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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 June 30, 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 August 1, 2003



COMPASS MINERALS GROUP, INC.

Table of Contents


Part I. FINANCIAL INFORMATION       Page  
     
      Item 1.      Financial Statements    
     
                        Consolidated Balance Sheets as of June 30, 2003    
                        (unaudited) and December 31, 2002       2  
     
                        Consolidated Statements of Operations for the three and six month    
                        periods ended June 30, 2003 and 2002 (unaudited)       3  
     
                        Consolidated Statement of Stockholder’s Equity (Deficit) for the six    
                        month period ended June 30, 2003 (unaudited)       4  
     
                        Consolidated Statements of Cash Flows for the six    
                        month periods ended June 30, 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       17  
           
      Item 3.      Quantitative and Qualitative Disclosure of Market Risk       24  
           
      Item 4.      Controls and Procedures       25  
     
Part II. OTHER INFORMATION    
           
      Item 1.      Legal Proceedings       25  
           
      Item 2.      Changes in Securities and Use of Proceeds       25  
           
      Item 3.      Defaults upon Senior Securities       25  
           
      Item 4.      Submission of Matters to a Vote of Security Holders       25  
           
      Item 5.      Other Information       25  
           
      Item 6.      Exhibits & Reports on Form 8-K       26  
           
SIGNATURES       26  
           
CERTIFICATIONS       27  


1


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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


      June 30,     December 31,  
         2003     2002  
      (Unaudited)      
ASSETS
    
Current assets:    
  Cash and cash equivalents     $ 13.7   $ 11.9  
  Receivables, less allowance for doubtful accounts of    
     $1.6 million in 2003 and 2002       45.9     94.5  
  Inventories       78.1     96.5  
  Other       3.5     0.7  
       Total current assets       141.2     203.6  
  Property, plant and equipment, net       409.4     413.2  
  Intangibles       24.5     —  
  Other       30.1     27.2  
      Total assets     $ 605.2   $ 644.0  
               LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)    
Current liabilities:    
  Current portion of long-term debt     $ 0.8   $ 1.2  
  Accounts payable       42.7     62.3  
  Accrued expenses       9.3     8.9  
  Accrued interest       12.5     12.6  
  Accrued salaries and wages       11.8     12.6  
  Income taxes payable       1.5     4.8  
       Total current liabilities       78.6     102.4  
Long-term debt, net of current portion       405.9     436.4  
Deferred income taxes       106.6     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       (369.8 )   (369.3 )
  Accumulated other comprehensive income       10.8     0.1  
      Total stockholder’s equity (deficit)       (9.5 )   (19.7 )
      Total liabilities and stockholder’s equity (deficit)     $ 605.2   $ 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
June 30 		Six Months ended
June 30
        2003     2002     2003     2002  
Sales     $ 88.7   $ 82.3   $ 301.4   $ 244.7  
Cost of sales – shipping and handling       21.1     20.2     85.2     68.7  
Cost of sales – products       48.9     45.7     144.4     120.0  
  Gross profit       18.7     16.4     71.8     56.0  
Selling, general and administrative expenses       11.5     9.7     23.1     19.3  
Restructuring and other charges       —     2.2     —     4.7  
  Operating earnings       7.2     4.5     48.7     32.0  
Other expense:    
  Interest expense       9.5     10.3     19.2     20.5  
  Other, net       3.2     4.4     2.9     4.4  
Income / (Loss) before income taxes       (5.5 )   (10.2 )   26.6     7.1  
Income tax expense (benefit)       0.2     (2.9 )   5.4     2.7  
Net income / (loss)     $ (5.7 ) $ (7.3 ) $ 21.2   $ 4.4  

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 six months ended June 30, 2003
(in millions)


                  Accumulated      
             Additional         Other      
           Common     Paid In     Accumulated     Comprehensive      
             Stock     Capital     Deficit     Income (Loss)     Total  
Balance, December 31, 2002     $ —   $ 349.5   $ (369.3 )   $ 0.1     $ (19.7 )
Dividends declared               (21.7 )       (21.7 )
Comprehensive income:    
     Net income               21.2         21.2  
     Unrealized loss on cash flow hedges, net    
        of tax                   (0.2 )   (0.2 )
     Cumulative translation adjustments                   10.9     10.9  
     Comprehensive income              31.9
  
Balance, June 30, 2003     $ —   $ 349.5   $ (369.8 ) $ 10.8   $ (9.5 )

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)


Six months ended
June 30,
       2003    2002  
Cash flows from operating activities:    
  Net income     $ 21.2   $ 4.4  
  Adjustments to reconcile net income to net cash flows provided    
        by operating activities:    
        Depreciation and depletion       19.4     18.3  
     Amortization       0.8     1.0  
        Early extinguishment of long-term debt       —     5.3  
        Transition and other charges, net of cash       —     1.1  
     Deferred income taxes       5.3     (1.1 )
     Other       —     0.1  
     Changes in operating assets and liabilities:    
        Receivables       50.7     48.2  
        Inventories       21.0     8.0  
        Other assets       (2.3 )   (1.2 )
        Accounts payable and accrued expenses       (32.9 )   (13.1 )
        Other noncurrent liabilities       (0.2 )   (0.9 )
  Net cash provided by operating activities       83.0     70.1  
     
Cash flows from investing activities:    
  Capital expenditures       (5.4 )   (6.5 )
  Acquisition of intangible assets       (21.0 )   —  
  Other       —     0.1  
    Net cash used in investing activities       (26.4 )   (6.4 )
     
Cash flows from financing activities:    
  Dividends paid       (21.7 )   —  
  Revolver activity       —     (39.8 )
  Issuance of long-term debt       —     78.4  
  Principal payments on other long-term debt, including capital leases       (30.7 )   (95.1 )
  Deferred financing costs       —     (3.4