, basic	$	0.37		$	0.94		$	0.52		$	1.38
Net earnings per common share, diluted	$	0.37		$	0.94		$	0.51		$	1.38
Net (loss) earnings per common share, basic													$	(0.36	)	$	(0.23	)	$	(0.14	)	$	0.14
Net (loss) earnings per common share, diluted													$	(0.36	)	$	(0.23	)	$	(0.14	)	$	0.14

(a)

Weighted participating securities include RSUs and PSUs that receive non-forfeitable dividends and consist of ~~193,000~~319,000 and ~~183,000~~276,000 weighted participating securities for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively, and ~~169,000~~191,000 and ~~165,000~~177,000 weighted participating securities for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively.

(b)

For the calculation of diluted ~~earnings~~net loss 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 ~~871,000~~1,184,000 and ~~802,000~~992,000 weighted-average equity awards outstanding for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018, respectively,~~2019 and ~~695,000~~920,000 and ~~637,000~~772,000 weighted-average equity awards outstanding for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively, which were anti-dilutive and therefore not included in the diluted earnings per share calculation.~~2018, respectively.

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; strikes, other forms of work stoppage or slowdown or other union ~~activities, including the impact of the Goderich mine strike; weather conditions;~~activities; the inability to fund necessary capital expenditures or successfully complete capital projects; supply constraints or price increases for energy and raw materials used in our production processes; our indebtedness and ability 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; 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~~ our ~~ability to pay~~payment of any dividends; the impact of competition on the sales of our products; risks associated with our international operations and sales; the impact of anticipated changes in plant nutrition product prices and customer application rates; conditions in the agricultural sector and supply and demand imbalances for competing plant nutrition products; increasing costs or a lack of availability of transportation services; the seasonal demand for our products; our rights and governmental authorizations to mine and operate our properties; compliance with foreign and U.S. laws and regulations applicable to our international operations; compliance with environmental, health and safety laws and regulations; environmental liabilities; misappropriation or infringement claims relating to intellectual property; product liability claims and product recalls; inability to obtain required product registrations or increased regulatory requirements; changes in industry standards and regulatory requirements; our ability to successfully implement our strategies; the loss of key personnel; if our computer systems, information technology or operations technology are compromised or the inability to protect confidential or proprietary data; our ability to expand our business through acquisitions, integrate acquired businesses and realize anticipated benefits from acquisitions; ~~the ability to access and control our computer systems and information technology or the inability to protect confidential data; the loss of key personnel;~~climate change; 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 the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

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 ~~the highway deicing markets; weather;~~ our expected sales ~~sales volumes, sales prices, Goderich mine post-strike transition impacts and logistics costs; fertilizer demand; farmer economics, crop prices; the seasonal distribution of~~volumes; working capital requirements; our reinvestment of foreign earnings outside the U.S.; our ability to optimize cash accessibility, minimize tax expense and meet debt service requirements; future tax payments and tax refunds; outcomes of matters with taxing authorities; the effects of currency fluctuations and inflation; and the seasonality of our business. 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.”) and Canada, and references to the United Kingdom (the “U.K.”) include only England, Scotland and Wales. Except 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. Compass Minerals, Protassium+, Wolf Trax and Proacqua, and combinations thereof, are trademarks of CMI or its subsidiaries in the U.S. and other countries.

Critical Accounting Estimates

Preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“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’s Discussion and Analysis and Note 2 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 describe the significant accounting estimates and policies used in preparation of our consolidated financial statements. For a description of our critical accounting

policies and estimates affecting revenue ~~recognition,~~and leases, see ~~Note~~Notes 1, 2and 3 to 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~~June 30, ~~2018,~~2019, we operated 2221 production and packaging facilities, including:

The largest rock salt mine in the world in Goderich, Ontario, Canada;

The largest dedicated rock salt mine in the U.K. in Winsford, Cheshire;

A solar evaporation facility located in Ogden, Utah, which is both the largest SOP production site and the largest solar salt production site in the Western Hemisphere;

Several mechanical evaporation facilities producing consumer and industrial salt; and

Several facilities producing essential agricultural nutrients and specialty chemicals in Brazil.

Our salt business 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, agricultural and industrial applications in North America. In the U.K., we operate a records management business utilizing excavated areas of our Winsford salt mine with one other surface location in London, England.

Our plant nutrition business produces and markets specialty plant nutrition products worldwide to distributors and retailers of crop inputs, as well as growers. Our principal plant nutrition product in our Plant Nutrition North America segment is SOP, which we market under the trade name Protassium+. We also sell various secondary nutrients as well as premium micronutrient products under our Wolf Trax brand.

Our Plant Nutrition South America segment operates two primary businesses in Brazil—agricultural productivity, which manufactures and distributes a broad offering of specialty plant nutrition solution-based products; and chemical solutions, which manufactures and markets specialty chemicals, primarily for the water treatment industry and for use in other industrial processes.

Consolidated Results of Operations

The following is a summary of our consolidated results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~September 30, 2018,~~2019, 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~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30

* Refer to “—Sensitivity Analysis Related to EBITDA and Adjusted 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 ~~SEPTEMBER~~JUNE 30, ~~2017~~2018 AND ~~2018~~2019

Total sales ~~increased 11%~~decreased 1%, or ~~$31.8~~$1.5 million, due to decreases in Salt and Plant Nutrition North America sales, which were largely offset by an increase in Plant Nutrition South America sales.

Operating earnings increased 46%, or $1.3 million, due to increases in all ~~three~~of our operating segments.

~~Operating earnings increased 4%, or $1.2 million, due to increases in our Plant Nutrition South America segment, which was partially offset by a decline in our Salt segment.~~

Earnings before interest, taxes, depreciation and amortization (“EBITDA”)* adjusted for items management believes are not indicative of our ongoing operating performance (“Adjusted EBITDA”)* ~~decreased 2%~~increased 6%, or ~~$1.6~~$2.4 million.

Diluted net earnings per share decreased ~~61%~~57%, or ~~$0.57.~~$0.13.

COMMENTARY: ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2018 AND ~~2018~~2019

Total sales ~~increased 11%~~decreased 5%, or ~~$100.6~~$35.7 million, due to ~~increases in all three segments.~~

~~Operating earnings decreased 21%, or $16.8 million, due to lower operating earnings~~decreases in Salt and Plant Nutrition North ~~America segments,~~American sales, which ~~was~~were partially offset by an increase in ~~the~~ Plant Nutrition South America ~~segment.~~sales.

Operating earnings increased 27%, or $7.9 million, due to higher operating earnings in our Salt segment, which was partially offset by lower operating earnings in both of our plant nutrition businesses.

Adjusted EBITDA* ~~decreased 4%~~increased 10%, or ~~$6.3~~$9.7 million.

Diluted net earnings per share decreased ~~63%, or $0.87.~~$0.28.

THREE AND ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30

COMMENTARY: THREE MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2018 AND ~~2018~~2019

Gross Profit: ~~Decreased 6%~~Increased 8%, or ~~$4.7~~$3.3 million; Gross Margin ~~decreased 4~~increased 2 percentage points

~~The~~ Salt segment gross profit ~~decreased $11.9~~increased $1.4 million primarily due to higher ~~per-unit product costs~~average sales prices and improved operating rates at our ~~Goderich mine facility resulting from~~North American mines, which was partially offset by lower sales volumes and increased per-unit shipping and handling costs.

The gross profit of the ~~strike~~plant nutrition business, on a combined basis, increased $2.4 million. Plant Nutrition North America segment gross profit increased $0.9 million primarily due to lower depreciation expense, which was partially offset by higher per-unit shipping and handling costs due to an unfavorable geographic sales mix. Plant Nutrition South America segment gross profit increased $1.5 million primarily due to higher sales volumes, which were partially offset by lower average sales prices for chemical solutions products and higher raw material input costs.

COMMENTARY: SIX MONTHS ENDED JUNE 30, 2018 AND 2019

Gross Profit: Increased 10%, or $10.5 million; Gross Margin increased 2 percentage points

Salt segment gross profit increased $19.4 million primarily due to higher average sales prices, which was partially offset by lower sales volumes and increased per-unit shipping and handling costs.

The plant nutrition business, on a combined basis, ~~increased $7.1~~decreased $8.4 million. ~~The~~ Plant Nutrition North America segment gross profit ~~increased $0.3~~decreased $4.9 million primarily due to ~~higher micronutrient~~lower sales volumes, ~~which was mostly offset by~~ higher ~~depreciation expense. The~~per-unit shipping and handling costs due to an unfavorable geographic sales mix and higher carryover inventory costs. Plant Nutrition South America segment gross profit ~~increased $6.8~~decreased $3.5 million primarily due to higher ~~sales,~~raw material costs and a weaker Brazilian reais compared to the U.S. dollar, which was partially offset by higher sales volumes.

OTHER EXPENSES AND INCOME

COMMENTARY: THREE MONTHS ENDED JUNE 30, 2018 AND 2019

SG&A: Increased $2.0 million; increased 0.9 of a percentage point as a percentage of sales from 16.1% to 17.0%

The increase in SG&A expense was primarily due to higher costs related to the transition to a new CEO, corporate and Plant Nutrition North America employee-related costs and South American sales commissions, partially offset by a weaker Brazilian reais compared to the U.S. dollar.

~~COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2018~~

~~Gross Profit: Decreased 12%, or $23.3 million; Gross Margin decreased 4 percentage points~~

The Salt segment contributed approximately $21.9 million to the decrease in gross profit. The decrease resulted primarily from higher per-unit product costs including costs associated with the Goderich mine strike and higher shipping and handling costs.

The plant nutrition business, on a combined basis, contributed $1.7 million to the decrease in gross profit. The Plant Nutrition North America segment gross profit decreased $6.0 million primarily due to higher depreciation expense which was partially offset by lower per-unit shipping and handling costs. The Plant Nutrition South America segment gross profit increased $4.3 million due to higher sales which were partially offset by higher per-unit costs and a weaker Brazilian reais compared to the U.S. dollar.

~~OTHER EXPENSES AND INCOME~~

~~COMMENTARY: THREE MONTHS ENDED SEPTEMBER 30, 2017 AND 2018~~

~~SG&A: Decreased $5.9 million; Decreased 3.4 percentage points as a percentage of sales from 15.4% to 12.0%~~

The decrease in SG&A expense was primarily due to restructuring costs incurred in the third quarter of 2017 of approximately $2 million impacting corporate SG&A and our Salt and Plant Nutrition North America segments and a decrease in SG&A costs in our Plant Nutrition South America segment resulting from a weaker Brazilian reais compared to the U.S. dollar. In addition, a portion of the decrease is due to a decrease in marketing and advertising expenses in our Salt segment.

Interest Expense: Increased ~~$2.4~~$1.9 million to ~~$15.9~~$16.8 million

The increase was primarily due to ~~higher interest rates and~~ an increase in borrowings under our revolving credit ~~facility.~~facility and higher U.S. interest rates.

Other Expense, ~~(Income),~~ Net: ~~Decreased $4.0~~Increased $2.6 million from ~~income of $1.2~~$1.0 million to ~~an expense of $2.8~~$3.6 million

We realized foreign exchange losses of ~~$3.5 million and foreign exchange gains of $1.1~~$4.1 million in the ~~third~~second quarter of ~~2018 and 2017, respectively.~~2019 compared to $2.0 million in the second quarter of 2018.

Income Tax ~~Expense~~ (Benefit)~~: Expense increased $14.2~~ Expense: Benefit decreased $0.7 million from a benefit of ~~$(12.5)~~$5.1 million to ~~an expense of $1.7~~$4.4 million

The decrease in income tax benefit ~~in the third quarter of 2017~~ was primarily due to the release of ~~approximately $17 million~~tax reserves in the second quarter of ~~valuation allowances related to our Brazil business,~~2018, which was partially offset by higher pretax losses in the second quarter of ~~which approximately $13 million was accounted for as a discrete item and approximately $4 million was included in our annual effective tax rate.~~2019.

Our income tax provision in both periods differs from the U.S. statutory rate primarily due to U.S. statutory depletion, state income taxes, foreign income, mining and withholding taxes and interest expense recognition differences for tax and financial reporting purposes. Global intangible low-taxed income (“GILTI”) also affected the 2019 income tax provision.

Our effective tax rate ~~increased~~declined from a benefit of ~~(64)%~~40% in the ~~third~~second quarter of ~~2017~~2018 to ~~an expense~~a benefit of ~~12%~~27% in the ~~third~~second quarter of 2019 primarily due to the impact of a discrete tax item in the second quarter of 2018, GILTI and increased mining tax due to higher production at our Goderich mine in 2019 as compared to 2018.

COMMENTARY: ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2018 AND ~~2018~~2019

SG&A: ~~Decreased$6.5~~Increased $2.6 million; ~~Decreased 2.1~~increased 1 percentage ~~points~~point as a percentage of sales from ~~13.7%~~11.5% to ~~11.6%~~12.5%

The ~~decrease~~increase in SG&A expense was primarily due to ~~restructuring~~higher costs ~~incurred in~~related to the ~~third quarter of 2017 of approximately $2 million impacting~~transition to a new CEO, corporate ~~SG&A and our Salt~~ and Plant Nutrition North America ~~segments~~employee-related costs and ~~a decrease in SG&A~~information technology licenses and services agreement costs, ~~in our~~which were partially offset by lower Plant Nutrition South America segment costs resulting from a weaker Brazilian reais compared to the U.S. dollar. ~~The decrease in SG&A expense was partially offset by an increase in corporate depreciation expense related to a significant software system upgrade implemented in the latter half of 2017.~~

Interest Expense: Increased ~~$5.0~~$4.4 million to ~~$44.5~~$33.0 million

The increase was primarily due to ~~higher U.S. interest rates and~~ an increase in borrowings under our revolving credit facility ~~which was partially offset by lower~~and higher U.S. interest ~~rates for our Produquímica debt.~~rates.

Other Expense (Income), Net: ~~Improved $0.9~~Decreased $11.2 million from income of $3.2 million to an expense of ~~$0.5~~$8.0 million ~~to income of $(0.4) million~~

We realized foreign exchange losses of ~~$2.3~~$9.0 million ~~and $2.9 million for~~during the first ~~nine~~six months of ~~2018 and 2017, respectively. In addition, a portion~~2019 compared to foreign exchange gains of $1.2 million during the ~~improvement related to increases in~~first six months of 2018. Lower interest income ~~in 2018.~~also contributed to the decrease.

Income Tax ~~Expense(Benefit): Expense increased $8.7~~(Benefit) Expense: Increased $1.2 million from a benefit of ~~$(7.7)~~$0.7 million to an expense of ~~$1.0~~$0.5 million

The increase was primarily due to a discrete tax expense item in the first quarter of 2019 and the release of ~~$18 million~~tax reserves in the second quarter of ~~Brazilian valuation allowances in 2017~~2018, which was partially offset by lower ~~2018 pretax earnings.~~pre-tax income during the first six months of 2019 compared to the first six months of 2018.

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. GILTI also affected the 2019 income tax provision.

Our effective tax rate ~~increased~~decreased from ~~a benefit of (20)%~~16% in the first ~~nine~~six months of ~~2017~~2018 to ~~an expense of 5%~~14% in the first ~~nine~~six months of ~~2018.~~2019.

Operating Segment Performance

The following financial results represent consolidated financial information with respect to sales from 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 ~~$2.6~~$2.4 million and ~~$2.5~~$2.7 million for the ~~third~~second quarter of ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$8.1~~$4.8 million and ~~$7.4~~$5.5 million for the first ~~nine~~six months of ~~2018~~2019 and ~~2017,~~2018, respectively. These revenues are not material to our consolidated financial results and are not included in the following operating segment financial data.

Salt

THREE AND ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30


	3Q 2018		3Q 2017		2018 YTD		2017 YTD		2Q 2019		2Q 2018		2019 YTD		2018 YTD
Salt Sales (in millions)	$	137.0	$	124.7	$	574.0	$	508.5	$	112.6	$	121.1	$	419.0	$	437.0
Salt Operating Earnings (in millions)	$	12.1	$	22.5	$	58.7	$	78.6	$	14.6	$	12.5	$	66.9	$	46.6
Salt Sales Volumes (thousands of tons)
Highway deicing	1,302		1,157		6,765		5,596		865		1,201		4,408		5,463
Consumer and industrial	474		446		1,379		1,412		438		403		989		905
Total tons sold	1,776		1,603		8,144		7,008		1,303		1,604		5,397		6,368
Average Salt Sales Price (per ton)
Highway deicing	$	49.15	$	49.04	$	53.21	$	53.07	$	54.17	$	50.40	$	60.25	$	54.18
Consumer and industrial	$	154.17	$	152.39	$	155.26	$	149.83	$	150.02	$	150.29	$	155.15	$	155.83
Combined	$	77.16	$	77.79	$	70.48	$	72.56	$	86.41	$	75.47	$	77.63	$	68.62

COMMENTARY: THREE MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2018 AND ~~2018~~2019

Salt sales ~~increased 10%~~decreased 7%, or ~~$12.3~~$8.5 million, primarily due to lower highway deicing volumes, which was partially offset by higher highway deicing average sales ~~volumes in both salt businesses.~~prices and higher consumer and industrial sales volumes.

Salt average sales prices ~~decreased 1%~~increased 14% and contributed $3.1 million to sales due to higher highway deicing prices. Salt average sales prices were also impacted by product sales mix, as ~~highway deicing~~consumer and industrial products, which have a ~~lower~~higher average sales price, were a higher proportion of total sales in the current period.

Highway deicing average sales prices ~~were essentially flat as a significant portion of our sales during~~increased 7% due to higher North American highway deicing contract prices for the ~~quarter was related to our 2017-2018~~2018-2019 winter ~~season sales contracts.~~season. Consumer and industrial average sales prices ~~increased 1%.~~were essentially flat.

Salt sales volumes ~~increased 11%~~decreased 19%, or ~~173,000~~301,000 tons, and ~~contributed approximately $11.4 million to the increase in Salt segment sales.~~unfavorably impacted sales by $11.6 million. Highway deicing sales volumes ~~increased 13%~~decreased 28% primarily as a result of ~~strong~~lower North American contract volumes in the 2018-2019 bid season, a delay in shipments due to Mississippi River flooding as well as lower restocking ~~orders~~ in the U.K. ~~and an increase in restocking orders in North America~~following a milder winter season when compared to the ~~prior year.~~significantly above average winter weather in the first quarter of 2018. Consumer and industrial sales volumes increased 6%9% due to higher sales of ~~consumer deicing~~non-deicing products.

Salt operating earnings ~~decreased 46%~~increased 17%, or ~~$10.4~~$2.1 million, ~~primarily~~ due to higher ~~logistics costs and higher costs as a result of~~highway deicing prices in the ~~strike at our Goderich mine facility, including costs of purchased salt as a result of lower production volumes experienced during and subsequent to the Goderich mine strike. The third~~second quarter of ~~2017 results also include a $2.0~~2019, partially offset by $2.8 million ~~restructuring charge.~~of additional shipping and handling costs due to Mississippi River flooding.

COMMENTARY: ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2018 AND ~~2018~~2019

Salt sales ~~increased 13%~~decreased 4%, or ~~$65.5~~$18.0 million, due to ~~increases in~~lower highway deicing sales ~~in both businesses.~~volumes which was partially offset by higher highway deicing average sales prices and higher consumer and industrial sales volumes.

Salt average sales price ~~decreased 3%~~increased 13% due to higher highway deicing prices and product sales mix, as ~~highway deicing~~consumer and industrial products, which have a ~~lower~~higher average sales price than ~~consumer and industrial~~highway deicing products, were a higher proportion of total sales in the current period.

Highway deicing average sales prices ~~were relatively flat.~~increased 11% due to the realization of higher North American highway deicing contract prices for the 2018-2019 winter season. Consumer and industrial average sales prices ~~increased 4% due to price increases introduced over the last year as well as an improvement in product sales mix.~~were essentially flat.

Salt sales volumes ~~increased 16%~~decreased 15%, or ~~1,136,000~~971,000 tons, and ~~contributed~~resulted in approximately ~~$57.1~~$44.1 million ~~to the increase in~~of decreased Salt ~~segment~~ sales. Highway deicing sales volumes ~~increased 21%~~decreased 19% as a result of mild weather in the U.K. when compared to the significantly above average winter weather in the ~~U.K. and more winter weather events in North America in the~~ first quarter of 2018 ~~compared~~and lower North American contract volumes in the 2018-2019 bid season due primarily to ~~the mild prior year. The consumer~~lower production volumes at our Goderich mine in 2018. Consumer and industrial ~~business~~ sales volumes ~~decreased 2%.~~increased 9% due to higher sales volumes in both deicing and non-deicing products.

Salt operating earnings ~~decreased 25%~~increased 44%, or ~~$19.9~~$20.3 million, due to higher ~~per-unit~~highway deicing prices in the first six months of 2019. Per-unit product ~~and logistics~~ costs were lower in the first six months of 2019 due to improved production levels at our North America ~~as well as higher-cost~~mines and fewer higher cost carryover inventory ~~produced in 2017 and sold in 2018.~~tons. The first six months of 2018 was impacted by higher per-unit product costs and ~~logistics~~higher carryover inventory costs ~~resulted primarily~~resulting from lower Goderich mine production levels and higher carryover inventory costs due to the Goderich mine ceiling fall in the second half of 2017 and lower production levels at the Goderich mine related to the strike in 2018. The reduced inventory levels led to higher costs aslevels. As a result of lower Goderich mine production volumes in 2018, we also purchased salt and incurred higher logistics costs to ~~move salt into~~serve markets typically served by our Goderich mine. ~~In addition, the 2017 period also included a restructuring charge of $3 million.~~

Plant Nutrition North America

THREE AND ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30


	3Q 2018		3Q 2017		2018 YTD		2017 YTD		2Q 2019		2Q 2018		2019 YTD		2018 YTD
Plant Nutrition North America Sales (in millions)	$	41.7	$	40.3	$	146.4	$	140.0	$	48.1	$	51.8	$	85.3	$	104.7
Plant Nutrition North America Operating Earnings (in millions)	$	2.3	$	2.3	$	11.4	$	17.5	$	4.6	$	4.2	$	3.0	$	9.1
Plant Nutrition North America Sales Volumes (thousands of tons)	64		65		231		222		74		80		131		167
Plant Nutrition North America Average Sales Price (per ton)	$	658	$	626	$	635	$	631	$	649	$	644	$	652	$	626

COMMENTARY: THREE MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2018 AND ~~2018~~2019

Plant Nutrition North America sales ~~increased 3%~~decreased 7%, or ~~$1.4 million.~~$3.7 million due to sales volumes.

Plant Nutrition North America sales volumes decreased 2%8%, or ~~1,000~~6,000 tons, ~~and partially offset the increase~~which resulted in ~~sales by approximately $0.6 million.~~a $4.1 million decrease in sales. The decrease in sales volumes ~~was attributable to SOP, which was partially offset by stronger micronutrient sales.~~

Plant Nutrition North America average sales prices increased 5% and contributed approximately $2.0 million to the increase in Plant Nutrition North America sales reflecting a stronger mix of micronutrient sales which have higher average sales prices.

~~Plant Nutrition North America operating earnings were flat as operational improvements~~ resulted inprimarily from lower per-unit product costs, which were offset by higher depreciation expense associated with commissioning new production assets at our Ogden facility. In addition, the third quarter of 2017 results included a restructuring charge of $1 million.

~~COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2018~~

~~Plant Nutrition North America sales increased 5%, or $6.4 million.~~

~~Plant Nutrition North America sales volumes increased 4%, or 9,000 tons, and contributed approximately $5.6 million to the increase in Plant Nutrition North America sales. This increase was~~demand due to ~~an increase~~wet weather conditions in ~~both SOP and micronutrient sales volumes.~~key North American markets.

Plant Nutrition North America average sales prices increased 1%, providing a $0.4 million offset to the decline in sales volumes reflecting a stronger average sales price of our micronutrient products.

Plant Nutrition North America operating earnings increased $0.4 million to $4.6 million due to lower depreciation expense. This increase was partially offset by higher per-unit shipping and handling costs and higher SG&A expense. Per-unit shipping and handling costs increased primarily due to longer shipping distances as fewer tons were sold in our primary markets due to the weather conditions.

COMMENTARY: SIX MONTHS ENDED JUNE 30, 2018 AND 2019

Plant Nutrition North America sales decreased 19%, or $19.4 million due to lower sales volumes, which were partially offset by an increase in average sales prices.

Plant Nutrition North America sales volumes decreased 22%, or 36,000 tons, and contributed approximately ~~$0.8~~$22.7 million

to the ~~increase~~decrease in Plant Nutrition North America sales. The volume decrease was primarily due to lower demand due to the wet weather conditions in key North American markets in the first six months of 2019.

Plant Nutrition North America average sales prices increased 4% and resulted in an increase in sales of $3.3 million due to a higher proportion of micronutrient product sales in 2019.

Plant Nutrition North America operating earnings decreased ~~35%~~67%, or $6.1 million, due to ~~an increase in depreciation expense associated with commissioning new production assets at our Ogden facility~~lower sales volumes, higher per-unit shipping and ~~additional potassium chloride feedstock used to boost SOP production during the first half of the year, partially offset by lower logistics costs. In addition, the 2017 period included~~handling costs, a ~~restructuring charge of approximately $1 million.~~less favorable geographic sales mix and higher cost carryover inventory from 2018.

Plant Nutrition South America

THREE AND ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30


	3Q 2018		3Q 2017		2018 YTD		2017 YTD		2Q 2019		2Q 2018		2019 YTD			2018 YTD
Plant Nutrition South America Sales (in millions)	$	141.2	$	123.2	$	278.6	$	250.6	$	82.1	$	71.1	$	139.8		$	137.4
Plant Nutrition South America Operating Earnings (in millions)	$	31.2	$	21.4	$	32.7	$	24.0
Plant Nutrition South America Operating Earnings (Loss) (in millions)									$	1.7	$	0.7	$	(0.9	)	$	1.5
Plant Nutrition South America Sales Volumes (thousands of tons)
Agricultural productivity	180		163		331		302		109		90		161			151
Chemical solutions	74		70		222		214		80		69		162			148
Total tons sold	254		233		553		516		189		159		323			299
Average Plant Nutrition South America Sales Price (per ton)
Agricultural productivity	$	656	$	604	$	622	$	580	$	556	$	538	$	596		$	582
Chemical solutions	$	313	$	354	$	328	$	353	$	266	$	331	$	270		$	336
Combined	$	557	$	529	$	504	$	486	$	433	$	448	$	432		$	460

COMMENTARY: THREE MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2018 AND ~~2018~~2019

Plant Nutrition South America sales increased 15%, or ~~$18.0~~$11.0 million, ~~despite~~due to higher sales volumes, and was partially offset by the impact of a ~~23%~~10% unfavorable weighted average change in the Brazilian reais versus the U.S. dollar from the prior year.

Plant Nutrition South America sales volumes increased 9%19%, or ~~21,000~~30,000 tons, ~~and contributed approximately $12.0~~which accounted for $14.4 million toof the increase in Plant Nutrition South America sales. Agricultural productivity sales volumes increased ~~10% primarily driven by an increase in sales a result of improved crop economics in Brazil versus the prior year.~~21% due to increased demand for foliar and soil products. Chemical solutions sales volumes increased 6%16% due to higher demand for water treatment and chlor-alkali products. Sales of agricultural productivity and chemical solutions products were negatively impacted in the second quarter of 2018 by a truck driver strike in Brazil.

A ~~5% increase~~3% decrease in Plant Nutrition South America average sales price ~~contributed approximately $6.3~~reduced sales by $3.4 million due to a weaker Brazilian reais versus the U.S. dollar. In addition, the decrease in average sales price was due to a 20% decrease in chemical solutions product prices as a result of shifts in product sales mix and competitive pressure for industrial and water treatment products. The decrease was partially offset by a 3% increase in agriculture product sales prices, reflecting shifts in product sales mix and price increases to cover increased raw material input costs.

Plant Nutrition South America operating earnings increased $1.0 million to ~~the~~ $1.7 million despite a weaker Brazilian reais, due to higher sales volumes and an increase in agricultural productivity average sales prices, which were partially offset by increased raw materials costs.

COMMENTARY: SIX MONTHS ENDED JUNE 30, 2018 AND 2019

Plant Nutrition South America sales ~~increase.~~increased 2% or $2.4 million despite a 13% unfavorable weighted average change in the Brazilian reais versus the U.S. dollar from the prior year.

Plant Nutrition South America sales volumes increased 8%, or 24,000 tons, and contributed approximately $10.6 million to the increase in Plant Nutrition South America sales with increased volumes in both agricultural productivity and chemical solutions. Sales of agricultural productivity and chemical solutions products were negatively impacted in the second quarter of 2018 by a truck driver strike in Brazil.

A 6% decrease in Plant Nutrition South America average sales price partially offset the higher volumes by $8.2 million. The ~~increase~~decrease in average sales price was primarily due to a 9%20% decrease in chemical solutions average sales prices due to a weaker Brazilian reais, shifts in product sales mix and competitive pressure for industrial and water treatment products. This decrease was partially offset by a 2% increase in agriculture product sales prices partially offset by a 12% decrease in chemical solutions product prices and reflect shifts in product sales mix and price increases, partially offset by a weaker Brazilian reais versus the U.S. dollar.to cover commodity cost increases.

Plant Nutrition South America operating earnings ~~increased 46%, or $9.8~~decreased $2.4 million, primarily due to ~~higher sales, which was partially offset by higher commodity~~increased raw material costs and ~~a weaker Brazilian reais versus the~~an unfavorable product mix.

2019 Full-Year Outlook

Due to better than anticipated year-to-date sales volumes and an improved rock salt supply position, we expect Salt sales volumes for 2019 to range from 10.8 million tons to 11.2 million tons.

A shortened spring fertilizer season in many U.S. ~~dollar.~~

~~COMMENTARY: NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2018~~

agriculture markets has reduced our full-year 2019 sales volume outlook for our Plant Nutrition ~~South~~North America products. As a result, we expect Plant Nutrition North America sales ~~increased 11% or $28.0 million.~~volumes for 2019 to range from 340,000 tons to 360,000 tons.

While we have experienced some recent uncertainty in Brazil’s agriculture markets, Plant Nutrition South America sales volumes increased 7%, or 37,000 tons, and contributed approximately $19.7 million to the increase in Plant Nutrition South America sales. The increase in sales volumes was primarily driven by an increase in early season sales of agricultural productivity products as a result of the economic environment in Brazil in 2018. Chemical solutions sales were negatively impacted by the national truck driver strike in Brazil.

A 4% increase in Plant Nutrition South America average sales price contributed approximately $8.6 million to the Plant Nutrition South America sales increase. The increase in average sales price was primarily due to a 7% increase in agriculture product sales prices, partially offset by a 7% decrease in chemical solutions product prices due to shifts in product sales mix and a weaker Brazilian reais versus the U.S. dollar.

Plant Nutrition South America operating earnings increased 36%, or $8.7 million, primarily due to increased sales in 2018, which was partially offset by increased commodity costs, a weaker Brazilian reais versus the U.S. dollar and a $1.9 million gain recognized in the first quarter of 2017 related to the settlement of the contingent consideration for ~~the acquisition of Produquímica.~~

~~Outlook~~

Due to strong price results achieved during this year’s North American highway deicing bid season and price expectations for consumer and industrial salt products, we expect fourth quarter 2018 Salt revenue growth of approximately 15% compared to the prior year, assuming average winter weather. These Salt sales price increases2019 are expected to be partially offset by increased logistics costs and the remaining cost impacts from lower third quarter 2018 production rates at the Goderich mine. We expect Salt sales volumes to range from 11.6 million to 12.0 million tons in 2018.

Fourth quarter 2018 Plant Nutrition North America sales are expected to benefit from strong SOP demand and a seasonal increase in demand for micronutrients. Plant Nutrition North American sales volumes arestill expected to range from ~~345,000~~800,000 tons to ~~360,000 tons in 2018.~~900,000 tons.

Continued improvement in broad agriculture fundamentals in Brazil is expected to result in an increase in Plant Nutrition South America sales volumes in 2018 when compared to the prior year. Plant Nutrition South America sales volumes are expected to range from 740,000 to 780,000 tons in 2018.

Liquidity and Capital Resources

Historically, our cash flows from operating activities have generally been adequate to fund our basic operating requirements and ongoing debt ~~service and sustaining investment in property, plant and equipment.~~service. 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, weather, 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 fourth quarter and lowest in the second quarter. As a result of the acquisition of Produquímica ~~acquisition (described in~~ ~~Note 3~~ toIndústria e Comércio S.A. (which is now known as Compass Minerals América do Sul Indústria e Comércio S.A.), our ~~Consolidated Financial Statements), we expect a less seasonal distribution of~~ working capital ~~requirements.~~requirements are less seasonal. When needed, we may fund short-term working capital requirements by accessing our $300 million revolving credit 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~~June 30, ~~2018,~~2019, we had ~~$14.0~~$15.7 million of cash and cash equivalents (in our Consolidated Balance Sheets) that ~~was~~were either held directly or indirectly by foreign subsidiaries. During the fourth quarter of 2018, we revised our permanently reinvested assertion to indicate that we expect to repatriate approximately $150 million of unremitted foreign earnings on which we have recorded a $4.7 million deferred tax liability as of June 30, 2019 for foreign withholding tax and state income tax net of foreign exchange loss. Due to our ability to generate adequate levels of domestic cash flow on an annual basis, it is our current intention to ~~permanently~~continue to reinvest all remaining undistributed earnings of our foreign earnings outside of the U.S. In December 2017, U.S. tax reform legislation was enacted, including a one-time mandatory tax on previously deferred foreign earnings. As a result, in December 2017 we recorded tax expense of $55.2 million related to this one-time tax, which will be paid over an eight-year period. As of December 31, 2017, all non-U.S. undistributed earnings were subject to the one-time mandatory tax in the U.S. with the exception of outside basis differences of $59.3 million related to our Brazilian entities.subsidiaries indefinitely. We review our tax circumstances on a regular basis with the intent of optimizing cash accessibility and minimizing tax expense.

In addition, the amount 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 domestic and foreign subsidiaries are impacted by the transfer price charged on the transfer of our products between them. As discussed in Note 7 to our Consolidated Financial Statements, our calculated transfer price on certain products between one of our foreign subsidiaries and a domestic subsidiary has been challenged by Canadian federal and provincial governments. In the fourth quarter of 2017,

we reached a federal settlement agreement with Canadian and U.S. tax authorities related to our transfer pricing issues for our 2007-2012 tax years. ~~The~~During 2018, in accordance with the settlement agreement, ~~resulted in~~our U.S. subsidiary made intercompany cash payments ~~from our U.S. subsidiary~~of $85.7 million to our Canadian subsidiary and tax payments to Canadian taxing authorities of ~~$85.7~~$17.5 million. Tax payments of $5.7 million inwere made during the first ~~quarter~~and second quarters of ~~2018 and payments to~~2019, leaving an outstanding balance of $1.3 million as of June 30, 2019. Corresponding tax refunds of $3.4 million have been received as of

June 30, 2019 from U.S. taxing authorities, with the ~~Canadian tax authorities~~remaining refund of ~~$18.4~~approximately $19.5 million expected in ~~the second quarter of 2018. We will also make an additional tax payment of $4.3 million to the Canadian tax authorities in~~late 2019. Additionally during the fourth quarter of 2018, we reached a federal settlement agreement with Canadian and U.S. tax authorities on transfer pricing and management fees as part of an advanced pricing agreement that covers tax years 2013-2021. During the second quarter of 2019, in ~~connection~~accordance with ~~this settlement. In addition, we have a corresponding~~the settlement agreement, the Company’s U.S. subsidiary made intercompany cash payments of $106.1 million to its Canadian subsidiary and tax ~~refund due~~payments to Canadian taxing authorities of $29.9 million. Corresponding tax refunds of $2.3 million were received during the first and second quarters of 2019 from U.S. taxing authorities, ~~of $22.8~~with the remaining $58.9 million ~~that is~~ expected ~~to be received~~ in late ~~2018~~2019 or early ~~2019.~~2020. There are ongoing challenges by Canadian provincial taxing authorities regarding our transfer prices of certain ~~items.~~products. The final resolution of 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 from our domestic operations. See Note 7 to our Consolidated Financial Statements for a discussion regarding our Canadian tax reassessments and settlement.

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 the second half of 2017, we refinanced $54.3 million of loans we assumed in the Produquímica acquisition using proceeds from approximately $87 million of new loans. The new variable-rate loans bear interest rates ranging from 108.7% and 118% of CDI and mature in September and November 2019. In the first quarter of 2018, we entered into a new U.S. dollar denominated loan which matures in March 2020. No material fees were paid in connection with these transactions. A portion of ~~the~~our loans in Brazil are denominated in U.S. ~~dollars and a portion of the loans are denominated in Brazilian reais.~~dollars. We have ~~also~~ entered into foreign currency agreements whereby we 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~~the functional ~~currency.~~currency of our Brazil subsidiary. See Note 12 to our Consolidated Financial Statements for a discussion of our foreign currency agreements. In September 2018, we paid off approximately $36 million of our Brazilian loans and entered into a new $20.0 million Brazilian loan. The new variable rate loan bears interest of 117.5% of CDI (an overnight inter-bank lending rate in Brazil) and matures in September 2020. In the third quarter of 2018, we sold approximately $9.2 million of receivables for $8.6 million in cash. We are contingently liable for up to 20% of the receivables balance if the banks are unable to collect on these accounts. The proceeds were used to refinance a portion of our Brazilian loans during the the third quarter of 2018.

Cash and cash equivalents as of ~~September~~June 30, ~~2018~~2019 of ~~$36.1~~$20.4 million, decreased ~~$0.5~~$6.6 million from December 31, ~~2017.~~2018. We generated ~~$165.4~~$103.2 million of operating cash flows in the first ~~nine~~six months of ~~2018.~~2019. In the first ~~nine~~six months of ~~2018,~~2019, we used cash on hand and cash flows from operations to make net payments on our debt of ~~$11.3~~$17.9 million, fund capital expenditures of ~~$72.2~~$49.8 million and pay dividends on our common stock of ~~$73.4~~$49.2 million.

As of ~~September~~June 30, ~~2018,~~2019, we had ~~$1.34~~$1.35 billion of indebtedness, consisting of $250.0 million outstanding under our 4.875% Senior Notes due 2024, ~~$1.02 billion~~$995.4 million of borrowings outstanding under our senior secured credit facilities (consisting of term loans and a revolving credit facility), including ~~$184.2~~$170.8 million borrowed against our revolving credit facility, and ~~$80.7~~$108.8 million of Brazilian ~~debt.~~debt (see Note 8 to our Consolidated Financial Statements for more detail regarding our debt). We had ~~$10.3~~$10.5 million of outstanding letters of credit as of ~~September~~June 30, ~~2018,~~2019, which reduced our revolving credit facility borrowing availability to ~~$105.5~~$118.7 million.

Our debt service obligations could, under certain circumstances, materially affect our financial condition and impair our ability to operate our business or pursue our business strategies. 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 our credit agreement governing our term loans and revolving credit facility, including the total 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. Although we are in compliance with our debt covenants as of ~~September~~June 30, ~~2018,~~2019, 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. 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.

The table below provides a summary of our cash flows by category:



~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2018~~2019	~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2018
Operating Activities:
» Net ~~earnings were $17.8~~loss was $4.2 million.	» Net earnings were ~~$47.1~~$5.0 million.
» Non-cash depreciation and amortization expense was ~~$103.6~~$68.9 million.	» Non-cash depreciation and amortization expense was ~~$89.1~~$69.6 million.
» Working capital items were a source of operating cash flows of ~~$27.3~~$42.4 million.	» Working capital items were a source of operating cash flows of ~~$3.0~~$92.7 million.
Investing Activities:
» Net cash flows used by investing activities included ~~$72.2~~$49.8 million of capital expenditures.	» Net cash flows used by investing activities included ~~$81.0~~$52.1 million of capital expenditures.
Financing Activities:
» Net cash flows used by financing activities included the payment of dividends of ~~$73.4~~$49.2 million. » In addition, we had net payments on our debt of ~~$11.3~~$17.9 million.	» Net cash flows used by financing activities included the payment of dividends of ~~$73.3~~$49.0 million. » In addition, we had net ~~borrowings~~payments on our debt of ~~$2.9~~$67.3 million. ~~» We also paid $14.7 million for the final payment related to the Produquímica acquisition.~~

Other Matters

See Notes 7 and 9 to our Consolidated Financial Statements for a discussion regarding labor, environmental and litigation matters.

Sensitivity Analysis Related 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. 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 measures to assess our operating performance and return on capital, and to evaluate potential acquisitions or other capital projects. These measures are not calculated under U.S. GAAP and should not be considered in isolation or as a substitute for net earnings, operating 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 non-cash items including restructuring costs and other (income) expense. 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. 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 September 30,					Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2018		2017			2018			2017			2019			2018			2019			2018
Net earnings	$	12.8	$	32.0		$	17.8		$	47.1
Net (loss) earnings												$	(11.8	)	$	(7.6	)	$	(4.2	)	$	5.0
Interest expense	15.9		13.5			44.5			39.5			16.8			14.9			33.0			28.6
Income tax expense (benefit)	1.7		(12.5		)	1.0			(7.7		)
Income tax (benefit) expense												(4.4		)	(5.1		)	0.5			(0.7		)
Depreciation, depletion and amortization	34.0		32.7			103.6			89.1			33.9			35.3			68.9			69.6
EBITDA	64.4		65.7			166.9			168.0			34.5			37.5			98.2			102.5
Adjustments to EBITDA:
Restructuring charges^(a)	—		4.3			—			4.3
Logistics impact from flooding												2.8			—			2.8			—
Other expense (income), net	2.8		(1.2		)	(0.4		)	0.5			3.6			1.0			8.0			(3.2		)
Adjusted EBITDA	$	67.2	$	68.8		$	166.5		$	172.8		$	40.9		$	38.5		$	109.0		$	99.3


~~(a)~~	~~In July 2017, we initiated a restructuring plan to reduce ongoing costs and further streamline the organization.~~

Recent Accounting Pronouncements

See Note 1 to our Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Effects of Currency Fluctuations

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 enter 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 effect on our financial condition.

Although inflation has not had a significant impact on our operations, our efforts to recover cost increases due to inflation may be hampered as a result of the competitive industries and countries in which we operate.

Seasonality

We experience a substantial amount of seasonality in our sales. Our sales of our salt deicing products are seasonal. Consequently, our Salt 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 product is used. Following industry practice in North America, we seek to stockpile sufficient quantities of deicing salt in the second, third and fourth quarters 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 low demand periods of the year to ensure timely product availability during the peak sales season. The seasonality of this demand results in our sales volumes and net sales for our 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).

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 by entering into natural gas derivative instruments and foreign currency contracts. We may take further actions to mitigate our exposure to interest rates, exchange rates and changes in 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, ~~2017.~~2018.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange 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’s disclosure controls and procedures were effective as of ~~September~~June 30, ~~2018~~2019 to ensure that information required to be disclosed in the reports it files and submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

For this purpose, disclosure controls and procedures include controls and procedures designed to ensure that information that is required to be disclosed under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

Beginning January 1, ~~2018,~~2019, the Company implemented new guidance related to ~~revenue recognition. Though adoption of the guidance was not deemed to have a material effect on the amounts reported in its consolidated financial statements, the~~leases. The Company has implemented internal controls to monitor and analyze those business practices that, if ~~changed,~~not followed, could have a material impact on ~~the~~its consolidated financial statements under the guidance.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in the legal proceedings described in Note 7 and Note 9 to our Consolidated 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. There have been no material developments since December 31, ~~2017~~2018 with respect to our legal proceedings, except as described in Note 7 and Note 9 to our 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. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2017 and Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30,~~ 2018. There have been no material changes to our risk factors as disclosed in such Annual Report and Quarterly Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) None.

(b) None.

The Company withheld 9,263 shares with a fair value of $0.3 million related to the vesting of RSUs during the first six months of 2019. 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. These shares are not considered common stock repurchases under the Company’s equity compensation plans.

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 included in Exhibit 95 to this Quarterly Report on Form 10-Q.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit No.		Exhibit Description
10.1		~~Separation~~ Letter Agreement, ~~dated September 14, 2018,~~effective July 15, 2019, between Compass Minerals International, Inc. and ~~Steven N. Berger~~George J. Schuller, Jr. (incorporated herein by reference to Exhibit 10.1 to Compass Minerals International, Inc.’s Current Report on Form 8-K filed on ~~September 17, 2018)~~July 18, 2019).
31.1*10.2		Form of Release between Compass Minerals International, Inc. and Anthony J. Sepich (incorporated herein by reference to Exhibit 10.2 to Compass Minerals International, Inc.’s Current Report on Form 8-K filed on July 18, 2019).
10.3		Form of Release between Compass Minerals International, Inc. and Diana C. Toman (incorporated herein by reference to Exhibit 10.3 to Compass Minerals International, Inc.’s Current Report on Form 8-K filed on July 18, 2019).
31.1*		Section 302 Certifications of ~~Francis J. Malecha,~~Kevin S. Crutchfield, 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,~~Kevin S. Crutchfield, 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~~June 30, ~~2018,~~2019, formatted in ~~Extensive~~Inline Extensible Business Reporting Language ~~(XBRL)~~(iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated ~~Statement~~Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements.
* Filed herewith
** Furnished herewith

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: ~~November 1, 2018~~August 7, 2019	By:	/s/ James D. Standen
		James D. Standen
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

4337



Fair Value of Consideration Transferred (in millions)	October 3, 2016
Cash paid at closing	$	317.1
Additional cash due at closing	20.6
Fair value of contingent consideration	31.4
Fair value of 35% equity investment	178.7
Total	$	547.8



Recognized amounts of identifiable assets acquired and liabilities assumed (in millions):	Purchase Price Allocation
Cash and cash equivalents	$	73.8
Accounts receivable	89.4
Inventories	77.1
Other current assets	13.7
Property, plant and equipment	189.4
Intangible assets	81.2
Investment in equity method investee	24.5
Other noncurrent assets	6.9
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 assets	195.1
Goodwill	352.7
Total fair value of business combination	$	547.8



	Estimated Fair Value (in millions)		Weighted-Average Amortization Period (in years)
Trade names	$	36.9	11.0
Developed technology	37.5		5.3
Customer relationships	6.8		13.5
Total identifiable intangible assets	$	81.2	8.6



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)	78.6		17.5		24.0		(41.3		)	78.8
Depreciation, depletion and amortization	39.1		26.7		18.2		5.1			89.1




	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 contracts	(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	)	$	—