UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

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.

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

     The number of shares outstanding of the registrant’s common stock, $0.01 par value per share, at November 8, 2004 was 30,870,936 shares.

COMPASS MINERALS INTERNATIONAL, INC.

Introductory Note

     Compass Minerals International, Inc. (the “Company”) amended its Annual Report on Form 10-K filed on March 19, 2004 with the Securities and Exchange Commission (“SEC”), for the years ended December 31, 2003, 2002 and 2001 to restate the combined and consolidated financial statements for each of those three years in order to correct an error in the calculation of the deferred income tax accounts and related valuation allowance dating back to the year ended December 31, 1998. The effect of the timing of future reversals of existing taxable temporary differences (deferred tax liabilities) had not been previously considered as a possible source of future taxable income (see the disclosure under the heading “Restatement” in Note 1 to the combined and consolidated financial statements in the Annual Report on Form 10-K/A filed with the SEC on November 12, 2004).

     As a result of restating the consolidated financial statements for the year ended December 31, 2003, the Company, determined that its financial statements for the three-month and nine-month periods ended September 30, 2003 also needed to be restated in order to reflect the correction discussed above (see the disclosure under the heading “Restatement” in Note 1 to the consolidated financial statements in this Quarterly Report on Form 10-Q). This amendment reflects only the changes discussed above and has no impact on cash flows, operating earnings, income before income taxes or the Company’s ability to realize the benefits from its deferred tax assets.

Table of Contents

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

COMPASS MINERALS INTERNATIONAL, INC.

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

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COMPASS MINERALS INTERNATIONAL, INC.

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

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COMPASS MINERALS INTERNATIONAL, INC.

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

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COMPASS MINERALS INTERNATIONAL, INC.

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

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COMPASS MINERALS INTERNATIONAL, INC.

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 and nine-month periods ended September 30, 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/A filed with the Securities and Exchange Commission (the “SEC”) on November 12, 2004.

Restatement: Prior to the quarter ended September 30, 2004, the Company recorded full valuation allowances against certain U.S. deferred tax assets. The Company, after discussions with its independent registered public accounting firms, has subsequently determined that future reversals of existing taxable temporary differences (deferred tax liabilities) should have been considered as a possible source of taxable income when evaluating the need for a valuation allowance against deferred tax assets. Upon consideration of the reversal of these existing taxable temporary differences, the Company has now determined that it had overstated its deferred tax asset valuation allowance and, thereby, understated its deferred tax assets.

     As a result, the Company has recalculated its deferred income tax accounts and related valuation allowance at the end of each year ended from December 31, 1998 through December 31, 2003 and the six months ended June 30, 2004 and has restated consolidated financial statements and the accompanying notes to the consolidated financial statements, as applicable, for the three and nine-month periods ended September 30, 2003 to reflect the adjustments in the deferred income tax accounts and related valuation allowance. These adjustments during the previous reporting periods had no impact on cash flows, operating earnings, income before income taxes or the Company’s ability to realize the benefits from its deferred tax assets.

     The following is a summary of the effects of these non-cash adjustments (in millions):

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     The following tables present (in millions, except share data) the impact of the restatement on the consolidated statements of operations, the consolidated balance sheets and consolidated statements of cash flows. The amounts previously reported are derived from the Company’s historical filings with the SEC.

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

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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.

     In April 2004, the FASB issued FASB staff position (“FSP”) FAS 141-1 and FAS 142-1, “Interaction of FASB Statements No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, and Emerging Issues Task Force (“EITF”) Issue No. 04-2, “Whether Mineral Rights Are Tangible or Intangible Assets.” This FSP amends SFAS Nos. 141 and 142, and requires mineral rights to be accounted for as tangible assets based on the consensus reached in EITF 04-2. The Company adopted the guidance in the FSP on July 1, 2004, resulting in the balance sheet reclassification of approximately $147.2 million of net mineral rights from intangible assets to property, plant and equipment. At December 31, 2003, approximately $148.0 million of net mineral rights were similarly reclassified. This FSP had no impact on the Company’s consolidated statements of operations or cash flows.

3. Inventories:

     Inventories consist of the following (in millions):

4. Property, Plant and Equipment:

     As discussed in Note 2, Recent Accounting Pronouncements, the Company reclassified approximately $147.2 million of net mineral rights from intangible assets to property, plant and equipment on July 1, 2004. At December 31, 2003, approximately $148.0 million of net mineral rights were similarly reclassified. The Company leases probable 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 leased mineral interests are amortized on a units-of-production basis. The Company also owns other mineral properties. The Company’s owned mineral properties are amortized on a straight-line basis over their estimated useful lives.

     At September 30, 2004, mineral properties and rights include leased probable mineral reserves and owned mineral properties of approximately $158.6 million and $20.4 million, respectively, with accumulated depletion of $11.9 million and $12.6 million, respectively. At December 31, 2003, mineral properties and rights include leased probable mineral reserves and owned mineral properties of approximately $158.6 million and $20.3 million, respectively, with accumulated depletion of $10.6 million and $12.3 million, respectively.

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

5. Intangible Assets:

     The Company acquired 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 intangible assets for the three months ended September 30, 2004 and 2003 was $0.2 million and zero, respectively, and for the nine months ended September 30, 2004 and 2003 was $0.8 million and zero, respectively. Estimated amortization expense from fiscal 2004 to fiscal 2008 is approximately $1.1 million annually.

     Intangible assets consist of the following (in millions):

6. Income Taxes:

     Income tax benefit for the three months ended September 30, 2004 and 2003 was $12.2 million and $4.1 million, respectively. Income tax benefit for the nine months ended September 30, 2004 and 2003 was $3.1 million and $2.8 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 and changes in the valuation allowance for deferred tax assets.

     At September 30, 2004, we had approximately $85.5 million of net operating loss carryforwards (“NOLs”) that expire between 2007 and 2022. The Company has recorded a valuation allowance for a portion of its deferred tax assets relating to NOLs that it does not believe will, more likely than not, be realized.

     For the three and nine-month periods ended September 30, 2004, a valuation allowance against deferred tax assets, in the amount of $11.1 million, was no longer necessary based on an assessment of potential sources of future taxable income other than future reversals of existing taxable temporary differences. As part of the restatement to the combined and consolidated financial statements in the

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Annual Report on Form 10-K/A filed with the SEC on November 12, 2004, the Company determined that a valuation allowance against deferred tax assets for the three and nine-month periods ended September 30, 2003, in the amount of $1.3 million and $3.8 million, respectively, was not necessary based on the timing of future reversals of existing taxable temporary differences. The Company reduced its valuation allowance against deferred tax assets by these amounts resulting in decreases in income tax expense, increases in net income and net income available for common stock for the three and nine-month periods ended September 30, 2004 and 2003. As of September 30, 2004 and December 31, 2003, the Company’s valuation allowance was $13.7 million and $24.8 million, respectively. If sufficient evidence exists in the future that more or less of the Company’s deferred tax assets should be realized, an adjustment to the valuation allowance will be made at that time.

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 and nine-month periods ended September 30, are as follows (in millions):