Back to GetFilings.com




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2003

OR


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

For the transition period from ______to______

Commission File Number 333-82700

Compass Minerals Group, Inc.
(Exact name of registrant as specified in its charter)


Delaware
(State or other jurisdiction of
incorporation or organization)
     48-1135403
(I.R.S. Employer
Identification Number)

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 Exchange Act Rule 12b-2).

Yes:         No:  X 

Common Stock, $0.01 Par Value - 1,000 shares outstanding as of May 1, 2003



COMPASS MINERALS GROUP, INC.

Table of Contents

Part I. FINANCIAL INFORMATION Page
     
          Item 1.     Financial Statements
     
                           Consolidated Balance Sheets as of March 31, 2003
                           (unaudited) and December 31, 2002 2
     
                           Consolidated Statements of Operations for the three month
                           period ended March 31, 2003 and 2002 (unaudited) 3
        
                           Consolidated Statement of Stockholder’s Equity (Deficit) for the three
                           month period ended March 31, 2003 (unaudited) 4
     
                           Consolidated Statements of Cash Flows for the three
                           month period ended March 31, 2003 and 2002 (unaudited) 5
     
                           Notes to Consolidated Financial Statements (unaudited) 6
     
           Item 2.    Management’s Discussion and Analysis of Financial Condition and
                           Results of Operations 15
     
           Item 3.    Quantitative and Qualitative Disclosure of Market Risk 20
     
           Item 4.    Controls and Procedures 21
     
Part II. OTHER INFORMATION
     
           Item 1.    Legal Proceedings 21
     
           Item 2.    Changes in Securities and Use of Proceeds 22
     
           Item 3.    Defaults upon Senior Securities 22
     
           Item 4.    Submission of Matters to a Vote of Security Holders 22
     
           Item 5.    Other Information 22
     
           Item 6.    Exhibits & Reports on Form 8-K 22
     
SIGNATURES 22
     
CERTIFICATIONS 23

1



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

March 31,
2003
December 31,
2002
(Unaudited)
ASSETS        
Current assets:        
  Cash and cash equivalents $ 50.1             $ 11.9  
  Receivables, less allowance for doubtful accounts of        
       $1.6 million in 2003 and 2002   83.7     94.5  
  Inventories   53.5     96.5  
  Other   2.5     0.7  
       Total current assets   189.8     203.6  
    
  Property, plant and equipment, net   408.9     413.2  
  Other   26.9     27.2  
      Total assets $ 625.6   $ 644.0  
    
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)        
Current liabilities:        
  Current portion of long-term debt $ 0.8   $ 1.2  
  Accounts payable   48.7     62.3  
  Accrued expenses   10.5     8.9  
  Accrued interest   4.3     12.6  
  Accrued salaries and wages   14.4     12.6  
  Income taxes payable   7.0     4.8  
       Total current liabilities   85.7     102.4  
    
Long-term debt, net of current portion   406.2     436.4  
Deferred income taxes   101.3     99.6  
Other noncurrent liabilities   23.6     25.3  
    
Commitments and contingencies        
    
Stockholder’s equity (deficit):        
  Common stock, $.01 par value, 1,000 shares authorized, issued and        
      outstanding   —     —  
  Additional paid in capital   349.5     349.5  
  Accumulated deficit   (342.4 )   (369.3 )
  Accumulated other comprehensive income   1.7     0.1  
      Total stockholder’s equity (deficit)   8.8     (19.7 )
    
      Total liabilities and stockholder’s equity (deficit) $ 625.6   $ 644.0  

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

2



COMPASS MINERALS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in millions)

Three months ended
March 31,
   2003    2002
          Sales $ 212.7                      $ 162.4
          Cost of sales – shipping and handling costs   64.1     48.5
          Cost of sales – products   95.5     74.3
  
            Gross profit   53.1     39.6
  
          Selling, general and administrative expenses   11.6     9.6
          Restructuring and other charges   —     2.5
  
            Operating earnings   41.5     27.5
  
          Other (income) expense:      
            Interest expense   9.7     10.2
            Other, net   (0.3 )   —
  
          Income before income taxes   32.1     17.3
  
          Income tax expense   5.2     5.6
  
          Net income $ 26.9   $ 11.7

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

3



COMPASS MINERALS GROUP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY (DEFICIT) (unaudited)
For the three months ended March 31, 2003
(in millions)

Common
Stock
 Additional
Paid In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
 Total
Balance, December 31, 2002 $ —         $ 349.5         $ (369.3 )       $ 0.1         $ (19.7 )
  
Comprehensive income:                    
     Net income           26.9         26.9  
     Unrealized loss on cash flow                    
        hedges, net of tax               (0.6 )   (0.6 )
     Cumulative translation adjustments               2.2     2.2  
     Comprehensive income                   28.5  
Balance, March 31, 2003 $ —   $ 349.5   $ (342.4 ) $ 1.7   $ 8.8  

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

4



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

  Three months ended
March 31,		  
 
 
   2003    2002  
Cash flows from operating activities:        
   Net income $ 26.9                $ 11.7  
   Adjustments to reconcile net income to net cash flows provided        
        by operating activities:        
        Depreciation and depletion   9.8     9.1  
        Amortization   0.5     0.5  
        Restructuring and other charges, net of cash   —     1.1  
        Deferred income taxes   1.7     3.1  
        Changes in operating assets and liabilities:        
              Receivables   12.3     19.6  
              Due to affiliates   (0.3 )   —  
              Inventories   43.7     22.4  
              Other assets   (1.9 )   (0.1 )
              Accounts payable and accrued expenses   (20.0 )   (4.7 )
              Other noncurrent liabilities   (0.1 )   (0.8 )
   Net cash provided by operating activities   72.6     61.9  
  
Cash flows from investing activities:        
   Capital expenditures   (2.7 )   (3.3 )
  
        Net cash used in investing activities   (2.7 )   (3.3 )
  
Cash flows from financing activities:        
   Revolver activity   —     (39.8 )
   Principal payments on other long-term debt, including capital leases   (30.5 )   (0.1 )
   Deferred financing costs   —     (0.5 )
  
        Net cash used in financing activities   (30.5 )   (40.4 )
  
Effect of exchange rate changes on cash and cash equivalents   (1.2 )   (0.8 )
  
        Net increase in cash and cash equivalents   38.2     17.4  
  
Cash and cash equivalents, beginning of the period   11.9     15.9  
  
Cash and cash equivalents, end of the period $ 50.1   $ 33.3  
  
Supplemental cash flow information:        
   Interest paid excluding capitalized interest $ 17.4   $ 8.7  
   Income taxes paid   2.1     3.8  

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

5



COMPASS MINERALS GROUP, INC.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Organization, Formation and Basis of Presentation:

              On November 28, 2001, IMC Inc. (“IMC”) completed the sale of Compass Minerals Group, Inc. (“CMG” or the “Company”) to Salt Holdings Corporation (“SHC”), an affiliate of Apollo Management V, L.P. (“Apollo”), whereby SHC acquired control of CMG in a recapitalization transaction (“Recapitalization”). The acquisition has been accounted for as a leveraged recapitalization. The excess of the purchase price over the net assets acquired was recorded in Stockholder’s Equity of SHC.

              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, 2003 are not necessarily indicative of the results that may be expected for the year ended December 31, 2003.

              The balance sheet at December 31, 2002 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, 2002 included in the CMG Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2003.

              Certain reclassifications were made to prior year amounts in order to conform with the current year’s presentation.

2. Recent Accounting Pronouncements:

              In June 2001, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Obligations Associated with the Retirement of Long-Lived Assets.” The objective of SFAS 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. The Company adopted SFAS No. 143 on January 1, 2003. The adoption of SFAS No. 143 did not have a material impact on the Company’s 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 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.