UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the quarterly period ended March 31, 2004

OR

For the transition period from ______to______

Commission File Number 001-31921

Compass Minerals International, Inc.

8300 College Blvd.
Overland Park, KS 66210
(913) 344-9200
(Address of principal executive offices and telephone number)

     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:    

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes: No: X

     The number of shares outstanding of the registrant’s common stock, $0.01 par value per share, at May 3, 2004 was 30,412,590 shares.

COMPASS MINERALS INTERNATIONAL, INC.

Table of Contents

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
(in millions, except share data)

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

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COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in millions, except share data)

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

3

COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) (unaudited)
For the three months ended March 31, 2004
(in millions)

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

4

COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in millions)

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

5

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

1. Organization, Formation and Basis of Presentation:

     Compass Minerals International, Inc. (“CMI” or the “Company”), 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”). CMI serves a variety of markets, including agriculture, food processing, chemical processing, water conditioning and highway deicing. The consolidated financial statements include the accounts of CMI and its wholly owned subsidiary, Compass Minerals Group, Inc. (“CMG”), and the consolidated results of CMG’s wholly owned subsidiaries.

     The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation, have been included. Operating results for the three-month period ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, 2004.

     The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto for the year ended December 31, 2003 included in CMI’s Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 19, 2004.

2. Recent Accounting Pronouncements:

     In January 2003, the Financial Accounting Standards Board, or “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 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) is 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 reviewed the applicability of FIN 46(R) to entities other than SPEs and has determined that the adoption of FIN 46(R) did not have a material effect on its consolidated financial statements.

3. Inventories:

     Inventories consist of the following (in millions):

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4. Property, Plant and Equipment:

     Property, plant and equipment consists of the following at December 31 (in millions):

5. Intangible Assets — Mineral Interests and Other:

     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 amortized on a units-of-production basis. The Company acquired other intangible assets related to its SOP segment during 2003. These assets are being amortized on a straight-line basis over their estimated useful lives.

     The aggregate amortization of mineral interests and other intangible assets for the three months ended March 31, 2004 and 2003 was $0.7 million and $0.3 million, respectively. The estimated amortization expense from fiscal 2004 to fiscal 2008 is approximately $1.7 million annually.

     Mineral interests and other intangible assets consist of the following (in millions):

6. Income Taxes:

     Income tax expense for the three months ended March 31, 2004 and 2003 was $11.4 million and $4.4 million, respectively. 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 income taxes, non-deductible interest expense, valuation allowance on interest expense on discount notes and changes in the utilization of previously reserved NOLs.

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7. Long-term Debt:

     Third-party long-term debt consists of the following (in millions):

8. Pension Plans:

     The components of net periodic benefit cost for the three-month periods ended March 31, are as follows (in millions):

     Employer contributions were approximately $0.4 million during the three-month periods ended March 31, 2004 and 2003.

9. Commitments and Contingencies:

     The Company is involved in legal and administrative proceedings and claims of various types from normal Company activities.

     The Company has become aware of an aboriginal land claim filed by The Chippewas of Nawash and The Chippewas of Saugeen (the"Chippewas") in the Ontario Superior Court against the Attorney General of Canada and Her Majesty The Queen In Right of Ontario. The Chippewas claim that a large part of the land under Lake Huron was never conveyed by treaty and therefore belong to the Chippewas. The land claimed includes land in which the Company's Goderich mine operates and has mining rights granted to it by the government of Ontario. The Company is not a party to this court action. Similar claims are pending with respect to other parts of the Great Lakes by other aboriginal claimants. The Company has been informed by the Ministry of the Attorney General of Ontario that "Canada takes the position that the common law does not recognize aboriginal title to the Great Lakes and its connecting waterways."

     The Company does not believe that this action will result in a material adverse financial effect on the Company. Furthermore, while any litigation contains an element of uncertainty, management presently believes that the outcome of each such proceeding or claim which is pending or know 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.

10. Operating Segments:

     Segment information is as follows (in millions):

     (a) “Other” includes corporate entities and eliminations.

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11. Stockholders’ Equity and Stock Options:

     On February 9, 2004, the board declared a quarterly cash dividend of $0.1875 per share, or approximately $5.7 million, on its outstanding common stock. The dividend was paid on March 15, 2004 to stockholders of record as of the close of business on March 1, 2004.

     During the first quarter of 2004, the Company reissued 110,942 shares of treasury stock, all of which were issued upon the exercise of stock options.

12. Earnings per Share:

     The following table sets forth the computation of basic and diluted earnings per common share for the three-month periods ended March 31, (in millions, except for share and per share data):

13. Other Comprehensive Income:

     The Company’s comprehensive income is comprised of net income, the change in the unrealized gain (loss) on cash flow hedges related to the Company’s gas hedging activities and foreign currency translation adjustments. The components of comprehensive income for the three-month periods ended March 31, are (in millions):

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     The following tables provide additional detail related to amounts recorded in Other Comprehensive Income during the three-month period ended March 31, 2004 (in millions):

14. Subsequent Event:

     In May 2004, the board declared a quarterly cash dividend of $0.25 per share, approximately $7.6 million, on its outstand