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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
   FORM 10-K
 (Mark One)[X]
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the fiscal year ended December 31, 2003 OR [  ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
 For the transition period from ____ to ____ Commission File Number 333-82700 COMPASS MINERALS GROUP, INC.  Delaware
(State or Other Jurisdiction of Incorporation or Organization)
    
    48-1135403
(I.R.S. Employer Identification Number)
 8300 College Boulevard
Overland Park, Kansas
(Address of Principal Executive Offices)
    
    66210
(Zip Code)
 Registrants telephone number, including area code: (913) 344-9200 Securities registered pursuant to Section 12(b) of the Act:
None Securities registered pursuant to Section 12(g) of the Act:
None 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   x   No   o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.   x Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes   o   No   x The number of shares outstanding of the registrants $0.01 par value common stock at February 29, 2004 was 1,000 shares. All of such shares are
owned by Compass Minerals International, Inc. (formerly known as Salt Holdings Corporation).




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TABLE OF CONTENTS Page No.PART IItem 1.
    
    Business
    
    
    3Item 2.
    
    Properties
    
    
    24Item 3.
    
    Legal Proceedings
    
    
    24Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    24PART IIItem 5.
    
    Market for the Registrant's Common Equity and Related Stockholder Matters
    
    
    24Item 6.
    
    Selected Financial Data
    
    
    24Item 7.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    41Item 8.
    
    Financial Statements and Supplementary Data
    
    
    43Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
    
    
    78Item 9A.
    
    Controls and Procedures
    
    
    78PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    78Item 11.
    
    Executive Compensation
    
    
    82Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    85Item 13.
    
    Certain Relationships and Related Transactions
    
    
    86Item 14.
    
    Principal Accountant Fees and Services
    
    
    88PART IVItem 15.
    
    Exhibits, Financial Statement Schedules and Reports on Form 8-K
    
    
    88Signatures
    
    
    94Exhibit 12.1Exhibit 21.1Exhibit 31.1Exhibit 31.2Exhibit 32
  1




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COMPASS MINERALS GROUP, INC. 
 Part I CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS This annual report on Form 10-K (the report) contains forward-looking
statements. These 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. These risks and other factors include, among other
things, those listed under Item 1, Business  Risk Factors and elsewhere in
this report. In some cases, you can identify forward-looking statements by
terminology such as may, will, should, expects, intends, plans,
anticipates, believes, estimates, predicts, potential, continue or
the negative of these terms or other comparable terminology. These statements
are only predictions. Actual events or results may differ materially. In
evaluating these statements, you should specifically consider various factors,
including the risks outlined under Item 1, Business  Risk Factors. These
factors may cause our actual results to differ materially from any
forward-looking statement. 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 are under no duty to update any of
the forward-looking statements after the date of this report. MARKET AND INDUSTRY DATA AND FORECASTS This report includes market share and industry data and forecasts that we
obtained from internal company surveys, market research, consultant surveys,
publicly available information and industry publications and surveys. Industry
surveys, publications, consultant surveys and forecasts generally state that
the information contained therein has been obtained from sources believed to be
reliable, but there can be no assurance as to the accuracy and completeness of
such information. We have not independently verified any of the data from
third-party sources nor have we ascertained the underlying economic assumptions
relied upon therein. Similarly, internal company surveys, industry forecasts
and market research, which we believe to be reliable based upon managements
knowledge of the industry, have not been verified by any independent sources.
In addition, we do not know what assumptions regarding general economic growth
were used in preparing the forecasts we cite. Except where otherwise noted,
references to North America include only the continental United States and
Canada, and statements as to our position relative to our competitors or as to
market share refer to the most recent available data. Statements concerning (a)
North America highway deicing salt are generally based on historical production
capacity, (b) North America general trade salt are generally based on
historical sales volumes, (c) sulfate of potash are generally based on
historical sales volumes and (d) United Kingdom salt sales (general trade and
highway deicing) are generally based on historical sales volumes. Except where
otherwise noted, all references to tons refer to short tons. One short ton
equals 2,000 pounds. Unless the context requires otherwise, references in this annual report to
the Company, Compass, Compass Minerals, CMG, we, us and our refer
to Compass Minerals Group, Inc. and its consolidated subsidiaries. Compass
Minerals Group, Inc. is a wholly owned subsidiary of Compass Minerals
International, Inc. (Compass Minerals International, CMI or parent). 2




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Item 1. BUSINESS Company Overview We are the largest producer of rock, or highway deicing, salt in North
America and the United Kingdom, and operate the largest highway deicing salt
mines in these regions. We are also the third-largest producer of general trade
salt in North America and the second-largest in the United Kingdom, serving
major retailers, agricultural cooperatives and food producers. In addition, we
are the largest producer of sulfate of potash, or SOP, in North America,
which is used in the production of specialty fertilizers. Salt is one of the
most widely used minerals in the world and has a wide variety of end-use
applications, including highway deicing, food-grade applications, water
conditioning and various industrial uses. Our business also includes the
following key characteristics:  
    
    We believe that our cash flows are not materially impacted by
economic cycles due to the stable end-use markets of salt and the
absence of cost-effective alternatives.
    
    We operate 11 facilities in North America and the United
Kingdom, including the largest rock salt mine in the world in
Goderich, Ontario and the largest salt mine in the United Kingdom in
Winsford, Cheshire.
    
    We believe that we are among the lowest cost rock salt
producers in our markets. Our cost advantage is due to the size and
quality of our reserves, effective mining techniques and efficient
production processes. In addition, our salt mines in North America
are located near either rail or water transport systems, thereby
minimizing shipping and handling costs, which constitute a
significant portion of the overall delivered cost of salt. For the year ended December 31, 2003, we sold approximately 12.8 million
tons of salt and other minerals, generating sales of $600.6 million and net
income of $45.7 million. On November 28, 2001, Salt Holdings Corporation (now known as Compass
Minerals International, Inc.) completed a leveraged recapitalization (the
Recapitalization) with our assets and liabilities retaining their historical
value. Immediately following the Recapitalization, Apollo Management V, L.P.
(Apollo), co-investors and management owned approximately 81% of CMIs,
outstanding common stock and IMC Global, Inc. (IMC Global) owned
approximately 19% of CMIs outstanding common stock as fully diluted for
management options and stock issuable under our stock option plan. On December 17, 2003, CMI completed an initial public offering of
16,675,000 shares of its common stock, par value $.01 per share, at an initial
public offering price of $13.00 per share. In connection with the offering, our
parent changed its name from Salt Holdings Corporation to Compass Minerals
International, Inc. The shares were sold by CMIs stockholders. Neither CMI
nor CMG received any proceeds from the sale of the shares. Apollo and IMC
Global each sold portions of their holdings of CMI common stock, which reduced
the ownership, on a fully diluted basis, of Apollo and co-investors, management
and IMC Global to approximately 35%, 11% and 2%, respectively. SALT SEGMENT Through our salt segment we mine, produce, process and distribute salt in
North America and Europe, including rock, evaporated and solar salt. Our
products are marketed primarily in the United States, Canada and the United
Kingdom. Salt is used in a wide variety of applications, including as a deicer
for both highway and consumer use (rock salt), an ingredient in the production
of chemicals for paper bleaching, water treatment and a variety of other
industrial uses, a flavor enhancer and preservative in food, a nutrient and
trace mineral delivery vehicle in animal feeds and an essential component in
both industrial and residential water 3




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softeners. The demand for salt has historically remained relatively stable
during economic cycles due to its relatively low cost and high value with a
diverse number of end uses. However, demand in the highway deicing market is affected by changes in
winter weather conditions. Approximately 61% of our highway deicing annual
sales, net of shipping and handling costs, are generated from December through
March when the need for highway deicing salt is at its peak. Salt Industry Overview The salt industry is characterized by stable demand and steady price
increases across various grades. Salt is one of the most common and widely
consumed minerals in the world due to its low relative cost and its utility in
a variety of applications, including food processing, water conditioning,
industrial chemical processing, nutritional supplements for animal stock and
highway deicing. We estimate that the consumption of highway deicing salt in
North America is 23 million tons per annum (18 million tons per annum in the
markets we serve), while the general trade market totals 11 million tons per
annum. In the United Kingdom, we estimate that the size of the highway deicing
market is 1.9 million tons per annum while the general trade market is
approximately 1.0 million tons per annum. During the thirty-year period ending
2002, the production of salt used in highway deicing in the United States has
increased at an historical average of approximately 1% per annum, while the
production of general trade salt products has increased at an historical
average of more than 1% per annum over the same period. Salt prices vary according to purity from the lowest grade (highway
deicing salt) at around $20 per ton to the highest-grade salt (food-grade salt)
at more than $400 per ton. The price difference between highway and food-grade
salt reflects, among other things, the more elaborate refining and packaging
processes for higher-grade salt. Due to its low production cost, transportation
and handling costs tend to be a significant component of the total delivered
cost making logistics management and customer service key competitive factors
in the industry. The higher relative cost associated with transportation also
acts as a barrier to entry in favor of salt manufacturers located in close
proximity to their customers. During the thirty year period ending 2002, prices
for salt used in highway deicing in the United States have increased at a
historical average of approximately 4% per annum, while prices for general
trade salt products have increased at a historical average of approximately 5%
per annum over the same period. Processing Methods We have production capacity, including salt purchased under long-term
contracts, of approximately 14.5 million tons of salt per annum. Mining, other
production activities and packaging are currently conducted at 11 of our
facilities and at two facilities where finished product is purchased from IMC
Global under long-term contracts. Summarized below are the three processing methods we use to produce salt. Underground Rock Salt Mining.We employ a drill and blast mining technique
at our underground rock salt mines. Mining machinery moves salt from the salt
face to conveyor belts where it is then crushed and screened. Salt is then
hoisted to the surface where it is loaded onto shipping vessels, railcars or
trucks. The primary power sources for each of our rock salt mines are
electricity and diesel fuel. At our Winsford, U.K. facility, we use a
continuous miner process. Rock salt is primarily used in our highway and
consumer deicing products. Based on annual production capacities, our
underground rock salt mining represents approximately 78% of our salt
production. Mechanical Evaporation.The mechanical evaporation method involves
subjecting salt-saturated brine to vacuum pressure and heat, generated by
natural gas or oil, to precipitate salt. The salt brine is obtained from
underground salt deposits through a series of brine wells. The resulting
product has both a high purity and uniform physical shape. Evaporated salt is
primarily used in our general trade salt product lines. 4




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Based on annual production capacities, our mechanical evaporation represents
approximately 12% of our salt production. Solar Evaporation.The solar evaporation method is used in areas of the
world where high-salinity brine is available and where weather conditions
provide for a high natural-evaporation rate. The brine is pumped into a series
of large open ponds where sun and wind evaporate the water and crystallize the
salt, which is then mechanically harvested and processed through washing,
drying and screening. Solar salt is primarily used in our general trade salt
product lines. Based on annual production capacities, our solar evaporation
represents approximately 10% of our salt production. Operations and Facilities United States.Our Central and Midwestern United States general trade
customer base is served by our mechanical evaporation plant in Lyons, Kansas.
Additionally, we serve areas around the Great Lakes with evaporated salt
purchased from IMC Globals potash and salt facility in Michigan. The Cote
Blanche, Louisiana rock salt mine serves chemical customers in the Southern and
Western United States, highway deicing customers through a series of depots
located along the Mississippi and Ohio Rivers, and agriculture customers in the
Southern and Midwestern United States. Our solar evaporation facility located
in Ogden, Utah is the largest solar salt production site in the United States.
This facility principally serves the Western United States general trade
markets and also provides salt for chemical applications and highway deicing,
and provides magnesium chloride which is primarily used in deicing, dust
control and soil stabilization applications. Production capacity of salt at our
Ogden facility is currently only limited by demand. We also own and operate two
salt packaging facilities in Illinois and Wisconsin, which also serve consumer
deicing and water conditioning customers in the Central, Midwestern and parts
of the Northeastern United States. Canada.Our salt is produced at five different locations in Canada.
Mechanically evaporated salt is produced at three facilities strategically
located throughout Canada: Amherst, Nova Scotia in Eastern Canada; Goderich,
Ontario in Central Canada; and Unity, Saskatchewan in Western Canada. From the
Goderich, Ontario rock salt mine, we serve the consumer and highway deicing
markets in Canada and the Great Lakes region of the United States. We also
purchase salt and other products from IMC Globals potash and salt facilities
located in Saskatchewan, which serve both the general trade and the highway
deicing markets. United Kingdom.Our United Kingdom customer base is served by two
facilities. Highway deicing customers throughout the United Kingdom are served
by the Winsford rock salt mine in Northwest England. The Weston Point
mechanical evaporation plant is located 12 miles north of the mine and serves
our general trade and chemical customers in the United Kingdom as well as in
continental Europe. 5




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The table below shows the capacity and type of salt produced at each of
our owned or leased production locations: ANNUALPRODUCTIONCAPACITY
    
    PRODUCTLOCATION
    
    (tons)
    
    TYPENorth AmericaGoderich, Ontario Mine
    
    
    6,500,000
    
    
    RockCote Blanche, Louisiana Mine
    
    
    2,800,000
    
    
    RockOgden, Utah Plant
    
    
    1,500,000
    
    
    SolarLyons, Kansas Plant
    
    
    425,000
    
    
    EvaporatedUnity, Saskatchewan Plant
    
    
    175,000
    
    
    EvaporatedGoderich, Ontario Plant
    
    
    170,000
    
    
    EvaporatedAmherst, Nova Scotia Plant
    
    
    115,000
    
    
    EvaporatedUnited KingdomWinsford, Cheshire Mine
    
    
    2,000,000
    
    
    RockWeston Point, Cheshire Plant
    
    
    850,000
    
    
    Evaporated
 Salt production at these facilities totaled an aggregate 12.0 million
tons, 10.0 million tons and 12.2 million tons for the years ended December 31,
2003, 2002 and 2001, respectively. Salt is found throughout the world and is typically deposited in extremely
large quantities where it is commercially produced. Our mines at Goderich, Cote
Blanche and Winsford, as well as at our other operating facilities, are
proximate to vast mineral deposits. In most of our production locations, we
estimate the recoverable salt to exceed 100 years of reserves at current
production rates and capacities. Our rights to extract those minerals may
currently be contractually limited by either geographic boundaries or time. We
believe that we will be able to continue to extend these agreements, as we have
in the past, at commercially reasonable terms, without incurring substantial
costs or incurring material modifications to the existing lease terms and
conditions, thereby allowing us to extract the additional salt necessary to
fully develop our existing mineral rights. Our underground mines in Canada (Goderich, Ontario), the United States
(Cote Blanche, Louisiana) and the United Kingdom (Winsford, Cheshire) make up
approximately three-fourths of our salt producing capacity. Each of these mines
are operated with modern mining equipment and utilize subsurface improvements
such as vertical shaft lift systems, milling and crushing facilities,
maintenance and repair shops and extensive conveyor systems. We believe that
the properties and their operating equipment are maintained in good working
condition. The land and related surface rights at the Goderich mine are owned. We
also maintain a mineral lease at Goderich with the provincial government, which
grants us the right to mine salt. This lease expires in 2022 with the option to
renew until 2043. Cote Blanche is operated under land and mineral leases with a
third-party landowner who grants us the right to mine salt. The leases expire
in 2060. We own the land, related surface rights and salt reserves at the
Winsford mine. Our mines at Goderich, Cote Blanche and Winsford have been in operation
for approximately 44, 38 and 158 years, respectively. At current average rates
of production, we estimate that our remaining years of production for the
recoverable minerals we presently own or lease to be 177, 93 and 32 years,
respectively. Our mineral interests are amortized on an individual basis over
estimated useful lives not to exceed 99 years using the units-of-production
method for leased mineral rights and the straight-line method for owned
minerals. Our estimates are based on, among other things, both internal
estimates and the results of reserve 6




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studies completed by a third-party
engineering firm. The reserve estimates are primarily a function of the area
and volume covered by the mining rights and estimates of extraction rates
utilized by the company with the reasonable expectation of reliably operating
the mines on a long-term basis. Established criteria for proven and probable
reserves is primarily applicable to mining deposits of discontinuous metal,
where both presence of ore and its variable grade need to be precisely
identified. However, the massive continuous nature of evaporative deposits,
such as salts, require proportionately less data for the same degree of
confidence in mineral reserves, both in terms of quantity and quality. Reserve
studies performed by a third-party engineering firm suggest that our salt
reserves most closely resemble probable reserves and we have therefore
classified our reserves as probable reserves. We package salt product produced by us or others at two additional
facilities. The table below shows the packaging capacity at each of these
facilities: ANNUALPACKAGINGCAPACITYLOCATION
    
    (tons)Kenosha, Wisconsin
    
    
    100,000Chicago, Illinois.
    
    
    100,000
 We also have a long-term contract to purchase finished salt from IMC
Global, which is produced as a co-product of their potash operations. The table
below shows the amount and type of salt purchased from each of these production
facilities: ANNUALPURCHASINGCAPACITY
    
    PRODUCTLOCATION
    
    (tons)
    
    TYPEEsterhazy, Saskatchewan
    
    
    200,000
    
    
    RockHersey, Michigan
    
    
    250,000
    
    
    Evaporated
 We divide our salt products into two separate product lines: highway
deicing salt (including chemical salt) and general trade salt. Highway Deicing Salt Products Products and Sales Highway deicing constituted approximately 47% of our gross sales of salt
in 2003. Principal customers are states, provinces, counties, municipalities
and road maintenance contractors that purchase bulk salt for ice control on
public roadways. Highway deicing salt is sold primarily through an annual
tendered bid contract system as well as through some longer-term contracts,
with price, product quality and delivery being the primary competitive market
factors. Annual supply contracts generally are awarded on the basis of tendered
bids once the purchaser is assured that the minimum requirements for purity,
service and delivery can be met. The bidding process eliminates the need to
invest significant time and effort in marketing and advertising. Location of
the source of salt and distribution outlets also play a significant role in
determining a supplier. We have an extensive network of approximately 72 depots
for storage and distribution of highway deicing salt in North America. The
majority of these depots are located on the Great Lakes and the Mississippi and
Ohio River systems where our Goderich, Ontario and Cote Blanche, Louisiana
mines are located to serve those markets. Salt from our Ogden, Utah facility is
also partially used for highway deicing. 7




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We produce salt in the United Kingdom for the highway deicing product line
through our facility at Winsford, Cheshire, the largest rock salt mine in the
United Kingdom. We believe our superior production capacity, productivity and
favorable logistics allow us to be the only supplier of highway deicing salt
capable of meeting peak winter demands in the United Kingdom. This strong
position has resulted in us being viewed as a strategic operation by the United
Kingdoms Highway Agency. As such, we work with the Highway Agency to develop
standards for deicing product specifications and to monitor Highway Agency
deicing application contractors. We further act as a primary contact for the
Highway Agency in connection with winter road management in the United Kingdom.
In the United Kingdom approximately 59% of our highway deicing business is on
multi-year contracts. Winter weather variability is the most significant factor affecting salt
sales for deicing applications because mild winters reduce the need for salt
used in ice and snow control. Over the last four years, our North American
highway deicing product line has generated over 61% of its annual sales, net of
shipping and handling costs, from December through March when the need for
highway deicing is at its peak. Lower than expected sales during this period
could have a material adverse effect on our results of operations. The vast
majority of North American deicing sales are made in Canada and the Midwestern
United States where winter weather is generally harsher than in other parts of
North America. In keeping with industry practice, we, together with our
customers, stockpile sufficient quantities of salt to meet estimated
requirements for the next winter season. See Item 1, Business  Risk Factors
 The seasonal demand for our products and the variations in our cash flows
from quarter to quarter as a result of weather conditions may have an adverse
effect on our results of operations and Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations  Seasonality. Chemical customers accounted for approximately 6% of our 2003 gross sales
of salt. Principal customers are producers of intermediate chemical products
used in pulp bleaching, water treatment and a variety of other industrial uses
that do not have a captive source of brine. Distribution into the chemical
market is made primarily through multi-year supply agreements, which are
negotiated privately. Price, service and product quality are the major
competitive market factors. The table below shows our shipments of highway deicing and chemical salt
products to the following regions (thousands of tons): Year Ended December 31,2003
    
    2002
    
    2001Tons
    
    %
    
    Tons
    
    %
    
    Tons
    
    %U.S.
    
    
    6,267
    
    
    
    65
    
    
    
    5,104
    
    
    
    64
    
    
    
    5,656
    
    
    
    60Canada
    
    
    2,560
    
    
    
    26
    
    
    
    2,162
    
    
    
    27
    
    
    
    2,301
    
    
    
    25Europe and Others
    
    
    836
    
    
    
    9
    
    
    
    699
    
    
    
    9
    
    
    
    1,445
    
    
    
    15Total
    
    
    9,663
    
    
    
    100
    
    
    
    7,965
    
    
    
    100
    
    
    
    9,402
    
    
    
    100
 Competition We face strong competition in each of the markets in which we operate. In
North America, other large, nationally recognized companies compete against our
highway deicing and chemical salt products. In addition, there are several
smaller regional producers of highway deicing salt. There are several importers
of salt into North America but these mostly impact the Eastern seaboard where
we have a minimal position. In the United Kingdom, there are two other
companies that produce highway deicing salt, one in Northern 8




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England and the
other in Northern Ireland. There are no significant imports of highway deicing
salt into the United Kingdom. General Trade Salt Products Products and Sales The general trade business accounted for approximately 46% of our 2003
gross sales of salt. We are the third largest producer of general trade salt in
North America. This product line includes commercial and consumer applications,
such as table salt, water conditioning, consumer ice control, food processing,
agricultural applications, as well as a variety of industrial applications. We
believe that we are the largest private label producer of water conditioning
and salt-based agricultural products in North America and sell more than 70
private labels of table salt to major retailers. Our Sifto® brand is well
recognized in the Canadian market. In the United Kingdom we operate the largest evaporated-salt plant in the
United Kingdom at Weston Point. We are one of the U.K.s market leaders in
branded evaporated salt for water conditioning. We also produce salt for the
food, chemical, animal feeds and textile markets. We have maintained a significant presence in the general trade business
over recent years due to our strong focus on: (i) the Midwestern region of the
United States; (ii) all of Canada and the United Kingdom; (iii) our
distribution network to the grocery trade; and (iv) our relationships with
large distributors of water conditioning salt. The general trade market is driven by strong customer relationships. Sales
in the general trade salt product line occur through retail channels, such as
grocery stores, building supply, hardware and automotive stores and feed
suppliers. Distribution in the general trade salt product line is channeled
through a direct sales force located in various parts of our service
territories who sell products to distributors, dealers and end users. We also
maintain a network of brokers who sell table salt, consumer deicing and water
conditioning products. These brokers service wholesalers, grocery chains and
retailers, as well as the food service industry. The table below shows our shipments of general trade salt products to the
following regions (thousands of tons): Year Ended December 31,2003
    
    2002
    
    2001Tons
    
    %
    
    Tons
    
    %
    
    Tons
    
    %U.S.
    
    
    1,758
    
    
    
    60
    
    
    
    1,629
    
    
    
    59
    
    
    
    1,725
    
    
    
    61Canada
    
    
    565
    
    
    
    19
    
    
    
    506
    
    
    
    18
    
    
    
    513
    
    
    
    18Europe and Others
    
    
    604
    
    
    
    21
    
    
    
    651
    
    
    
    23
    
    
    
    584
    
    
    
    21Total
    
    
    2,927
    
    
    
    100
    
    
    
    2,786
    
    
    
    100
    
    
    
    2,822
    
    
    
    100
 Competition In North America, other large nationally recognized companies compete
against our salt business in production and marketing of general trade salt
products. In addition, there are several smaller regional producers of general
trade salt. There are several importers of salt into North America but they
mostly impact the East Coast and West Coast of the United States where we have
a minimal position. In the United 9




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Kingdom, there is one other large domestic
producer of general trade salt, several small local producers and some imports
from continental Europe. We also export salt from the United Kingdom to
Scandinavia and continental Europe and compete with many other European
producers in these markets. SPECIALTY POTASH SEGMENT SOP is primarily used as a specialty fertilizer, providing essential
potassium to high-value, chloride-sensitive crops, such as vegetables, fruits,
tea, tobacco and turf grass. We are the market leader in North America for SOP
and market SOP products both domestically and overseas. We offer several grades
of SOP, which are designed to differentiate us from our competitors, as well as
to better serve the needs of our customers. In 2003, the specialty potash
segment accounted for approximately 10% of our sales after shipping and
handling costs. Potash Industry Overview The annual worldwide consumption of all potash fertilizers approaches 50
million tons. Muriate of potash, or potassium chloride, is the most common
source of potassium and accounts for over 90% of all potash consumed in
fertilizer production. SOP represents about 5% of potash consumption. The
remainder is supplied in the forms of potassium magnesium sulfate, nitrate of
potassium, and, to a lesser extent, potassium thiosulfate and monopotassium
phosphate. All of these products contain varying concentrations of potassium
expressed as potassium oxide (K20) and different combinations of co-nutrients. Muriate of potash is the least expensive form of potash fertilizer based
on the concentration of K20. It is the preferred potassium source for most
crops. However, SOP (containing approximately 50% K20) is utilized by growers
for many high-value crops, especially where the requirements are for
fertilizers with low chloride content. The use of SOP has been scientifically
proven to improve the yield and quality of certain crops. Examples of crops where SOP is utilized to increase yield and quality
include tobacco, tea, potatoes, citrus fruits, grapes, almonds, some vegetables
and on turfgrass for golf courses. Approximately 73% of our annual SOP sales
volumes in 2003 were made to domestic customers, which include retail
fertilizer dealers and distributors of professional turf care products. These
dealers and distributors combine or blend SOP with other fertilizers and
minerals to produce fertilizer blends tailored to individual requirements. Operations and Facilities All of our SOP production is located on the Great Salt Lake west of Ogden,
Utah. It is the largest SOP production facility in North America. The
evaporation facility utilizes solar energy and operates over 40,000 acres of
evaporation ponds to manufacture SOP and magnesium chloride from the brines of
the Great Salt Lake. The property utilized in our operation is both owned and
leased under annually renewing leases. This facility has the capacity to
annually produce approximately 450,000 tons of SOP, approximately 400,000 tons
of magnesium chloride and over 1.5 million tons of salt. These recoverable
minerals exist in vast quantities in the Great Salt Lake. We estimate the
recoverable minerals exceed 100 years of reserves at current production rates
and capacities. Our rights to extract these minerals are contractually limited.
We believe we will continue to be able to extend these agreements, as we have
in the past, at commercially reasonable terms, without incurring substantial
costs or incurring material modifications to the existing lease terms and
conditions, thereby allowing us to extract additional quantities of minerals
necessary to significantly extend the economic life of the reserves. The potassium bearing salts are mechanically harvested and refined to high
purity SOP in an integrated production facility that has been in operation
since 1967. We believe that our property and operating equipment are maintained
in good working condition. 10




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The Ogden facility was unable to produce SOP from 1984 through the
beginning of 1989 due to flooding. Following the flood, dikes were raised to a
height three feet over the historic peak flood level. Also, the State of Utah
constructed and implemented the West Desert Pumping Project, which could be
utilized to lower the level of the Great Salt Lake by up to 12 inches per year thus
reducing the risk of flooding. Although we believe that the subsequent dike
improvements and the West Desert Pumping Project have reduced the likelihood of
future pond flooding, we maintain both property damage and business
interruption insurance policies for this risk. Products and Sales Our domestic sales of SOP are concentrated in the western states of
California, Oregon, Washington, Idaho and the central tobacco belt area where
the crops and soil conditions favor SOP. We generally export SOP through major
trading companies. International SOP sales volumes in 2003 were 27% of our
annual SOP sales. Prior to the acquisition by IMC Global in 1998, our SOP was
marketed and sold by a sales group consisting of trained agronomists and
professional fertilizer agents. These representatives directly contacted
dealers and growers in the United States. Following the IMC Global acquisition,
this SOP sales group was dissolved and the IMC Global sales force handled SOP
sales. The IMC Global sales group was responsible for selling all potash and
phosphate fertilizer products for IMC Global. Because the bulk of these
fertilizers are sold as commodities, the focus on specialty products such as
SOP diminished under IMC Global. Upon the purchase of the SOP business from IMC
Global, we organized and employed an experienced global sales group similar to
the one that was in place prior to 1998. The table below shows our shipments of SOP to the following regions
(thousands of tons): Year Ended December 31,2003
    
    2002
    
    2001Tons
    
    %
    
    Tons
    
    %
    
    Tons
    
    %U.S.
    
    
    182
    
    
    
    73
    
    
    
    151
    
    
    
    62
    
    
    
    148
    
    
    
    79Export (a)
    
    
    69
    
    
    
    27
    
    
    
    91
    
    
    
    38
    
    
    
    40
    
    
    
    21Total
    
    
    251
    
    
    
    100
    
    
    
    242
    
    
    
    100
    
    
    
    188
    
    
    
    100
 (a) Export sales include product sold to foreign customers at U.S.
ports. We previously had a long-term contract with IMC Global following the
Recapitalization, whereby we acted as a sales agent for IMC Global to customers
serviced by IMC Globals Carlsbad, New Mexico facility. The contract did not
limit the amount of SOP we could purchase from IMC Global. As a result of our
June 2003 purchase of IMC Globals remaining SOP marketing business this
long-term contract with IMC Global terminated on November 30, 2003. Competition Approximately 56% of the world SOP production is located in Europe, 14% in
the United States and the remaining 30% in various other countries. The world
consumption of SOP totals about 2.9 million tons. Our major competition for SOP
sales in North America include imports from Germany, Chile, Canada and Belgium.
In addition, there is also some functional competition between SOP, muriate of
potash and nitrate of potash. For exports into Asia, the Pacific Rim countries
and Latin America, we compete with various local and European producers. 11




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INTELLECTUAL PROPERTY We rely on a combination of patents, trademarks, copyright and trade
secret protection, employee and third-party non-disclosure agreements, license
arrangements and domain name registrations to protect our intellectual
property. We sell many of our products under a number of registered trademarks
that we believe
are widely recognized in the industry. No single patent, trademark or trade
name is material to our business as a whole. Any issued patents that cover our proprietary technology and any of our
other intellectual property rights may not provide us with substantial
protection or be commercially beneficial to us. The issuance of a patent is not
conclusive as to its validity or its enforceability. Competitors may also be
able to design around our patents. If we are unable to protect our patented
technologies, our competitors could commercialize our technologies. With respect to proprietary know-how, we rely on trade secret protection
and confidentiality agreements. Monitoring the unauthorized use of our
technology is difficult, and the steps we have taken may not prevent
unauthorized use of our technology. The disclosure or misappropriation of our
intellectual property could harm our ability to protect our rights and our
competitive position. See Item 1, Business  Risk Factors  Protection of
proprietary technology  Our intellectual property may be misappropriated or
subject to claims of infringement. EMPLOYEES As of December 31, 2003, we had 1,497 employees, of which 708 are employed
in the United States, 596 in Canada and 193 in the United Kingdom.
Approximately 38% of our U.S. workforce (54% of our global workforce) is
represented by labor unions. Of our nine material collective bargaining
agreements, four will expire in 2004, one will expire in 2005 and four will
expire in 2006. Additionally, approximately 13% of our workforce is employed
in Europe where trade union membership is common. We consider our labor
relations to be good. 12




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PRINCIPAL PROPERTIES The table below sets forth our principal properties: Land and RelatedSurface Rights
    
    Mineral ReservesOwned/
    
    Expiration
    
    Owned/
    
    ExpirationLocation
    
    Use
    
    Leased
    
    of Lease
    
    Leased
    
    of LeaseOgden, Utah
    
    SOP and solar salt production
facility
    
    Owned
    
    
    N/A
    
    
    Leased
    
    
    (1)Lyons, Kansas
    
    Evaporated salt production facility
    
    Owned
    
    
    N/A
    
    
    Owned
    
    
    N/ACote Blanche, Louisiana
    
    Rock salt production facility
    
    Leased
    
    
    2060
    
    
    Leased
    
    
    2060Weston Point,
Cheshire, U.K.
    
    Evaporated salt production facility
    
    Owned
    
    
    N/A
    
    
    N/A(2)
    
    
    N/AWinsford, Cheshire,
U.K.
    
    Rock salt production facility
    
    Owned
    
    
    N/A
    
    
    Owned
    
    
    N/AGoderich, Ontario,
    
    Rock salt production facility
    
    Owned
    
    
    N/A
    
    
    Leased
    
    
    2022(3)Canada
    
    Evaporated salt production facility
    
    Owned
    
    
    N/A
    
    
    Owned
    
    
    N/AUnity, Saskatchewan,
Canada
    
    Evaporated salt production facility
    
    Owned
    
    
    N/A
    
    
    Leased
    
    
    2009/2016
(4)Amherst, Nova
Scotia, Canada
    
    Evaporated salt production facility
    
    Owned
    
    
    N/A
    
    
    Leased
    
    
    (5)Overland Park, Kansas
    
    Corporate headquarters
    
    Leased
    
    
    2008
    
    
    N/A
    
    
    N/A
   (1)
    
    The Ogden lease automatically renews on an annual basis.(2)
    
    Weston Point purchases brine for production purposes from a third
party pursuant to a supply agreement that will expire in 2017.(3)
    
    Subject to the right of renewal through 2043.(4)
    
    Consists of two leases expiring in 2009 and 2016 subject to the right of
renewal through 2030 and 2037, respectively.(5)
    
    Consists of two leases that are currently in the process of being
renewed that will expire in 20 years with rights of renewal at 20-year
increments. With respect to each facility at which we extract salt, brine or SOP, we
obtain any required or necessary permits prior to the commencement of mining.
Permits or licenses are obtained as needed in the normal course of business
based on our mine plans and state, provincial and local regulatory provisions
regarding mine permitting and licensing. Based on our historical permitting
experience, we expect to be able to continue to obtain necessary mining permits
to support historical rates of production. Our mineral leases have varying terms. Some will expire after a set term
of years, while others continue indefinitely. Many of these leases provide for
a royalty payment to the lessor based on a specific amount per ton of mineral
extracted or as a percentage of revenue. We believe we will be able to continue
to extend our material mineral lease agreements, as we have in the past, at
commercially reasonable terms, without incurring substantial costs or incurring
material modifications to the existing lease terms and conditions. In addition,
we own a number of properties and are party to non-mining leases that permit us
to perform activities that are ancillary to our mining operations, such as
surface use leases, and storage, depot and warehouse leases. We also believe
that all of our leases were entered into on market terms. 13




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The following map shows the locations of our principal salt and SOP
production facilities: (MAP) ENVIRONMENTAL, HEALTH AND SAFETY MATTERS We produce and distribute crop and animal nutrients, salt and deicing
products. These activities subject us to an evolving set of international,
federal, state, provincial and local environmental, health and safety (EHS)
laws that regulate, or propose to regulate: (i) product content; (ii) use of
products by both us and our customers; (iii) conduct of mining and production
operations, including safety procedures followed by employees; (iv) management
and handling of raw materials; (v) air and water quality impacts from our
facilities; (vi) disposal, storage and management of hazardous and solid
wastes; (vii) remediation of contamination at our facilities and third-party
sites; and (viii) post-mining land reclamation. For new regulatory programs, it
is difficult for us to ascertain future compliance obligations or estimate
future costs until implementing regulations have been finalized and definitive
regulatory interpretations have been adopted. We intend to respond to these
regulatory requirements at the appropriate time by implementing necessary
modifications to our facilities and/or operating procedures. We have expended, and anticipate that we will continue to expend,
substantial financial and managerial resources to comply with EHS standards. We
estimate that our 2004 EHS capital expenditures will total approximately $2.6
million, primarily related to air quality devices and highway deicing salt
storage pads. We expect that our estimated expenditures in 2004 for reclamation
activities will be approximately $0.2 million. It is possible that greater than
anticipated EHS capital expenditures or reclamation expenditures will be
required in 2004 or in the future. We maintain accounting accruals for certain contingent environmental
liabilities and believe these accruals comply with generally accepted
accounting principles. We record accruals for environmental investigatory and
non-capital remediation costs when litigation has commenced or a claim or
assessment has been asserted or is imminent, the likelihood of an unfavorable
outcome is probable and the financial impact of such outcome is reasonably
estimable. Based on current information, it is the opinion of management that
our contingent liabilities arising from EHS matters, taking into account
established accruals, will not have a 14




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material adverse effect on our business, financial condition or results of
operations. As of December 31, 2003, we had recorded environmental accruals of
$2.3 million. Product Requirements and Impacts International, federal, state and provincial standards: (i) require
registration of many of our products before such products can be sold; (ii)
impose labeling requirements on those products; and (iii) require producers to
manufacture the products to formulations set forth on the labels.
Environmental, natural resource and public health agencies at all regulatory
levels continue to evaluate alleged health and environmental impacts that might
arise from the handling and use of products such as those we manufacture. The
U.S. Environmental Protection Agency, or the EPA, the State of California and
The Fertilizer Institute have each completed independent assessments of
potential risks posed by crop nutrient materials. These assessments concluded
that, based on the available data, crop nutrient materials generally do not
pose harm to human health. It is unclear whether any further evaluations may
result in additional standards or regulatory requirements for the producing
industries, including us, or for our customers. At this stage, it is the
opinion of management that the potential impact of these standards on the
market for our products or on the expenditures that may be necessary to meet
new requirements will not have a material adverse effect on our business,
financial condition or results of operations. In December 2001, the Canadian government released a Priority Substances
List Assessment Report for road salt. This report found that road salts are
entering the environment under conditions that may have a harmful effect or
constitute a danger to the environment. Based on this report, the Minister of
Environment has proposed designating road salt as a toxic substance pursuant
to the Canadian Environmental Protection Act. Canadas federal cabinet, which
has ultimate responsibility, has not yet taken final action with respect to
this proposal and is not subject to any deadline to do so. This proposal was
subject to a public comment, during which individuals and the municipalities
which comprise most of our customers expressed a variety of views, including
noting the utility and cost-efficiency of salt as compared to other potential
measures to reduce ice-related road hazards. At this point, Environment Canada
has indicated that, whether or not road salts are declared toxic, their
preferred course of action is the establishment of voluntary guidelines for
users as opposed to any form of regulation. Environment Canada has been
developing these guidelines based on consultation with a broad-based
stakeholders group, which includes the salt industry. On September 20, 2003,
Environment Canada released a proposed Code of Practice to serve as these
guidelines. The proposed Code of Practice remained subject to public comment
until November 19, 2003. Environment Canada has indicated that it expects to
publish the final code in 2004. Although the proposed Code of Practice remains
subject to change, the released draft requires large road-salt users to develop
salt management plans. We do not believe that this would have a material direct
effect on us, but the new salt management plans may reduce the demand from our
customers in Canada for road salt. Given the importance of road salt for traffic safety and the current lack
of any practical substitute, we deem it unlikely that any final guidance or
regulation would result in a complete ban on the use of road salt. As noted in
the December 2001 report, the use of road salt and other deicing agents is an
important component of strategies to keep roadways open and safe during the
winter and minimize traffic crashes, injuries and mortality under icy and snowy
conditions. The report further stated that mitigation measures must be based
on optimization of winter road maintenance practices so as not to jeopardize
road safety, while minimizing the potential for harm to the environment.
Environment Canada recently confirmed the high importance of road safety in its
proposed regulation of road salt. In its September 22, 2003 press release in
connection with the proposed Code of Practice, it indicated that the proposed
code will provide those who use road salts with a way to reduce harm to the
environment without jeopardizing road safety. Since the dissemination of the
December 2001 report, we have endeavored to work more closely with the national
government as well as provinces and municipalities to better manage the use,
storage and release of our road salts. As a result, we believe it has become
less likely that road salts will be designated as a toxic substance. Although
we cannot predict whether the proposal to list road salts will be finalized or
the precise form of the proposed Code of Practice or other future regulation,
if standardized guidelines are developed for the use and 15




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storage of road salt
or any alternate deicing products, we could suffer reduced sales and incur
substantial costs and expenses that could have a material adverse effect on our business,
financial condition and results of operation. In addition, while we are not
aware of any similar governmental proposals for such designation of road salt
in either the United States or the United Kingdom, we cannot guarantee that
such proposals will not arise. Operating Requirements and Impacts We hold numerous environmental, mining and other permits or approvals
authorizing operations at each of our facilities. Our operations are subject to
permits for extraction of salt and brine, discharges of process materials to
air and surface water, and injection of brine and wastewater to subsurface
wells. Some of our proposed activities may require waste storage permits. A
decision by a government agency to deny or delay issuing a new or renewed
permit or approval, or to revoke or substantially modify an existing permit or
approval, could have a material adverse effect on our ability to continue
operations at the affected facility. In addition, changes to environmental and
mining regulations or permit requirements could have a material adverse effect
on our ability to continue operations at the affected facility. Expansion of
our operations also is predicated upon securing the necessary environmental or
other permits or approvals. For example, since we recently installed a new
grinding circuit, some of our existing equipment at our Lyons, Kansas facility
is subject to the Federal Clean Air Acts New Source Performance Standard
requirement. We have completed a compliance program with the Kansas Department
of Health and Environment, and do not expect to incur any additional costs or
significant penalties, although there can be no guarantee. Pursuant to the Mine Safety and Health Act, new interim regulatory
standards for diesel particulate matter became effective in 2002 and final
standards are expected to become effective in 2006. In response to litigation
regarding its final rule on diesel particulate matter, the Mine Safety and
Health Administration has initiated a new rule regarding certain provisions of
the final standards. We are currently in compliance with the interim standards
that are in effect between 2002 and 2006. However, material expenditures may be
required to achieve compliance with the final standards at the Cote Blanche
facility in Louisiana. Remedial Activities Remediation at Our Facilities Many of our formerly-owned and current facilities have been in operation
for a number of years. Operations have historically involved the use and
handling of regulated chemical substances, salt and by-products or process
tailings by us and predecessor operators which have resulted in soil, surface
water and groundwater contamination. At some locations there are areas where
salt-processing waste and ordinary trash may have been disposed or buried, and
have since been closed and covered with soil and other materials. These past
operating practices at several of our facilities have resulted in soil, surface
water and groundwater contamination. At many of these facilities, spills or other releases of regulated
substances have occurred previously and potentially could occur in the future,
possibly requiring us to undertake or fund cleanup efforts under the U.S.
Comprehensive Environmental Response, Compensation, and Liability Act, or
CERCLA, or state and provincial or United Kingdom laws governing cleanup or
disposal of hazardous substances. In some instances, we have agreed, pursuant
to consent orders or agreements with the appropriate governmental agencies, to
undertake investigations, which currently are in progress, to determine whether
remedial action may be required to address such contamination. At other
locations, we have entered into consent orders or agreements with appropriate
governmental agencies to perform required remedial activities that will address
identified site conditions. At still other locations, we have undertaken
voluntary remediation, and have removed formerly used underground storage
tanks. Taking into account established reserves, expenditures for these known
conditions currently are not expected, individually or in the aggregate, to be
material. However, material expenditures could be required in the future to
remediate the contamination at these or at other 16




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current or former sites. In
addition, in connection with the Recapitalization, IMC Global has agreed to
indemnify us against liabilities for certain known and unknown conditions at
existing and former sites. Remediation at Third-Party Facilities Along with impacting the sites at which we have operated, various third
parties have alleged that our historic operations have resulted in
contamination to neighboring off-site areas or nearby third-party facilities.
CERCLA imposes liability, without regard to fault or to the legality of a
partys conduct, on certain categories of persons who are considered to have
contributed to the release of hazardous substances into the environment.
Under CERCLA, or its various state analogues, one party may potentially be
required to bear more than its proportional share of cleanup costs at a site
where it has liability if payments cannot be obtained from other responsible
parties. We have entered into de minimis settlement agreements with the EPA with
respect to several CERCLA sites, pursuant to which we have made one-time cash
payments and received statutory protection from future claims arising from
those sites. In some cases, however, such settlements have included
reopeners, which could result in additional liability at such sites in the
event of newly discovered contamination or other circumstances. At other sites for which we have received notice of potential CERCLA
liability, we have provided information to the EPA that we believe demonstrates
that we are not liable, and the EPA has not asserted claims against us with
respect to such sites. In some instances, we have agreed, pursuant to orders
from or agreements with appropriate governmental agencies or agreements with
private parties, to undertake or fund investigations, some of which currently
are in progress, to determine whether remedial action, under CERCLA or
otherwise, may be required to address contamination. At other locations, we
have entered into consent orders or agreements with appropriate governmental
agencies to perform required remedial activities that will address identified
site conditions. At the present time, we are not aware of any additional sites
for which we expect to receive a notice from the EPA or any other party of
potential CERCLA liability. However, based on past operations, there is a
potential that we may receive notices in the future for sites of which we are
currently unaware or that our liability at currently known sites may increase.
Taking into account established accruals, expenditures for our known
environmental liabilities and site conditions currently are not expected,
individually or in the aggregate, to be material or have a material adverse
effect on our business, financial condition or results of operations. RISK FACTORS You should carefully consider the following risks and all of the
information set forth in this annual report onForm 10-K. The risks described
below are not the only ones facing our company. Additional risks and
uncertainties not currently known to us or that we currently deem to be
immaterial may also materially and adversely affect our business, financial
condition or results of operations. Risks Related to Our Business The seasonal demand for our products and the variations in our cash flows from
quarter to quarter as a result of weather conditions may have an adverse effect
on our results of operations. Our highway deicing product line is seasonal, with operating results
varying from quarter to quarter as a result of weather conditions and other
factors. Over the last four years, our North American highway deicing product
line has generated over 61% of its annual sales, net of shipping and handling
costs, during the months of December through March when the need for highway
deicing is at its peak. We need to stockpile sufficient highway deicing salt in
the first two fiscal quarters to meet estimated demand for the winter season.
Weather conditions that impact our highway deicing product line include
temperature, levels of precipitation, 17




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number of snow days and duration and
timing of snow fall in our relevant geographic markets. Lower than expected
sales by us during this period could have a material adverse effect on our
results of operations. Our SOP operating results are dependent in part upon conditions in the
agriculture markets. The agricultural products business can be affected by a
number of factors, the most important of which for U.S. markets are weather
patterns and field conditions (particularly during periods of traditionally
high crop nutrients consumption) and quantities of crop nutrients imported to
and exported from North America. Our substantial indebtedness could adversely affect our financial condition and
impair our ability to operate our business. As of December 31, 2003, we had $420.2 million of outstanding
indebtedness, including approximately $78.3 million under our senior credit
facilities, $14.0 million under our revolving credit facility and $327.9
million of Compass Minerals Groups senior subordinated notes and stockholders
equity of $43.8 million. At December 31, 2003, CMI had $75.7 million of senior
discount notes and $107.4 million of subordinated discount notes outstanding. This level of leverage could have important consequences, including the
following:  
    
    it may limit our ability to borrow money or sell stock to fund
our working capital, capital expenditures and debt service
requirements;
    
    it may limit our flexibility in planning for, or reacting to,
changes in our business;
    
    we may be more highly leveraged than some of our competitors,
which may place us at a competitive disadvantage;
    
    it may make us more vulnerable to a downturn in our business or
the economy;
    
    it will require us to dedicate a substantial portion of our
cash flow from operations to the repayment of our indebtedness,
thereby reducing the availability of our cash flow for other
purposes; and
    
    it may materially and adversely affect our business and
financial condition if we are unable to service our indebtedness or
obtain additional financing, as needed. In addition, our and CMIs indentures and our senior credit facilities
contain financial and other restrictive covenants discussed below that may
limit our ability to engage in activities that may be in our long-term best
interests. Our failure to comply with those covenants could result in an event
of default which, if not cured or waived, could result in the acceleration of
all of our debt. See   Restrictive covenants in the agreements governing our
indebtedness and certain indebtedness of CMI may restrict our ability to pursue
our business strategies. Restrictive covenants in the agreements governing our indebtedness and certain
indebtedness of CMI may restrict our ability to pursue our business strategies. Our senior credit facilities and indebtedness and the indebtedness of CMI
limit our ability and the ability of our restricted subsidiaries, among other
things, to:  
    
    incur additional indebtedness or contingent obligations;
    
    pay dividends or make distributions to our stockholders; 18




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
    
    repurchase or redeem our stock;
    
    make investments;
    
    grant liens;
    
    make capital expenditures;
    
    enter into transactions with our stockholders and affiliates;
    
    sell assets; and
    
    acquire the assets of, or merge or consolidate with, other companies. In addition, our senior credit facilities require us to maintain financial
ratios. These financial ratios include an interest coverage ratio and a
consolidated indebtedness leverage ratio. Although we have historically been
able to maintain these financial ratios, we may not be able to maintain these
ratios in the future. Covenants in our senior credit facilities may also impair
our ability to finance future operations or capital needs or to enter into
acquisitions or joint ventures or engage in other favorable business
activities. If we default under our senior credit facilities under certain
circumstances, the lenders could require immediate payment of the entire
principal amount. These circumstances include a change of control, default
under agreements governing our and CMIs other indebtedness, material judgments
in excess of $5,000,000 or breach of representations and warranties. Any
default under our senior credit facilities or agreements governing our and
CMIs other indebtedness could lead to an acceleration of debt under our other
debt instruments that contain cross-acceleration or cross-default provisions.
If the lenders under our senior credit facilities require immediate repayment,
we will not be able to repay them and also repay our other indebtedness in
full. Our ability to comply with these covenants and restrictions contained in
our senior credit facilities and other agreements governing our other
indebtedness may be affected by changes in the economic or business conditions
or other events beyond our control. Economic and other risks associated with international sales and operations
could adversely affect our business, including economic loss and a negative
impact on earnings. Since we manufacture and sell our products primarily in the United States,
Canada and the United Kingdom, our business is subject to risks associated with
doing business internationally. Our sales outside the United States, as a
percentage of our total sales, were 34% for the year ended December 31, 2003.
Accordingly, our future results could be adversely affected by a variety of
factors, including:  
    
    changes in foreign currency exchange rates;
    
    exchange controls;
    
    tariffs, other trade protection measures and import or export licensing requirements;
    
    potentially negative consequences from changes in tax laws;
    
    differing labor regulations;
    
    requirements relating to withholding taxes on remittances and other payments by subsidiaries; 19




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
    
    restrictions on our ability to own or operate subsidiaries,
make investments or acquire new businesses in these jurisdictions;
    
    restrictions on our ability to repatriate dividends from our subsidiaries; and
    
    unexpected changes in regulatory requirements. Fluctuations in the value of the U.S. dollar may adversely affect our
results of operations. Because our consolidated financial results are reported
in U.S. dollars, if we generate sales or earnings in other currencies the
translation of those results into U.S. dollars can result in a significant
increase or decrease in the amount of those sales or earnings. In addition, our
debt service requirements are primarily in U.S. dollars even though a
significant percentage of our cash flow is generated in Canadian dollars and
pounds sterling. Significant changes in the value of Canadian dollars and
pounds sterling relative to the U.S. dollar could have a material adverse
effect on our financial condition and our ability to meet interest and
principal payments on U.S. dollar-denominated debt. In addition to currency translation risks, we incur currency transaction
risk whenever we or one of our subsidiaries enter into either a purchase or a
sales transaction using a currency other than the local currency of the
transacting entity. Given the volatility of exchange rates, we cannot assure
you that we will be able to effectively manage our currency transaction and/or
translation risks. It is possible that volatility in currency exchange rates
will have a material adverse effect on our financial condition or results of
operations. We have in the past experienced and expect to continue to
experience economic loss and a negative impact on earnings as a result of
foreign currency exchange rate fluctuations. We expect that the amount of our
revenues denominated in non-U.S. dollar currencies will continue to increase in
future periods. See Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations  Effects of Currency Fluctuations and
Inflation and Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations  Market Risk. Our overall success as a global business depends, in part, upon our
ability to succeed in differing economic and political conditions. We cannot
assure you that we will continue to succeed in developing and implementing
policies and strategies that are effective in each location where we do
business. Our operations are dependent on natural gas and significant interruption in the
supply or increase in the price of natural gas could have a material adverse
effect on our financial condition or results of operations. Energy costs, including primarily natural gas and electricity, represented
approximately 12% of the costs of our North American salt production in 2003.
Natural gas is a primary fuel source used in the evaporated salt production
process. Our profitability is impacted by the price and availability of natural
gas we purchase from third parties. In the fourth quarter of 2002, we adopted a
policy of hedging natural gas prices through the use of swap agreements. We
have not entered into any long-term contracts for the purchase of natural gas.
Our contractual arrangements for the supply of natural gas do not specify
quantities and are automatically renewed annually unless either party elects
not to do so. We do not have arrangements in place with back-up suppliers. A
significant increase in the price of natural gas that is not recovered through
an increase in the price of our products or covered through our hedging
arrangements, or an extended interruption in the supply of natural gas to our
production facilities, could have a material adverse effect on our business,
financial condition or results of operations. Competition in our markets could limit our ability to attract and retain
customers, force us to continuously make capital investments and put pressure
on the prices we can charge for our products. We encounter competition in all areas of our business. Competition in our
product lines is based on a number of considerations, including product
performance, transportation costs in salt distribution, brand 20




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reputation,
quality of client service and support, and price. Additionally, customers for
our products are attempting to reduce the number of vendors from which they
purchase in order to increase their efficiency. Our customers increasingly
demand a broad product range and we must continue to develop our expertise in
order to manufacture and market these products successfully. To remain
competitive, we will need to invest continuously in manufacturing, marketing,
customer service and support and our distribution networks. We may have to
adjust the prices of some of our products to stay competitive. We may not have
sufficient resources to continue to make such investments or maintain our competitive
position. Some of our competitors have greater financial and other resources
than we do. Environmental laws and regulation may subject us to significant liability and
require us to incur additional costs in the future. We are subject to numerous environmental, health and safety laws and
regulations in the United States, Canada and Europe, including laws and
regulations relating to land reclamation and remediation of hazardous substance
releases, and discharges to air and water. For example CERCLA, imposes
liability, without regard to fault or to the legality of a partys conduct, on
certain categories of persons (known as potentially responsible parties) who
are considered to have contributed to the release of hazardous substances
into the environment. Although we are not currently incurring material
liabilities pursuant to CERCLA, we may in the future incur material liabilities
under CERCLA and other environmental cleanup laws, with regard to our current
or former facilities, adjacent or nearby third-party facilities, or off-site
disposal locations. Under CERCLA, or its various state analogues, one party
may, under some circumstances, be required to bear more than its proportional
share of cleanup costs at a site where it has liability if payments cannot be
obtained from other responsible parties. Liability under these laws involves
inherent uncertainties. Violations of environmental, health and safety laws are
subject to civil, and in some cases, criminal sanctions. We have received notices from governmental agencies that we may be a
potentially responsible party at certain sites under CERCLA or other
environmental cleanup laws. We have entered into de minimis settlement
agreements with the United States with respect to certain CERCLA sites,
pursuant to which we have made one-time cash payments and received statutory
protection from future claims arising from those sites. At other sites for
which we have received notice of potential CERCLA liability, we have provided
information to the EPA, that we believe demonstrates that we are not liable and
the EPA has not asserted claims against us with respect to such sites. In some
instances, we have agreed, pursuant to consent orders or agreements with the
appropriate governmental agencies, to undertake investigations, which currently
are in progress, to determine whether remedial action may be required to
address such contamination. At other locations, we have entered into consent
orders or agreements with appropriate governmental agencies to perform remedial
activities that will address identified site conditions. At the present time,
we are not aware of any additional sites for which we expect to receive a
notice from the EPA of potential CERCLA liability. However, based on past
operations there is a potential that we may receive such notices in the future
for sites of which we are currently unaware. Taking into account established
reserves, expenditures for our known environmental liabilities and site
conditions currently are not expected, individually or in the aggregate, to be
material. However, material expenditures could be required in the future to
remediate the contamination at these or at other current or former sites. We have also developed alternative mine uses. For example, we entered into
a joint venture with a subsidiary of Violia Environnement that is in the waste
management industry. The joint venture has applied for a permit to allow for
the storage of certain stable types of hazardous waste in our salt mine in the
United Kingdom. We believe that the mine is stable and should provide a secure
storage location. However, we recognize that any temporary or permanent storage
of hazardous waste may involve risks to the environment. Although we believe
that we have taken these risks into account as much as possible in our planning
process, it is possible that material expenditures could be required in the
future to further reduce this risk, or to remediate any future contamination. 21




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Continued government and public emphasis on environmental issues can be
expected to result in increased future investments for environmental controls
at ongoing operations, which will be charged against income from future
operations. Present and future environmental laws and regulations applicable to
our operations may require substantial capital expenditures and may have a
material adverse effect on our business, financial condition and results of
operations. For more information, see Item 1, Business  Environmental,
Health and Safety Matters. The Canadian governments proposal to designate road salt as a toxic substance
could have a material adverse effect on our business, including reduced sales
and the incurrence of substantial costs and expenditures. In December 2001, the Canadian government released a Priority Substances
List Assessment Report for road salt. This report found that road salts are
entering the environment under conditions that may have a harmful effect or
constitute a danger to the environment. Based on this report, the Minister of
Environment has proposed designating road salt as a toxic substance pursuant
to the Canadian Environmental Protection Act. Canadas federal cabinet, which
has ultimate responsibility, has not yet taken final action with respect to
this proposal and is not subject to any deadline to do so. At this point,
Environment Canada has indicated that, whether or not road salts are declared
toxic, their preferred course of action is the establishment of voluntary
guidelines for users as opposed to any form of regulation. Environment Canada
has been developing these guidelines based on consultation with a broad-based
stakeholders group, which includes the salt industry. On September 20, 2003,
Environment Canada released a proposed Code of Practice to serve as these
guidelines. The proposed Code of Practice remained subject to public comment
until November 19, 2003. Environment Canada has indicated that it expects to
publish the final code in 2004. Although the proposed Code of Practice remains
subject to change, the released draft requires large road-salt users to develop
salt management plans. We do not believe that this would have a material direct
effect on us, but the new salt management plans may lead our customers in
Canada to require less road salt. Given the importance of road salt for traffic safety and the current lack
of any practical substitute, we deem it unlikely that any final guideline or
regulation would result in a complete ban on the use of road salt. We do,
however, recognize the importance of environmental protection in Canadas
decision-making process. Although we cannot predict whether the proposal to
designate road salt as a toxic substance will be finalized or the precise form
of the proposed Code of Practice or other future regulation, if standardized
guidelines are developed for the use and storage of road salt or any alternate
deicing products, we could suffer reduced sales and incur substantial costs and
expenses that could have a material adverse effect on our business, financial
condition and results of operation. Our road-salt sales, net of shipping and
handling, in Canada generated approximately 13% of our total sales in 2003. In
addition, while we are not aware of any similar governmental proposals for the
designation of road salt as a toxic substance in either the United States or
the United Kingdom, we cannot guarantee that these proposals will not arise. Our operations are dependent on our having received the required permits and
approvals from governmental authorities. We hold numerous governmental environmental, mining and other permits and
approvals authorizing operations at each of our facilities. A decision by a
governmental agency to deny or delay issuing a new or renewed permit or
approval, or to revoke or substantially modify an existing permit or approval,
could have a material adverse effect on our ability to continue operations at
the affected facility. Expansion of our existing operations also is predicated
upon securing the necessary environmental or other permits or approvals. We
currently do not have any material pending permits or approvals. 22




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Protection of proprietary technology  Our intellectual property may be
misappropriated or subject to claims of infringement. We attempt to protect our intellectual property rights through a
combination of patent, trademark, copyright and trade secret protection, as
well as licensing agreements and third-party nondisclosure and assignment
agreements. We cannot assure you that any of our applications for protection of
our intellectual property rights will be approved or that others will not
infringe or challenge our intellectual property rights. The patents we
currently have in place expire between 2009 and 2018. We also rely on
unpatented proprietary technology. It is possible that others will
independently develop the same or similar technology or otherwise obtain access
to our unpatented technology. To protect our trade secrets and other
proprietary information, we require employees, consultants, advisors and
collaborators to enter into confidentiality agreements. Many of our important
brand names are registered as trademarks in the United States and foreign
countries. These registrations can be renewed if the trademark remains in use.
These agreements may not provide meaningful protection for our trade secrets,
know-how or other proprietary information in the event of any unauthorized use,
misappropriation or disclosure. If we are unable to maintain the proprietary
nature of our technologies, we may lose the competitive advantage provided by
our intellectual property. As a result, our results of operations may be
adversely affected. If we are unsuccessful in negotiating new collective bargaining agreements, we
may experience significant increases in the cost of labor or a disruption in
our operations. As of December 31, 2003, we had 1,497 employees. Approximately 38% of our
U.S. workforce (54% of our global workforce) is represented by labor unions. Of
our nine material collective bargaining agreements, four will expire in 2004,
one will expire in 2005 and four will expire in 2006. Additionally,
approximately 13% of our workforce is employed in Europe where trade union
membership is common. Although we believe that our relations with our employees
are good, as a result of general economic, financial, competitive, legislative,
political and other factors beyond our control, we cannot assure you that we
will be successful in negotiating new collective bargaining agreements, that
such negotiations will not result in significant increases in the cost of labor
or that a breakdown in such negotiations will not result in the disruption of
our operations. We rely on independent distributors and the loss of a substantial number of
these distributors may reduce our profits and sales. In addition to our own direct sales force, we depend on the services of
independent distributors to sell our products and provide service and
aftermarket support to our customers. In 2003, 12% of our sales, net of
shipping and handling costs, were generated through these independent
distributors. Many of these independent distributors are not bound to us by
exclusive distribution contracts and may offer products of, and services to,
businesses that compete with ours. In addition, the majority of the
distribution contracts we have with these independent distributors are
cancelable by the distributor after providing us with notice, which on average
is six months prior to termination. The loss of a substantial number of these
distributors or the decision by many of these distributors to offer
competitors products to our customers could materially reduce our sales and
profits. If we cannot successfully complete acquisitions or integrate acquired
businesses, our growth may be limited and our financial condition adversely
affected. Our business strategy includes supplementing internal growth by pursuing
acquisitions of small complementary businesses. We may be unable to complete
acquisitions on acceptable terms, identify suitable businesses to acquire or
successfully integrate acquired businesses in the future. We compete with other
potential buyers for the acquisition of other small complementary businesses.
This competition and regulatory considerations may result in fewer acquisition
opportunities. If we cannot complete acquisitions, our growth may be limited
and our financial condition may be adversely affected. 23




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Our business is dependent upon highly skilled personnel, and the loss of key
personnel may have a material adverse effect on our development and results of
operations. The success of our business is dependent on our ability to attract and
retain highly skilled managers and other personnel. We cannot assure you that
we will be able to attract and retain the personnel necessary for the
development of our business. The loss of the services of key personnel or the
failure to attract additional personnel as required could have a material
adverse effect on our development and results of operations. We do not
currently maintain key person life insurance on any of our key employees. Our principal stockholders interest may conflict with or differ from the
interests of other holders of our securities. Apollo and its affiliates own 35% of the fully diluted equity of CMI.
Consequently, Apollo has the ability to influence the election of our
directors, the appointment of new management and the potential outcome of all
matters submitted to a vote of our stockholders, including entering into
mergers, the sale of substantially all of our assets and other extraordinary
transactions. The interests of Apollo and its affiliates could conflict with
or differ from the interests of our securities holders. 
 Item 2. PROPERTIES Information regarding our plant and properties is included in Item 1,
Business, of this report. 
 Item 3. LEGAL PROCEEDINGS We are party from time to time to various routine legal proceedings.
Except as otherwise described in Item 1, Business  Environmental, Health and
Safety Matters, these primarily involve commercial claims, products liability
claims, personal injury claims and workers compensation claims. We cannot
predict the outcome of these lawsuits, legal proceedings and claims with
certainty. Nevertheless, we believe that the outcome of these proceedings, even
if determined adversely, would not have a material adverse effect on our
business, financial condition and results of operations. In addition, in
connection with the Recapitalization, IMC Global has agreed to indemnify us
against certain legal matters. 
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable 
 Part II 
 Item 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Not Applicable 
 Item 6. SELECTED FINANCIAL DATA The following table presents selected combined and consolidated financial
information. The statement of operations data for the years ended December 31,
2003, 2002 and 2001 and the balance sheet data as of December 31, 2003 and 2002
are derived from our audited combined and consolidated financial 24




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statements
included elsewhere in this report. The statement of operations data for the
years ended December 31, 2000 and 1999 and the balance sheet data as of December 31, 2001, 2000
and 1999 are derived from our audited combined financial statements that are
not included herein. The information included in this table should be read in conjunction with
Item 7, Managements Discussion and Analysis of Financial Condition and
Results of Operations and the audited combined and consolidated financial
statements and accompanying notes thereto included elsewhere in this annual
report. For the year ended December 31,2003
    
    2002
    
    2001
    
    2000
    
    1999(dollars in millions, except share data)Statement of Operations Data:Sales
    
    $
    600.6
    
    
    $
    502.6
    
    
    $
    523.2
    
    
    $
    509.2
    
    
    $
    494.4Cost of sales  shipping and handling
    
    
    165.3
    
    
    
    137.5
    
    
    
    143.2
    
    
    
    140.0
    
    
    
    126.9Cost of sales  products (1)
    
    
    246.2
    
    
    
    202.1
    
    
    
    224.4
    
    
    
    227.7
    
    
    
    213.1Depreciation and amortization (2)
    
    
    42.1
    
    
    
    37.1
    
    
    
    32.6
    
    
    
    44.3
    
    
    
    55.1Selling, general and administrative expenses
    
    
    48.6
    
    
    
    40.5
    
    
    
    38.9
    
    
    
    35.5
    
    
    
    37.2Goodwill write-down (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    191.0
    
    
    
    87.5Restructuring and other charges (3)(4)
    
    
    
    
    
    
    7.7
    
    
    
    27.0
    
    
    
    425.9
    
    
    
    13.7Operating earnings (loss)
    
    
    98.4
    
    
    
    77.7
    
    
    
    57.1
    
    
    
    (555.2
    )
    
    
    (39.1
    )Interest expense (5)
    
    
    39.1
    
    
    
    41.3
    
    
    
    14.3
    
    
    
    16.4
    
    
    
    19.0Net income (loss)
    
    
    45.7
    
    
    
    19.7
    
    
    
    19.1
    
    
    
    (467.7
    )
    
    
    (67.5
    )Balance Sheet Data (at period end):Total cash and cash equivalents
    
    $
    2.6
    
    
    $
    11.9
    
    
    $
    15.9
    
    
    $
    0.3
    
    
    $
    4.3Total assets
    
    
    690.0
    
    
    
    644.0
    
    
    
    655.6
    
    
    
    636.0
    
    
    
    1,290.5Total debt
    
    
    420.2
    
    
    
    437.6
    
    
    
    515.1
    
    
    
    152.3
    
    
    
    196.0Other Financial Data:Cash flows provided by operating activities
    
    $
    70.8
    
    
    $
    80.0
    
    
    $
    112.5
    
    
    $
    72.1
    
    
    $
    78.4Cash flows used for investing activities
    
    
    (45.6
    )
    
    
    (19.1
    )
    
    
    (43.6
    )
    
    
    (34.0
    )
    
    
    (48.1
    )Cash flows used for financing activities
    
    
    (38.0
    )
    
    
    (67.4
    )
    
    
    (53.8
    )
    
    
    (43.3
    )
    
    
    (33.6
    )Ratio of earnings to fixed charges (6)
    
    
    2.28
    x
    
    
    1.72
    x
    
    
    3.69
    x
    
    
    
    
    
    
    Capital expenditures
    
    $
    20.6
    
    
    $
    19.5
    
    
    $
    43.0
    
    
    $
    33.7
    
    
    $
    45.6
   (1)
    
    Cost of sales - products is presented net of depreciation and amortization.(2)
    
    Depreciation and amortization for purposes of this table excludes amortization of deferred financing costs.(3)
    
    Based on anticipated proceeds from the sale of the Company by IMC Global, we recorded an asset impairment charge of $616.6 million, $482.1
million after tax, in the fourth quarter of 2000. In connection with this non-cash charge, goodwill was reduced $191.0 million and intangible
assets  mineral interests was reduced $425.6 million. The goodwill write-down in 1999 was the result of lowering goodwill to its recoverable
value based on estimated future discounted cash flows of the business.(4)
    
    Restructuring and other charges include primarily those charges related to the impairment of idled assets in December of 1998, the
restructuring of our business in the fourth quarter of 1999 designed to reduce employee headcount and an asset impairment in the fourth quarter
of 2000 related to the planned disposition of the Company by IMC Global as described in (3) above. During 2001, we incurred $27.0 million of
transaction and transition costs in connection with the Recapitalization. During 2002, we incurred $7.7 million of transition costs required
to establish us as a self-sustaining entity.(5)
    
    As we have incurred substantial indebtedness in connection with the Recapitalization, we believe it is helpful to provide a measure describing
the cash requirements necessary to satisfy our debt service in terms of cash interest expense, which is interest expense excluding the
amortization of debt issuance costs, plus amortization of the original issuance premium. For a discussion of our indebtedness, see Note 8 to
our audited combined and consolidated financial statements. Cash interest expense was $37.6 million and $39.5 million for the years ended
December 31, 2003 and 2002, respectively. Cash interest expense is not calculated under generally accepted accounting principles, or GAAP.
While cash interest expense and similar variations thereof are commonly used as measures of the ability to meet debt service requirements, they
are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of
calculation. The following table reconciles the differences between cash interest expense and interest expense, calculated in accordance with
GAAP. 25




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For the year ended December 31,2003
    
    2002(dollars in millions)Interest expense
    
    $
    39.1
    
    
    $
    41.3Less (plus) amortization:Deferred financing costs
    
    
    1.8
    
    
    
    1.9Amortization of premium on senior subordinated notes
    
    
    (0.3
    )
    
    
    (0.1
    )Cash interest expense
    
    $
    37.6
    
    
    $
    39.5
  (6)
    
    For the purposes of computing the ratio of earnings to fixed charges, earnings consist of
earnings before income taxes and fixed charges. Fixed charges consist of net interest expense
including the amortization of deferred debt issuance costs and the interest component of our
operating rents. The ratio of earnings to fixed charges prior to November 28, 2001 is not
meaningful because we participated in a credit facility with IMC Global and its affiliates and
the level of third-party debt was not comparable to the level of third-party debt in place upon
consummation of the Recapitalization, the offering by Compass Minerals Group of an additional
$75.0 million in aggregate principal amount of senior subordinated notes, or the April 2002
senior subordinated notes. Earnings were insufficient to cover fixed charges by approximately
(6) $572.5 million and $55.6 million, respectively, for the years ended December 31, 2000 and 1999. 
 Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The statements in this discussion regarding the industry outlook, our
expectations regarding the future performance of our business, and the other
non-historical statements in this discussion are forward-looking statements.
These forward-looking statements are subject to numerous risks and
uncertainties, including, but not limited to, the risks and uncertainties
described in Item 1, Business  Risk Factors. You should read the following
discussion together with Item 1, Business  Risk Factors and the combined and
consolidated financial statements and notes thereto included elsewhere in this
annual report on Form 10-K. Company Overview We are the largest producer of rock, or highway deicing, salt in North
America and the United Kingdom, and operate the largest highway deicing salt
mines in these regions. We are also the third largest producer of general trade
salt in North America and the second largest in the United Kingdom, serving
major retailers, agricultural cooperatives and food producers. In addition, we
are the largest producer of sulfate of potash, or SOP, in North America,
which is used in the production of specialty fertilizers. Salt is one of the
most widely used minerals in the world and has a wide variety of end-use
applications, including highway deicing, food-grade applications, water
conditioning and various industrial uses. We focus on building intrinsic value by improving our earnings before
interest, income taxes, depreciation and amortization, or EBITDA, based on a
normal winter weather season and by improving our cost structure. Our
management teams stewardship is to generate consistent cash flow despite
weather variations and to maximize value from our cash flow generated from
operations. We can employ our operating cash flow to pay dividends, re-invest
in our business, pay down debt and make small tuck-in acquisitions.
Additionally, through our operational excellence program, we strive to maintain
or improve our flexible, low-cost structure. We design programs to measure and
continuously improve our operating performance. 26




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Our business also includes the following key characteristics:  We believe that our cash flows are not materially impacted by economic
cycles due to the stable end-use markets of salt and the absence of
cost-effective alternatives. Short-term cash flows are affected by the
seasonality of our business and are dependent on weather conditions. See Item
1, Business  Risk Factors  The seasonal demand for our products and the
variations in our cash flows from quarter to quarter as a result of weather
conditions may have an adverse effect on our results of operations.  We operate eleven facilities in North America and the United Kingdom,
including the largest rock salt mine in the world in Goderich, Ontario and the
largest salt mine in the United Kingdom in Winsford, Cheshire.  We believe that we are among the lowest cost rock salt producers in our
markets. Our cost advantage is due to the size and quality of our reserves,
effective mining techniques and efficient production processes. In addition,
our salt mines in North America are located near either rail or water transport
systems, thereby minimizing shipping and handling costs, which constitute a
significant portion of the overall delivered cost of salt. Note 13 to our
audited combined and consolidated financial statements provides additional
information regarding geographical data. We recognize revenue at the time of shipment to the customer, which
coincides with the transfer of title and risk of ownership to the customer.
Sales represent billings to customers net of sales taxes charged for the sale
of the product. Sales include shipping and handling costs which are expensed
when the related product is sold. For the year ended December 31, 2003, we sold approximately 12.8 million
tons of salt and other minerals, generating sales of $600.6 million and net
income of $45.7 million. In our North American highway deicing business, we
have been awarded contracts for over 10% more volume for the 2003  2004
winter season as compared to the prior winter season, with an increase in
contract prices of almost 1% as compared to last year. Contract bid volumes are
non-binding indications of our customers expected volume requirements for the
upcoming winter season. Stand-Alone Company The combined and consolidated financial information related to periods
ending 2001 and prior included in this annual report on Form

10-K have been
derived from the consolidated financial statements of IMC Global. The
preparation of this information was based on assumptions and estimates,
including allocations of costs from IMC Global, that we believe are reasonable.
This financial information may not, however, necessarily reflect the results of
operations, financial positions and cash flows that would have occurred if we
had been a separate, stand-alone entity during the periods presented or our
future results of operations, financial position and cash flows. We believe that there are opportunities to improve performance on both the
revenue and cost sides of our business. For example, we believe that our new
management focus on operating efficiencies and monitoring capital expenditures
following the consummation of the Recapitalization has led to reductions in our
operating costs and maintenance capital expenditures. Additionally, we intend
to continue to focus on growing our SOP business and regaining our lost market
share. In connection with the Recapitalization, we have incurred substantial
indebtedness, interest expense and repayment obligations. The interest expense
relating to this debt has adversely affected our net income. Upon consummation
of the Recapitalization, we incurred a number of one-time fees and expenses of
approximately $35.0 million. Note 3 and Note 11 to our audited combined and
consolidated financial statements provides additional information. 27




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Managements Discussion on Critical Accounting Policies We have identified the critical accounting policies that are most
important to the portrayal of our financial condition and results of
operations. The policies set forth below require managements most subjective
or complex judgments, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain. Inventory Allowances We record allowances for unusable or slow moving finished goods and raw
materials and supplies inventory. We adjust the value of certain inventory to
the estimated market value to the extent that managements assumptions of
future demand, market or functional conditions indicate the cost basis is
either in excess of market or the inventory will not be utilized or sold in
future operations. If actual demand or conditions are less favorable than those
projected by management, additional inventory write-downs may be required. Mineral Interests As of December 31, 2003, we maintained $148.0 million of net mineral
interests as a part of mineral interests and other intangible assets and $7.9
million of net mineral properties as a part of property, plant and equipment. Mineral interests include probable mineral reserves. We lease mineral
reserves at several of our extraction facilities. These leases have varying
terms and many provide for a royalty payment to the lessor based on a specific
amount per ton of mineral extracted or as a percentage of revenue. Pursuant to
Statement of Financial Accounting Standards, or SFAS, No. 141, Business
Combinations and SFAS No. 142, Goodwill and Other Intangible Assets, mineral
interests associated with other-than-owned properties are classified as
intangible assets. Mineral interests recorded as a part of mineral interests and other
intangible assets are amortized on a units-of-production method based on
internal and third-party estimates of recoverable reserves. Mineral interests
recorded as a part of property, plant and equipment are amortized on a
straight-line basis. Our rights to extract minerals are contractually limited by time. If we
are not able to continue to extend lease agreements, as we have in the past, at
commercially reasonable terms, without incurring substantial costs or incurring
material modifications to the existing lease terms and conditions, the assigned
lives may be less than that projected by management, or if the actual size,
quality or recoverability of the minerals is less than that projected by
management, then the rate of amortization could be increased or the value of
the reserves could be reduced by a material amount. Income Taxes In determining income for financial statement purposes, we must make
certain estimates and judgments. These estimates and judgments occur in the
calculation of certain tax liabilities and in the determination of the
recoverability of certain of the deferred tax assets, which arise from
temporary differences between the tax and financial statement recognition of
revenue and expense. We are required to assess the likelihood that we will
ultimately be able to recover our deferred tax assets. If recovery is not
likely, we must increase our provision for taxes by recording a reserve, in the
form of a valuation allowance, for the deferred tax assets that we estimate
will not ultimately be recoverable. In evaluating our ability to recover our deferred tax assets we consider
all available positive and negative evidence including our past operating
results, the existence of cumulative losses in recent reporting years and, to
some extent, our forecast of future taxable income. In determining future
taxable income, we 28




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are responsible for the assumptions utilized including the
amount of state, federal and international pre-tax
operating income, the reversal of temporary differences and the implementation
of feasible and prudent tax planning strategies. These assumptions require
significant judgment about the forecasts of future taxable income and are
consistent with the plans and estimates we are using to manage the underlying
businesses. As a result of this analysis, after considering all available evidence,
both positive and negative, we concluded that a valuation allowance for certain
of our deferred tax assets was required. As of December 31, 2003 we had $34.5
million of deferred tax assets resulting from our prior year U.S. net operating
loss (NOL) carryforwards and alternative minimum tax credits. Since we do not consider recovery of the aforementioned deferred tax
assets to be more likely than not under our current operating structure, a
valuation allowance has been recorded. At December 31, 2003, the valuation
allowance was $34.5 million for which the ultimate recovery of the deferred tax
asset is primarily dependent upon the availability of an adequate level of
domestic taxable income. The actual amount of the deferred tax assets realized
could ultimately be materially different from those recorded, as impacted by
changes in income tax laws and actual operating results that differ from
historical and forecasted amounts. We intend to maintain this valuation allowance until sufficient positive
evidence exists to support reversal of the valuation allowance. Our income tax
expense recorded in the future will be reduced to the extent of offsetting
decreases in our valuation allowance. An increase in the valuation allowance
would result in additional income tax expense in such period and could have a
significant impact on our future earnings. In addition, the calculation of our tax liabilities involves dealing with
uncertainties in the application of complex tax regulations in multiple
jurisdictions. We recognize potential liabilities for anticipated tax issues
in the U.S. and other tax jurisdictions based on our estimate of whether, and
the extent to which, additional taxes will be due. If payment of these amounts
ultimately proves to be unnecessary, the reversal of the liabilities would
result in tax benefits being recognized in the period when we determine the
liabilities are no longer necessary. If our estimate of tax liabilities proves
to be less than the ultimate assessment, a further charge to expense would
result. Pension Plans We make actuarial assumptions in conjunction with our actuaries as our
advisors that we believe are reasonable. These assumptions include discount
rates, expected long-term rates of return on plan assets and rate of
compensation increases, and are used in the calculation of the actuarial
valuation of our defined benefit pension plans. If actual conditions or results
vary from those projected by management, adjustments may be required in future
periods to meet minimum pension funding, thereby increasing pension expense and
our pension liability. Note 9 to our audited combined and consolidated
financial statements provides additional information regarding pension
assumptions used by us. We have two defined benefit pension plans for some of our employees in the
United States and the United Kingdom. The size of the U.S. plan is not
significant as compared to the U.K. plan, taken as a whole. The U.K. plan was
closed to new participants in 1992. Our funding policy is to make the minimum
annual contributions required by applicable regulations. Cash contributions to
the plans totaled $1.5 and $1.1 million during the years ended December 31,
2003 and 2002, respectively. Other Significant Accounting Policies Other significant accounting policies not involving the same level of
measurement uncertainties as those discussed above are nevertheless important
to an understanding of our financial statements. Policies related to revenue
recognition, environmental accruals, financial instruments and consolidation
require difficult judgments on complex matters that are often subject to
multiple sources of authoritative guidance. 29




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Certain of these matters are among
topics currently under re-examination by accounting standards setters and
regulators. Although no specific conclusions reached to date by these
standard setters appear likely to cause a material change in our accounting
policies, future outcomes cannot be predicted with confidence. Results of Operations The following table sets forth combined and consolidated historical
financial information for the years ended December 31, 2003, 2002 and 2001.
The table and discussion should be read in conjunction with the information
contained in our combined and consolidated financial statements and the notes
thereto included in this annual report on Form 10-K. However, our results of
operations set forth below and elsewhere in this annual report may not
necessarily reflect what would have occurred if we had been a separate,
stand-alone entity during the periods presented or what will occur in the
future. For the year ended December 31,2003
    
    2002
    
    2001(dollars in millions)Sales
    
    $
    600.6
    
    
    $
    502.6
    
    
    $
    523.2Cost of sales  shipping and handling
    
    
    165.3
    
    
    
    137.5
    
    
    
    143.2Cost of sales  products
    
    
    288.3
    
    
    
    239.2
    
    
    
    257.0Gross profit
    
    
    147.0
    
    
    
    125.9
    
    
    
    123.0Selling, general and administrative expenses.
    
    
    48.6
    
    
    
    40.5
    
    
    
    38.9Restructuring and other charges
    
    
    
    
    
    
    7.7
    
    
    
    27.0Operating earnings
    
    
    98.4
    
    
    
    77.7
    
    
    
    57.1Interest expense
    
    
    39.1
    
    
    
    41.3
    
    
    
    14.3Other (income) expense
    
    
    5.6
    
    
    
    4.9
    
    
    
    (3.1
    )Income before taxes
    
    
    53.7
    
    
    
    31.5
    
    
    
    45.9Income tax expense
    
    
    8.0
    
    
    
    11.8
    
    
    
    26.8Net income
    
    $
    45.7
    
    
    $
    19.7
    
    
    $
    19.1Sales by Segment:Salt
    
    $
    546.6
    
    
    $
    452.5
    
    
    $
    485.0Specialty potash fertilizers
    
    
    54.0
    
    
    
    50.1
    
    
    
    38.2Total
    
    $
    600.6
    
    
    $
    502.6
    
    
    $
    523.2Sales Volumes (in thousands of tons):Highway Deicing
    
    
    9,663
    
    
    
    7,965
    
    
    
    9,402General Trade
    
    
    2,927
    
    
    
    2,786
    
    
    
    2,822Specialty potash fertilizers
    
    
    251
    
    
    
    242
    
    
    
    188Average Sales Price (per ton):Highway Deicing
    
    $
    29.25
    
    
    $
    27.96
    
    
    $
    26.87General Trade
    
    
    89.50
    
    
    
    82.48
    
    
    
    82.35Specialty potash fertilizers
    
    
    215.21
    
    
    
    207.02
    
    
    
    203.19
 30




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Year Ended December 31, 2003 Compared to the Year Ended December 31, 2002 Sales Sales for the year ended December 31, 2003 of $600.6 million increased
$98.0 million, or 19% compared to $502.6 million for the year ended December
31, 2002. Sales include revenues from the sale of our products, or Product
Sales, as well as pass-through shipping and handling fees charged to customers
to reimburse us for shipping and handling costs incurred in delivering salt and
SOP product to the customer. Such shipping and handling fees were $165.3
million during the year ended December 31, 2003, an increase of $27.8 million
compared to shipping and handling fees of $137.5 million for the year ended
December 31, 2002. The increase in shipping and handling-related fees for the
year ended December 31, 2003 was primarily due to more tons of deicing salt and
general trade salt sold in North America as compared to the same period in
2002. Product Sales for the year ended December 31, 2003 of $435.3 million
increased $70.2 million, or 19% compared to $365.1 million for the same period
in 2002. Salt Product Sales for the year ended December 31, 2003 of $390.0
million increased $67.7 million, or 21% compared to $322.3 million for the same
period in 2002. This increase was primarily due to a 1,561,000 ton increase in
sales volumes in our North American deicing product line combined with a
141,000 ton increase in sales volumes in our general trade product line. These
increases in sales volumes impacted sales by approximately $30.3 million and
$15.1 million, respectively. Also contributing to the increase in Product Sales
was improved pricing in both our North American deicing product line and
general trade product line of approximately $14.5 million, of which changes in
foreign exchange rates totaled $9.2 million. SOP Product Sales for the year
ended December 31, 2003 of $45.3 million increased $2.5 million, or 6% compared
to $42.8 million for the same period in 2002 due to both improved sales volumes
and pricing. Gross Profit Gross profit for the year ended December 31, 2003 of $147.0 million
increased $21.1 million, or 17% compared to $125.9 million for the same period
in 2002. The increase in gross profit primarily reflects the impact of improved
highway and consumer deicing sales volumes and improved pricing as described in
the preceding paragraph. Selling, General and Administrative Expenses Selling, general and administrative expenses of $48.6 million for the year
ended December 31, 2003 increased $8.1 million, or 20% compared to $40.5
million for the same period in 2002. This increase primarily reflects
additional compensation and variable benefit costs and higher spending on
discretionary promotional and marketing costs. Additionally, changing foreign
exchange rates increased selling, general and administrative expenses by $2.0
million. Restructuring and Other Charges During 2002, restructuring and other charges represented transition costs
that are non-recurring in nature and relate to charges required to establish us
as a self-sustaining entity. We incurred $7.7 million of transition costs in
the year ended December 31, 2002, consisting primarily of one-time compensation
costs, costs to develop stand-alone tax and inventory strategies and costs
associated with determining the post-closing purchase price adjustment. No such
costs were incurred in 2003. 31




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Interest Expense Interest expense for the year ended December 31, 2003 of $39.1 million
decrease $2.2 million compared to $41.3 million for the same period in 2002.
This decrease is primarily the result of lower outstanding debt balances during
2003. Other (Income) Expense Other expense for the year ended December 31, 2003 of $5.6 million
increased $0.7 million compared to $4.9 million for the same period in 2002. In
April 2002, we recorded a $5.3 million charge related to the write-off of the
deferred financing costs associated with the refinancing of our term loan
credit facility. In the second quarter of 2003, we recorded $1.4 million of
costs related to amending our senior credit facilities. We also recorded
non-cash foreign exchange losses and (gains) of $3.9 million and $(0.6) million
in the year ended December 31, 2003 and 2002, respectively. Income Tax Expense Income tax expense for the year ended December 31, 2003 of $8.0 million
decreased $3.8 million compared to $11.8 million for the same period in 2002.
This decrease was primarily due to a reduction in the effective state income
tax rate and a larger portion of pre-tax income being generated in the United
States during the year ended December 31, 2003 than in the same period in 2002.
This allowed for an increase in the amount of previously reserved NOLs to be
utilized to offset U.S. taxable income. Our income tax provision 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 taxes and changes in the expected
utilization of previously reserved NOLs. Year Ended December 31, 2002 Compared to the Year Ended December 31, 2001 Sales Sales for 2002 of $502.6 million decreased $20.6 million, or 3.9% compared
to $523.2 million in
2001. Sales include Product Sales as well as pass-through shipping and handling
fees charged to
customers to reimburse us for shipping and handling costs incurred in
delivering salt and SOP product
to the customer. Such shipping and handling fees were $137.5 million during
2002, a decrease of $5.7
million compared to 2001 shipping and handling fees of $143.2 million. The
decline in shipping and
handling related fees during 2002 was due to fewer tons of products sold
compared to 2001.
Product Sales for 2002 of $365.1 million decreased $14.9 million, or 3.9%
compared to $380.0
million for 2001. Salt Product Sales for 2002 of $322.3 million decreased $19.5
million, or 5.7% compared
to $341.8 million for 2001. This decrease was primarily the result of a
1,437,000 ton decline in sales
volumes in our combined North American and U.K. highway deicing product lines
due to the mild winter
weather in the March 2002 quarter. The decline in volumes negatively impacted
sales by approximately $27 million. Additionally, the general trade product
lines had a 36,000 ton reduction in sales volumes
which was also primarily the result of the mild March 2002 quarter winter
weather. This reduction in
volumes unfavorably impacted sales by approximately $7 million. Overall, the
reduction in sales volumes
were offset in part by an improvement in the pricing for our North American
salt product lines of $15
million. SOP Product Sales for 2002 of $42.8 million increased $4.6 million
compared to $38.2 million for
2001 primarily due to a 54,000 ton increase in sales volumes partially offset
by lower average prices. 32




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Gross Profit Gross profit for 2002 of $125.9 million increased $2.9 million, or 2.4%
compared to $123.0 million
for 2001. The increase in gross profit primarily reflects the $15 million
resulting from the improvement
in the pricing of our North American salt product lines offset by an
approximate $17 million decline due
to lower highway deicing sales volumes. Gross margins also increased by
approximately $2 million due
to the increase in SOP sales volumes partially offset by lower average prices.
Lower operating costs
also improved our gross margin by $4 million. Selling, General and Administrative Expenses Selling, general and administrative expenses of $40.5 million for 2002
increased $1.6 million, or 4.1% compared to $38.9 million for 2001. The
increase primarily reflects additional costs related to our transition to a
stand-alone entity for services previously provided by IMC prior to the
Recapitalization. Restructuring and Other Charges Transition costs are non-recurring in nature and relate to charges
required to establish us as an
independent entity. During 2002, we incurred $7.7 million of transition costs
that were directly related to
our transition from an entity controlled by IMC Global and consisted primarily
of one-time compensation
costs, costs to develop stand-alone tax and inventory strategies and costs
associated with determining
the post-closing purchase price adjustment. During 2001, we incurred $27.0
million in expenses in connection with the Recapitalization which consisted of
transaction and transition costs. The transaction costs were directly related
to the acquisition and consisted primarily of outside professional services. Interest Expense Interest expense for 2002 of $41.3 million increased $27.0 million
compared to $14.3 million for 2001. This increase is the result of our new
capital structure following the Recapitalization on November 28, 2001. Other (Income) Expense Other expense for 2002 of $4.9 million increased $8.0 million compared to
other income of $3.1 million for 2001. Other income in 2001 was primarily
interest income earned from IMC. We earned no interest income from IMC in
2002. Additionally, we recorded a $5.3 million loss related to refinancing our
term loan in 2002. Income Tax Expense Income tax expense for 2002 of $11.8 million decreased $15.0 million
compared to $26.8 million of income tax expense for 2001 due to a decline in
pre-tax income partially resulting from higher interest expense following the
Recapitalization. Our income tax provision 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,
changes in the expected utilization of previously reserved NOLs, non-deductible
transaction costs and foreign mining taxes. 33




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Liquidity and Capital Resources Historical Cash Flow We have used cash generated from operations to meet our working capital
needs and to fund capital expenditures and voluntary repayment of debt. We have
historically generated stable cash flows. Our primary sources of liquidity
will continue to be cash from operations and borrowings under our revolving
credit facility. Due to the seasonality of our business, we expect that ongoing
requirements for debt service and capital expenditures will be funded from
these sources. When we cannot meet our liquidity or capital needs with cash
from operations, we meet those needs with borrowings under our revolving credit
facility. For the year ended December 31, 2003 Net cash flow generated by operating activities for the year ended
December 31, 2003 was $71.0 million. Cash generated from operating activities
includes $15.0 million used for an increase in working capital. The primary
increase in working capital was an increase in receivables of $18.5 million,
offset in part by decreases in inventories of $4.3 million and decreases in
accounts payable and accrued expenses of $0.8 million. These changes are
indicative of the seasonal nature of highway deicing product line sales with
differences primarily related to changes in late December quarter sales versus
the prior year. Net cash flow used by investing activities for the year ended December 31,
2003 was $45.6 million. We had capital expenditures during 2003 of $18.6
million to maintain our business and $2.0 million for cost-reduction and
new-opportunity projects. We also spent $24.8 million related to our purchase
of certain intangible assets related to IMC Globals former SOP business. Net cash flow used by financing activities was $38.2 million and was
primarily due to $21.7 million of dividends paid to CMI, $8.2 million paid to
third parties on behalf of CMI primarily for financing activities at CMI and a
$30.0 million voluntary principal repayment that reduced the amount of
long-term debt outstanding under our term loan credit facility. These outflows
were partially offset by $14.0 million of borrowings under our revolving credit
facility and the receipt of $8.8 million from IMC Global to pay income taxes
for periods prior to the Recapitalization which were indemnified by IMC Global. For the year ended December 31, 2002 Net cash flow generated by operating activities was $82.2 million for the
year ended December 31, 2002. Of this amount, $12.4 million was generated by
working capital reductions. The primary working capital reductions were
increases in accounts payable and accrued expenses of $14.5 million and
decreases in inventories of $3.8 million offset in part by an increase in
receivables of $5.9 million. The improvement in working capital is partially
due to faster collections of our receivables and the timing of interest
payments. These improvements were partially offset by more severe winter
weather in December 2002 than in December 2001. Additionally, during 2002, we
amended an agreement with a supplier related to the purchase of salt from the
suppliers chemical production facility. We received a one-time cash payment
of $8.0 million related to the amendment which terminates in December 2010. In
the future we may elect to resume purchasing salt from the suppliers facility.
In that event, we would repay a ratable portion of the cash received. Net cash flow used by investing activities was $19.1 million for the year
ended December 31, 2002, primarily related to capital expenditures. Extensive
efforts have been made throughout 2002 to focus capital spending on maintaining
the business while leveraging off of our growth and cost reduction capital
spending in prior years. Capital expenditures during 2002 included $17.0
million of expenditures to maintain our facilities. During the four years prior
to 2002, on average, we have spent in excess of $20.0 million per year in
growth and cost reduction capital expenditures to upgrade our core operating
facilities, expand and rationalize 34




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production capacities and improve operating
efficiencies. Growth and cost reduction capital expenditures were $2.5 million
for 2002. Net cash flow used by financing activities was $69.6 million for the year
ended December 31, 2002, primarily due to the $39.8 million repayment of
borrowings under our revolving credit facility, $2.2 million paid to third
parties on behalf of CMI primarily for financing activities at CMI and $40.0
million of voluntary principal repayments that reduced the amount of long-term
debt outstanding under our term loan credit facility. These cash uses were
partially offset by approximately $13 million of capital contributions from
CMI, which represents proceeds received by CMI from IMC related to the
post-closing purchase price adjustment. In connection with the offering of the New Notes, we amended and restated
our senior credit facilities and reduced the term loan credit facility to
$150.0 million. In connection with this transaction, we recorded a charge to
Other (income) expense in the accompanying consolidated statement of operations
of approximately $5.3 million which was reflected as a non-cash add-back to net
cash provided by operating activities. For the year ended December 31, 2001 Net cash flow generated by operating activities was $112.5 million for the
year ended December 31, 2001. Of this amount, $51.3 million was generated by
working capital reductions. The largest working capital reduction, reflective
of our exposure to weather conditions, was a $36.3 million decrease in our
receivables. This reduction was primarily related to more severe winter
weather in December 2000 than in December 2001. Net cash flow used by investing activities was $43.6 million for the year
ended December 31, 2001, primarily representing capital expenditures of the
business. As part of these capital expenditures, we incurred $5.7 million
related to the new mine shaft, mill and headframe at the Cote Blanche,
Louisiana facility. The remaining capital expenditures included $26.4 million
of expenditures to maintain our facilities and $10.9 million of growth and cost
reduction capital expenditures. The significant growth and cost reduction
projects related to the continuing expansion of our Lyons, Kansas evaporation
facility and the purchase of a continuous miner at our Winsford facility. Net cash flow used by financing activities was $53.8 million for the year
ended December 31, 2001. A significant level of activity occurred during the
fourth quarter as a result of the Recapitalization. Most notably, we borrowed
$250.0 million from our newly issued Senior Subordinated Notes, $225.0 million
from our new term loan and approximately $39.8 million on our new revolving
credit facility. These funds were used primarily to repay certain notes payable
to IMC and affiliates and to declare a dividend to IMC. We also incurred $18.0
million in financing costs. Additionally, $70.7 million were used in the net
repayment of third-party debt, including a £45.0 million bank facility for our
U.K. operations. Post-Recapitalization Our primary sources of liquidity will continue to be cash flow from
operations and borrowings under our revolving credit facility. We expect that
ongoing requirements for debt service and capital expenditures will be funded
from these sources. We have incurred substantial indebtedness in connection with the
Recapitalization. As of December 31, 2003, we had $417.3 million of
indebtedness outstanding, net of issuance premium. Our significant debt service
obligations could, under certain circumstances, materially affect our financial
condition and prevent us from fulfilling our debt obligations. See Item 1,
Business  Risk Factors  Our substantial indebtedness could adversely affect
our financial condition and impair our ability to operate our business. 35




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Concurrent with the Recapitalization, Compass Minerals Group issued $250.0
million aggregate principal amount of its 10% senior subordinated notes due
2011 and entered into the senior credit facilities. Our senior credit
facilities provided for a term loan credit facility in the principal amount of
$225.0 million and a revolving credit facility in an aggregate amount of up to
$135.0 million. Upon consummation of the
Recapitalization, Compass Minerals Group borrowed the full amount
available under the term loan credit facility and made borrowings under the
revolving credit facility based upon our working capital needs. As of December
31, 2003, $14.0 million of indebtedness and $9.4 million of letters of credit
were outstanding under the revolving credit facility. Future borrowings under
the revolving credit facility will be available to fund our working capital
requirements, capital expenditures and for other general corporate purposes. As
of December 31, 2003, approximately $111.6 million was available under the
revolving credit facility. The revolving credit facility is available until
2008. Borrowings under the amended term loan credit facility are due and
payable in quarterly installments that began in 2002. The quarterly term loan
amortization payments due before 2009 approximate $0.8 million on an annual
basis, or 1% of the term loan. The remaining balance of the term loan credit
facility will amortize in equal quarterly installments in the eighth year of
the term loan credit facility. As of December 31, 2003, the outstanding balance
of the term loan was $78.3 million. On April 10, 2002, Compass Minerals Group completed an offering of an
additional $75.0 million aggregate principal amount of its senior subordinated
notes. The April 2002 senior subordinated notes and the senior subordinated
notes are governed by, and treated as a single class of securities under an
indenture, dated November 28, 2001, between Compass Minerals Group and The Bank
of New York, as trustee. The gross proceeds from the offering of the April 2002
senior subordinated notes in the amount of $78.4 million, including a purchase
premium in the amount of $3.4 million, were used to refinance borrowings under
the term loan credit facility and pay related fees and expenses. The April 2002
senior subordinated notes mature in August 2011. On May 5, 2003, we amended our senior credit facilities to allow CMI to
pay a dividend to be funded with either cash on hand or with borrowings under
the amended and restated senior revolving credit facility. Additionally, the
amendment permits CMI to repurchase CMI securities (other than the subordinated
discount notes and the senior discount notes) not held by Apollo or management. On May 22, 2003, CMI issued $179.6 million in aggregate principal amount
at maturity of subordinated discount notes in a private placement under Rule
144A and Regulation S of the Securities Act. The proceeds from the sale of the
subordinated discount notes were distributed to CMIs stockholders. In
connection with the offering of CMIs subordinated discount notes, we amended
our senior credit facilities in order to permit the distribution of the
proceeds from the offering of CMIs subordinated discount notes to CMI
stockholders. On November 17, 2003, we further amended our senior credit facilities to
allow CMI to pay future dividends funded with either cash on hand or with
borrowings under the amended and restated senior revolving credit facility. In connection with the Recapitalization, we received NOLs and expect to
realize cash tax savings if these NOLs are able to be utilized. As of December
31, 2003, we had approximately $85.7 million of NOLs remaining that expire
between 2006 and 2022. These NOLs may be used to offset a portion of future
taxable income, up to the year 2022, and thereby reduce or eliminate our U.S.
federal income taxes otherwise payable. The Internal Revenue Code of 1986, as
amended, or the Code, imposes significant limitations on the utilization of
NOLs in the event of an ownership change, as defined in Section 382 of the
Code. Generally, an ownership change occurs with respect to a corporation if
the aggregate increase in the percentage of stock ownership by value of that
corporation by one or more 5% stockholders, including specified groups of
stockholders who in the aggregate own at least 5% of that corporations stock
(including a group of public stockholders), exceeds 50 percentage points over a
three-year testing period. The Company has incurred three ownership changes,
placing annual limitations on the amount of each loss carryforward utilization.
We cannot assure you that we will be able to use any NOLs to offset future
taxable income or that 36




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the NOLs will not become subject to additional
limitations due to future ownership changes. Due to the uncertainty that these
carryforwards will be utilized, a full valuation allowance was previously
established against the remaining deferred tax asset. We have two defined benefit pension plans for certain of our U.K. and U.S.
employees. Our cash funding policy is to make the minimum annual contributions
required by applicable regulations. Since the plans accumulated benefit
obligations are in excess of the fair value of the plans assets, we may be
required to use cash from operations above our historical levels to further
fund these plans in the future. At December 31, 2003, we had no off-balance sheet arrangements that have
or are likely to have a material current or future effect on our financial
statements. Parent Company Obligations In December 2002, certain holders of CMIs series A redeemable preferred
stock converted their preferred stock into subordinated discount debentures.
CMI then issued $123.5 million in aggregate principal amount of senior discount
notes in exchange for CMI subordinated discount debentures. No cash interest
will accrue on the senior discount notes prior to December 15, 2007. The
accreted value of each senior discount note will increase from the date of
issuance until December 15, 2007 at a rate of 12 3⁄4% per annum, reflecting the
accrual of non-cash interest, such that the accreted value will equal the
principal amount at maturity on December 15, 2007. Cash interest will accrue on
the senior discount notes at a rate of 12 3⁄4% per annum, beginning December
15, 2007. The first cash interest payment will be made on June 15, 2008. On May 22, 2003, CMI issued $179.6 million in aggregate principal amount
at maturity of subordinated discount notes in a private placement under Rule
144A and Regulation S of the Securities Act. No cash interest will accrue on
the subordinated discount notes prior to June 1, 2008. The accreted value of
each subordinated discount note will increase from the date of issuance until
June 1, 2008 at a rate of 12% per annum, reflected in the accrual of non-cash
interest, such that the accreted value will equal the principal amount at
maturity on June 1, 2008. Cash interest will accrue on the subordinated
discount notes at a rate of 12% per annum, beginning June 1, 2008 through
maturity. The proceeds from the sale of the subordinated discount notes were
distributed to CMI stockholders in the form of a common stock dividend. The senior discount notes and subordinated discount notes are not a part
of our combined and consolidated statements. However, our operations are
currently the main source of cash that is expected to service the senior
discount notes, subordinated discount notes and any future dividends on CMI
common stock. 37




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##### Table of Contents



Our contractual cash obligations and commitments as of December 31, 2003
are as follows (in millions): Payments Due by Period Lessthan
    
    2  3
    
    4  5
    
    After 5Contractual Cash Obligations
    
    Total
    
    1 Year
    
    Years
    
    Years
    
    YearsLong-term Debt
    
    $
    417.3
    
    
    $
    0.8
    
    
    $
    1.6
    
    
    $
    15.6
    
    
    $
    399.3Operating Leases (a)
    
    
    26.7
    
    
    
    6.2
    
    
    
    7.9
    
    
    
    4.8
    
    
    
    7.8Unconditional Purchase
Obligations (b)
    
    
    64.2
    
    
    
    8.7
    
    
    
    17.4
    
    
    
    17.4
    
    
    
    20.7Management Agreement (c)
    
    
    8.0
    
    
    
    1.0
    
    
    
    2.0
    
    
    
    2.0
    
    
    
    3.0Total Contractual Cash
Obligations
    
    $
    516.2
    
    
    $
    16.7
    
    
    $
    28.9
    
    
    $
    39.8
    
    
    $
    430.8
 Amount of Commitment Expiration per Period Lessthan
    
    2  3
    
    4  5
    
    After 5Other Commitments
    
    Total
    
    1 Year
    
    Years
    
    Years
    
    YearsRevolver
    
    $
    111.6
    
    
    $
    
    
    
    $
    
    
    
    $
    111.6
    
    
    $
    Letters of Credit
    
    
    9.4
    
    
    
    9.4
    
    
    
    
    
    
    
    
    
    
    
    Performance Bonds (d)
    
    
    15.3
    
    
    
    15.3
    
    
    
    
    
    
    
    
    
    
    
    Total Other Commitments.
    
    $
    136.3
    
    
    $
    24.7
    
    
    $
    
    
    
    $
    111.6
    
    
    $
    
   (a)
    
    We lease property and equipment under non-cancelable operating leases for
varying periods.(b)
    
    We have long-term contracts to purchase certain amounts of electricity
and steam.(c)
    
    Note 11 to our audited combined and consolidated financial statements
provides additional information.(d)
    
    Note 10 to our audited combined and consolidated financial statements
provides additional information under Sales Contracts. Our ability to make scheduled payments of principal of, to pay the
interest on, or to refinance our indebtedness, or to fund planned capital
expenditures will depend on our ability to generate cash in the future. This,
to a certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control. Based on our current level of operations, we believe that cash flow from
operations and available cash, together with available borrowings under our
senior credit facilities, will be adequate to meet our liquidity needs over the
next 12 months. There can be no assurance, however, that our business will generate
sufficient cash flow from operations or that future borrowings will be
available to us under our senior credit facilities in an amount sufficient to
enable us to pay our indebtedness or to fund our other liquidity needs. If we
consummate an acquisition, our debt service requirements could increase. We may
need to refinance all or a portion of our indebtedness on or before maturity.
We cannot assure you that we will be able to refinance any of our indebtedness
on commercially reasonable terms or at all. 38




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##### Table of Contents



Sensitivity Analysis Related to EBITDA In connection with the Recapitalization and prior to the Recapitalization,
we have incurred significant non-recurring restructuring and other charges that
impact our results of operations. As a result, our results of operations and
cash flows are not indicative of what they would have been had we not incurred
these non-recurring charges. We believe it would be helpful to provide a
sensitivity analysis that describes our ability to satisfy our debt service,
capital expenditures and working capital requirements and make dividend
payments in terms of EBITDA, and EBITDA adjusted for the restructuring and
other charges described below, or Adjusted EBITDA. We believe that these
non-GAAP measures can assist investors in understanding our cost structure,
cash flows and financial position. In addition, the financial covenants and
ratios in our senior credit facilities and our indentures, such as restrictions
on payments and indebtedness and ratios relating to leverage, interest coverage
and fixed charge coverage, are also tied to measures that are calculated by
adjusting EBITDA as described below. We believe it is necessary to adjust
EBITDA to enable investors to see how we view our business given the
significant non-recurring restructuring and other charges that have
historically affected our results of operations. Neither EBITDA nor Adjusted EBITDA are calculated under GAAP and neither
should be considered in isolation or as a substitute for net income, cash flows
or other income or cash flow data prepared in accordance with GAAP or as a
measure of our profitability or liquidity. While EBITDA and Adjusted EBITDA and
similar variations thereof are frequently used as a measure of operations and
the ability to meet debt service requirements, these terms are not necessarily
comparable to other similarly titled captions of other companies due to the
potential inconsistencies in the method of calculation. The following is a summary of our restructuring and other charges incurred
for each of our last three fiscal years: For the year ended December 31, 2003 No non-recurring costs were incurred or expensed in 2003. For the year ended December 31, 2002 Following the Recapitalization, we incurred and expensed certain
non-recurring costs totaling $7.7 million that consisted of transition costs
required to establish us as an self-sustaining entity. The costs were directly
related to the transition from an entity controlled by IMC Global and consisted
primarily of one-time compensation costs, costs to develop stand-alone tax and
inventory strategies and costs associated with determining the post-closing
purchase price adjustment. For the year ended December 31, 2001 In connection with the Recapitalization, we expensed certain transaction
and transition costs. We incurred $20.1 million of transaction costs related to
activities associated with the Recapitalization (which consisted primarily of
costs related to outside professional services). We also expensed $6.9 million
of transition costs related to activities and other charges incurred in
connection with separating us from IMC Global. The adjustments to EBITDA set forth in the table below include adjustments
relating to the expenses and charges described above, which we believe are not
likely to recur. Although these adjustments are not permitted as adjustments in
preparing financial statements in accordance with Regulation S-X, management
believes that the presentation of EBITDA, as so adjusted, provides useful
information in analyzing the effects of non-recurring restructuring and other
charges, including those resulting from the initial public offering and the
Recapitalization. 39




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##### Table of Contents



For the year ended December 31,2003
    
    2002
    
    2001Net income (loss)
    
    $
    45.7
    
    
    $
    19.7
    
    
    $
    19.1Income tax expense (benefit)
    
    
    8.0
    
    
    
    11.8
    
    
    
    26.8Interest expense
    
    
    39.1
    
    
    
    41.3
    
    
    
    14.3Depreciation and amortization
    
    
    42.1
    
    
    
    37.1
    
    
    
    32.6EBITDA
    
    
    134.9
    
    
    
    109.9
    
    
    
    92.8Adjustments to income (loss)
from operations:Restructuring and other charges
    
    
    
    
    
    
    7.7
    
    
    
    27.0Other (income) expense (1)
    
    
    5.6
    
    
    
    4.9
    
    
    
    (3.1
    )Adjusted EBITDA
    
    $
    140.5
    
    
    $
    122.5
    
    
    $
    116.7
   (1)
    
    Other (income) expense primarily includes losses on early retirements
of debt ($5.3 million in 2002), costs related to amending our senior
credit facilities ($1.4 million in 2003), interest income, and non-cash
foreign exchange gains and losses. Effects of Currency Fluctuations and Inflation We conduct operations in Canada, the United Kingdom and the United States.
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 combined and
consolidated financial statements. Exchange rates between these currencies and
U.S. dollars in recent years have fluctuated significantly and may do so in the
future. The majority of our revenues and costs are denominated in U.S. dollars,
with pounds sterling and Canadian dollars also being significant. We generated
34% of our 2003 sales in foreign currencies, and we incurred 41% of our 2003
total operating expenses in foreign currencies. The net depreciation of the
pound sterling and Canadian dollar against the U.S. dollar and other world
currencies during the 2001 and 2002 had a negative impact on our sales and
Adjusted EBITDA, as reported in U.S. dollars in our combined and consolidated
financial statements while the weakening U.S. dollar against these currencies
in 2003 had a positive impact on our sales and Adjusted EBITDA. Significant
changes in the value of the Canadian dollar, the euro or pound sterling
relative to the U.S. dollar could have a material adverse effect on our
financial condition and our ability to meet interest and principal payments on
U.S. dollar denominated debt, including borrowings under our senior credit
facilities. Seasonality We experience a substantial amount of seasonality in salt sales. The
result of this seasonality is that 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 products are seasonal as they vary based on the severity of the winter
conditions in areas where the product is used. Following industry practice in
North America, we stockpile sufficient quantities of deicing salt in the
second, third and fourth quarters to meet the estimated requirements for the
winter season. Recent Accounting Pronouncements In June 2001, the Financial Accounting Standards Board, or FASB, issued
SFAS No. 143, Accounting for Obligations Associated with the Retirement of
Long-Lived Assets. The objective of SFAS 40




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##### Table of Contents



No. 143 is to establish an accounting
standard for the recognition and measurement of an obligation related to
the retirement of certain long-lived assets. The retirement obligation
must be one that results from the acquisition, construction or normal operation
of a long-lived asset. SFAS No. 143 requires the legal obligation associated
with the retirement of a tangible long-lived asset to be recognized at fair
value as a liability when incurred and the cost to be capitalized by increasing
the carrying amount of the related long-lived asset. SFAS No. 143 became
effective for us and was adopted on January 1, 2003. Its adoption did not have
a material impact on our financial position, results of operations or cash
flows. In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies EITF Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). This statement requires
that a liability for costs associated with an exit or disposal activity be
recognized when the liability is incurred. The provisions of this statement are
effective for exit or disposal activities that are initiated after December 31,
2002. The adoption of SFAS No. 146 on January 1, 2003 did not have a material
impact on our financial position, results of operations or cash flows. In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure, which provides guidance
on how to transition from the intrinsic value method of accounting for
stock-based employee compensation under APB Opinion No. 25 to SFAS No. 123s
fair value method of accounting, if a company so elects. Through December 31,
2002, we accounted for our stock option plan under the recognition and
measurement provisions of APB Opinion No. 25. In the fourth quarter of 2003, we
adopted the preferable fair value recognition provisions of SFAS No. 123 using
the prospective method of adoption as described in SFAS No. 148. Under the
prospective method, all options granted or modified after January 1, 2003 are
accounted for under the fair value method retroactively effective as of January
1, 2003. The impact of this adoption, under the fair value recognition
provisions, resulted in stock option compensation expense of approximately $0.1
million in 2003. In January 2003, the FASB issued Interpretation, or FIN, No. 46,
Consolidation of Variable Interest Entities, an Interpretation of Accounting
Research Bulletin No. 51. FIN No. 46 establishes accounting guidance for
consolidation of variable interest entities that function to support the
activities of the primary beneficiary. FIN No. 46 applies to any business
enterprise, public or private, that has a controlling interest, contractual
relationship or other business relationship with a variable interest entity.
In December 2003, the FASB issued FIN No. 46(R) which supercedes FIN No. 46.
FIN No. 46(R) is effective for all Special Purpose Entities (SPEs) created
prior to February 1, 2003 at the end of the first interim or annual reporting
period ending after December 15, 2003. FIN 46(R) will be applicable to all
non-SPEs created prior to February 1, 2003 by public entities at the end of the
first interim or annual reporting period ending after March 15, 2004. The
Company has determined that it has no SPEs. We are in the process of reviewing
the applicability of FIN 46(R) to entities other than SPEs, but we do not
expect the adoption to have a material effect on our consolidated statements. 
 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our business is subject to various types of market risks that include, but
are not limited to, interest rate risk, foreign currency translation risk and
commodity pricing risk. In the future, management may take actions that would
mitigate our exposure to these types of risks including forward purchase
contracts and financial instruments. However, there can be no assurance that
our hedging operations will eliminate or substantially reduce risks associated
with these risks. We will not enter into any financial instrument arrangements
for speculative purposes. 41




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##### Table of Contents



Interest Rate Risk As of December 31, 2003, we had $78.3 million of debt outstanding under
the term loan credit facility and $14.0 million outstanding under our revolving
credit facility. Both the term loan credit facility and revolving credit
facility are subject to variable rates. Accordingly, our earnings and cash
flows are affected by changes in interest rates. Assuming no change in the term
loan credit facility borrowings at December 31, 2003, and an average level of
borrowings from our revolving credit facility at variable rates, and assuming a
one hundred basis point increase in the average interest rate under these
borrowings, it is estimated that our interest expense for the year ended
December 31, 2003 would have increased by approximately $0.9 million.
Actual changes will vary from hypothetical changes. Foreign Currency Risk We conduct our business primarily in the United Kingdom and North America
and export some products to Europe and Southeast Asia. Our operations may,
therefore, be subject to volatility because of currency fluctuations, inflation
changes and changes in political and economic conditions in these countries.
Sales and expenses are frequently denominated in local currencies and results
of operations may be affected adversely as currency fluctuations affect our
product prices and operating costs or those of our competitors. We may engage
in hedging operations, including forward foreign exchange contracts, to reduce
the exposure of our cash flows to fluctuations in foreign currency rates. We
will not engage in hedging for speculative investment reasons. Our historical
results do not reflect any foreign exchange hedging activity. There can be no
assurance that our hedging operations will eliminate or substantially reduce
risks associated with fluctuating currencies. See Item 1, Business  Risk
Factors  Economic and other risks associated with international sales and
operations could adversely affect our business, including economic loss and a
negative impact on earnings. Considering our currency expenses, a hypothetical 10% unfavorable change
in the exchange rates compared to the U.S. dollar would have an estimated $2.0
million impact on earnings for the year ended December 31, 2003. Actual changes
in market prices or rates will differ from hypothetical changes. Commodity Pricing Risk: Commodity Derivative Instruments and Hedging Activities We have reviewed various options to mitigate the impact of fluctuating
natural gas prices. During 2002 and 2003, we instituted a hedging policy to
mitigate the impact of fluctuations in the price of natural gas. The notional
volumes hedged are based on a combination of factors including estimated
natural gas usage, current market prices and historical market prices.
Pursuant to our policy, we enter into contractual gas price swaps related to
the purchase price of our natural gas requirements up to 36 months in advance
of the physical purchase of the natural gas and hedge up to approximately 80%
of our expected natural gas usage. We have determined that these financial
instruments qualify as cash flow hedges under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activity, as amended. The notional amount
of natural gas swap derivative contracts outstanding at December 31, 2003 that
expire in one year or less and expire greater than one year total $9.7 million
and $3.2 million, respectively. Excluding gas hedged with derivative instruments, a hypothetical 10%
adverse change in our natural gas prices during the year ended December 31,
2003 would have had an estimated $0.7 million impact on earnings. Actual
results will vary based on actual changes in market prices and rates. 42




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##### Table of Contents



Item 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Description
    
    PageReport of Independent Auditors
    
    
    44Report of Independent Auditors
    
    
    45Consolidated Balance Sheets as of December 31, 2003 and 2002
    
    
    46Combined and Consolidated Statements of Operations for the three years
ended December 31, 2003
    
    
    47Combined and Consolidated Statements of Stockholders Equity (Deficit)
for the three years ended December 31, 2003
    
    
    48Combined and Consolidated Statements of Cash Flows for the three years ended
December 31, 2003
    
    
    49Notes to Combined and Consolidated Financial Statements
    
    
    50
 43




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##### Table of Contents



Report of Independent Auditors To the Board of Directors and Shareholder
of Compass Minerals Group, Inc.: In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a)(1) present fairly, in all material respects, the
financial position of Compass Minerals Group, Inc. and its subsidiaries at
December 31, 2003 and 2002, and the results of their operations and their cash
flows for each of the two years in the period ended December 31, 2003 in
conformity with accounting principles generally accepted in the United States
of America. In addition, in our opinion, the financial statement schedule
listed in the index appearing under Item 15(a)(2) presents fairly, in all
material respects, the information set forth therein for each of the two years
in the period ended December 31, 2003 when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Companys management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP
Kansas City, Missouri
March 3, 2004 44




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##### Table of Contents



Report of Independent Auditors To the Board of Directors and Shareholder
Compass Minerals Group, Inc. We have audited the accompanying consolidated balance sheet of Compass
Minerals Group, Inc. as of December 31, 2001, and the related combined and
consolidated statements of operations, stockholders equity (deficit), and cash
flows for the year then ended. Our audit also included the financial statement
schedule for the year ended December 31, 2001 listed in the Index at Item 15
(a) (2). These financial statements and schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audit. We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Compass
Minerals Group, Inc. at December 31, 2001, and the combined and consolidated
results of its operations and its cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States.
Also, in our opinion, the related financial statement schedule for the year
ended December 31, 2001, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein. /s/ Ernst & Young LLP  Kansas City, Missouri
March 8, 2002 45




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##### Table of Contents



COMPASS MINERALS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2003 and 2002
(in millions, except share data) 2003
    
    2002ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2.6
    
    
    $
    11.9Receivables, less allowance for doubtful accounts of
$2.1 million in 2003 and $1.6 million in 2002
    
    
    117.4
    
    
    
    94.5Inventories
    
    
    96.7
    
    
    
    96.5Other
    
    
    3.7
    
    
    
    0.7Total current assets
    
    
    220.4
    
    
    
    203.6Property, plant and equipment, net
    
    
    262.0
    
    
    
    263.4Intangible assets  mineral interests and other, net
    
    
    172.7
    
    
    
    149.8Other
    
    
    34.9
    
    
    
    27.2Total assets
    
    $
    690.0
    
    
    $
    644.0LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Current portion of long-term debt
    
    $
    0.8
    
    
    $
    1.2Accounts payable
    
    
    72.6
    
    
    
    62.3Accrued expenses
    
    
    13.3
    
    
    
    8.9Accrued interest
    
    
    12.5
    
    
    
    12.6Accrued salaries and wages
    
    
    13.5
    
    
    
    12.6Income taxes payable
    
    
    
    
    
    
    4.8Total current liabilities
    
    
    112.7
    
    
    
    102.4Long-term debt, net of current portion
    
    
    419.4
    
    
    
    436.4Deferred income taxes
    
    
    77.7
    
    
    
    83.5Other noncurrent liabilities
    
    
    36.4
    
    
    
    41.4Stockholders equity (deficit):Common Stock:$0.01 par value, authorized shares 1,000 shares
authorized, issued and outstanding
    
    
    
    
    
    
    Additional paid in capital
    
    
    341.9
    
    
    
    349.5Accumulated deficit
    
    
    (323.6
    )
    
    
    (369.3
    )Accumulated other comprehensive income
    
    
    25.5
    
    
    
    0.1Total stockholders equity (deficit)
    
    
    43.8
    
    
    
    (19.7
    )Total liabilities and stockholders equity (deficit)
    
    $
    690.0
    
    
    $
    644.0
 The accompanying notes are an integral part of the combined and consolidated financial statements. 46




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##### Table of Contents



COMPASS MINERALS GROUP, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2003, 2002 and 2001
(in millions) 2003
    
    2002
    
    2001Sales
    
    $
    600.6
    
    
    $
    502.6
    
    
    $
    523.2Cost of
sales - shipping and handling
    
    
    165.3
    
    
    
    137.5
    
    
    
    143.2Cost of sales  products
    
    
    288.3
    
    
    
    239.2
    
    
    
    257.0Gross profit
    
    
    147.0
    
    
    
    125.9
    
    
    
    123.0Selling, general and administrative expenses
    
    
    48.6
    
    
    
    40.5
    
    
    
    38.9Restructuring and other charges
    
    
    
    
    
    
    7.7
    
    
    
    27.0Operating earnings
    
    
    98.4
    
    
    
    77.7
    
    
    
    57.1Other (income) expense:Interest expense
    
    
    39.1
    
    
    
    41.3
    
    
    
    14.3Other, net
    
    
    5.6
    
    
    
    4.9
    
    
    
    (3.1
    )Income before income taxes
    
    
    53.7
    
    
    
    31.5
    
    
    
    45.9Income tax expense
    
    
    8.0
    
    
    
    11.8
    
    
    
    26.8Net income
    
    $
    45.7
    
    
    $
    19.7
    
    
    $
    19.1
 The accompanying notes are an integral part of the combined and consolidated financial statements. 47




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##### Table of Contents



COMPASS MINERALS GROUP, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
For the years ended December 31, 2003, 2002 and 2001
(in millions) AccumulatedAdditional
    
    
    
    
    
    OtherCommon
    
    Paid In
    
    Accumulated
    
    ComprehensiveStock
    
    Capital
    
    Excess (Deficit)
    
    Income (Loss)
    
    TotalBalance, December 31, 2000
    
    
    
    
    
    
    944.7
    
    
    
    (657.3
    )
    
    
    1.1
    
    
    
    288.5Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    36.0
    
    
    
    
    
    
    
    36.0Cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3.2
    )
    
    
    (3.2
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32.8Capital contribution from IMC
    
    
    
    
    
    
    82.0
    
    
    
    
    
    
    
    
    
    
    
    82.0Dividend to IMC and affiliates
    
    
    
    
    
    
    
    
    
    
    (71.1
    )
    
    
    
    
    
    
    (71.1
    )Balance, November 27, 2001
    
    $
    
    
    
    $
    1,026.7
    
    
    $
    (692.4
    )
    
    $
    (2.1
    )
    
    $
    332.2Balance, November 28, 2001
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Contribution of IMCI net assets to CMG
    
    
    
    
    
    
    332.2
    
    
    
    
    
    
    
    
    
    
    
    332.2Dividend to IMC
    
    
    
    
    
    
    
    
    
    
    (372.1
    )
    
    
    
    
    
    
    (372.1
    )Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    (16.9
    )
    
    
    
    
    
    
    (16.9
    )Unfunded pension losses, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5.4
    )
    
    
    (5.4
    )Cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.0
    
    
    
    3.0Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19.3
    )Capital contribution
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    
    
    
    
    1.4Balance, December 31, 2001
    
    
    
    
    
    
    333.6
    
    
    
    (389.0
    )
    
    
    (2.4
    )
    
    
    (57.8
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    19.7
    
    
    
    
    
    
    
    19.7Unfunded pension losses, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6.5
    )
    
    
    (6.5
    )Unrealized gain on cash flow hedges,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    0.1Cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.9
    
    
    
    8.9Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22.2Capital contributions
    
    
    
    
    
    
    15.9
    
    
    
    
    
    
    
    
    
    
    
    15.9Balance, December 31, 2002
    
    $
    
    
    
    $
    349.5
    
    
    $
    (369.3
    )
    
    $
    0.1
    
    
    $
    (19.7
    )Dividends declared to CMI
    
    
    
    
    
    
    (21.7
    )
    
    
    
    
    
    
    
    
    
    
    (21.7
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    45.7
    
    
    
    
    
    
    
    45.7Unfunded pension adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.9
    
    
    
    4.9Unrealized gain on cash flow hedges,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    0.7Cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19.8
    
    
    
    19.8Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71.1Capital contributions
    
    
    
    
    
    
    14.1
    
    
    
    
    
    
    
    
    
    
    
    14.1Balance, December 31, 2003
    
    $
    
    
    
    $
    341.9
    
    
    $
    (323.6
    )
    
    $
    25.5
    
    
    $
    43.8
 The accompanying notes are an integral part of the combined and consolidated financial statements. 48




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COMPASS MINERALS GROUP, INC.
COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2003, 2002 and 2001
(in millions) 2003
    
    2002
    
    2001Cash flows from operating activities:Net income
    
    $
    45.7
    
    
    $
    19.7
    
    
    $
    19.1Adjustments to reconcile net income (loss) to net cash flows provided
by operating activities:Depreciation, depletion and amortization
    
    
    42.1
    
    
    
    37.1
    
    
    
    32.6Finance fee amortization
    
    
    1.6
    
    
    
    1.9
    
    
    
    0.2Loss/(gain) on early extinguishment of long-term debt
    
    
    
    
    
    
    5.3
    
    
    
    Restructuring charge and other charges, net of cash
    
    
    
    
    
    
    1.1
    
    
    
    1.4Deferred income taxes
    
    
    
    
    
    
    (1.5
    )
    
    
    8.2Loss on disposal of property, plant and equipment
    
    
    0.3
    
    
    
    0.2
    
    
    
    0.2Changes in operating assets and liabilities:Receivables
    
    
    (18.5
    )
    
    
    (5.9
    )
    
    
    36.3Inventories
    
    
    4.3
    
    
    
    3.8
    
    
    
    (20.9
    )Other assets
    
    
    (4.0
    )
    
    
    0.6
    
    
    
    1.8Accounts payable and accrued expenses
    
    
    (0.8
    )
    
    
    14.5
    
    
    
    3.8Due to IMC and affiliates
    
    
    
    
    
    
    
    
    
    
    32.1Other noncurrent liabilities
    
    
    0.3
    
    
    
    5.4
    
    
    
    (2.3
    )Net cash provided by operating activities
    
    
    71.0
    
    
    
    82.2
    
    
    
    112.5Cash flows from investing activities:Capital expenditures
    
    
    (20.6
    )
    
    
    (19.5
    )
    
    
    (43.0
    )Proceeds from sales of property, plant and equipment
    
    
    0.1
    
    
    
    0.6
    
    
    
    0.2Acquisition of intangible assets
    
    
    (24.8
    )
    
    
    
    
    
    
    Other
    
    
    (0.3
    )
    
    
    (0.2
    )
    
    
    (0.8
    )Net cash used in investing activities
    
    
    (45.6
    )
    
    
    (19.1
    )
    
    
    (43.6
    )Cash flows from financing activities:Proceeds from issuance of long-term debt
    
    
    
    
    
    
    78.4
    
    
    
    475.0Principal payments on long-term debt, including capital leases
    
    
    (31.1
    )
    
    
    (115.9
    )
    
    
    (66.3
    )Revolver activity
    
    
    14.0
    
    
    
    (39.8
    )
    
    
    35.4Advances to CMI, net
    
    
    (8.2
    )
    
    
    (2.2
    )
    
    
    Payments from (to) IMC and affiliates, net
    
    
    
    
    
    
    
    
    
    
    (81.1
    )Dividend to IMC and affiliates
    
    
    
    
    
    
    
    
    
    
    (398.8
    )Dividends paid
    
    
    (21.7
    )
    
    
    
    
    
    
    Deferred financing costs
    
    
    
    
    
    
    (3.9
    )
    
    
    (18.0
    )Capital contributions
    
    
    8.8
    
    
    
    12.8
    
    
    
    Other
    
    
    
    
    
    
    1.0
    
    
    
    Net cash used in financing activities
    
    
    (38.2
    )
    
    
    (69.6
    )
    
    
    (53.8
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    3.5
    
    
    
    2.5
    
    
    
    0.5Net increase (decrease) in cash and cash equivalents
    
    
    (9.3
    )
    
    
    (4.0
    )
    
    
    15.6Cash and cash equivalents, beginning of year
    
    
    11.9
    
    
    
    15.9
    
    
    
    0.3Cash and cash equivalents, end of year
    
    $
    2.6
    
    
    $
    11.9
    
    
    $
    15.9Supplemental cash flow information:Interest paid excluding capitalized interest
    
    $
    36.9
    
    
    $
    29.4
    
    
    $
    15.4Income taxes paid, net of refunds and indemnification
    
    
    8.4
    
    
    
    10.4
    
    
    
    14.8Supplemental disclosure of noncash activities:Dividends to IMC and affiliates
    
    $
    
    
    
    $
    
    
    
    $
    44.5Capital contributions from IMC and affiliates
    
    
    
    
    
    
    
    
    
    
    82.0
 The accompanying notes are an integral part of the combined and consolidated financial statements. 49




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COMPASS MINERALS GROUP, INC.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS 1. Organization, Formation and Basis of Presentation: Compass Minerals Group, Inc. (CMG), is a producer and marketer of
inorganic mineral products with manufacturing sites in North America and
Europe. Its principal products are salt and sulfate of potash (SOP). CMG
serves a variety of markets, including agriculture, food processing, chemical
processing, water conditioning and highway deicing. The combined and
consolidated financial statements include the accounts of CMG, formerly IMC
Inorganic Chemicals Inc. (IMCI), and the combined and consolidated results of
CMGs wholly owned subsidiaries. CMGs primary subsidiaries include those
entities listed below (collectively, the Company).  
    
    NAMSCO Inc. (NAMSCO) and subsidiaries  
    
    North American Salt Company (NASC)  
    
    Carey Salt Company  
    
    Sifto Canada Inc. (Sifto)  
    
    GSL Corporation and subsidiary (GSL)  
    
    Great Salt Lake Minerals Corporation  
    
    Compass Minerals (Europe) Limited (CMGE) and subsidiaries  
    
    Compass Minerals (UK) Limited  
    
    Salt Union Limited U.K. (SUL) and subsidiaries CMG has been a wholly owned subsidiary of Compass Minerals International,
Inc. (CMI) since CMIs acquisition of the Company on November 28, 2001. CMG
was a wholly owned subsidiary of IMC Global Inc. (IMC) since IMCs
acquisition of IMCI on April 1, 1998. Those subsidiaries of IMCI as listed
above (prior to the Recapitalization described below) and other immaterial
subsidiaries have been included in the combined financial statements for
periods prior to the Recapitalization. As part of the recapitalization transaction described below, IMC Potash
Corporation was reincorporated as Salt Holdings Corporation, which is now known
as Compass Minerals International, Inc. At November 28, 2001, IMC contributed
the net assets of CMG to CMI. On November 28, 2001, Apollo Management V, L.P. (Apollo), through its
subsidiary YBR Holdings LLC (YBR Holdings), acquired control of CMI from IMC
pursuant to a recapitalization transaction (Recapitalization) with assets and
liabilities of CMG retaining their historical value. The excess of the purchase
price over the net assets acquired was recorded in Stockholders Equity of CMI.
Immediately following the Recapitalization, on a fully-diluted basis for
management options and stock issuable under CMIs stock option plan, Apollo,
co-investors and management owned approximately 81% of the outstanding common
stock of CMI and IMC owned approximately 19% of the outstanding common stock of
CMI. On November 5, 2003, the CMIs board of directors approved the initial
public offering of the CMI common stock. In connection with the offering, CMI
changed its name from Salt Holdings Corporation to Compass Minerals
International, Inc. The shares were sold by stockholders of CMI and the Company
did not receive any proceeds from the sale of the shares. Apollo and IMC Global
each sold portions of their holdings of CMI common stock, which reduced the
ownership, on a fully diluted basis, of Apollo and Apollo co-investors,
management, and IMC to approximately 35%, 11% and 2%, respectively. 50




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These combined and consolidated financial statements have been prepared to
present the historical financial condition and results of operations and cash
flows for the subsidiaries that were included in the Recapitalization. Prior to the Recapitalization, sales in the accompanying 2001 combined and
consolidated statement of operations represent sales directly attributable to
the Company. Costs and expenses in the accompanying 2001 combined and
consolidated statement of operations represent direct costs and expenses
related to the Company. In addition, the 2001 combined and consolidated
statement of operations includes the estimated cost of all services provided by
IMC and its subsidiaries to the Company through November 27, 2001, which had
previously not been directly allocated to the Company. All of the allocations
and estimates in the 2001 combined and consolidated statement of operations are
based on assumptions that Company management believes are reasonable under the
circumstances. However, these allocations and estimates are not necessarily
indicative of the costs and expenses that would have resulted if the Company
had been operated as a separate entity. 2. Summary of Significant Accounting Policies: a. Management Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles, or GAAP, requires management
to make estimates and assumptions that affect the amounts reported in the
combined and consolidated financial statements and accompanying notes. Actual
results could differ from those estimates. b. Basis of Combination/Consolidation: The Companys combined and consolidated
financial statements include the accounts of the Company, which include the
domestic and foreign subsidiaries discussed in Note 1. The Companys financial
statements have been combined through the Recapitalization date and
consolidated thereafter. All significant intercompany balances and transactions
have been eliminated. c. Foreign Currency Translation: Assets and liabilities are translated into
U.S. dollars at end of period exchange rates. Revenues and expenses are
translated using the average rates of exchange for the year. Adjustments
resulting from the translation of foreign-currency financial statements into
the reporting currency, U.S. dollars, are included in accumulated other
comprehensive income (loss). Exchange gains and losses from transactions
denominated in a currency other than a companys functional currency are
included in income. d. Revenue Recognition: The Company sells mineral products, primarily salt and
SOP. Revenue is recognized by the Company at the time of shipment to the
customer, which coincides with the transfer of title and risk of ownership to
the customer. Sales represent billings to customers net of sales taxes charged
for the sale of the product. Sales include shipping and handling costs which
are expensed when the related product is sold. e. Cash and Cash Equivalents: The Company considers all investments with
original maturities of three months or less to be cash equivalents. The Company
maintains the majority of its cash in bank deposit accounts with several
commercial banks with high credit ratings in the U.S., Canada and Europe. The
Company does not believe it is exposed to any significant credit risk on cash
and cash equivalents. f. Inventories: Inventories are stated at the lower of cost or market.
Finished goods costs are determined by the average cost method. Raw materials
and supply costs are determined by either the first-in, first-out (FIFO) or
the average cost method. Raw materials and supplies primarily consist of raw
materials purchased to aid in the production of our mineral products,
maintenance materials and packaging materials. Finished goods are comprised of
salt and SOP products readily available for sale. All costs associated with the
production of salt and SOP at our producing locations are captured as inventory
costs. Additionally, since our products are often stored at third-party
warehousing locations, we include in the cost of inventory the freight and
handling costs necessary to move the product to storage until the product is
sold to a customer. g. Property, Plant and Equipment: Tangible property, plant and equipment,
including assets under capital leases, are stated at cost and include interest
on funds borrowed to finance construction. The costs of replacements or 51




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renewals which improve or extend the life of existing property are capitalized.
Maintenance and repairs are expensed as incurred. Upon retirement or
disposition of an asset, any resulting gain or loss is included in results from
operations. Asset classes or groups are depreciated or amortized on a straight-line
basis over the following estimated useful lives: Land improvements
    
    5 to 25 yearsBuildings and improvements
    
    10 to 40 yearsMachinery and equipment
    
    3 to 25 yearsFurniture and fixtures
    
    3 to 10 yearsMineral properties
    
    20 to 30 years
 To review for possible impairments, the Company uses methodology
prescribed in Statement of Financial Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. The Company
reviews long-lived assets and the related intangible assets for impairment
whenever events or changes in circumstances indicate the carrying amounts of
such assets may not be recoverable. Once an indication of a potential
impairment exists, recoverability of the respective assets is determined by
comparing the forecasted undiscounted net cash flows of the operation to which
the assets relate, to the carrying amount, including associated intangible
assets, of such operation. If the operation is determined to be unable to
recover the carrying amount of its assets, then intangible assets are written
down first, followed by the other long-lived assets of the operation, to fair
value. Fair value is determined based on discounted cash flows or appraised
values, depending upon the nature of the assets. h. Mineral Interests: Mineral interests include probable mineral reserves. The
Company leases mineral reserves at several of its extraction facilities. These
leases have varying terms, and many provide for a royalty payment to the lessor
based on a specific amount per ton of mineral extracted or as a percentage of
revenue. Pursuant to SFAS No. 141, Business Combinations (SFAS No. 141),
and SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142),
mineral interests associated with other than owned properties are classified as
intangible assets. Probable mineral reserves are amortized on a
units-of-production basis over the respective estimated mine lives not to
exceed 99 years. The weighted average amortization period for probable mineral
reserves is 93 years as of December 31, 2003. The Companys rights to extract
minerals are contractually limited by time. However, the Company believes it
will be able to continue to extend lease agreements, as it has in the past, at
commercially reasonable terms, without incurring substantial costs or incurring
material modifications to the existing lease terms and conditions, and
therefore, believes that the assigned lives are appropriate. i. Other Intangible Assets: The Company follows the rules on accounting for
intangible assets as set forth in SFAS No. 142. Under these rules, intangible
assets deemed to have indefinite lives are not amortized but are subject to
annual impairment tests in accordance with the Statements. Other intangible
assets are amortized over their estimated useful lives that range from 5 to 25
years. j. Other Noncurrent Assets: Other noncurrent assets include deferred financing
costs of $16.3 million and $14.5 million net of accumulated amortization of
$3.6 million and $1.9 million as of December 31, 2003 and 2002, respectively.
Deferred financing costs are being amortized on a straight-line basis over the
terms of the debt to which the costs relate and the related amortization is
recorded as interest expense. k. Income Taxes: The Companys U.S. subsidiaries participated in the
consolidated federal income tax return of IMC for periods owned by IMC. The
foreign subsidiaries file separate-company returns in their respective
jurisdictions. For financial reporting purposes, while owned by IMC, the
Company computed a provision for income taxes on a stand alone basis. The
Company accounts for income taxes using the liability method in accordance with
the provisions of SFAS No. 109, Accounting for Income Taxes. Under the
liability method, deferred taxes are determined based on the differences
between the financial statement and the tax basis of assets and liabilities
using enacted tax rates in effect in the years in which the differences are
expected to reverse. 52




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l. Environmental Costs: Environmental costs, other than those of a capital
nature, are accrued at the time the exposure becomes known and costs can
reasonably be estimated. Costs are accrued based upon managements estimates of
all direct costs, after taking into account reimbursement by third parties. The
Company does not accrue liabilities for unasserted claims that are not probable
of assertion and the Company does not provide for environmental clean-up costs,
if any, at the end of the useful lives of its facilities, since it is not
practical to estimate such costs due to the long lives of the Companys mineral
deposits. The Companys environmental accrual was $2.3 million and $2.0
million as of December 31, 2003 and 2002, respectively. m. Asset Retirement Obligations: The Company adopted SFAS No. 143, Accounting
for Obligations Associated with the Retirement of Long-Lived Assets on January
1, 2003. The Company recognizes and measures obligations related to the
retirement of tangible long-lived assets. The retirement obligation must be one
that results from the acquisition, construction or normal operation of the
long-lived asset. The legal obligation associated with the retirement of a
tangible long-lived asset is recognized at fair value as a liability when
incurred and the cost is capitalized by increasing the carrying amount of the
related long-lived asset. The adoption of SFAS No. 143 did not have a material
impact on the Companys financial position, results of operations or cash
flows. n. Stock Options: CMI has a stock option plan that was adopted on November 28,
2001 for employees and officers of CMG and directors of CMG and CMI (see Note
14, Stock Options). Prior to the fourth quarter of 2003, the Company accounted
for its stock-based employee compensation plan under the recognition and
measurement provisions of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees,and related interpretations. No
stock-based employee compensation expense for stock options was reflected in
net income for the years ended December 31, 2002 and 2001, as all stock options
granted under the plan had an exercise price equal to the fair market value of
the underlying common stock on the date of grant. During the fourth quarter of
2003, the Company adopted the preferable fair value recognition provisions of
SFAS No. 123, Accounting for Stock-Based Compensation. The Company selected
the prospective method of adoption described in SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure. Under the prospective
method, all options granted or modified after January 1, 2003 are accounted for
under the fair value method retroactively effective as of January 1, 2003. Awards to the Companys directors vest immediately. Awards to employees
under the plan vest over periods ranging from one to eight years. Therefore,
the cost related to stock-based employee compensation included in the
determination of net income for 2003 is less than that which would have been
recognized if the fair value based method had been applied to all awards since
the original effective date of SFAS No.123, December 1994. The following table illustrates the effect on net income if the fair value
based method had been applied to all outstanding and unvested awards for the
years ended December 31 (in millions, except for share data): 2003
    
    2002
    
    2001Net income, as reported
    
    $
    45.7
    
    
    $
    19.7
    
    
    $
    19.1Add: Stock-based compensation expense
included in reported net income, net of
related tax effects
    
    
    0.2
    
    
    
    
    
    
    
    Deduct: Total stock-based compensation
expense determined under fair value based
method for all awards, net of related tax
effects
    
    
    (0.2
    )
    
    
    (0.3
    )
    
    
    Pro forma net income
    
    $
    45.7
    
    
    $
    19.4
    
    
    $
    19.1
 53




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The following table sets forth information about the fair value of each
option grant on the date of grant using the Black-Scholes option-pricing model
and the weighted-average assumptions used for such grants for the years ended
December 31: 2003
    
    2002
    
    2001Fair value of options granted
    
    $
    10.98
    
    
    $
    2.11
    
    
    $
    2.01Expected lives (years)
    
    
    7.8
    
    
    
    7.8
    
    
    
    8.0Expected volatility*
    
    
    
    
    
    
    
    
    
    
    Dividend yield
    
    
    
    
    
    
    
    
    
    
    Risk-free interest rates
    
    
    3.4
    %
    
    
    4.9
    %
    
    
    4.3
    %
  *
    
    Under the minimum value method, volatility was excluded. o. Derivatives: The Company accounts for derivative financial instruments in
accordance with SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended, which requires companies to record derivative
financial instruments as assets or liabilities measured at fair value. SFAS
No. 133 further requires that changes in the derivatives fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. Accounting for qualifying hedges allows a derivatives gains and losses
to offset related results from the hedged item on the income statement.
Companies must formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting. The Company is exposed to the impact of fluctuations in the purchase price
of natural gas consumed in operations, as well as changes in the market value
of its financial instruments. Prior to the fourth quarter of 2002, the Company
historically entered into natural gas supply agreements to minimize natural gas
pricing risks, but not for trading purposes. These supply agreements did not
meet the definition of a derivative instrument under the provisions of SFAS No.
133. In the fourth quarter of 2002, the Company adopted a policy of hedging
natural gas prices through the use of swap agreements in order to protect
against commodity price fluctuations. All of these derivative instruments held
by the Company as of December 31, 2003 and 2002 qualify as cash flow hedges.
The Company does not engage in trading activities with these financial
instruments. p. Concentration of Credit Risk: The Company sells its salt products to various
governmental agencies, manufacturers, distributors and retailers primarily in
the Midwestern United States, and throughout Canada and the United Kingdom. The
Companys potash products are sold across North America and internationally. No
single customer or group of affiliated customers accounted for more than 10% of
the Companys sales in any year during the three year period ended December 31,
2003, or for more than 10% of accounts receivable at December 31, 2003 or 2002. q. Recent Accounting Pronouncements: In July 2002, the FASB issued SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities. This
Statement addresses financial accounting and reporting for costs associated
with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring). This
Statement requires that a liability for costs associated with an exit or
disposal activity be recognized when the liability is incurred. The Company
adopted SFAS No. 146 in the first quarter of 2003 as the provisions of this
Statement are effective for exit or disposal activities initiated after
December 31, 2002. The adoption of SFAS No. 146 did not have a material impact
on the Companys financial position, results of operations or cash flows. In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of Accounting Research Bulletin
No. 51(FIN 46). FIN 46 establishes accounting guidance for consolidation of
variable interest entities that function to support the activities of the
primary beneficiary. FIN 46 54




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applies to any business enterprise, public or private, that has a controlling
interest, contractual relationship or other business relationship with a
variable interest entity. In December 2003, the FASB issued Interpretation No.
46(R) (FIN 46(R)) which supercedes FIN 46. FIN 46(R) is effective for all
Special Purpose Entities (SPEs) created prior to February 1, 2003 at the end
of the first interim or annual reporting period ending after December 15, 2003.
FIN 46(R) will be applicable to all non-SPEs created prior to February 1, 2003
by public entities at the end of the first interim or annual reporting period
ending after March 15, 2004. The Company has determined that it has no SPEs.
The Company is in the process of reviewing the applicability of FIN
46(R) to entities other than SPEs, but does not expect the adoption to have a material
effect on its consolidated statements. r. Reclassifications: Certain reclassifications were made to prior-year amounts
in order to conform with the current years presentation. 3. Asset Impairment, Restructuring and Other Charges: 2002 Following the Recapitalization, the Company incurred and expensed certain
non-recurring costs totaling $7.7 million that consist of transition costs
required to establish the Company as an independent entity. The costs were
directly related to the transition from an entity controlled by IMC and
consisted primarily of one-time compensation costs, costs to develop
stand-alone tax and inventory strategies, and costs associated with determining
the post-closing purchase price adjustment. 2001 In connection with the Recapitalization, the Company expensed certain
costs totaling $27.0 million which consist of transaction and transition costs.
The transaction costs were directly related to the acquisition and consisted
primarily of outside professional services. Below is a more detailed
description of such costs:  (1)
    
    $20.1 million of transaction costs related to activities associated
with the sale and Recapitalization, including approximately $6.4 million
in legal fees and other fees, and $13.7 million in financial services
and advice.(2)
    
    $6.9 million of transition costs, the majority of which related to
retention, recruiting, systems design and migration and other activities
and charges related to separating CMG from IMC, as well as charges for
legal costs and other asset write-offs associated with CMGs new
strategic direction. 4. Inventories: Inventories consist of the following at December 31 (in millions): 2003
    
    2002Finished goods
    
    $
    84.1
    
    
    $
    83.5Raw materials and supplies
    
    
    12.6
    
    
    
    13.0$
    96.7
    
    
    $
    96.5
 Certain inventories of approximately $7.7 million and $7.5 million at
December 31, 2003 and 2002, respectively, that will be utilized with respect to
long-lived assets have been classified in the consolidated balance sheets as
other noncurrent assets. 55




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5. Property, Plant and Equipment: Property, plant and equipment consists of the following at December 31 (in
millions): 2003
    
    2002Land and buildings
    
    $
    135.9
    
    
    $
    128.4Machinery and equipment
    
    
    408.3
    
    
    
    375.7Furniture and fixtures
    
    
    9.6
    
    
    
    9.9Mineral properties and rights
    
    
    20.3
    
    
    
    18.2Construction in progress
    
    
    6.5
    
    
    
    13.5580.6
    
    
    
    545.7Less accumulated depreciation
    
    
    318.6
    
    
    
    282.3$
    262.0
    
    
    $
    263.4
 6. Mineral Interests and Other Intangible Assets: Mineral interests include probable mineral reserves. The Company leases
mineral reserves at several of its extraction facilities. These leases have
varying terms, and many provide for a royalty payment to the lessor based on a
specific amount per ton of mineral extracted or as a percentage of revenue.
The Companys mineral interests are subject to amortization. In June 2003, the Company purchased, for $24.8 million, intangible assets
related to IMCs SOP marketing business including customer lists related to its
Carlsbad, New Mexico SOP product line and rights to produce SOP at IMCs
Carlsbad, New Mexico facility (see Note 11, Related Party Transactions). In
accordance with SFAS No. 142, the Company allocated the purchase price to these
intangible assets based on their estimated fair values. The Company allocated
approximately $0.5 million to a long-term customer contract and the remaining
$24.3 million to the rights to produce SOP at IMCs Carlsbad facility. The
long-term sales contract terminates at the end of 2008 and will be amortized
over its remaining life on a straight-line basis. The life over which the
rights to produce SOP at IMCs facility will be amortized on a straight-line
basis estimated at 25 years. Neither asset has a residual value. The aggregate amortization of mineral interests and other intangible
assets for the years ended December 31, 2003, 2002 and 2001 was $1.9 million,
$1.3 million $1.4 million, respectively. Estimated amortization expense for
fiscal 2004 through fiscal 2008 is approximately $2.9 million, annually. Mineral interests and other intangible assets consist of the following at
December 31 (in millions): 2003
    
    2002Gross
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Net Book
    
    Carrying
    
    Accumulated
    
    Net BookValue
    
    Amortization
    
    Value
    
    Value
    
    Amortization
    
    ValueProbable mineral reserves
    
    $
    158.6
    
    
    $
    10.6
    
    
    $
    148.0
    
    
    $
    158.6
    
    
    $
    8.8
    
    
    $
    149.8SOP long-term customer contract
    
    
    0.5
    
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    Other SOP intangible asset
    
    
    24.3
    
    
    
    0.1
    
    
    
    24.2
    
    
    
    
    
    
    
    
    
    
    
    183.4
    
    
    
    10.7
    
    
    
    172.7
    
    
    
    158.6
    
    
    
    8.8
    
    
    
    149.8
 56




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7. Income Taxes: As discussed in Note 2, the Companys income tax provision and related
assets and liabilities have been computed on a stand-alone basis for the
periods owned by IMC, without regard to actual liabilities and benefits related
to consolidated tax return filings by IMC. The schedule of deferred tax assets
and liabilities below reflects assets related to net operating loss
carryforwards and alternative minimum tax credits, net of the necessary
reserves, on a historical basis based upon the Recapitalization and related
transfer of certain tax assets to the Company. The following table summarizes the income tax provision of the Company for
the years ended December 31 (in millions): 2003
    
    2002
    
    2001Current:Federal
    
    $
    0.6
    
    
    $
    
    
    
    $
    5.9State
    
    
    0.2
    
    
    
    1.3
    
    
    
    0.8Foreign
    
    
    7.2
    
    
    
    12.0
    
    
    
    11.9Total current
    
    
    8.0
    
    
    
    13.3
    
    
    
    18.6Deferred:Federal
    
    
    (0.1
    )
    
    
    (2.8
    )
    
    
    5.3State
    
    
    (3.2
    )
    
    
    (0.4
    )
    
    
    0.8Foreign
    
    
    3.3
    
    
    
    1.7
    
    
    
    2.1Total deferred
    
    
    
    
    
    
    (1.5
    )
    
    
    8.2Total provision for income taxes
    
    $
    8.0
    
    
    
    11.8
    
    
    
    26.8
 57




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The following table summarizes components of income before taxes and the
effects of significant adjustments to tax computed at the federal statutory
rate for the years ended December 31 (in millions): 2003
    
    2002
    
    2001Domestic income
    
    $
    33.4
    
    
    $
    9.6
    
    
    $
    22.2Foreign income
    
    
    20.3
    
    
    
    21.9
    
    
    
    23.7Income before income taxes
    
    $
    53.7
    
    
    $
    31.5
    
    
    $
    45.9Computed tax at the federal statutory rate of 35%
    
    $
    18.8
    
    
    $
    11.0
    
    
    $
    16.1Foreign income, mining, and withholding taxes
    
    
    3.5
    
    
    
    6.0
    
    
    
    3.0Foreign exchange gain
    
    
    
    
    
    
    
    
    
    
    2.6Percentage depletion in excess of basis
    
    
    (5.1
    )
    
    
    (1.9
    )
    
    
    (2.9
    )State income taxes, net of federal income tax benefit
    
    
    (3.2
    )
    
    
    0.6
    
    
    
    1.1Restructuring and other charges
    
    
    
    
    
    
    
    
    
    
    6.8Valuation allowance on alternative minimum tax
credit carryforward
    
    
    0.6
    
    
    
    
    
    
    
    Net operating loss carryforward benefit
    
    
    (7.0
    )
    
    
    (3.4
    )
    
    
    Other
    
    
    0.4
    
    
    
    (0.5
    )
    
    
    0.1Income tax expense (benefit)
    
    $
    8.0
    
    
    $
    11.8
    
    
    $
    26.8Effective tax rate
    
    
    15
    %
    
    
    37
    %
    
    
    58
    %
 The Company does not provide U.S. federal income taxes on undistributed
earnings of foreign companies that are not currently taxable in the United
States. No undistributed earnings of foreign companies were subject to U.S.
income tax in the years ended December 31, 2003, 2002 and 2001. Total
undistributed earnings on which no U.S. federal income tax has been provided
were $94.1 million at December 31, 2003. If these earnings are distributed,
foreign tax credits may become available under current law to reduce or
possibly eliminate the resulting U.S. income tax liability. 58




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Under SFAS No. 109 deferred tax assets and liabilities are recognized for
the estimated future tax effects, based on enacted tax law, of temporary
differences between the values of assets and liabilities recorded for financial
reporting and for tax purposes and of net operating loss and other
carryforwards. Significant components of the Companys deferred tax assets and
liabilities were as follows at December 31 (in millions): 2003
    
    2002Deferred tax liabilities:Property, plant and equipment
    
    $
    90.5
    
    
    $
    99.2Total deferred tax liabilities
    
    
    90.5
    
    
    
    99.2Deferred tax assets:Net operating loss carryforwards
    
    
    31.5
    
    
    
    38.5Alternative minimum tax credit carryforwards
    
    
    3.0
    
    
    
    2.4Other assets
    
    
    12.8
    
    
    
    15.7Subtotal
    
    
    47.3
    
    
    
    56.6Valuation allowance
    
    
    (34.5
    )
    
    
    (40.9
    )Total deferred tax assets
    
    
    12.8
    
    
    
    15.7Net deferred tax liabilities
    
    $
    77.7
    
    
    $
    83.5
 SFAS No. 109 requires a valuation allowance against deferred tax assets
if, based on available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized. As of December 31, 2003 and 2002,
the Company had a valuation allowance relating to such items of $34.5 million
and $40.9 million, respectively. At December 31, 2003, the Company has net operating loss carryforwards of
approximately $85.7 million. The Company is a loss corporation as defined in
Section 382 of the Internal Revenue Code. The Company has previously incurred
three ownership changes placing annual limitations on the amount of each loss
carryforward utilization. If not utilized, these carryforwards expire between
2006 and 2022. The Company also has a U.S. federal alternative minimum tax
credit carryforward at December 31, 2003 of approximately $3.0 million. This
credit carryforward may be carried forward indefinitely to offset any excess of
regular tax liability over alternative minimum tax liability subject to certain
separate company limitations. The alternative minimum tax credit has been fully
offset by a valuation allowance since the Company does not foresee utilization
of these credits. We intend to maintain this valuation allowance against the aforementioned
deferred tax assets until sufficient positive evidence exists to support
reversal of all or a portion of the valuation allowance. The ultimate recovery
of the deferred tax assets is largely dependent upon the availability of an
adequate level of domestic taxable income. In the third quarter of 2003, in accordance with the merger agreement
related to the Recapitalization, IMC indemnified the Company for approximately
$14.1 million for income taxes related to periods prior to the
Recapitalization. The Company had previously recognized income tax expense for
these items. The Company recorded the indemnification as a reduction to income
taxes provided for in prior years and an increase to additional paid in
capital. The Company received $8.8 million from IMC during the third quarter
and used the cash to pay income taxes for periods prior to Recapitalization. 59




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8. Long-term Debt: In November 2001, the Company issued $250 million aggregate principal
amount of 10% Senior Subordinated Notes due August 15, 2011 (the Notes) in a
private offering pursuant to Rule 144A under the Securities Act of 1933. The
proceeds from the issuance of the Notes were used to finance the
Recapitalization and certain related costs. Interest on the Notes is payable
semi-annually in cash on each February 15 and August 15. The Notes may be
redeemed in whole or in part from time to time, on or after August 15, 2006, at
specified redemption prices. The Companys domestic restricted subsidiaries as
of the issue date are the guarantors of the Notes, with restricted net assets
of $341.1 million at December 31, 2003. On November 28, 2001, the Company entered into a $360 million credit
facility (the Credit Facility) with a syndicate of financial institutions.
The Credit Facility allowed for an eight-year $225 million term loan (the Term
Loan). The Term Loan was fully drawn as of closing and used to finance the
Recapitalization and certain related costs. In addition, the Credit Facility
also provides a six and one-half year, $135 million revolving credit facility,
$30 million of which may be drawn in Canadian dollars and $10 million of which
may be drawn in British pounds sterling. Additionally, the revolving credit
facility includes a sub-limit for letters of credit in an amount not to exceed
$50 million. Borrowings under the Credit Facility incur interest at either the
Eurodollar Rate (LIBOR) or the greater of a specified U.S. and Canadian prime
lending rate or the federal funds effective rate plus 0.50% (Base Rate) plus,
in each case, a margin ranging from 1.75% to 3.50%, which margin is dependent
upon the Companys leverage ratio, as determined quarterly. Interest on the
Credit Facility is payable at least quarterly. The Company had outstanding letters of credit of $9.4 million as of
December 31, 2003. For each drawn letter of credit, the Company is required to
pay a per annum participation fee ranging from 2.75% to 3.50%, depending on the
Companys leverage ratio, plus other administrative charges. Additionally, the
Company will pay a commitment fee ranging from 0.375% to 0.500% per annum,
depending on the Companys leverage ratio, and is payable quarterly on the
available portion of the revolving credit facility. As of December 31, 2003,
additional borrowings of up to $111.6 million under the revolving credit
facility were available for working capital and general corporate purposes,
subject to certain conditions. The Term Loan requires quarterly principal reductions. Also, the Company
may be required to make mandatory additional principal reductions, based on the
Companys excess cash flow and certain other events as described in the Credit
Facility. No mandatory additional principal reductions were required in 2003. On April 10, 2002, the Company completed an offering of $75.0 million
aggregate principal amount of 10% Senior Subordinated Notes due 2011 (the New
Notes). The New Notes were issued to the bondholders at a premium of $3.4
million, plus accrued interest of $1.1 million from February 15, 2002 and
accordingly, the Company received gross proceeds of $79.5 million from the
offering of the notes. The New Notes, together with the $250.0 million
aggregate principal amount of Notes, are treated as a single class of
securities under the Companys existing indenture. The proceeds from the
offering of the New Notes, net of transaction costs, were used to repay
borrowings under the Companys Credit Facility. In connection with the
offering, the Company amended and restated the Credit Facility with respect to
a reduction in the Term Loan to $150.0 million and a 0.75% reduction in the
interest rate margin charged to the Company on the Term Loan. The Company also
incurred a charge of approximately $5.3 million in April 2002, related to the
write-off of the deferred financing costs associated with the refinancing of
the original Term Loan. The Credit Facility is principally secured by all existing and future
assets of the Company, and requires the Company to maintain certain minimum
financial covenants including minimum interest coverage ratio, a maximum total
leverage ratio, and a maximum level of capital expenditures. The Credit
Facility and the indentures governing the Notes limit the Companys ability,
among other things, to: incur additional indebtedness or contingent
obligations; pay dividends or make distributions to stockholders; repurchase or
redeem stock; make investments; grant liens; make capital expenditures; enter
into transactions with stockholders and affiliates; sell 60




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##### Table of Contents



assets; and acquire the assets of, or merge or consolidate with, other
companies. As of December 31, 2003, the Company was in compliance with each of
its covenants. On May 5, 2003, the Company amended the Credit Facility to allow CMI to
pay a dividend to be funded with either cash on hand or with borrowings under
the amended and restated senior revolving credit facility. Additionally, the
amendment permits CMI to repurchase certain securities (other than the Notes)
not held by Apollo or management. On May 22, 2003, CMI issued $179.6 million in aggregate principal amount
at maturity of subordinated discount notes in a private placement under Rule
144A and Regulation S of the Securities Act. The proceeds from the sale of the
subordinated discount notes were distributed to CMIs stockholders in the form
of common stock dividends. In connection with the offering of CMIs
subordinated discount notes, the Company amended its senior credit facilities
in order to permit the distribution of the proceeds from the offering of CMIs
subordinated discount notes to CMI stockholders. On November 17, 2003, the Company further amended the Credit Facilities to
allow CMI to pay future dividends funded with either cash on hand or with
borrowings under the amended and restated senior revolving credit facility. Third-party long-term debt consists of the following at December 31 (in
millions) (The notes are listed in order of subordination with all notes
subordinate to the Credit Facility borrowings): 2003
    
    2002Senior Subordinated Notes
    
    $
    325.0
    
    
    $
    325.0Term Loan
    
    
    78.3
    
    
    
    109.3Revolving Credit Facility
    
    
    14.0
    
    
    
    Other, including capital lease obligations
    
    
    
    
    
    
    0.1417.3
    
    
    
    434.4Plus premium on Senior Subordinated Notes, net
    
    
    2.9
    
    
    
    3.2Less current portion
    
    
    (0.8
    )
    
    
    (1.2
    )$
    419.4
    
    
    $
    436.4
 Future minimum maturities of long-term debt for the years ending December
31, are as follows (in millions): 2004
    
    $
    0.82005
    
    
    0.82006
    
    
    0.82007
    
    
    0.82008
    
    
    14.8Thereafter.
    
    
    399.3$
    417.3
 As of December 31, 2003, the estimated fair value of the notes, based on
available trading information, was $364.0 million, and the estimated fair value
of amounts outstanding under the Credit Facility approximated book value. 61




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9. Pension Plans and Other Benefits: The Company has two defined benefit pension plans for certain of its U.K.
and U.S. employees. Benefits of the U.K. plan are based on a combination of
years of service and compensation levels. The Companys funding policy is to
make the minimum annual contributions required by applicable regulations. The Companys pension plan assets are managed by external investment
managers. The Companys investment strategy is to maximize return on
investments while minimizing risk. The Company believes the best way to
accomplish this goal is to take a conservative approach to its investment
strategy by investing in high-grade equity and debt securities. Policy requires
that equity securities comprise approximately 75% of the total portfolio, and
that approximately 25% be invested in debt securities. The Companys
weighted-average asset allocations at December 31, 2003 and 2002, by asset
category are as follows: Plan Assetsat December 31,Asset Category
    
    2003
    
    2002Cash and cash equivalents
    
    
    1
    %
    
    
    1
    %Equity Securities
    
    
    76
    
    
    
    78Debt Securities
    
    
    23
    
    
    
    21Total
    
    
    100
    %
    
    
    100
    %
 The Company makes actuarial assumptions that it believes are reasonable.
Those assumptions for the year ended December 31, 2003 include a discount rate
of 5.25%, expected return on plan assets of 6.25%, and rate of compensation
increase of 2.75%. Those assumptions for the years ended December 31, 2002 and
2001 include a discount rate of 5.5%, expected return on plan assets of 6.5%,
and rate of compensation increase of 3.5%. The overall expected long-term rate of return on assets is a
weighted-average expectation for the return on plan assets. The Company
considers historical performance and current benchmarks to arrive at expected
long-term rates of return in each asset category. The Company assumed that 75%
of its portfolio would be invested in equity securities, with the remainder
invested in debt securities. The Company made contributions to the plans of approximately $1.5 million,
$1.1 million and $0.8 million in the years ended December 31, 2003, 2002 and
2001, respectively. The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid (in millions): FutureExpectedBenefitCalendar Year
    
    Payments2004
    
    $
    1.62005
    
    
    1.52006
    
    
    1.32007
    
    
    1.42008
    
    
    1.42009 - 2013
    
    
    8.5
 62




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##### Table of Contents



The following table sets forth pension obligations and plan assets for the
Companys defined benefit plans, based on a November 30 measurement date for
2003 and a September 30 measurement date for 2002, as of December 31 (in
millions): 2003
    
    2002Change in benefit obligation:Benefit obligation as of January 1
    
    $
    56.2
    
    
    $
    44.4Service cost
    
    
    1.4
    
    
    
    1.2Interest cost
    
    
    2.9
    
    
    
    2.6Transfer in from IMC
    
    
    
    
    
    
    2.2Actuarial (gain) loss
    
    
    (3.3
    )
    
    
    1.6Benefits paid
    
    
    (1.4
    )
    
    
    (1.1
    )Currency fluctuation adjustment
    
    
    5.9
    
    
    
    5.2Other
    
    
    0.1
    
    
    
    0.1Benefit obligation as of December 31
    
    $
    61.8
    
    
    $
    56.2Change in plan assets:Fair value as of January 1
    
    $
    35.0
    
    
    $
    34.2Actual return
    
    
    6.4
    
    
    
    (4.7
    )Company contributions
    
    
    1.5
    
    
    
    1.1Transfer in from IMC
    
    
    
    
    
    
    2.3Currency fluctuation adjustment
    
    
    4.4
    
    
    
    3.1Benefits paid
    
    
    (1.4
    )
    
    
    (1.1
    )Other
    
    
    0.1
    
    
    
    0.1Fair value as of December 31
    
    $
    46.0
    
    
    $
    35.0Funded status of the plans
    
    $
    (15.8
    )
    
    $
    (21.2
    )Unrecognized net (gain) loss
    
    
    13.6
    
    
    
    20.5Unrecognized transition liability
    
    
    0.4
    
    
    
    0.4Net amount recognized
    
    $
    (1.8
    )
    
    $
    (0.3
    )Amounts recognized in the balance sheet:Prepaid (accrued) benefit cost
    
    $
    (0.2
    )
    
    $
    (0.3
    )Accrued benefit liability
    
    
    (12.0
    )
    
    
    (17.4
    )Other noncurrent assets
    
    
    0.4
    
    
    
    0.4Accumulated other comprehensive loss
    
    
    10.0
    
    
    
    17.0Net amount recognized
    
    $
    (1.8
    )
    
    $
    (0.3
    )
 The accumulated benefit obligations for the defined benefit pension plans
with accumulated benefit obligations in excess of the plans assets were $58.1
million and $52.7 million, as of December 31, 2003 and 2002, respectively. The components of net pension expense were as follows for the years ended
December 31 (in millions): 2003
    
    2002
    
    2001Service cost for benefits earned during the year
    
    $
    1.4
    
    
    $
    1.2
    
    
    $
    1.1Interest cost on projected benefit obligation
    
    
    2.9
    
    
    
    2.6
    
    
    
    2.3Return on plan assets
    
    
    (2.2
    )
    
    
    (2.4
    )
    
    
    (3.0
    )Net amortization and deferral
    
    
    1.1
    
    
    
    0.5
    
    
    
    0.1Net pension expense
    
    $
    3.2
    
    
    $
    1.9
    
    
    $
    0.5
 63




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The Company has defined contribution and pre-tax savings plans (Savings
Plans) for certain of its employees. Under each of the Savings Plans,
participants are permitted to defer a portion of their compensation. Company
contributions to the Savings Plans are based on a percentage of employee
contributions. Additionally, certain of the Companys Savings Plans have a
profit sharing feature for salaried and non-union hourly employees. The
Company contribution to the profit-sharing feature is based on the employees
age and pay and the Companys financial performance. Expense attributable to
these Savings Plans was $4.1 million, $3.3 million and $2.9 million for the
years ended December 31, 2003, 2002 and 2001, respectively. 10. Commitments and Contingencies: The Company is involved in legal and administrative proceedings and claims
of various types from normal Company activities. While any litigation contains
an element of uncertainty, management presently believes that the outcome of
each such proceeding or claim which is pending or known to be threatened, or
all of them combined, will not have a material adverse effect on the Companys
results of operations or financial position. Leases:The Company leases certain property and equipment under
non-cancelable operating leases for varying periods. The aggregate future
minimum annual rentals under lease arrangements as of December 31, 2003, are as
follows (in millions): OperatingCalendar Year
    
    Leases2004
    
    $
    6.22005
    
    
    4.52006
    
    
    3.42007
    
    
    3.02008
    
    
    1.8Thereafter
    
    
    7.8$
    26.7
 Rental expense, net of sublease income, was $8.2 million, $8.1 million and
$7.7 million for the years ended December 31, 2003, 2002 and 2001,
respectively. Royalties:The Company has various private, state and Canadian provincial
leases associated with the salt and specialty potash businesses. Royalty
expense related to these leases was $5.8 million, $4.5 million and $5.3 million
for the years ended December 31, 2003, 2002 and 2001, respectively. Sales Contracts:The Company has various salt and other deicing-product
sales contracts that include performance provisions governing delivery and
product quality. These sales contracts either require the Company to maintain
performance bonds for stipulated amounts or contain contractual penalty
provisions in the event of non-performance. For the three years ended December
31, 2003, the Company has had no material penalties related to these sales
contracts. At December 31, 2003, the Company had approximately $15.3 million
of outstanding performance bonds. Purchase Commitments:In connection with the operations of the Companys
facilities, the Company purchases electricity, steam, other raw materials and
services from third parties under existing contracts, extending, in some cases,
for multiple years. Purchases under these contracts are generally based on
prevailing market prices. The Companys future minimum long-term purchase
commitments are approximately $8.7 million annually from 2004 to 2008 and
approximately $20.7 million in total, thereafter. Environmental Matters:At December 31, 2003 and 2002, the Company has
recorded accruals of $2.3 million and $2.0 million, respectively, for estimated
future costs associated with existing environmental exposures 64




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##### Table of Contents



at certain of its facilities. The Company estimates that a significant portion
of these accruals will be used over the next five years. Purchase Agreement:During 2002, the Company amended an agreement with a
supplier related to the purchase of salt from the suppliers chemical
production facility in Tennessee. The Company has received a one-time cash
payment of $8.0 million related to the amendment. In 2002, the Company
recognized $0.6 million as a net reduction to cost of sales in the Consolidated
Statement of Operations resulting from recognition of a ratable portion of the
cash received and the sale of certain assets. In 2003, the Company recognized
another ratable portion, $0.9 million, as a net reduction to cost of sales.
Approximately $5.4 million of the original one-time cash payment remains to be
recognized over the remaining life of the amended agreement, terminating
December 2010, as certain conditions are met by the Company and the supplier.
Alternatively, the Company may elect to resume purchasing salt from the
suppliers facility. In that event, the Company would repay a ratable portion
of the cash received. Parent Company Obligations:In December 2002, certain holders of CMIs
series A redeemable preferred stock converted their preferred stock into
subordinated discount debentures. CMI then issued $123.5 million in aggregate
principal amount of senior discount notes in exchange for CMI subordinated
discount debentures. No cash interest will accrue on the senior discount notes
prior to December 15, 2007. The accreted value of each senior discount note
will increase from the date of issuance until December 15, 2007 at a rate of 12
 3⁄4% per annum, reflecting the accrual of non-cash interest, such that the
accreted value will equal the principal amount at maturity on December 15,
2007. Cash interest will accrue on the senior discount notes at a rate of 12
 3⁄4% per annum, beginning December 15, 2007. The first cash interest payment
will be made on June 15, 2008. The accreted value of the senior discount notes
was $75.7 million and $66.9 million at December 31, 2003 and 2002,
respectively. On May 22, 2003, CMI issued $179.6 million in aggregate principal amount
at maturity of subordinated discount notes in a private placement under Rule
144A and Regulation S of the Securities Act. No cash interest will accrue on
the subordinated discount notes prior to June 1, 2008. The accreted value of
each subordinated discount note will increase from the date of issuance until
June 1, 2008 at a rate of 12% per annum, reflected in the accrual of non-cash
interest, such that the accreted value will equal the principal amount at
maturity on June 1, 2008. Cash interest will accrue on the subordinated
discount notes at a rate of 12% per annum, beginning June 1, 2008 through
maturity. The proceeds from the sale of the subordinated discount notes were
distributed to CMI stockholders. The accreted value of the subordinated
discount notes at December 31, 2003 was $107.4 million. The senior discount notes and subordinated discount notes are not a part
of our combined and consolidated statements. However, our operations are
currently the main source of cash that is expected to service the senior
discount notes, subordinated discount notes and any future dividends on CMI
common stock. 11. Related Party Transactions: The following related party transactions are in addition to those
disclosed elsewhere in the notes to the combined and consolidated financial
statements. Transactions with IMC and its subsidiaries (IMC affiliates) and Apollo
and its subsidiaries (Apollo affiliates) are considered related parties. The
Company believes that all of the related party transactions approximate terms
which would otherwise be negotiated by the Company with unrelated third
parties. During the year ended December 31, 2002, CMI and IMC reached an agreement
related to the settlement of certain provisions of the agreement to transfer
controlling interest in CMG to CMI. As part of the settlement, CMG received
approximately $13.0 million in cash. CMG recorded the proceeds as a capital
contribution from CMI. 65




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##### Table of Contents



The Company did not record any interest income or expense related to IMC
affiliates for the years ended December 31, 2003 and 2002. For the year ended
December 31, 2001, the Company recorded interest income and interest expense
related to IMC affiliates of $2.9 million and $10.8 million, respectively. The Company did not record any sales to IMC affiliates for the years ended
December 31, 2003 and 2002. The Companys sales to IMC affiliates were $33.7
million for the year ended December 31, 2001. The Company recorded purchases
from IMC affiliates of $25.6 million, $19.0 million and $16.5 million for the
years ended December 31, 2003, 2002 and 2001, respectively. Until November 28, 2001, the Company sold potash to IMC affiliates who
marketed, distributed and sold this product to the agriculture industry. The
Company was not charged for these services and received a discounted price for
the product sales. The Company estimates its sales and operating earnings for
the year ended December 31, 2001 would have been $528.4 million and $60.3
million, respectively, had the Company provided its own sales and marketing
resources and directly sold its potash product (unaudited). Subsequent to November 28, 2001, the Company entered into an agreement
with IMC whereby the Company markets SOP produced by IMC at their New Mexico
facility as an agent. The Company recognized approximately $0.7 million and
$0.5 million in fees from IMC for the years ended December 31, 2003 and 2002,
respectively. In June 2003, the Company purchased, for $24.5 million, intangible assets
related to IMCs SOP marketing business including customer lists related to its
Carlsbad, New Mexico SOP product line and rights to produce SOP at IMCs
Carlsbad, New Mexico facility. The Company also incurred approximately $0.3
million of related transaction costs. As part of the transaction, the agreement
under which the Company, as agent, markets SOP produced by IMC at their
Carlsbad, New Mexico facility terminated on November 30, 2003. As of November
30, 2003, the Company had purchased approximately $3.9 million of SOP finished
goods inventory from IMC. IMC has provided certain management services to the Company. The Company
estimates the cost of these services to be $0.7 million for the year ended
December 31, 2001. These costs have been included in the Companys results for
that period and have discontinued effective with the Recapitalization.
Services provided by IMC included tax, treasury and cash management, risk
management, information systems and certain employee benefit administration
costs. These estimates are not necessarily indicative of future expenses of
the Company or expenses that would have resulted if the Company had been
operated as a separate entity. The Company subleases railcars from affiliates of IMC that are used by us
to transport products. At December 31, 2003, the Company leased approximately
46 railcars with terms that expire on various dates throughout 2005 and with
renewal options available on some railcars until 2014. The lease amounts
expensed were $0.5 million, $0.8 million and $0.8 million for the years ended
December 31, 2003, 2002, and 2001, respectively. In connection with the Recapitalization, the Company entered into a
management agreement with Apollo. The agreement allows us and any of our
affiliates to utilize Apollos expertise in areas such as financial
transactions, acquisitions and other matters that relate to our business,
administration and policies. Apollo will receive an annual fee of
approximately $1.0 million for its management services and advice through 2011.
During the years ended December 31, 2003, 2002 and 2001, the Company recorded
management fee charges of $1.0 million, $0.9 million and $0.1 million,
respectively, from Apollo. Additionally, during the year ended December 31,
2001, the Company recorded a $7.5 million charge to Apollo for transaction fees
related to the Recapitalization. Upon completion of CMIs initial public offering in December 2003, the
Company amended the management consulting agreement with Apollo, whereby Apollo
will have the right to terminate the amended management consulting agreement at
any time upon prior written notice to the Company. Upon Apollos election to
terminate the amended management consulting agreement, the Company will pay
Apollo approximately $5.5 66




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##### Table of Contents



million, less any amounts paid under the annual fee from the date of the
amended agreement, as a final payment for all services rendered under the
agreement. Upon termination of the agreement by Apollo, any future obligations
of Apollo under the agreement will effectively terminate. Such payment will be
expensed as incurred. On September 29, 2003, the CMI Senior Executives Deferred Compensation
Plan was terminated and the CMI capital stock held in the deferred compensation
plan was subsequently distributed to the participants with no impact to the
Company. In May and June 2003, the Company made dividend payments to CMI of $3.7
million and $18.0 million, respectively. Throughout 2003 and 2002, CMG advanced CMI cash to pay certain third party
expenses. Advances totaling approximately $8.2 million were made during 2003
that primarily consisting of deferred financing costs related to the senior
discount notes and subordinated discount notes issued by CMI, costs related to
CMIs initial public offering and costs related to the repurchase of CMIs
redeemable preferred stock. Advances totaling approximately $2.2 million were
made during 2002 that primarily consisted of deferred financing costs related
to the senior discount notes issued by CMI during 2002. At December 31, 2003
and 2002, CMG is due $10.4 million and $2.2 million, respectively, from CMI.
This receivable is recorded in other noncurrent assets. 12. Commodity Derivative Instruments and Hedging Activities: During the fourth quarter of 2002, the Company adopted a policy of hedging
natural gas prices through the use of swap agreements in order to protect
against commodity price fluctuations. No derivative instruments existed prior
to the fourth quarter of 2002. The Company does not engage in trading
activities with these financial instruments. All derivative instruments held by the Company as of December 31, 2003 and
2002 qualify as cash flow hedges. The derivative instruments outstanding at
December 31, 2003 had expiration dates extending into December 2005. For
derivatives classified as cash flow hedges, changes in fair value are
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative designated as a hedge, if
any, is immediately recognized in earnings. Hedge effectiveness is measured
quarterly based on the change in relative fair value between the derivative
contract and the hedged item over time. Hedge ineffectiveness had no
significant impact on earnings for 2003 or 2002. We recognized increases in
the net derivative asset and associated increases in accumulated other
comprehensive income of approximately $1.1 and $0.1 million, at December 31,
2003 and 2002, respectively. The notional amounts of natural gas swap
derivative contracts outstanding were $12.9 million and $1.5 million, at
December 31, 2003 and 2002, respectively. 13. Operating Segments: The Companys reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies.
The Company has two reportable segments: Salt and Potash. Salt produces salt
for use in road deicing, food processing, water softeners, and agricultural and
industrial applications. Potash crop nutrients and industrial grade potash are
produced and marketed through the Potash segment. The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. All intersegment sales prices
are market-based. The Company evaluates performance based on operating earnings
of the respective segments. The notes to the combined and consolidated
financial statements include detail related to special charges and should be
referred to when viewing the segment information herein. Beginning in 2003, the Company no longer allocates corporate general and
administrative costs incurred by CMI and CMG to its operating segments. For
purposes of segment disclosure information, these costs are now classified in
Other. The Company believes that this action will improve its ability to
analyze its segment 67




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##### Table of Contents



operating results. The annual periods presented below have been updated to
conform to the Companys 2003 manner of analyzing its operating segment
results. Segment information as of and for the years ended December 31, is as
follows (in millions): 2003
    
    Salt
    
    Potash
    
    Other (c)
    
    TotalSales from external customers
    
    $
    546.6
    
    
    $
    54.0
    
    
    $
    
    
    
    $
    600.6Intersegment sales
    
    
    
    
    
    
    9.4
    
    
    
    (9.4
    )
    
    
    Cost of sales  shipping and handling
    
    
    156.6
    
    
    
    8.7
    
    
    
    
    
    
    
    165.3Operating earnings (loss)
    
    
    108.8
    
    
    
    7.5
    
    
    
    (17.9
    )
    
    
    98.4Depreciation, depletion and amortization
    
    
    34.2
    
    
    
    7.9
    
    
    
    
    
    
    
    42.1Total assets
    
    
    522.6
    
    
    
    141.5
    
    
    
    25.9
    
    
    
    690.0Capital expenditures
    
    
    17.7
    
    
    
    2.9
    
    
    
    
    
    
    
    20.6
 2002
    
    Salt
    
    Potash
    
    Other (d)
    
    TotalSales from external customers
    
    $
    452.5
    
    
    $
    50.1
    
    
    $
    
    
    
    $
    502.6Intersegment sales
    
    
    
    
    
    
    8.9
    
    
    
    (8.9
    )
    
    
    Cost of sales  shipping and handling
    
    
    130.2
    
    
    
    7.3
    
    
    
    
    
    
    
    137.5Operating earnings (loss)(a)
    
    
    95.1
    
    
    
    4.8
    
    
    
    (22.2
    )
    
    
    77.7Depreciation, depletion and amortization
    
    
    29.2
    
    
    
    7.9
    
    
    
    
    
    
    
    37.1Total assets
    
    
    509.8
    
    
    
    116.0
    
    
    
    18.2
    
    
    
    644.0Capital expenditures
    
    
    15.3
    
    
    
    4.2
    
    
    
    
    
    
    
    19.5
 2001
    
    Salt
    
    Potash
    
    Other (d)
    
    TotalSales from external customers
    
    $
    485.0
    
    
    $
    38.2
    
    
    $
    
    
    
    $
    523.2Intersegment sales
    
    
    
    
    
    
    8.8
    
    
    
    (8.8
    )
    
    
    Cost of sales  shipping and handling
    
    
    143.2
    
    
    
    
    
    
    
    
    
    
    
    143.2Operating earnings (loss)(b)
    
    
    94.3
    
    
    
    0.7
    
    
    
    (37.9
    )
    
    
    57.1Depreciation, depletion and amortization
    
    
    24.5
    
    
    
    8.1
    
    
    
    
    
    
    
    32.6Total assets
    
    
    514.2
    
    
    
    120.9
    
    
    
    20.5
    
    
    
    655.6Capital expenditures
    
    
    38.5
    
    
    
    4.5
    
    
    
    
    
    
    
    43.0
  (a)
    
    Includes $7.7 million related to transition costs.(b)
    
    $27.0 million related to transaction and transition costs.(c)
    
    Other includes corporate entities and eliminations. Financial information relating to the Companys operations by geographic
area for the years ended December 31, is as follows (in millions): Sales
    
    2003
    
    2002
    
    2001United States
    
    $
    394.5
    
    
    $
    345.2
    
    
    $
    339.1Canada
    
    
    128.7
    
    
    
    90.8
    
    
    
    99.4United Kingdom
    
    
    68.2
    
    
    
    60.0
    
    
    
    79.4Other
    
    
    9.2
    
    
    
    6.6
    
    
    
    5.3$
    600.6
    
    
    $
    502.6
    
    
    $
    523.2
 68




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##### Table of Contents



Financial information relating to the Companys long-lived assets,
including deferred financing costs and other long-lived assets, by geographic
area as of December 31 (in millions): Long-Lived Assets
    
    2003
    
    2002United States
    
    $
    273.1
    
    
    $
    248.4Canada
    
    
    122.4
    
    
    
    128.2United Kingdom
    
    
    74.1
    
    
    
    63.8$
    469.6
    
    
    $
    440.4
 14. Stock Options: On November 28, 2001, CMI adopted a stock option plan pursuant to which
options with respect to a total of 2,783,283 shares of CMIs common stock are
available for grant to employees of, consultants to, or directors of CMI or the
Company. The board of directors of CMI administers the option plan. The right
to grant options under the plan expires November 2011, the tenth anniversary of
the closing date of the Recapitalization. Options granted under the plan are or
will be either non-qualified or incentive stock options. Options are granted in
amounts and at such times and to such eligible persons as determined by the
board of directors of CMI. One-half of the options granted to employees will vest in varying amounts
from one to four years depending on the terms of the individual option
agreements. However, generally upon termination of a grantees employment
within one year following the sale of the Company, all of the time vesting
options allocated to such terminated employee shall vest immediately. The other
one-half of the options granted to employees are performance options and vested
upon completion of CMIs initial public offering in December 2003. Options
granted to members of the board of directors vest at the time of grant. Options
expire on the thirtieth day immediately following the eighth anniversary of
issuance. The weighted-average exercise price approximates the weighted-average
grant-date fair value of options granted during 2002 and 2001. As a result of
CMIs initial public offering, the Company determined that certain stock option
issuances made during 2003 were issued with exercise prices below the fair
value. The weighted average fair value for options granted during 2003 was
$10.98. 69




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##### Table of Contents



The table below has been adjusted to reflect the 4.982 for one stock split that
occurred at CMI on December 11, 2003. The following is a summary of CMIs
stock option activity and related information for the following periods: Weighted-Number of
    
    averageoptions
    
    Exercise priceOutstanding at December 31, 2001
    
    
    617,043
    
    
    $
    2.01Granted
    
    
    1,122,433
    
    
    
    2.11Exercised
    
    
    
    
    
    
    Cancelled / Expired
    
    
    
    
    
    
    Outstanding at December 31, 2002
    
    
    1,739,476
    
    
    
    2.08Exercised
    
    
    (23,053
    )
    
    
    2.01Cancelled / Expired
    
    
    (6,592
    )
    
    
    2.01Outstanding at May 22, 2003
    
    
    1,709,831
    
    
    
    2.08Outstanding at May 23, 2003
after the amendment to the
option plan (a)
    
    
    2,455,943
    
    
    
    1.45Granted
    
    
    50,311
    
    
    
    7.04Exercised (b)
    
    
    (246,458
    )
    
    
    1.41Cancelled / Expired
    
    
    (42,832
    )
    
    
    1.40Outstanding at December 31, 2003
    
    
    2,216,964
    
    
    $
    1.58
  (a)
    
    In connection with CMIs $100.0 million
dividend payment on its common stock in May 2003, the
number of CMI stock options and their exercise prices
were adjusted to preserve the intrinsic value of the
stock options that existed prior to the dividend. This
was accomplished by decreasing the exercise price of
outstanding options and increasing the number of
outstanding options by a factor of 1.436 to one.(b)
    
    Exercised options include 6,077 shares of
common stock that were issued from CMI treasury stock. The following table summarizes information about options outstanding and
exercisable at December 31, 2003: Options outstanding
    
    Options exercisableWeighted-averageremaining
    
    Weighted-
    
    
    
    
    
    Weighted-contractual
    
    average
    
    
    
    
    
    averageRange of
    
    Number
    
    life
    
    exercise
    
    Number
    
    exerciseexercise prices
    
    outstanding
    
    (years)
    
    price
    
    outstanding
    
    price$1.40
    
    
    2,100,298
    
    
    
    6.15
    
    
    $
    1.40
    
    
    
    1,618,787
    
    
    $
    1.40$1.41 - $2.60
    
    
    6,377
    
    
    
    6.58
    
    
    $
    2.60
    
    
    
    3,642
    
    
    $
    2.60$2.61 - $3.23
    
    
    59,980
    
    
    
    6.83
    
    
    $
    3.23
    
    
    
    57,273
    
    
    $
    3.23$3.24 - $5.17
    
    
    12,942
    
    
    
    7.58
    
    
    $
    5.17
    
    
    
    6,471
    
    
    $
    5.17$5.18 - $7.70
    
    
    37,367
    
    
    
    7.93
    
    
    $
    7.70
    
    
    
    37,367
    
    
    $
    7.70Totals
    
    
    2,216,964
    
    
    
    6.19
    
    
    $
    1.58
    
    
    
    1,723,540
    
    
    $
    1.61
 Options exercisable at December 31, 2002 numbered 532,534. There were no
options exercisable at December 31, 2001. 70




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##### Table of Contents



15. Other Comprehensive Income: The following tables provide additional detail related to amounts recorded
in Other Comprehensive Income: AccumulatedUnfunded
    
    Unrealized
    
    Foreign
    
    OtherPension
    
    gains on cash
    
    currency
    
    comprehensiveLosses
    
    flow hedges
    
    Adjustments
    
    incomeBalance at December 31, 2000
    
    $
    
    
    
    $
    
    
    
    $
    1.1
    
    
    $
    1.1January 1, 2001    November 27, 2001 changes
    
    
    
    
    
    
    
    
    
    
    (3.2
    )
    
    
    (3.2
    )Balance at November 27, 2001
    
    $
    
    
    
    $
    
    
    
    $
    (2.1
    )
    
    $
    (2.1
    )Balance at November 28, 2001
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    November 28, 2001 - December 31, 2001 changes
    
    
    (5.4
    )
    
    
    
    
    
    
    3.0
    
    
    
    (2.4
    )Balance at December 31, 2001
    
    
    (5.4
    )
    
    
    
    
    
    
    3.0
    
    
    
    (2.4
    )2002 changes
    
    
    (6.5
    )
    
    
    0.1
    
    
    
    8.9
    
    
    
    2.5Balance at December 31, 2002
    
    
    (11.9
    )
    
    
    0.1
    
    
    
    11.9
    
    
    
    0.12003 changes
    
    
    4.9
    
    
    
    0.7
    
    
    
    19.8
    
    
    
    25.4Balance at December 31, 2003
    
    $
    (7.0
    )
    
    $
    0.8
    
    
    $
    31.7
    
    
    $
    25.5
 TaxBefore tax
    
    (expense)
    
    Net-of-taxFor the year ended December 31, 2003:
    
    amount
    
    benefit
    
    amountMinimum pension liability adjustment
    
    $
    7.0
    
    
    $
    (2.1
    )
    
    $
    4.9Gas hedging adjustment
    
    
    1.1
    
    
    
    (0.4
    )
    
    
    0.7Foreign currency translation adjustment
    
    
    19.8
    
    
    
    
    
    
    
    19.8Other comprehensive income
    
    $
    27.9
    
    
    $
    (2.5
    )
    
    $
    25.4
 16. Quarterly Results (Unaudited) (a) (in millions): Quarter
    
    First
    
    Second
    
    Third
    
    Fourth
    
    Year2003Sales
    
    $
    212.7
    
    
    $
    88.7
    
    
    $
    97.1
    
    
    $
    202.1
    
    
    $
    600.6Cost of sales  shipping and
handling
    
    
    64.1
    
    
    
    21.1
    
    
    
    24.1
    
    
    
    56.0
    
    
    
    165.3Cost of sales  products
    
    
    95.5
    
    
    
    48.9
    
    
    
    55.1
    
    
    
    88.8
    
    
    
    288.3Gross profit
    
    
    53.1
    
    
    
    18.7
    
    
    
    17.9
    
    
    
    57.3
    
    
    
    147.0Operating earnings (loss)
    
    
    41.5
    
    
    
    7.2
    
    
    
    6.7
    
    
    
    43.0
    
    
    
    98.4Net income
    
    
    26.9
    
    
    
    (5.7
    )
    
    
    (3.8
    )
    
    
    28.3
    
    
    
    45.7
 Quarter
    
    First
    
    Second
    
    Third
    
    Fourth
    
    Year2002Sales
    
    $
    162.4
    
    
    $
    82.3
    
    
    $
    92.2
    
    
    $
    165.7
    
    
    $
    502.6Cost of sales  shipping and
handling
    
    
    48.5
    
    
    
    20.2
    
    
    
    22.5
    
    
    
    46.3
    
    
    
    137.5Cost of sales  products
    
    
    74.3
    
    
    
    45.7
    
    
    
    53.3
    
    
    
    65.9
    
    
    
    239.2Gross profit
    
    
    39.6
    
    
    
    16.4
    
    
    
    16.4
    
    
    
    53.5
    
    
    
    125.9Operating
earnings (loss)(b)
    
    
    27.5
    
    
    
    4.5
    
    
    
    3.5
    
    
    
    42.2
    
    
    
    77.7Net income
    
    
    11.7
    
    
    
    (7.3
    )
    
    
    (3.5
    )
    
    
    18.8
    
    
    
    19.7
  (a)
    
    See Notes to Combined and Consolidated Financial Statements for detail
related to special charges.(b)
    
    Annual quarterly operating results include special charges of $7.7
million ($7.6 million after tax) related to transition costs associated
with the Recapitalization. 71




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##### Table of Contents



17. Guarantor/Non-guarantor Condensed Combining and Consolidating Statements As discussed in Note 8, the Company issued a total of $325.0 million of
10% Senior Subordinated Notes due 2011. These notes were unsecured obligations
of CMG, however, they were guaranteed on an unsecured basis by its domestic
subsidiaries. The guarantee is full and unconditional. The following condensed combined and consolidated financial statements
present the financial position, results of operations and cash flows of the
Company, its domestic subsidiaries (guarantors) and its foreign subsidiaries
(non-guarantors). 72




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##### Table of Contents



CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2003
(in millions) Non-Guarantors
    
    guarantors
    
    CMG
    
    Eliminations
    
    ConsolidatedCash and cash equivalent
    
    $
    0.3
    
    
    $
    2.3
    
    
    $
    
    
    
    $
    
    
    
    $
    2.6Receivables, net
    
    
    68.6
    
    
    
    48.8
    
    
    
    
    
    
    
    
    
    
    
    117.4Inventories
    
    
    66.5
    
    
    
    30.2
    
    
    
    
    
    
    
    
    
    
    
    96.7Other current assets
    
    
    2.8
    
    
    
    1.7
    
    
    
    (0.8
    )
    
    
    
    
    
    
    3.7Property, plant and equipment, net
    
    
    55.9
    
    
    
    206.1
    
    
    
    
    
    
    
    
    
    
    
    262.0Intangible assets  mineral interests
and other, net
    
    
    172.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172.7Investment in subsidiaries
    
    
    
    
    
    
    
    
    
    
    512.7
    
    
    
    (512.7
    )
    
    
    Other
    
    
    7.9
    
    
    
    14.3
    
    
    
    12.7
    
    
    
    
    
    
    
    34.9Total assets
    
    $
    374.7
    
    
    $
    303.4
    
    
    $
    524.6
    
    
    $
    (512.7
    )
    
    $
    690.0Current portion of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    0.8
    
    
    $
    
    
    
    $
    0.8Other current liabilities
    
    
    55.2
    
    
    
    46.3
    
    
    
    10.4
    
    
    
    
    
    
    
    111.9Total current liabilities
    
    
    55.2
    
    
    
    46.3
    
    
    
    11.2
    
    
    
    
    
    
    
    112.7Long-term debt, net of current portion
    
    
    
    
    
    
    
    
    
    
    419.4
    
    
    
    
    
    
    
    419.4Due to (from) affiliates
    
    
    (122.4
    )
    
    
    83.1
    
    
    
    39.3
    
    
    
    
    
    
    
    Other noncurrent liabilities
    
    
    100.8
    
    
    
    2.4
    
    
    
    10.9
    
    
    
    
    
    
    
    114.1Total stockholders equity
    
    
    341.1
    
    
    
    171.6
    
    
    
    43.8
    
    
    
    (512.7
    )
    
    
    43.8Total liabilities and common
stockholders equity
    
    $
    374.7
    
    
    $
    303.4
    
    
    $
    524.6
    
    
    $
    (512.7
    )
    
    $
    690.0
 CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2002
(in millions) Non-Guarantors
    
    guarantors
    
    CMG
    
    Eliminations
    
    ConsolidatedCash and cash equivalent
    
    $
    6.5
    
    
    $
    5.4
    
    
    $
    
    
    
    $
    
    
    
    $
    11.9Receivables, net
    
    
    59.1
    
    
    
    35.4
    
    
    
    
    
    
    
    
    
    
    
    94.5Inventories
    
    
    65.7
    
    
    
    30.8
    
    
    
    
    
    
    
    
    
    
    
    96.5Other current assets
    
    
    0.2
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    0.7Property, plant and equipment, net
    
    
    66.7
    
    
    
    196.7
    
    
    
    
    
    
    
    
    
    
    
    263.4Intangible assets  mineral interests
and other, net
    
    
    149.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149.8Investment in subsidiaries
    
    
    
    
    
    
    
    
    
    
    375.4
    
    
    
    (375.4
    )
    
    
    Other
    
    
    7.6
    
    
    
    2.7
    
    
    
    16.9
    
    
    
    
    
    
    
    27.2Total assets
    
    $
    355.6
    
    
    $
    271.5
    
    
    $
    392.3
    
    
    $
    (375.4
    )
    
    $
    644.0Current portion of long-term debt
    
    $
    
    
    
    $
    0.1
    
    
    $
    1.1
    
    
    $
    
    
    
    $
    1.2Other current liabilities
    
    
    59.0
    
    
    
    27.3
    
    
    
    14.9
    
    
    
    
    
    
    
    101.2Total current liabilities
    
    
    59.0
    
    
    
    27.4
    
    
    
    16.0
    
    
    
    
    
    
    
    102.4Long-term debt, net of current portion
    
    
    
    
    
    
    
    
    
    
    436.4
    
    
    
    
    
    
    
    436.4Due to (from) affiliates
    
    
    (70.8
    )
    
    
    92.8
    
    
    
    (22.0
    )
    
    
    
    
    
    
    Other noncurrent liabilities
    
    
    137.0
    
    
    
    6.3
    
    
    
    (18.4
    )
    
    
    
    
    
    
    124.9Total stockholders equity
    
    
    230.4
    
    
    
    145.0
    
    
    
    (19.7
    )
    
    
    (375.4
    )
    
    
    (19.7
    )Total liabilities and common
stockholders equity
    
    $
    355.6
    
    
    $
    271.5
    
    
    $
    392.3
    
    
    $
    (375.4
    )
    
    $
    644.0
 73




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##### Table of Contents



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2003 (in millions) Non-Guarantors
    
    guarantors
    
    CMG
    
    Eliminations
    
    ConsolidatedSales
    
    $
    383.7
    
    
    $
    216.9
    
    
    $
    
    
    
    $
    
    
    
    $
    600.6Cost of sales  shipping and handling
    
    
    118.7
    
    
    
    46.6
    
    
    
    
    
    
    
    
    
    
    
    165.3Cost of sales  products
    
    
    173.8
    
    
    
    114.5
    
    
    
    
    
    
    
    
    
    
    
    288.3Gross profit
    
    
    91.2
    
    
    
    55.8
    
    
    
    
    
    
    
    
    
    
    
    147.0Selling, general and administrative expenses
    
    
    26.7
    
    
    
    21.9
    
    
    
    
    
    
    
    
    
    
    
    48.6Operating income
    
    
    64.5
    
    
    
    33.9
    
    
    
    
    
    
    
    
    
    
    
    98.4Interest expense
    
    
    0.5
    
    
    
    9.1
    
    
    
    29.5
    
    
    
    
    
    
    
    39.1Other (income) expense
    
    
    (1.2
    )
    
    
    4.6
    
    
    
    2.2
    
    
    
    
    
    
    
    5.6Earnings in equity of subsidiary
    
    
    
    
    
    
    
    
    
    
    (55.9
    )
    
    
    55.9
    
    
    
    Income (loss) before income taxes
    
    
    65.2
    
    
    
    20.2
    
    
    
    24.2
    
    
    
    (55.9
    )
    
    
    53.7Income tax expense (benefit)
    
    
    19.0
    
    
    
    10.5
    
    
    
    (21.5
    )
    
    
    
    
    
    
    8.0Net income (loss)
    
    $
    46.2
    
    
    $
    9.7
    
    
    $
    45.7
    
    
    $
    (55.9
    )
    
    $
    45.7
 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2002 (in millions) Non-Guarantors
    
    guarantors
    
    CMG
    
    Eliminations
    
    ConsolidatedSales
    
    $
    334.1
    
    
    $
    168.5
    
    
    $
    
    
    
    $
    
    
    
    $
    502.6Cost of sales  shipping and handling
    
    
    99.6
    
    
    
    37.9
    
    
    
    
    
    
    
    
    
    
    
    137.5Cost of sales  products
    
    
    157.2
    
    
    
    82.0
    
    
    
    
    
    
    
    
    
    
    
    239.2Gross profit
    
    
    77.3
    
    
    
    48.6
    
    
    
    
    
    
    
    
    
    
    
    125.9Selling, general and administrative expenses
    
    
    24.1
    
    
    
    16.5
    
    
    
    (0.1
    )
    
    
    
    
    
    
    40.5Restructuring and other charges
    
    
    4.6
    
    
    
    1.4
    
    
    
    1.7
    
    
    
    
    
    
    
    7.7Operating income (loss)
    
    
    48.6
    
    
    
    30.7
    
    
    
    (1.6
    )
    
    
    
    
    
    
    77.7Interest expense
    
    
    0.4
    
    
    
    9.4
    
    
    
    31.5
    
    
    
    
    
    
    
    41.3Other (income) expense
    
    
    (0.3
    )
    
    
    (0.1
    )
    
    
    5.3
    
    
    
    
    
    
    
    4.9Earnings in equity of subsidiary
    
    
    
    
    
    
    
    
    
    
    (39.6
    )
    
    
    39.6
    
    
    
    Income (loss) before income taxes
    
    
    48.5
    
    
    
    21.4
    
    
    
    1.2
    
    
    
    (39.6
    )
    
    
    31.5Income tax expense (benefit)
    
    
    19.3
    
    
    
    11.0
    
    
    
    (18.5
    )
    
    
    
    
    
    
    11.8Net income (loss)
    
    $
    29.2
    
    
    $
    10.4
    
    
    $
    19.7
    
    
    $
    (39.6
    )
    
    $
    19.7
 CONDENSED COMBINING AND CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2001 (in millions) Non-
    
    
    
    
    
    
    
    
    
    Combined andGuarantors
    
    guarantors
    
    CMG
    
    Eliminations
    
    ConsolidatedSales
    
    $
    342.8
    
    
    $
    180.4
    
    
    $
    
    
    
    $
    
    
    
    $
    523.2Cost of sales  shipping and handling
    
    
    100.9
    
    
    
    42.3
    
    
    
    
    
    
    
    
    
    
    
    143.2Cost of sales  products
    
    
    166.5
    
    
    
    90.5
    
    
    
    
    
    
    
    
    
    
    
    257.0Gross profit
    
    
    75.4
    
    
    
    47.6
    
    
    
    
    
    
    
    
    
    
    
    123.0Selling, general and administrative expenses
    
    
    22.0
    
    
    
    16.8
    
    
    
    0.1
    
    
    
    
    
    
    
    38.9Restructuring and other charges
    
    
    3.7
    
    
    
    0.1
    
    
    
    23.2
    
    
    
    
    
    
    
    27.0Operating income (loss)
    
    
    49.7
    
    
    
    30.7
    
    
    
    (23.3
    )
    
    
    
    
    
    
    57.1Interest expense
    
    
    1.0
    
    
    
    10.2
    
    
    
    3.1
    
    
    
    
    
    
    
    14.3Other (income) expense
    
    
    (2.5
    )
    
    
    (0.9
    )
    
    
    0.3
    
    
    
    
    
    
    
    (3.1
    )Earnings in equity of subsidiary
    
    
    
    
    
    
    
    
    
    
    (41.7
    )
    
    
    41.7
    
    
    
    Income (loss) before income taxes
    
    
    51.2
    
    
    
    21.4
    
    
    
    15.0
    
    
    
    (41.7
    )
    
    
    45.9Income tax expense (benefit)
    
    
    17.9
    
    
    
    13.0
    
    
    
    (4.1
    )
    
    
    
    
    
    
    26.8Net income (loss)
    
    $
    33.3
    
    
    $
    8.4
    
    
    $
    19.1
    
    
    $
    (41.7
    )
    
    $
    19.1
 74




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CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2003
(in millions) Non-Guarantors
    
    guarantors
    
    CMG
    
    Eliminations
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    79.4
    
    
    $
    23.8
    
    
    $
    (32.2
    )
    
    $
    
    
    
    $
    71.0Cash flows from investing:Capital expenditure
    
    
    (10.0
    )
    
    
    (10.6
    )
    
    
    
    
    
    
    
    
    
    
    (20.6
    )Proceeds from sales of property, plant
and equipment
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Acquisition of intangible assets
    
    
    (24.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24.8
    )Other
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Net cash used in investing activities
    
    
    (34.8
    )
    
    
    (10.8
    )
    
    
    
    
    
    
    
    
    
    
    (45.6
    )Cash flows from financing:Principal payments on other long-term
debt, including capital leases
    
    
    
    
    
    
    
    
    
    
    (31.1
    )
    
    
    
    
    
    
    (31.1
    )Revolver activity
    
    
    
    
    
    
    
    
    
    
    14.0
    
    
    
    
    
    
    
    14.0Dividends paid
    
    
    
    
    
    
    
    
    
    
    (21.7
    )
    
    
    
    
    
    
    (21.7
    )Advances to CMI, net
    
    
    
    
    
    
    
    
    
    
    (8.2
    )
    
    
    
    
    
    
    (8.2
    )Payments (to) from Affiliates, net
    
    
    (50.8
    )
    
    
    (20.0
    )
    
    
    70.8
    
    
    
    
    
    
    
    Capital contribution from CMI
    
    
    
    
    
    
    8.8
    
    
    
    
    
    
    
    
    
    
    
    8.8Net cash provided by (used in)
Financing activities
    
    
    (50.8
    )
    
    
    (11.2
    )
    
    
    23.8
    
    
    
    
    
    
    
    (38.2
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    (4.9
    )
    
    
    8.4
    
    
    
    
    
    
    
    3.5Net increase (decrease) in cash and cash
equivalents
    
    
    (6.2
    )
    
    
    (3.1
    )
    
    
    
    
    
    
    
    
    
    
    (9.3
    )Cash and cash equivalents:Beginning of year
    
    
    6.5
    
    
    
    5.4
    
    
    
    
    
    
    
    
    
    
    
    11.9End of year
    
    $
    0.3
    
    
    $
    2.3
    
    
    $
    
    
    
    $
    
    
    
    $
    2.6
 75




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##### Table of Contents



CONDENSED CONSOLIDATING STATEMENTS OF FLOWS
For the Year Ended December 31, 2002 (in millions) Non-Guarantors
    
    guarantors
    
    CMG
    
    Eliminations
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    78.8
    
    
    $
    26.5
    
    
    $
    (23.1
    )
    
    $
    
    
    
    $
    82.2Cash flows from investing:Capital expenditure
    
    
    (10.4
    )
    
    
    (9.1
    )
    
    
    
    
    
    
    
    
    
    
    (19.5
    )Other
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.4Net cash used in investing activities
    
    
    (10.0
    )
    
    
    (9.1
    )
    
    
    
    
    
    
    
    
    
    
    (19.1
    )Cash flows from financing:Revolver activity
    
    
    
    
    
    
    (10.8
    )
    
    
    (29.0
    )
    
    
    
    
    
    
    (39.8
    )Issuance of long-term debt
    
    
    
    
    
    
    
    
    
    
    78.4
    
    
    
    
    
    
    
    78.4Principal payments on other long-term
debt, including capital leases
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    (115.7
    )
    
    
    
    
    
    
    (115.9
    )Advances to CMI, net
    
    
    
    
    
    
    
    
    
    
    (2.2
    )
    
    
    
    
    
    
    (2.2
    )Payments (to) from Affiliates, net
    
    
    (70.4
    )
    
    
    (3.3
    )
    
    
    73.7
    
    
    
    
    
    
    
    Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    (3.9
    )
    
    
    
    
    
    
    (3.9
    )Capital contribution from CMI
    
    
    
    
    
    
    
    
    
    
    12.8
    
    
    
    
    
    
    
    12.8Other
    
    
    
    
    
    
    
    
    
    
    1.0
    
    
    
    
    
    
    
    1.0Net cash provided by (used in)
Financing activities
    
    
    (70.5
    )
    
    
    (14.2
    )
    
    
    15.1
    
    
    
    
    
    
    
    (69.6
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    (5.5
    )
    
    
    8.0
    
    
    
    
    
    
    
    2.5Net increase (decrease) in cash and cash
equivalents
    
    
    (1.7
    )
    
    
    (2.3
    )
    
    
    
    
    
    
    
    
    
    
    (4.0
    )Cash and cash equivalents:Beginning of year
    
    
    8.2
    
    
    
    7.7
    
    
    
    
    
    
    
    
    
    
    
    15.9End of year
    
    $
    6.5
    
    
    $
    5.4
    
    
    $
    
    
    
    $
    
    
    
    $
    11.9
 76




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CONDENSED COMBINING AND CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2001
(in millions) Non-
    
    
    
    
    
    
    
    
    
    Combined andGuarantors
    
    guarantors
    
    CMG
    
    Eliminations
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    65.0
    
    
    $
    66.2
    
    
    $
    (18.7
    )
    
    $
    
    
    
    $
    112.5Cash flows from investing:Capital expenditure
    
    
    (22.8
    )
    
    
    (20.2
    )
    
    
    
    
    
    
    
    
    
    
    (43.0
    )Proceeds from sales
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.2Other
    
    
    (0.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.8
    )Net cash used in investing activities
    
    
    (23.6
    )
    
    
    (20.0
    )
    
    
    
    
    
    
    
    
    
    
    (43.6
    )Cash flows from financing:Revolver activity
    
    
    6.4
    
    
    
    
    
    
    
    29.0
    
    
    
    
    
    
    
    35.4Issuance of long-term debt
    
    
    
    
    
    
    
    
    
    
    475.0
    
    
    
    
    
    
    
    475.0Principal payments on other long-term
debt, including capital leases
    
    
    (0.8
    )
    
    
    (65.5
    )
    
    
    
    
    
    
    
    
    
    
    (66.3
    )Borrowings from IMC Global and
affiliates, net
    
    
    (12.9
    )
    
    
    27.0
    
    
    
    (95.2
    )
    
    
    
    
    
    
    (81.1
    )Dividends paid
    
    
    (26.7
    )
    
    
    
    
    
    
    (372.1
    )
    
    
    
    
    
    
    (398.8
    )Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    (18.0
    )
    
    
    
    
    
    
    (18.0
    )Net cash provided by (used in)
Financing activities
    
    
    (34.0
    )
    
    
    (38.5
    )
    
    
    18.7
    
    
    
    
    
    
    
    (53.8
    )Effect of exchange rate changes on cash
    
    
    (1.6
    )
    
    
    2.1
    
    
    
    
    
    
    
    
    
    
    
    0.5Net increase (decrease) in cash and cash
equivalents
    
    
    5.8
    
    
    
    9.8
    
    
    
    
    
    
    
    
    
    
    
    15.6Cash and cash equivalents:Beginning of year
    
    
    2.3
    
    
    
    (2.0
    )
    
    
    
    
    
    
    
    
    
    
    0.3End of year
    
    $
    8.1
    
    
    $
    7.8
    
    
    $
    
    
    
    $
    
    
    
    $
    15.9
 18. Subsequent Event On February 9, 2004, CMIs board of directors declared a quarterly cash
dividend of $0.1875 per share, approximately $5.7 million, on its outstanding
common stock. The dividend is payable on March 15, 2004 to stockholders of
record as of the close of business on March 1, 2004. The Companys operations
are currently the main source of cash that is expected to service dividends
declared on CMIs common stock. 77




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##### Table of Contents



Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE None. 
 Item 9A. CONTROLS AND PROCEDURES Within the 90 days prior to the date of this annual report, we carried out
an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the disclosure controls and
procedures of Compass Minerals Group, Inc. pursuant to Exchange Act Rule
13a-14. In designing and evaluating the disclosure controls and procedures, we
recognized that any controls and procedures, regardless of how designed and
operated, can provide only reasonable assurance of achieving the desired
control objectives and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures. Based on that evaluation, the Chief Executive Officer and the
Chief Financial Officer have concluded that these disclosure controls and
procedures are effective in timely alerting them to material information
relating to us required to be included in periodic SEC filings. The conclusions
of the Chief Executive Officer and Chief Financial Officer from this evaluation
were communicated to the Audit Committee. In connection with this evaluation,
there were no breaches of such controls that would require disclosure to the
Audit Committee or our independent auditors. There were no significant changes in our disclosure controls or in other
factors that could significantl affect these controls subsequent to the date of
the evaluation. 
 Part III 
 Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Directors and Executive Officers The following table sets forth the name, age and position of each person
who is an executive officer or director of CMG on the date of this annual
report. Name
    
    Age
    
    PositionMichael E. Ducey
    
    
    55
    
    
    President, Chief Executive Officer and Director of CMGKeith E. Clark
    
    
    48
    
    
    Vice President and General Manager, General Trade of CMGDavid J. Goadby
    
    
    49
    
    
    Vice President of CMG and Managing Director, Salt UnionRodney L. Underdown
    
    
    37
    
    
    Chief Financial Officer and Vice President of CMGSteven Wolf
    
    
    58
    
    
    Vice President and General Manager, Highway Deicing and SOP of CMGJoel A. Asen
    
    
    53
    
    
    Director of CMGBradley J. Bell
    
    
    51
    
    
    Director of CMGRobert F. Clark
    
    
    61
    
    
    Director of CMGPeter P. Copses
    
    
    45
    
    
    Director of CMGRobert H. Falk
    
    
    65
    
    
    Director of CMGJoshua J. Harris
    
    
    39
    
    
    Director of CMGScott M. Kleinman
    
    
    31
    
    
    Director of CMGDouglas A. Pertz
    
    
    49
    
    
    Director of CMGHeinn F. Tomfohrde, III
    
    
    70
    
    
    Director of CMG
 78




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##### Table of Contents



Michael E. Duceywas appointed the President and Chief Executive Officer
of CMI in December 2002. Mr. Ducey joined CMG as the President and Chief
Executive Officer on April 1, 2002. Prior to joining CMG, Mr. Ducey worked
approximately 30 years for Borden Chemical, a diversified chemical company, in
various positions including President and Chief Executive Officer (December
1999 to March 2002) and Executive Vice President and Chief Operation Officer
(October 1997 to December 1999). Keith E. Clarkhas served as the Vice President and General Manager of
CMGs General trade business unit since August 1997, when North American Salt
Company was still under the management of Harris Chemical Group. Prior to this
position, Mr. Clark served as Vice President, Operations for North American
Salt for two years, beginning in April 1995. Prior to his career at Harris
Chemical Group, Mr. Clark held various operations positions at US Steel
Corporation and General Chemical Inc., where he most recently served as the
Operations Manager at General Chemical. David J. Goadbyhas served as the Vice President of CMG since November
2001 and as the Managing Director of Salt Union Ltd., our U.K. subsidiary,
since April 1994, when IMC Inorganic Chemicals, Inc. was still under the
management of Harris Chemical Group. Prior to that position, Mr. Goadby served
as the Commercial Manager of Salt Union Ltd. for two years. From 1984 until
1992, Mr. Goadby was employed with Imperial Chemical Industries plc in various
production and distribution positions, where he most recently served as
Business Manager Sulphur Chemicals. Rodney L. Underdownwas appointed Chief Financial Officer of CMI in
December 2002 and has served as a Vice President of CMI since November 2001.
Mr. Underdown has served as the Chief Financial Officer and Vice President of
CMG since November 2001. Prior to that he served as the Vice President, Finance
of CMGs salt division since June 1998 when the company was purchased by IMC
Global. Mr. Underdown joined the Harris Chemical Group in September 1997, where
he served as the Director of Corporate Reporting. Prior to his career at Harris
Chemical Group, Mr. Underdown was employed with Arthur Andersen for nine years,
where he most recently served as an Audit Manager. Steven Wolfhas served as the Vice President and General Manager, Highway
Deicing of CMG since 1994, when CMG, formerly known as IMC Inorganic Chemicals,
Inc., was still under the management of Harris Chemical Group. Mr. Wolf joined
Harris Chemical Group in 1991, assuming various management responsibilities.
Prior to his career at Harris Chemical Group, Mr. Wolf was employed by Kerr
McGee, where he served as a Senior Vice President. Mr. Wolf also became the
General Manager, SOP of CMG in August 2003. Joel A. Asenhas been a director of CMI since December 2003 and a director
of CMG since November 2001. Mr. Asen has been the Managing Director of PLASE
Capital Group LP, an affiliate of Apollo, since June 2003 and has served as the
President of Asen Advisory since April 1992, which provides strategic and
financial advisory services. He was Managing Director at Whitehead Sterling
from 1991 to 1992, at Paine Webber, Inc. from 1990 to 1991 and at Drexel
Burnham Lambert Incorporated from 1988 to 1990. From 1985 to 1988, he was a
Senior Vice President at GAF Corporation. Prior to that time, Mr. Asen was a
Manager of Business Development at GE and Manager of Marketing and Business
Development at GECC. Mr. Asen is also a Director of Resolution Performance
Products Inc. and Anchor Glass Container Corp. Bradley J. Bellhas been a director of CMI since December 2003 and a
director of CMG since November 2003. Mr. Bell has been Executive Vice President
and Chief Financial Officer of Nalco Company since November 2003. From 1997 to
2003, Mr. Bell served as Senior Vice President and Chief Financial Officer of
Rohm and Haas Company. Prior to that time, Mr. Bell served from 1987 to 1997 as
Vice President and Treasurer of the Whirlpool Corporation, and from 1980 to
1987 as Vice President and Treasurer of the Bundy Corporation. Mr. Bell is also
a Director and Chairman of the Audit Committee of IDEX Corporation. Robert F. Clarkhas been a director of CMI since December 2003 and a
director of CMG since November 2001. Mr. Clark served as the President and
Chief Executive Officer of CMG from November 2001 to April 2002. 79




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##### Table of Contents



From April 1999 to November 2001, Mr. Clark served as Senior Vice President of
IMC Global and President of IMC Salt, Inc. since joining IMC Global in April
1998 as a result of the acquisition of Harris Chemical Group. From 1993 to
1998, Mr. Clark served as President of Great Salt Lake Minerals, a division of
Harris Chemical Group. Peter P. Copseshas been a director of CMI since December 2003 and a
director of CMG since November 2001. Mr. Copses is a founding Senior Partner at
Apollo where he has worked since September 1990. From 1986 to 1990, Mr. Copses
was initially an investment banker at Drexel Burnham Lambert Incorporated, and
subsequently at Donaldson, Lufkin & Jenrette Securities Corporation,
concentrating on the structuring, financing and negotiation of mergers and
acquisitions. Mr. Copses is also a Director of Rent-A-Center, Inc., Zale
Corporation and Resolution Performance Products Inc. Robert H. Falkhas been a director of CMI and CMG since November 2001. Mr.
Falk is a Partner at Apollo and has served as an officer of certain affiliates
of Apollo since 1992. Prior to 1992, Mr. Falk was a Partner in the law firm of
Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Falk is a Director of Newiesy
Gmbh. Joshua J. Harrishas been a director of CMI and CMG since November 2001.
Mr. Harris is a founding Senior Partner at Apollo and has served as an officer
of certain affiliates of Apollo since 1990. Prior to that time, Mr. Harris was
a member of the Mergers and Acquisitions Department of Drexel Burnham Lambert
Incorporated. Mr. Harris is also a Director of Breuners Home Furnishings
Corporation, Pacer International, Inc., Quality Distribution Inc., Resolution
Performance Products Inc. and Nalco Company. Scott M. Kleinmanhas been a director of CMI and CMG since November 2001.
Mr. Kleinman is a Partner at Apollo, where he has worked since February 1996.
Prior to that time, Mr. Kleinman was employed by Smith Barney Inc. in its
Investment Banking division. Mr. Kleinman is also a Director of Resolution
Performance Products Inc. Douglas A. Pertzhas been a director of CMI since December 2003 and a
director of CMG since November 2001. Mr. Pertz has been Chairman and Chief
Executive Officer of IMC Global since March 2002. From October 2000 to March
2002, Mr. Pertz served as Chairman, President and Chief Executive Officer of
IMC Global, and from October 1999 to October 2000, Mr. Pertz served as
President and Chief Executive Officer of IMC Global. Mr. Pertz served as
President and Chief Operating Officer of IMC Global from October 1998 to
October 1999. Prior to joining IMC Global, Mr. Pertz served from 1995 to 1998
as President and Chief Executive Officer and as a director of Culligan Water
Technologies, Inc., a leading manufacturer and distributor of water
purification and treatment products. Heinn F. Tomfohrde, IIIhas been a director of CMI since December 2003 and
a director of CMG since November 2001. Mr. Tomfohrde has served the chemicals
industry in a variety of leadership positions for 44 years. Currently, Mr.

Tomfohrde serves in directorship positions only. Mr. Tomfohrde served as
President and Chief Operating Officer of International Specialty Products, Inc.
and its predecessor company, GAF Chemicals Corp., from 1987 to 1993. Prior to
that time, Mr. Tomfohrde spent 31 years with Union Carbide Corp., rising from
positions in research and development and marketing to senior management,
serving as President of Union Carbidess Consumer and Industrial Products Group
from 1983 to 1986. Mr. Tomfohrde is also a Director of Resolution Performance
Products Inc. 80




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##### Table of Contents



Board of Committees In connection with the initial public offering of our parent, CMI, CMI
established an audit committee in accordance with Section 3(a)(58) of the
Exchange Act, as well as a compensation committee, nominating/corporate
governance committee, operating committee and environmental, health and safety committee. In
conjunction with the establishment of those committees by CMI, in
February 2004, we dissolved our audit committee, compensation
committee, executive committee and
environmental, health and safety committee. The audit committee of CMI,
similar to our previous audit committee, oversees the engagement of our
independent public accountants, reviews our annual financial statements and the
scope of annual audits and considers matters relating to accounting policies
and internal controls. Board Compensation The members of our board of directors are reimbursed for their
out-of-pocket expenses. Those directors who are not employees of the Company
also receive compensation for their service on the board of directors. Code of Ethics We have adopted a code of ethics for our executive and senior financial
officers, violations of which are required to be reported to the audit
committee of CMI. The code of ethics is posted on our Web site at
www.compassminerals.com. 81




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##### Table of Contents



Item 11. Executive Compensation Summary Compensation Table The following table sets forth the compensation for the year ended
December 31, 2003 paid or awarded to the Chief Executive Officer and the four
other most highly compensated executive officers serving as executive officers
of CMG, or the named executive officers. Long TermCompensationAnnual Compensation
    
    Awards
    
    Pay outsSecuritiesUnderlying
    
    Long Term
    
    All OtherBonus
    
    Options/SARs
    
    Incentive
    
    CompensationName and Principal Position
    
    Salary ($)
    
    ($) (1)
    
    (#) (2)
    
    Pay outs ($)(5)
    
    ($) (3)Michael E. DuceyPresident and Chief Executive Officer of CMG2003
    
    
    356,563
    
    
    
    413,368
    
    
    
    
    
    
    
    
    
    
    
    167,514April (date of hire) to December 2002
    
    
    262,500
    
    
    
    251,328
    
    
    
    540,774
    
    
    
    
    
    
    
    130,761Steven WolfVice President and General Manager, Highway
Deicing and SOP of CMG2003
    
    
    282,042
    
    
    
    236,283
    
    
    
    
    
    
    
    852,920
    
    
    
    113,9852002
    
    
    258,803
    
    
    
    143,465
    
    
    
    
    
    
    
    63,408
    
    
    
    412,4302001
    
    
    247,108
    
    
    
    91,998
    
    
    
    220,961
    
    
    
    
    
    
    
    50,348Keith E. ClarkVice President and General Manager, General
Trade of CMG2003
    
    
    207,763
    
    
    
    111,054
    
    
    
    
    
    
    
    824,733
    
    
    
    88,9952002
    
    
    199,190
    
    
    
    93,234
    
    
    
    
    
    
    
    8,150
    
    
    
    325,0542001
    
    
    193,804
    
    
    
    75,323
    
    
    
    213,411
    
    
    
    
    
    
    
    34,405David J. Goadby (4)Vice President of CMG and Managing Director,
Salt Union Ltd.2003
    
    
    192,492
    
    
    
    69,859
    
    
    
    
    
    
    
    
    
    
    
    46,1992002
    
    
    168,774
    
    
    
    47,095
    
    
    
    
    
    
    
    
    
    
    
    219,8862001
    
    
    150,932
    
    
    
    27,860
    
    
    
    140,494
    
    
    
    
    
    
    
    45,801Rodney L. UnderdownVice President and Chief Financial Officer of CMG2003
    
    
    165,129
    
    
    
    76,751
    
    
    
    
    
    
    
    380,004
    
    
    
    48,1442002
    
    
    150,000
    
    
    
    48,960
    
    
    
    
    
    
    
    
    
    
    
    211,2942001
    
    
    128,105
    
    
    
    31,832
    
    
    
    98,214
    
    
    
    
    
    
    
    13,864
    (1)
    
    Bonuses were paid pursuant to the Compass Minerals Group
Incentive Compensation Program. Under this program, bonus amounts
were calculated on an annual basis according to business and
individual performance.(2)
    
    Represents the number of shares of CMIs common stock underlying
options (as adjusted to reflect changes in our capital structure
following the date of grant).(3)
    
    Consists of sale and retention bonuses related to the change in
ownership subsequent to the Recapitalization, certain moving
expenses incurred by Mr. Ducey considered by the U.S. Internal
Revenue Service to be compensation and other employer contributions
to our tax- qualified and non-tax-qualified defined contribution and
defined benefit retirement plans.(4)
    
    Mr. Goadbys compensation is paid in British pounds sterling,
which has been converted to U.S. dollars at a rate of £0.5814 per
$1.00.(5)
    
    In September of 2003, the deferred compensation plan was
terminated resulting in distribution of all of its holdings to its
participants. See Item 11, Executive CompensationDeferred
Compensation Plan. 82




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##### Table of Contents



Option Grants in 2003 There were no grants of options to acquire shares of CMI common stock made
to the named executive officers during 2003. Aggregate Option Exercises in 2003 and Fiscal Year-end Option Values The following table contains the aggregate number of shares of CMIs
common stock underlying stock options exercised in 2003 and the number of
shares of CMIs common stock underlying stock options held by each named
executive officer as of December 31, 2003. Number of Securities Underlying
    
    Value of UnexercisedNumber of
    
    
    
    Unexercised Options/SARs at
    
    In-the-Money Options/SARs atShares  Acquired on
    
    Value  Realized
    
    December 31, 2003
    
    December 31, 2003 ($)(1)Name
    
    Exercise
    
    ($)
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableMichael E. Ducey
    
    
    67,595
    
    
    
    77,740
    
    
    
    337,980
    
    
    
    135,193
    
    
    
    4,353,182
    
    
    
    1,741,286Steven Wolf
    
    
    27,617
    
    
    
    52,769
    
    
    
    138,101
    
    
    
    55,242
    
    
    
    1,778,741
    
    
    
    711,517Keith E. Clark
    
    
    26,675
    
    
    
    50,970
    
    
    
    133,379
    
    
    
    53,352
    
    
    
    1,717,922
    
    
    
    687,174David J. Goadby
    
    
    12,227
    
    
    
    5,365
    
    
    
    87,802
    
    
    
    35,125
    
    
    
    1,130,890
    
    
    
    452,410Rodney L. Underdown
    
    
    12,276
    
    
    
    23,457
    
    
    
    61,381
    
    
    
    24,553
    
    
    
    790,587
    
    
    
    316,243
    (1)
    
    Calculated by multiplying the difference between the fair market value of
the shares of CMIs common stock underlying the options as of December 31,
2003 ($14.28 per share) and the exercise price of the options by the
number of shares of CMIs common stock underlying the options. 2001 Option Plan Our employees, consultants and directors (and employees, consultants and
directors of our subsidiaries) are eligible to receive options under the CMI
2001 Stock Option Plan. The option plan will be administered by a committee of
two or more members of our board of directors, each of whom is both a
non-employee director for purposes of Rule 16b-3 under the Exchange Act and
an outside director for purposes of Section 162(m) of the Code.
Notwithstanding the foregoing, our full board of directors will administer the
option plan with respect to options granted to members of our board of
directors who are not also our employees. Options granted under the option plan may be non-qualified stock options
or incentive stock options. The maximum number of shares of common stock that
are issuable under the option plan is 2,783,283 (as adjusted to reflect changes
in our capital structure and as may be further adjusted for future changes in
our capital structure and other corporate transactions, such as stock
dividends, stock splits, mergers and reorganizations). Furthermore, following
the first meeting of our stockholders to occur after the close of the third
calendar year following the calendar year in which CMIs common stock is first
registered under the Exchange Act (or such earlier date as required by Section
162(m) of the Code or the regulations issued thereunder), the maximum number of
shares of CMIs common stock that may be subject to options granted to any
individual in any calendar year may not exceed 1,000,000. Following the consummation of the Recapitalization, we granted
non-qualified options to purchase shares of CMIs common stock to certain
management employees, including the named executive officers. The per share
exercise price of each option granted immediately following the
Recapitalization was $1.40 (as adjusted to reflect changes in our capital
structure following the date of grant), which was equal to the Recapitalization
consideration per share of common stock (as adjusted to reflect changes in our
capital structure following the date of grant). During the period following the
Recapitalization, we have granted options under the option plan to designated
newly-hired and other employees. The exercise price per share of these options
is equal to an estimate of the fair market value per share of CMIs common
stock as of the date of the grant. The options shall generally become vested
and exercisable as follows: 83




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##### Table of Contents




    
    one-half of the options are time vesting options that will
become vested and exercisable in equal annual installments on each of
the first four anniversaries of the date of grant, so long as the
optionee continues to provide services to us or one of our
subsidiaries as of such anniversary.
    
    one-half of the options are performance vesting options that
will become vested and exercisable on the eighth anniversary of the
date of grant, so long as the optionee continues to provide services
to us or one of our subsidiaries as of such date. However, all or a
portion of such performance vesting options will become vested and
exercisable prior to such eighth anniversary upon a sale of our
assets or capital stock pursuant to which Apollo achieves a specified
internal rate of return. In addition, this offering or future
offerings of CMI common stock may cause these performance vesting
options to become immediately vested. The term of the options is eight years and thirty days from the date of
grant. However, all unvested options will automatically expire upon the date of
an optionees termination of employment (or termination of directorship or
consultancy, as applicable). In addition, all vested options will generally
expire one year following the termination of an optionees services by us,
subject to certain exceptions. Shares of CMI common stock purchased or acquired
under the stock plan will generally be subject to restrictions on transfer,
repurchase rights and other limitations set forth in the investor rights
agreement. We filed a registration statement on Form S-8 under the Securities
Act to register the issuance of those shares issuable or reserved for issuance
under the CMI 2001 Stock Option Plan. The option plan may be modified or amended in any respect by the committee
administering the option plan with the prior approval of our board of
directors, except that the consent of each optionee is required with respect to
any amendment that impairs such optionees rights. In addition, to the extent
required by any applicable law, regulation or stock exchange rule, no amendment
will be effective without the consent of our stockholders. Deferred Compensation Plan In connection with the consummation of the Recapitalization, we adopted
the Salt Holdings Corporation Senior Executives Deferred Compensation Plan.
The deferred compensation plan is not a tax qualified retirement plan. The
deferred compensation plan is intended to allow certain highly-compensated
employees to elect in advance to defer certain retention bonuses or other
compensation and to allow such employees to transfer liabilities from certain
IMC Global deferred compensation plans to our deferred compensation plan. Any
amounts deferred into the deferred compensation plan represent a conditional
right to receive our capital stock as described below. Amounts deferred under
the deferred compensation plan are represented by bookkeeping accounts
established and maintained by the administrator on behalf of the participants.
Each such account is deemed to be invested in shares of our capital stock.
Distributions shall generally be made to a participant under the deferred
compensation plan in one lump sum in the form of our capital stock upon the
participants termination of employment or upon Apollo exit events. In
connection with the establishment of the deferred compensation plan, we have
established a rabbi trust, which has been funded with shares of our capital
stock. All assets contained in the rabbi trust will be subject to the claims of
creditors in the event of bankruptcy or insolvency. On September 29, 2003, the deferred compensation plan was terminated and
our capital stock held in the deferred compensation plan was subsequently
distributed to the participants. Employment Agreements Michael E. Ducey. CMG entered into an employment agreement, dated March
12, 2002, with Mr. Ducey pursuant to which he agreed to serve as its Chief
Executive Officer and be nominated for a seat on its board of directors. Under
the agreement, Mr. Ducey is paid a base salary and is eligible for incentive
bonuses based upon CMG meeting or exceeding financial objectives. Under the
terms of the agreement, Mr. Ducey is subject to non-compete, non-solicitation
and confidentiality requirements. In the event that Mr. Duceys employment is 84




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terminated without cause, he will receive his base pay until the earlier of 12
months, the day he accepts other employment or the day he violates the
non-compete agreement. David J. Goadby. Salt Union Limited entered into a service agreement,
dated September 1, 1997, with Mr. Goadby pursuant to which he was appointed as
Managing Director of Salt Union until his employment is terminated by either
Salt Union, giving Mr. Goadby not less than 12 months prior written notice, or
Mr. Goadby, giving Salt Union not less than three months prior written notice.
The agreement provides that Mr. Goadby be paid a base salary, as well as
bonuses or additional remuneration, if any, as the board of directors of Salt
Union may determine. For a period of six months following his termination, Mr.
Goadby will be subject to non-compete, non-solicitation and non-dealing
covenants with regard to customers and non-solicitation of suppliers and
managerial, supervisory, technical, sales, financial and administrative
employees. In the event of a change of control of Salt Union, Mr. Goadby will
be entitled to terminate the agreement immediately and Salt Union will be
obligated to pay him an amount equal to his annual base salary and the value of
his company car and medical insurance calculated over a 12 month period. Other Named Executive Officers.We have not entered into employment
agreements with any of our executive officers, except for the agreements
entered into by our subsidiaries with Mr. Ducey and Mr. Goadby. Accordingly,
each of our executive officers is currently an at will employee. 
 Item 12. SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS The following table sets forth information regarding the beneficial
ownership of CMI common stock as of the date of this annual report on Form 10-K
with respect to (i) each person that is a beneficial owner of more than 5% of
CMIs outstanding common stock, (ii) each director and named executive officer
of the Company and (iii) all directors and executive officers of the Company as
a group: Number ofShares of CMICommon StockBeneficially
    
    Percent ofName and Address of Beneficial Owner
    
    Owned(1)
    
    ClassApollo (2)
    
    
    11,462,064
    
    
    
    35.93
    %Neuberger Berman, Inc. (3)
    
    
    1,754,000
    
    
    
    5.50
    %Michael E. Ducey (4)
    
    
    617,190
    
    
    
    1.93
    %Keith E. Clark (4)
    
    
    255,883
    
    
    
    *David J. Goadby (4)
    
    
    155,578
    
    
    
    *Rodney L. Underdown (4)
    
    
    117,810
    
    
    
    *Steven Wolf (4)
    
    
    264,825
    
    
    
    *Joel A. Asen (5)
    
    
    53,669
    
    
    
    *Robert F. Clark (6)
    
    
    177,832
    
    
    
    *Peter P. Copses (5)
    
    
    53,669
    
    
    
    *Robert H. Falk (5)
    
    
    53,669
    
    
    
    *Joshua J. Harris (5)
    
    
    53,669
    
    
    
    *Scott M. Kleinman (5)
    
    
    53,669
    
    
    
    *Douglas A. Pertz (5)
    
    
    53,669
    
    
    
    *Heinn F. Tomfohrde, III (5)
    
    
    53,669
    
    
    
    *Bradley J. Bell (5)
    
    
    37,367
    
    
    
    *All directors and officers as a group
    
    
    2,002,168
    
    
    
    6.28
    %
    *
    
    Represents less than 1% of the outstanding shares of CMI common stock
(excluding any shares held by YBR Holdings that could be attributed to
any of these individuals).(1)
    
    For purposes of this table, information as to the percentage of shares beneficially owned is calculated based on 31,899,567 shares of
CMI common stock outstanding. The amounts and percentages of CMI common
stock beneficially owned are reported on the basis of regulations of the
SEC governing the determination of beneficial ownership of securities.
Under the rules of the SEC, a person is deemed to be a beneficial
owner of a 85




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security if that person has or shares voting power, which includes the
power to vote or direct the voting of such security, or investment power,
which includes the power to dispose of or to direct the disposition of
such security. A person is also deemed to be a beneficial owner of any
securities of which that person has a right to acquire beneficial
ownership within 60 days. Securities that can be so acquired are deemed to
be outstanding for purposes of computing such persons ownership
percentage, but not for purposes of computing any other persons
percentage. Under these rules, more than one person may be deemed
beneficial owner of the same securities and a person may be deemed to be a
beneficial owner of securities as to which such person has no economic
interest. Except as otherwise indicated in these footnotes, each of the
beneficial owners has, to our knowledge, sole voting and investment power
with respect to the indicated shares of CMI common stock.(2)
    
    Represents all shares held of record by YBR Holdings. YBR Holdings is
an affiliate of, and is controlled by, Apollo through Apollos majority
ownership of YBR Holdings membership interests. The address of each of
YBR Holdings, Apollo and of Messrs. P. Copses, R. Falk, J. Harris and S.
Kleinman is c/o Apollo Management, L.P., 1301 Avenue of the Americas,
New York, New York 10019.(3)
    
    The address of Neuberger Berman, Inc. is 605 Third Ave., New York,
New York 10158-3698.(4)
    
    Includes options that are currently exercisable or will become
exercisable in the next 60 days. Does not include options to purchase
135,192, 53,352, 35,125, 24,553 and 55,242 shares of CMI common stock
that we have granted to Messrs. M. Ducey, K. Clark, D. Goadby, R.
Underdown and S. Wolf, respectively. These options are subject to time
and performance vesting conditions and are not currently exercisable
(and will not become exercisable within the next 60 days). See Item 11,
Executive Compensation2001 Option Plan. The address of each of
Messrs. M. Ducey, K. Clark, D. Goadby, R. Underdown and S. Wolf is c/o
Compass Minerals International, Inc., 8300 College Boulevard, Overland
Park, Kansas 66210.(5)
    
    Represents options to purchase 37,367 shares of CMI common stock that
we have granted to Mr. B. Bell and 53,669 shares of CMI common stock
that we have granted to each of Messrs. J. Asen, P. Copses, R. Falk, J.
Harris, S. Kleinman, D. Pertz and H. Tomfohrde III. These options are
exercisable immediately.(6)
    
    The address of Mr. R. Clark is c/o Compass Minerals International,
Inc., 8300 College Boulevard, Overland Park, Kansas 66210. 
 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Ongoing Relationship with IMC Global In connection with the Recapitalization, we entered into several
additional agreements with IMC Global or its affiliates providing for the
continuation or transfer and transition of certain aspects of our business
operations. These agreements were the result of arms-length negotiations, and
we believe they are on terms at least as favorable to us as those we could have
obtained from unaffiliated third parties. Set forth below are descriptions of
the material agreements that we or our affiliates have entered into with IMC
Global. Supply Agreements We have contracted with IMC Global or its affiliates to supply some of our
facilities with raw materials used in the production of our products and to
supply to other facilities finished products that we distribute to our
customers or other distributors. IMC Global supplies us with the following
products:  
    
    coarse and mixed highway deicing salt, as a finished product, from
IMC Globals Esterhazy, Saskatchewan facility;
    
    bulk white granular ice melt muriate of potash from IMC Globals
Belle Plaine, Saskatchewan facility;
    
    packaged water softener muriate of potash, as a finished product,
from IMC Globals Belle Plaine, Saskatchewan facility;
    
    muriate of potash, as a raw material, from IMC Globals Esterhazy,
Saskatchewan facility to our Ogden facility; and
    
    a variety of general trade salt products, as finished products, from
IMC Globals Hersey, Michigan facility. The initial terms of these supply contracts range from five to 12 years
and are automatically extended by one-year intervals unless termination notice
is given by either party six months prior to the end of the term. The prices we
pay for these products vary depending on the product. However, we believe that
the prices IMC Global 86




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charges us are generally as favorable as the prices that we can obtain from
third parties. Some contracts require the purchase of all of our requirements
for a particular product from IMC Global. Others require the purchase of no
less than 90% of our requirements from IMC Global, while others have no
purchase requirement at all. Certain of those contracts permit us to obtain a
lower price elsewhere and, if IMC Global does not match the lower price, we can
purchase at the lower price from the third party. We cannot exercise our
matching rights under these provisions more than twice in a year. Under the
Hersey salt supply contract, we are required to purchase no less than 200,000
tons of salt products each year under most circumstances and we can purchase
from third parties if a force majeure event prevents IMC Global from delivering
products to us. Pricing for the Esterhazy highway deicing salt contract is
adjusted each year based on a Canadian product price index. Pricing under the
other supply contracts is generally adjusted each year based on the movement in
the sales prices of the products to our own or IMC Globals customers. Under
the Hersey salt supply contract, the price is adjusted each year based on a
salt producer price index, although we have the right to change the pricing
adjustment formula to a quarterly adjustment based on the prices at which we
sell the products to our customers. In June 2003, we purchased intangible assets related to IMC Globals SOP
marketing business for $24.8 million, including customer lists related to its
Carlsbad, New Mexico SOP product line and rights to produce SOP at IMC Globals
Carlsbad, New Mexico facility. We also purchased finished goods SOP inventory
in the amount of $3.9 million. The SOP supply contract that grants us the
right to purchase SOP from IMC Global had been in place since the
Recapitalization and, as a result of the purchase of IMC Globals remaining SOP
business in June 2003, terminated on November 30, 2003. Railcars We sublease railcars from affiliates of IMC Global that are used by us to
transport products used in our business. At December 31, 2003, we leased
approximately 46 railcars with terms that expire on various dates throughout
2005 and with renewal options available on some railcars until 2014. Management Consulting Agreement In connection with the Recapitalization, we entered into a management
consulting agreement with Apollo. The agreement allows us and any of our
affiliates to avail itself of Apollos expertise in areas such as financial
transactions, acquisitions and other matters that relate to our business,
administration and policies. Apollo received a one-time transaction fee for
structuring the Recapitalization and thereafter received an annual fee for its
management services and advice. In connection with the initial public offering,
we amended the management consulting agreement whereby Apollo has the right to
terminate the amended management consulting agreement at any time upon prior
written notice to the Company. Upon Apollos election to terminate the amended
management consulting agreement, we will pay Apollo approximately $5.5 million,
less any amounts paid under the annual fee from December 10, 2003, as a final
payment for all services rendered under the agreement. Upon termination of the
agreement by Apollo, any future obligations of Apollo under the agreement will
effectively terminate. Such payment will be expensed as incurred. Apollo
maintains the right following termination to act, in return for additional
fees, as our financial advisor or investment banker for any merger,
acquisition, disposition or the like if we decide to hire someone to fill such
a role. 87




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Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES A summary of the services provided to CMG and CMI by
PricewaterhouseCoopers LLP for the years ended December 31, 2003 and 2002 are
as follows (in millions): 2003
    
    2002Audit fees (a)
    
    $
    0.6
    
    
    $
    1.0Tax fees (b)
    
    
    1.0
    
    
    
    0.9All other fees (c)
    
    
    0.1
    
    
    
    $
    1.7
    
    
    $
    1.9
  (a)
    
    Relates to services for the annual financial statement audits
included in our Form 10-K for CMI and CMG, quarterly reviews for the
financial statements included in our Form 10-Q, other financial
statement audits that were required by SEC rules, reviews of
registration statements and other SEC filings, and procedures performed
for comfort letters issued to underwriters in connection with capital
market transactions.(b)
    
    Relates to services for reviews of certain tax filings, as well as
research and advice on tax planning matters.(c)
    
    Relates to audits of pension and retirement plans. Our audit committees policy has pre-approved all audit and permissible
audit-related services provided by the independent auditors. Going forward, the
audit committee of CMI, our parent company, will consider annually for
pre-approval a list of specific services and categories of services, including
audit and audit-related services, for the upcoming or current fiscal year. All
non-audit services are approved by the audit committee of CMI in advance on a
case-by-case basis. Any service that is not included in the approved list of
services or that does not fit within the definition of a pre-approved service
is required to be presented separately to the audit committee of CMI for
consideration at its next regular meeting or, if earlier consideration is
required, by other means of communication. 
 Part IV 
 Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) Financial statements and supplementary data required by this Item 15 are set forth below: Consolidated Balance Sheets as of December 31, 2003 and 2002
    
    
    46Combined and Consolidated Statements of Operations for the three years
ended December 31, 2003
    
    
    47Combined and Consolidated Statements of Stockholders Equity (Deficit)
for the three years ended December 31, 2003
    
    
    48Combined and Consolidated Statements of Cash Flows for the three years ended
December 31, 2003
    
    
    49Notes to Combined and Consolidated Financial Statements
    
    
    50
 88




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(a)(2) Financial Statement Schedule: Schedule II  Valuation Reserves Compass Minerals Group, Inc.
December 31, 2003, 2002 and 2001
(in millions) Balanceat the
    
    Additions
    
    
    
    
    
    
    
    
    
    BalanceBeginning of
    
    Charged to
    
    
    
    
    
    
    
    
    
    at the End ofDescription
    
    the Year
    
    Expense
    
    Deductions(1)
    
    Other
    
    the YearDeducted from Receivables -
Allowance for Doubtful
Accounts2003
    
    $
    1.6
    
    
    $
    1.1
    
    
    $
    (0.6
    )
    
    $
    
    
    
    $
    2.12002
    
    
    2.0
    
    
    
    0.0
    
    
    
    (0.4
    )
    
    
    
    
    
    
    1.62001
    
    
    1.8
    
    
    
    1.6
    
    
    
    (1.4
    )
    
    
    
    
    
    
    2.0Deducted from Deferred
Income Taxes  Valuation
Allowance2003
    
    $
    40.9
    
    
    $
    0.6
    
    
    $
    (7.0
    )
    
    $
    
    
    
    $
    34.52002
    
    
    44.3
    
    
    
    
    
    

    
    (3.4
    )
    
    
    
    
    
    
    40.92001(2)
    
    
    48.3
    
    
    
    
    
    
    
    
    
    
    
    (4.0
    )
    
    
    44.3
 (1) Deduction for purposes for which reserve was created.  (b)             Exhibits 
 EXHIBIT INDEX ExhibitNo.
    
    Description of Exhibit2.1
    
    Agreement and Plan of Merger, dated October 13, 2001, among
IMC Global Inc., Salt Holdings Corporation, YBR Holdings LLC
and YBR Acquisition Corp (incorporated herein by reference to
Exhibit 2.1 to Compass Minerals Registration Statement on
Form S-4, File No. 333-82700).2.2
    
    Amendment No. 1 to Agreement and Plan of Merger, dated
November 28, 2001, among IMC Global Inc., Salt Holdings
Corporation, YBR Holdings LLC and YBR Acquisition Corp
(incorporated herein by reference to Exhibit 2.2 to Compass
Minerals Registration Statement on Form S-4, File No.
333-82700).3.1
    
    Restated Certificate of Incorporation of IMC Inorganic
Chemicals Inc., filed as Exhibit A to the Certificate of
Merger of IMC Merger Sub Inc. with and into Harris Chemical
Group, Inc., filed on April 1, 1998 (incorporated herein by
reference to Exhibit 3.1 to Compass Minerals Registration
Statement on Form S-4, File No. 333-82700).3.2
    
    Certificate of Amendment of Certificate of Incorporation of
IMC Inorganic Chemicals Inc.,
 89




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ExhibitNo.
    
    Description of Exhibitchanging its name from IMC
Inorganic Chemicals Inc. to Compass Minerals Group, Inc.,
filed on November 28, 2001 (incorporated herein by reference
to Exhibit 3.2 to Compass Minerals Registration Statement on
Form S-4, File No. 333-82700).3.3
    
    By-laws of Compass Minerals Group, Inc. (incorporated herein
by reference to Exhibit 3.3 to Compass Minerals Registration
Statement on Form S-4, File No. 333-82700).3.4
    
    Certificate of Incorporation of GSL Corporation, filed as
Exhibit A to the Certificate of Merger of GSL Acquisition
Corp. into GSL Corporation, filed on September 24, 1993
(incorporated herein by reference to Exhibit 3.4 to Compass
Minerals Registration Statement on Form S-4, File No.
333-82700).3.5
    
    Certificate of Ownership and Merger merging GSL Holdings Inc.
into GSL Corporation filed on May 17, 1994 (incorporated
herein by reference to Exhibit 3.5 to Compass Minerals
Registration Statement on Form S-4, File No. 333-82700).3.6
    
    Certificate of Amendment to Certificate of Incorporation of
GSL Corporation filed on January 12, 2001 (incorporated herein
by reference to Exhibit 3.6 to Compass Minerals Registration
Statement on Form S-4, File No. 333-82700).3.7
    
    By-laws of GSL Corporation (incorporated herein by reference
to Exhibit 3.7 to Compass Minerals Registration Statement on
Form S-4, File No. 333-82700).3.8
    
    Certificate of Incorporation of Sifto Louisiana Inc. filed on
March 22, 1990 (incorporated herein by reference to Exhibit
3.8 to Compass Minerals Registration Statement on Form S-4,
File No. 333-82700).3.9
    
    Certificate of Amendment to the Certificate of Incorporation
of Sifto Louisiana Inc., changing its name from Sifto
Louisiana Inc. to Carey Louisiana Inc., filed on August 22,
1990 (incorporated herein by reference to Exhibit 3.9 to
Compass Minerals Registration Statement on Form S-4, File No.
333-82700).3.10
    
    Certificate of Amendment to the Certificate of Incorporation
of Carey Louisiana Inc., changing its name from Carey
Louisiana Inc. to Carey Salt Company, filed on November 8,
1990 (incorporated herein by reference to Exhibit 3.10 to
Compass Minerals Registration Statement on Form S-4, File No.
333-82700).3.11
    
    By-laws of Carey Salt Company (incorporated herein by
reference to Exhibit 3.11 to Compass Minerals Registration
Statement on Form S-4, File No. 333-82700).3.12
    
    Restated Certificate of Incorporation of American Salt
Company, filed as Exhibit A to Certificate of Merger of Carey
Salt, Inc. into American Salt Company, filed on March 30, 1990
(incorporated herein by reference to Exhibit 3.12 to Compass
Minerals Registration Statement on Form S-4, File No.
333-82700).3.13
    
    Certificate of Merger of Sifto Acquisition, Inc. into American
Salt Company filed on March 30, 1990 (incorporated herein by
reference to Exhibit 3.13 to Compass Minerals Registration
Statement on Form S-4, File No. 333-82700).3.14
    
    Certificate of Amendment to Restated Certificate of
Incorporation of American Salt Company, changing its name from
American Salt Company to North American Salt Company, filed on
August 20, 1990 (incorporated herein by reference to Exhibit
3.14 to Compass Minerals Registration Statement on Form S-4,
File No. 333-82700).3.15
    
    Certificate of Amendment to Restated Certificate of
Incorporation of North American Salt Company, changing its
name from North American Salt Company to IMC Salt Inc., filed
on May 1, 1998 (incorporated herein by reference to Exhibit
3.15 to Compass Minerals Registration Statement on Form S-4,
File No. 333-82700).3.16
    
    Certificate of Amendment of Certificate of Incorporation of
IMC Salt Inc., changing its name from IMC Salt Inc. to North
American Salt Company, filed on November 28, 2001
(incorporated herein by reference to Exhibit 3.16 to Compass
Minerals Registration Statement on Form S-4, File No.
333-82700).3.17
    
    By-laws of North American Salt Company (incorporated herein by
reference to Exhibit 3.17 to Compass Minerals Registration
Statement on Form S-4, File No. 333-82700).3.18
    
    Restated Certificate of Incorporation of Great Salt Lake
Minerals and Chemicals Corporation filed on March 29, 1990
(incorporated herein by reference to Exhibit 3.18 to Compass
 90




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ExhibitNo.
    
    Description of ExhibitMinerals Registration Statement on Form S-4, File No.
333-82700).3.19
    
    Certificate of Amendment to Restated Certificate of
Incorporation of Great Salt Lake Minerals and Chemicals
Corporation, changing its name from Great Salt Lake Minerals
and Chemicals Corporation to Great Salt Lake Minerals
Corporation, filed on October 9, 1991 (incorporated herein by
reference to Exhibit 3.19 to Compass Minerals Registration
Statement on Form S-4, File No. 333-82700).3.20
    
    Certificate of Amendment to Restated Certificate of
Incorporation of Great Salt Lake Minerals Corporation,
changing its name from Great Salt Lake Minerals Corporation to
IMC Kalium Ogden Corp., filed on June 18, 1998 (incorporated
herein by reference to Exhibit 3.20 to Compass Minerals
Registration Statement on Form S-4, File No. 333-82700).3.21
    
    Certificate of Amendment to Restated Certificate of
Incorporation of IMC Kalium Ogden Corp., changing its name
from IMC Kalium Ogden Corp. to Great Salt Lake Minerals
Corporation, dated November 28, 2001 (incorporated herein by
reference to Exhibit 3.21 to Compass Minerals Registration
Statement on Form S-4, File No. 333-82700).3.22
    
    By-laws of Great Salt Lake Minerals Corporation (incorporated
herein by reference to Exhibit 3.22 to Compass Minerals
Registration Statement on Form S-4, File No. 333-82700).3.23
    
    Restated Certificate of Incorporation of NAMSCO Inc., filed as
Exhibit A to the Certificate of Merger of NAMSCO Acquisition
Corp. with and into NAMSCO Inc., filed on September 24, 1993
(incorporated herein by reference to Exhibit 3.23 to Compass
Minerals Registration Statement on Form S-4, File No.
333-82700).3.24
    
    Certificate of Amendment to Certificate of Incorporation of
NAMSCO Inc. filed on January 16, 2001 (incorporated herein by
reference to Exhibit 3.24 to Compass Minerals Registration
Statement on Form S-4, File No. 333-82700).3.25
    
    By-laws of NAMSCO Inc. (incorporated herein by reference to
Exhibit 3.25 to Compass Minerals Registration Statement on
Form S-4, File No. 333-82700).10.1
    
    Indenture, dated November 28, 2001, among Compass Minerals
Group, Inc., as issuer, Carey Salt Company, Great Salt Lake
Minerals Corporation, GSL Corporation, NAMSCO Inc., North
American Salt Company, as guarantors, and The Bank of New
York, as trustee (incorporated herein by reference to Exhibit
4.1 to Compass Minerals Registration Statement on Form S-4,
File No. 333-82700).10.2
    
    Form of Initial Note (included as Exhibit A to Exhibit 10.1).10.3
    
    Form of Exchange Note (included as Exhibit B to Exhibit 10.1).10.4
    
    Salt mining lease, dated November 9, 2001, between the
Province of Ontario, as lessor, and Sifto Canada Inc. as
lessee (incorporated herein by reference to Exhibit 10.1 to
Compass Minerals Registration Statement on Form S-4, File
No. 333-82700).10.5
    
    Salt and Surface Agreement, dated June 21, 1961, by and
between John Taylor Caffery, as agent for Marcie Caffery
Gillis, Marcel A. Gillis, Bethia Caffery McCay, Percey McCay,
Mary Louise Caffery Ellis, Emma Caffery Jackson, Edward
Jackson, Liddell Caffery, Marion Caffery Campbell, Martha
Gillis Restarick, Katherine Baker Senter, Caroline Baker,
Bethia McCay Brown, Donelson Caffery McCay, Lucius Howard
McCurdy Jr., John Andersen McCurdy, Edward Rader Jackson III,
individually and as trustee for Donelson Caffery Jackson, and
the J.M. Burguieres Company, LTD., and Carey Salt Company as
amended by Act of Amendment to Salt Lease, dated May 30, 1973,
as further amended by Agreement, dated November 21, 1990, and
as further amended by Amendment to Salt and Surface lease,
dated July 1, 1997 (incorporated herein by reference to
Exhibit 10.2 to Compass Minerals Registration Statement on
Form S-4, File No. 333-82700).10.6
    
    Royalty Agreement, dated September 1, 1962, between IMC Kalium
Ogden Corp. and the Utah State Land Board (incorporated herein
by reference to Exhibit 10.3 to Compass Minerals Registration
Statement on Form S-4, File No. 333-82700).10.7
    
    Amended and Restated Credit Agreement, dated April 10, 2002,
among Salt Holdings Corporation, Compass Minerals Group, Inc.,
as U.S. borrower, Sifto Canada Inc., as Canadian borrower,
Salt Union Limited, as U.K. borrower, JPMorgan Chase Bank, as
administrative agent, J.P. Morgan Bank Canada, as Canadian
agent, Chase Manhattan
 91




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##### Table of Contents



ExhibitNo.
    
    Description of ExhibitInternational Limited, as U.K. agent,
J.P. Morgan Securities Inc., as joint advisor, co-lead
arranger and joint bookrunner, Deutsche Banc Alex. Brown Inc.,
as syndication agent, joint advisor, co-lead arranger and
joint-bookrunner, Credit Suisse First Boston Corporation, as
co-documentation agent, and Credit Lyonnais, as
co-documentation agent (incorporated herein by reference to
Exhibit 10.4 to Salt Holdings Corporations Registration
Statement on Form S-4, File No. 333-104603).10.8
    
    Amendment No. 1 to the Amended and Restated Credit Agreement, dated December 19, 2002, among Salt Holdings
Corporation, Compass Minerals Group, Inc., as U.S. borrower, Sifto Canada Inc., as Canadian borrower, Salt
Union Limited, as U.K. borrower, JPMorgan Chase Bank, as administrative agent, J.P. Morgan Bank Canada, as
Canadian agent, Chase Manhattan International Limited, as U.K. agent, J.P. Morgan Securities Inc., as joint
advisor, co-lead arranger and joint bookrunner, Deutsche Banc Alex. Brown Inc., as syndication agent, joint
advisor, co-lead arranger and joint bookrunner, Credit Suisse First Boston Corporation, as co-documentation
agent, and Credit Lyonnais, as co-documentation agent (incorporated herein by reference to Exhibit 10.5 to Salt
Holdings Corporations Registration Statement on Form S-4, File No. 333-104603).10.9
    
    Amendment No. 2 to the Amended and Restated Credit Agreement, dated May 5, 2003, among Salt Holdings
Corporation, Compass Minerals Group, Inc., as U.S. borrower, Sifto Canada Inc., as Canadian borrower, Salt
Union Limited, as U.K. borrower, JPMorgan Chase Bank, as administrative agent, J.P. Morgan Bank Canada, as
Canadian agent, and J.P. Morgan Europe Limited, as U.K. agent (incorporated herein by reference to Exhibit 10.6
to Salt Holdings Corporations Registration Statement on Form S-4, File No. 333-104603).10.10
    
    Amendment No. 3 to the Amended and Restated Credit Agreement, dated May 21, 2003, among Salt Holdings
Corporation, Compass Minerals Group, Inc., as U.S. borrower, Sifto Canada Inc., as Canadian borrower, Salt
Union Limited, as U.K. borrower, JPMorgan Chase Bank, as administrative agent, J.P. Morgan Bank Canada, as
Canadian agent, and J.P. Morgan Europe Limited, as U.K. agent (incorporated herein by reference to Exhibit 10.7
to Salt Holdings Corporations Registration Statement on Form S-4, File No. 333-104603).10.11
    
    Amendment No. 4 to the Amended and Restated Credit Agreement and Waiver, dated November 17, 2003, among Compass
Minerals International, Inc., Compass Minerals Group, Inc., as U.S. borrower, Sifto Canada Inc., as Canadian
borrower, Salt Union Limited, as U.K. borrower, JPMorgan Chase Bank, as administrative agent, J.P. Morgan Bank
Canada, as Canadian agent, and J.P. Morgan Europe Limited, as U.K. agent (incorporated herein by reference to
Exhibit 10.8 to Compass Minerals Internationals Registration Statement on Form S-1, File No. 333-110250).10.12
    
    U.S. Collateral and Guaranty Agreement, dated November 28,
2001, among Salt Holdings Corporation, Compass Minerals Group,
Inc., Carey Salt Company, Great Salt Lake Minerals
Corporation, GSL Corporation, NAMSCO Inc., North American Salt
Company and JPMorgan Chase Bank, as collateral agent
(incorporated herein by reference to Exhibit 10.5 to Compass
Minerals Registration Statement on Form S-4, File No.
333-82700).10.13
    
    U.S. Collateral Assignment, dated November 28, 2001, among Salt Holdings Corporation, Compass Minerals Group,
Inc. and JPMorgan Chase Bank (incorporated herein by reference to Exhibit 10.6 to Compass Minerals
Registration Statement on Form S-4, File No. 333-82700).10.14
    
    Foreign Guaranty, dated November 28, 2001, among Sifto Canada Inc., Salt Union Limited, IMC Global (Europe)
Limited, IMC Global (UK) Limited, London Salt Limited, Direct Salt Supplies Limited, J.T. Lunt & Co. (Nantwich)
Limited, and JPMorgan Chase Bank, as collateral agent (incorporated herein by reference to Exhibit 10.7 to
Compass Minerals Registration Statement on Form S-4, File No. 333-82700).10.15
    
    Amended and Restated 2001 Stock Option Plan of Compass Minerals International, Inc., as adopted by the Board of
Directors of Compass Minerals International, Inc. on December 11, 2003 (incorporated herein by reference to
Exhibit 10.12 to Compass Minerals Internationals Registration Statement on Form S-4, File No. 333-111953).
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ExhibitNo.
    
    Description of Exhibit10.16
    
    Service Agreement, dated September 1, 1997, between Salt Union Limited and David J. Goadby (incorporated herein
by reference to Exhibit 10.10 to Compass Minerals Registration Statement on Form S-4, File No. 333-82700).10.17
    
    Investor Rights Agreement, dated November 28, 2001, between
Salt Holdings Corporation and the holders of securities of
Salt Holdings Corporation party thereto (incorporated herein
by reference to Exhibit 10.11 to Compass Minerals
Registration Statement on Form S-4, File No. 333-82700).10.18
    
    Amended and Restated Stock Rights Agreement, dated as of June 23, 2003, by and among Salt Holdings Corporation,
Apollo Management V, L.P., each of the stockholders listed on Schedule A attached thereto and IMC Global Inc.
(incorporated herein by reference to Exhibit 10.15 to Salt Holdings Corporations Registration Statement on
Form S-4, File No. 333-104603).10.19
    
    Amended and Restated Management Consulting Agreement, dated December 10, 2003, between Compass Minerals
International, Inc. and Apollo Management V, L.P. (incorporated herein by reference to Exhibit 10.16 to Compass
Minerals Internationals Registration Statement on Form S-4, File No. 333-111953).10.20
    
    Master Assignment Agreement, dated April 10, 2002, among Compass Minerals Group, Inc., a Delaware corporation,
the lenders party thereto and JPMorgan Chase Bank, as administrative agent for the Existing Lenders (as defined
in the Master Assignment Agreement) (incorporated herein by reference to Exhibit 10.17 to Salt Holdings
Corporations Registration Statement on Form S-4, File No. 333-104603).10.21
    
    Employment Agreement, dated March 12, 2002, between Compass Minerals Group, Inc. and Michael E. Ducey
(incorporated herein by reference to Exhibit 10.18 to Salt Holdings Corporations Registration Statement on
Form S-4, File No. 333-104603).12.1*
    
    Statement of Computation of Ratio of Earnings to Fixed Charges.21.1*
    
    Subsidiaries of the Registrant.31.1*
    
    Section 302 Certifications of Michael E. Ducey, President and Chief Executive Officer.31.2*
    
    Section 302 Certifications of Rodney L. Underdown, Chief Financial Officer and Vice President.32*
    
    Certification Pursuant to 18 U.S.C.§1350 of Michael E. Ducey, President and Chief Executive Officer and Rodney
L. Underdown, Chief Financial Officer and Vice President.
   *  Filed herewith. (c)
    
    Reports on Form 8-K:From 8-K, filed May 13, 2003, Regulation FD DisclosureFrom 8-K, filed June 27, 2003, Other EventsFrom 8-K, filed August 13, 2003, Regulation FD DisclosureFrom 8-K, filed November 7, 2003, Regulation FD Disclosure
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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 GROUP, INC.Date:
March 19, 2004
    
    /s/ Michael E. DuceyMichael E. DuceyPresident and Chief Executive OfficerDate:
March 19, 2004
    
    /s/ Rodney L. UnderdownRodney L. UnderdownChief Financial Officer and Vice President
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Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Compass
Minerals Group, Inc. and in the capacities indicated on March 19, 2004. Signature
    
    Capacity/s/ Michael E. Ducey
Michael E. Ducey
    
    President, Chief Executive Officer
and Director (Principal Executive
Officer)/s/ Rodney L. Underdown
Rodney L. Underdown
    
    Chief Financial Officer and Vice
President (Principal Financial and
Accounting Officer)/s/ Joshua J. Harris
    
    DirectorJoshua J. Harris/s/ Scott M. Kleinman
    
    DirectorScott M. Kleinman
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