Compass Minerals International, Inc. (“CMI”), through its subsidiaries (collectively, the “Company”), is a leading producer of essential minerals focused on safely delivering where and when it matters to help solve nature’s challenges for customers and communities. The Company’s salt products help keep roadways safe during winter weather and are used in numerous other consumer, industrial and agricultural applications. Its plant nutrition products improvebusiness is the qualityleading producer of sulfate of potash (“SOP”), which is used in the production of specialty fertilizers for high-value crops and yield of crops, while supporting sustainable agriculture.turf. The Company’s principal products are salt, consisting of sodium chloride and magnesium chloride, and plant nutrients, consisting of sulfate of potash (“SOP”).SOP. The Company’s production sites are located in the United States (“U.S.”), Canada and the United Kingdom (“U.K.”). The Company also provides records management services to businesses located in the U.K. Except where otherwise noted, references to North America include only the continental U.S. and Canada, and references to the U.K. include only England, Scotland and Wales. References to “Compass Minerals,” “our,” “us” and “we” refer to CMI and its consolidated subsidiaries.

 

CMI is a holding company with no significant operations other than those of its wholly-owned subsidiaries. The consolidated financial statements include the accounts of CMI and its wholly-owned domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

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

consolidated financial statements. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the yeartransition period ended December 31, 2020,September 30, 2021, as filed with the SEC in its Transition Report on Form 10-K/A.10-KT on November 30, 2021. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included.

 

The Company experiences a substantial amount of seasonality in its sales, including its deicing salt product sales. As a result, Salt segment sales and operating earningsincome are generally higher in the first and fourthsecond fiscal quarters (ending December 31 and March 31) and lower during the secondthird and thirdfourth fiscal quarters (ending June 30 and September 30) of each calendar 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,first, third and fourth fiscal quarters of the calendar year(ending December 31, June 30 and September 30) to meet the estimated requirements for the winter season. Production of deicing salt can also vary based on the severity or mildness of the preceding winter season. Due to the seasonal nature of the deicing product lines, operating results for the interim periods are not necessarily indicative of the results that may be expected for the full fiscal year. The Company’s plant nutrition business is also seasonal. As a result, the Company and its customers generally build inventories during the plant nutrition business’ low demand periods of the year (which are typically winter and summer, but can vary due to weather and other factors) to ensure timely product availability during the peak sales seasons (which are typically spring and autumn, but can also vary due to weather and other factors).

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

RevisionsUnless otherwise indicated, amounts provided in these Notes pertain to Prior Period Consolidated Financial Statementscontinuing operations.

On March 23, 2021, the Company entered into a definitive agreement to sell its South America specialty plant nutrition business to ICL Brasil Ltda., a subsidiary of ICL Group Ltd. The transaction closed on July 1, 2021. Upon closing the Company received gross proceeds of approximately $432.3$421.1 million, including $12.7following a reduction in proceeds of $6.2 million in working capital adjustments (in each case, based on exchange rates at(finalized in the time of closing)quarter ended September 30, 2021), comprised of a cash paymentin the amount of approximately $325.5$318.4 million and an additional $106.8$102.7 million in net debt assumed by ICL Brasil Ltda. The terms of the definitive agreement provide for an additional earn-out payment of up to R$88 million Brazilian reais, payable in fiscal 2022 and which will be calculated on a sliding scale if the South America specialty plant nutrition business achieves certain full-yearfull-calendar year 2021 earnings before interest, taxes, depreciation and amortization (“EBITDA”) performance targets. The Brazil debt was deducted from gross proceeds from the transaction. At the closing of the transaction, the parties also entered into a Reverse Transition Services Agreement, which governs the parties’ respective rights and obligations with respect to the provision of certain transition services to the Company’s Brazil subsidiaries after closing. The Reverse Transition Services Agreement has a term of 18 months and allows the Company’s remaining Brazil subsidiaries to assign their rights and obligations with respect to the transition services to any buyer of a sufficient portion of their assets.

On April 7, 2021, the Company entered into a definitive agreement to sell a component of its North America micronutrient business (primarily consisting of intangible assets and certain inventory of the business) to Koch Agronomic Services, LLC, a subsidiary of Koch Industries, (“KAS”), through an asset purchase and sale agreement. On May 4, 2021, the Company completed the sale for approximately $56.7 million which resulted in the removal of the North America micronutrient business assets and liabilities from the Company’s unaudited consolidated financial statements, including $7.0 million in goodwill.paid fees totaling $0.5 million. The Company recognized a gain from the sale of $30.8$30.6 million, net of $2.8 million from the release of accumulated currency translation adjustment (“CTA”) upon substantial liquidation of the business.

On June 28, 2021, the Company entered into a definitive agreement to sell its investment in Fermavi for R$45 million Brazilian reais (including R$30 million Brazilian reais of deferred purchase price). The transaction closed on August 20, 2021. Upon closing, the Company received gross proceeds of approximately $2.8$2.9 million and recorded a discounted deferred proceeds receivable of approximately $4.8 million (based on exchange rates at the time of closing).

In measuring the assets and liabilities held for sale at fair value less estimated costs to sell, the Company completed an impairment analysis when its Board of Directors committed to a plan to sell the Specialty Businesses and the Company will update the analysis each quarter until the businesses areCompany’s South America chemicals business is sold. ManagementAccordingly, management evaluated indicators of fair value of each of the Specialty Businesses, including the net proceeds expected to be realized at closing of the transactions to sell itsCompany’s South America specialty plant nutritionchemicals business a componentas of its North America micronutrient business, its investment in Fermavi and the earn-out component of the proceeds from the sale of the South America specialty plant nutrition business, in addition toDecember 31, 2021, including indications of fair value received from third parties in connection with the marketing of its South America chemicalsthe remaining business.

The Company recognizedrecorded a net loss fromon the sale of its adjustment to fair value less estimated costs to sell of $255.2 million included in its loss from discontinued operations in its Consolidated Statement of Operations for the three months ended March 31, 2021. The net loss from adjustment to fair value less estimated costs to sell is due primarily to the translation of the net assets of the Company’s Brazil subsidiaries from Brazilian reais to U.S. dollars, which has been reported in CTA. As of March 31, 2021, the adjustment to fair value less costs to sell for the Company’s South America chemicals andAmerican specialty plant nutrition businesses was $92.7 millionbusiness and $154.5 million, respectively, inclusive of CTA. The amount of CTA recorded in AOCL will be eliminated upon substantial liquidation of each foreign entity. The Company also recognized loss for the adjustment to fair value less estimated costs to sell of $8.0 million on its investment in Fermavi astotaling approximately $209.8 million and a non-cash impairment loss for the remaining chemical business of March 31, 2021.

The information below sets forth selected financial information related to the operating results of the Specialty Businesses classified as discontinued operations. While the reclassification of theThe Specialty Business’Businesses’ revenue and expenses have been reclassified to net lossearnings from discontinued operations in prior periods has no impact upon previously reported results, theperiods. The Consolidated Balance Sheets present the assets and liabilities that were reclassified from the specified line items to assets and liabilities held for sale and the Consolidated Statements of Operations present the revenue and expenses that were reclassified from the specified line items to discontinued operations.

The following table represents summarized Consolidated Statements of Operations information of discontinued operations (in millions), inclusive of the remaining North America micronutrient product lines abandoned during the three months ended June 30, 2021, which were reclassified as discontinued operations for all periods presented, as discussed above::

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

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 and theapplications. The Company’s Plant Nutrition segment products includeproduces and markets SOP in various grades worldwide to distributors and retailers of SOP.crop inputs, as well as growers and for industrial uses. In the U.K., the Company operates a records management business utilizing excavated areas of theits Winsford salt mine with one other location in London, England.

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.

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.

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.

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 recognizeshas made an accounting policy election to recognize any shipping and handling costs that are incurred after the customer obtains control of the goods as fulfillment costs which are accrued at the time of revenue recognition.

The customer contract states the final terms of the sale, including the description, quantity and price of each product or service purchased. Payment is typically due in full within 30 days of delivery. The Company does not adjust the consideration for the

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.

 

Inventories consist of the following (in millions):

 

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

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

The Company’s effective income tax rate differs from the U.S. statutory federal income tax rate primarily due to U.S. statutory depletion, state income taxes (net of federal tax benefit), nondeductible executive compensation over $1 million, foreign income, mining and withholding taxes, global intangible low-taxed income and interest expense recognition differences for book and tax purposes.

 

 

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 MarchDecember 31, 2021, 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 AnnualTransition Report on Form 10-K10-KT for the yeartransition period ended December 31, 2020.

 

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

The Wisconsin Department of Agriculture, Trade and Consumer Protection (“DATCP”) and the Wisconsin Department of Natural Resources (“DNR”) havehas information indicating that agricultural chemicals are present within the subsurface area of the Company’s property located in Kenosha, Wisconsin.Wisconsin property. 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 directed the Company to conduct further investigations into the possible presence of agricultural chemicals in soil and ground water at the Kenosha property. The Company has completed initial on-property investigations and has provided the findings to DATCP. All investigations and mitigation activities to date, and any potential future remediation work, are being conducted under the Wisconsin Agricultural Chemical Cleanup Program (the “ACCP”), which provides for reimbursement of some of the costs. The Company may seek participation by, or cost reimbursement from, other parties responsible for the presence of any agricultural chemicals found in soil and ground water at this site if the Company does not receive an acknowledgment of no further action and is required to conduct further investigation or remedial work that may not be eligible for reimbursement under the ACCP.

 

For the three months ended MarchDecember 31, 2021 and 2020, the Company has presented 2 reportable segments:segments in its Consolidated Financial Statements: Salt and Plant Nutrition. The Salt segment produces and markets salt, consisting of sodium chloride and magnesium chloride, for use in road deicing for winter roadway safety and for dust control, food processing, water softeners and other consumer, agricultural and industrial applications. The Plant Nutrition segment produces and markets plant nutrients, including various grades of SOP.