# Compass Minerals International Inc: Form 10-Q for the period ended Mar 31, 2010

- Company: [Compass Minerals International Inc](/companies/cmp.md) (CIK 1227654)
- Form: 10-Q
- Filed: 2010-04-28
- Accepted by EDGAR: Apr 28, 2010, 16:44 ET
- Period: 2010-03-31
- Accession: 0001227654-10-000019
- Inline XBRL: no
- Main document: https://www.sec.gov/Archives/edgar/data/1227654/000122765410000019/q1tenq.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1227654/000122765410000019/

## Management's discussion and analysis

As filed, 30,848 characters.

All statements, other than statements of historical fact, contained herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking 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. Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following: domestic and international general business and economic conditions; uninsured risks and hazards associated with underground mining operations; governmental policies affecting the agricultural industry or highway maintenance programs in localities where the Company or its customers operate; weather conditions; the impact of competitive products; pressure on prices realized by the Company for its products; constraints on supplies of raw materials used in manufacturing certain of the Company’s products and the availability of transportation services; capacity constraints limiting the production of certain products; the ability to attract and retain skilled personnel as well as labor relations including without limitation, the impact of work rules, strikes or other disruptions, wage and benefit requirements; difficulties or delays in the development, production, testing and marketing of products; difficulties or delays in receiving required governmental and regulatory approvals; market acceptance issues, including the failure of products to generate anticipated sales levels; the effects of and changes in trade, monetary, environmental and fiscal policies, laws and regulations; the impact of the Company’s indebtedness and interest rates changes; foreign exchange rates and fluctuations in those rates; the costs and effects of legal proceedings including environmental and administrative proceedings involving the Company; customer expectations about future potash market prices and availability and agricultural economics; the impact of credit and capital markets, including the risk of customer and counterparty defaults and declining credit availability; changes in tax laws or estimates; and other risk factors reported in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) as updated quarterly on Form 10-Q.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “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.

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 undertake no duty to update any of the forward-looking statements after the date hereof or to reflect the occurrence of unanticipated events.

Unless the context requires otherwise, references in this quarterly report to the “Company,” “Compass,” “Compass Minerals,” “CMP,” “we,” “us” and “our” refer to Compass Minerals International, Inc. (“CMI”, the parent holding company) and its consolidated subsidiaries.

### Critical Accounting Estimates

Preparation of our consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Management believes the most complex and sensitive judgments result primarily from the need to make estimates about matters that are inherently uncertain. Management’s Discussion and Analysis and Note 2 to the Consolidated Financial Statements included in our Annual Report on Form 10-K filed with the SEC on February 22, 2010, describe the significant accounting estimates and policies used in preparation of our consolidated financial statements. Actual results in these areas could differ from management’s estimates.

### Results of Operations

Deicing products, consisting of deicing salt and magnesium chloride used by highway deicing and consumer and industrial customers, constitute a significant portion of the Company’s salt segment sales. Our deicing sales are seasonal and can fluctuate from year to year depending on the severity of the winter season weather in our regions. Inventory management practices are employed to respond to the varying level of demand which impacts our production volumes, the resulting per ton cost of inventory and ultimately profit margins, particularly during the non-winter quarters when we build our inventory levels. The 2009-2010 winter season was milder than normal in our North American regions, especially our Canadian regions around the Great Lakes. During the 2008-2009 winter season, winter weather during the fourth quarter of 2008 was significantly more severe than normal while the first quarter of 2009 was less severe than normal in our North American regions. Our U.K. subsidiary experienced winter weather which was more severe than normal in both the 2009 – 2010 winter season and the 2008 – 2009 winter season.

Our sulfate of potash (“SOP”) product is used in the production of specialty fertilizers for high-value crops and turf. Our domestic sales of SOP are concentrated in the western and southeastern portions of the United States where some crops and soil conditions favor the use of SOP as a source of potassium nutrients. Consequently, weather patterns and field conditions in these locations can impact the amount of specialty fertilizer sales volumes. Additionally, the demand for and market price of SOP is affected by the broader potash market which is influenced by many factors such as world grain and food supply, changes in consumer diets, general levels of economic activity and government food, agriculture and energy policies around the world. Economic factors may impact the amount or type of crop grown in certain locations, or the type of fertilizer product used. Crop yields and the quality of high-value or chloride-sensitive crops tend to decline when alternative fertilizers are used. Beginning late in 2007 and throughout much of 2008, the demand for potassium nutrients for crops exceeded the available supply, which contributed to a substantial increase in the market price for potash, including SOP. Demand for these products waned in the fourth quarter of 2008 and remained suppressed through 2009, as the broad agricultural industry dealt with a global economic slowdown, reduced credit availability and the reluctance of fertilizer customers to purchase potash at historically high prices. In the first quarter of 2010, we began to experience a rebound in potash demand. Potassium chloride (“KCl”) market pricing declined throughout 2009 and the first quarter of 2010 from prices experienced at the end of 2008, although pricing remained well above historical pricing levels. These same factors have similarly influenced SOP market pricing, which has historically been sold at prices above KCl market pricing, and the resulting average price of our SOP has fluctuated dramatically. We still expect SOP pricing to retain a premium to KCl.

Our North American salt mines and SOP production facility are near either water or rail transport systems, which reduces our shipping and handling costs when compared to alternative methods of distribution, although shipping and handling costs still account for a relatively large portion of the total delivered cost of our products. The tightening of available transportation services together with higher fuel costs has increased our shipping and handling costs on a per ton basis over the last several years. However, declining oil-based fuel costs beginning late in 2008 and continuing through much of 2009 contributed to lower shipping and handling costs on a per ton basis when compared to 2008. Shipping and handling costs on a per ton basis in the first quarter of 2010 have been similar to those experienced in the first quarter of 2009, however fuel costs have increased slightly from 2009 levels.

Manpower costs, energy costs, packaging, and certain raw material costs, particularly KCl, a deicing and water conditioning agent and feed-stock, which can be used to make a portion of our sulfate of potash fertilizer product, are also significant. The Company’s production workforce is typically represented by labor unions with multi-year collective bargaining agreements. On April 7, 2010, miners at our Cote Blanche mine initiated a strike relating to scheduling and wages. Although we cannot predict the length or outcome of this strike, we currently expect that the strike will not have a material impact on our 2010 results of operations. Our energy costs result from the consumption of electricity with relatively stable, rate-regulated pricing, and natural gas, which can have significant pricing volatility. We manage the pricing volatility of our natural gas purchases with natural gas forward swap contracts up to 36 months in advance of purchases, helping to reduce the impact of short-term spot market price volatility. We have historically purchased KCl under long-term supply contracts with annual changes in price based on previous year changes in the market price for KCl. The market price for KCl has increased significantly in recent years, causing continued price increases under our supply contracts. Beginning in 2010, we have significantly reduced (and plan to continue this significant reduction in the future) KCl purchases under these supply contracts due to several factors including the expected future contract price of KCl, existing inventory levels, as well as the expected additional solar pond-based production capacity gained from the Company’s SOP production capacity expansion project.

The consolidated financial statements have been prepared to present the historical financial condition and results of operations and cash flows for the Company which include our salt segment, specialty fertilizer segment, our records management business and unallocated corporate activities. The results of operations of the records management business, include sales of $2.6 million and $2.1 million for the three months ended March 31, 2010 and March 31, 2009, respectively, and are not material to our consolidated financial statements and consequently, are not included in the table below. The following tables and discussion should be read in conjunction with the information contained in our consolidated financial statements and the accompanying notes included elsewhere in this quarterly report.

| Salt Sales (in millions) | Three Months Ended March 31, 2010 | 2009 |
| --- | ---: | ---: |
| Salt sales | $302.5 | $268.8 |
| Less: salt shipping and handling | 91.6 | 88.4 |
| Salt product sales | $210.9 | $180.4 |
| **Salt Sales Volumes (thousands of tons)** |  |  |
| Highway deicing | 3,950 | 3,729 |
| Consumer and industrial | 535 | 630 |
| Total tons sold | 4,485 | 4,359 |
| **Average Salt Sales Price (per ton)** |  |  |
| Highway deicing | $55.46 | $46.80 |
| Consumer and industrial | 155.96 | 149.58 |
| Combined | 67.45 | 61.66 |
| **Specialty Fertilizer ("SOP") Sales (in millions)** |  |  |
| SOP sales | $52.5 | $38.2 |
| Less: SOP shipping and handling | 7.1 | 2.6 |
| SOP product sales | $45.4 | $35.6 |
| **SOP Sales Volumes (thousands of tons)** | 102 | 37 |
| **SOP Average Price (per ton)** | $514 | $1,020 |

### Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

#### Sales

Sales for the first quarter of 2010 of $357.6 million increased $48.5 million, or 16% compared to $309.1 million for the same quarter of 2009. Sales primarily include revenues from the sale of our products, which, in most instances, includes delivery to our customers, and revenues from our records management business. Product sales include sales less shipping and handling costs incurred to deliver salt and specialty fertilizer products to our customers. Shipping and handling costs were $98.7 million during the first quarter of 2010, an increase of $7.7 million or 8% compared to $91.0 million for the same quarter of 2009. The increase in shipping and handling costs is primarily due to the higher sales volumes in the first quarter of 2010 when compared to same period of 2009. In addition, fuel costs were slightly higher in 2010 when compared with 2009.

Product sales for the first quarter of 2010 of $256.3 million increased $40.3 million, or 19% compared to $216.0 million for the same period in 2009 reflecting higher product sales in both the salt and specialty fertilizer segments.

Salt product sales for the first quarter of 2010 of $210.9 million increased $30.5 million, or 17% compared to $180.4 million for the same period in 2009. The increase in the first quarter of 2010 was due primarily to higher pricing for our salt products, which contributed approximately $30 million to product sales. Salt sales volumes in 2010 increased slightly by 0.1 million tons from 2009 levels. We sold more rock salt and other products used in highway deicing as well as more rock salt to the non-seasonal chlor-alkali markets. Partially offsetting these increases were sharply lower consumer deicing salt volumes. Winter weather in the first quarter of 2009 was significantly milder than normal in our North American regions and the first quarter of 2010 winter weather was also milder than normal in several of our important North American regions, especially in our Canadian regions around the Great Lakes. In the U.K., we experienced a second consecutive year with more severe than normal winter weather. However, U.K. sales volumes declined slightly for the first quarter of 2010 when compared to the same period in 2009. The net decline in sales volumes for the first quarter of 2010, particularly consumer deicing, negatively impacted product sales by approximately $8 million. In addition, the weakening of the U.S. dollar in the first quarter of 2010 when compared to the prior year exchange rate for the Canadian dollar and British pound sterling, favorably impacted product sales by approximately $8 million.

SOP product sales during the first quarter of 2010 of $45.4 million increased $9.8 million, or 28% compared to $35.6 million for the same period in 2009. This increase was due to higher sales volumes as demand rebounded significantly following a prolonged period of uncertainty about broader potash pricing throughout 2009. The higher sales volumes contributed approximately $60 million to the increase in product sales. This increase was partially offset by lower prices in the first quarter of 2010 as our average market prices was $514 per ton compared to $1,020 per ton in the first quarter of 2009 and $640 per ton in the fourth quarter of 2009. The lower prices reduced product sales by approximately $50 million compared to the same period in 2009.

#### Gross Profit

Gross profit for the first quarter of 2010 of $114.6 million decreased $0.7 million or 1% compared to $115.3 million in 2009. As a percent of sales, gross margin was 32% in the first quarter of 2010 compared to 37% in the same period of 2009. The gross margin for the SOP segment contributed approximately $10 million to the decline in gross profit due primarily to lower sales prices partially offset by higher sales volumes. The gross margin for the salt segment partially offset the decline in SOP gross margin by contributing an increase of approximately $9 million. Salt price realizations were partially offset by lower sales volumes, including an unfavorable mix, and higher per unit productions costs, particularly at our consumer and industrial salt plants due to efforts to reduce our inventory levels.

#### Selling, General and Administrative Expenses

Selling, general and administrative expenses for the first quarter of 2010 of $21.9 million increased $1.2 million, or 6% compared to $20.7 million for the same period in 2009. The increase in expense is primarily due to higher variable compensation expenses in 2010 when compared to 2009. As a percentage of sales, selling, general and administrative expenses declined from 7% in the first quarter of 2009 to 6% in the first quarter of 2010.

#### Interest Expense

Interest expense for the first quarter of 2010 of $5.9 million decreased $1.6 million compared to $7.5 million for the same period in 2009. This decrease is primarily due to lower market interest rates on our unhedged floating-rate debt and the refinancing of approximately $90 million of the Company’s 12% Senior Subordinated Discount Notes with 8% Senior Notes in June 2009.

#### Other (income) expense, net

Other expense of $3.7 million for the first quarter of 2010 changed $4.8 million when compared to income of $1.1 million in the first quarter of 2009. Net foreign exchange losses were $3.9 million in 2010 when compared to foreign exchange gains of $1.1 million in 2009.

#### Income Tax Expense

Income tax expense for the three months ended March 31, 2010 was $24.2 million a decrease of $2.4 million compared to $26.6 million for the same quarter of 2009 due to lower taxable income in 2010 when compared to 2009. 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, domestic manufacturing deductions, and interest expense recognition differences for book and tax purposes.

### Liquidity and Capital Resources

Historically, we have used cash generated from operations to meet our working capital needs, to fund capital expenditures, to pay dividends and to repay our debt. Principally due to the nature of our deicing business, our cash flows from operations are seasonal, with the majority of our cash flows from operations generated during the first half of the calendar year. When we have not been able to meet our short-term liquidity or capital needs with cash from operations, whether as a result of the seasonality of our business or other causes, we have met those needs with borrowings under our $125 million revolving credit facility (“Revolving Credit Facility”). As our Revolving Credit Facility matures in December 2010, we are currently reviewing our borrowing options including, but not limited to, amending and extending the current Revolving Credit Facility, replacing the entire senior secured credit agreement (“Credit Agreement”) or allowing the Revolving Credit Facility portion of the Credit Agreement to expire. If we amend the Revolving Credit Facility or replace the Credit Agreement, we expect to obtain commercially reasonable market terms. We expect to meet the ongoing requirements for debt service, any declared dividends and capital expenditures from these sources as well as from future cash flows from operations, cash on hand or through leasing arrangements. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Management expects to fund its capital projects with cash on hand as of March 31, 2010, cash generated from operations, future borrowing or through leasing arrangements.

Cash and cash equivalents of $118.5 million as of March 31, 2010 increased $105.0 million over December 31, 2009 resulting principally from operating cash flows of $137.3 million generated in the first quarter of 2010. We used a portion of those cash flows to fund capital expenditures of $23.9 million and to pay dividends on our common stock of $12.9 million.

As of March 31, 2010, we had $489.8 million of principal indebtedness consisting of $97.7 million 8% Senior Notes ($100 million at maturity) due 2019 and $392.1 million of borrowings outstanding under our Credit Agreement. Our Credit Agreement also includes a Revolving Credit Facility which provides borrowing capacity up to an aggregate amount of $125.0 million. No amounts were borrowed under our Revolving Credit Facility as of March 31, 2010. We had $9.5 million of outstanding letters of credit as of March 31, 2010 which reduced our borrowing availability to $115.5 million.

Our 12% Senior Subordinated Discounts Notes became fully-accreted in May 2008 at an aggregate principal balance of $179.6 million with subsequent accrued interest paid in cash. In 2008, we redeemed $90 million of our 12% Senior Subordinated Discount Notes with cash generated from operations. In 2009, we refinanced the remaining $89.6 million in outstanding 12% Senior Subordinated Discount Notes with 8% Senior Notes. Our debt service obligations could, under certain circumstances, materially affect our financial condition and impair our ability to operate our business or pursue our business strategies. As a holding company, CMI’s investments in its operating subsidiaries constitute substantially all of its assets. Consequently, our subsidiaries conduct all of our consolidated operations and own substantially all of our operating assets. The principal source of the cash needed to pay our obligations is the cash generated from our subsidiaries’ operations and their borrowings. Our subsidiaries are not obligated to make funds available to CMI. Furthermore, we must remain in compliance with the terms of our Credit Agreement, including the total leverage ratio and interest coverage ratio, in order to make payments on our 8% Senior Notes or pay dividends to our stockholders. We must also comply with the terms of our indenture, which limits the amount of dividends we can pay to our stockholders. Although we are in compliance with our debt covenants as of March 31, 2010, we cannot assure you that we will remain in compliance with these ratios nor can we assure you that the agreements governing the current and future indebtedness of our subsidiaries will permit our subsidiaries to provide us with sufficient dividends, distributions or loans to fund scheduled interest payments on the 8% Senior Notes, when due. If we consummate an acquisition, our debt service requirements could increase. Furthermore, we may need to refinance all or a portion of our indebtedness on or before maturity, however we cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

### For the Three Months Ended March 31, 2010 and 2009

Net cash flows provided by operating activities for the three months ended March 31, 2010 were $137.3 million, an increase of $25.3 million compared to $112.0 million for the first quarter of 2009. The $70.3 million reduction in working capital items in the first quarter of 2010 compared to a $38.3 million in the first quarter of 2009 reflecting the seasonal nature of our deicing products and will vary with the severity and timing of the winter weather in our regions. In addition, we invested substantially more in inventories to replenish depleted inventories in 2009 due to strong salt sales in the fourth quarter of 2008.

Net cash flows used by investing activities of $24.2 million and $9.5 million for the three months ended March 31, 2010 and 2009, respectively, resulted from capital expenditures of $23.9 million and $9.4 million respectively. Our capital expenditures in 2010 include expenditures in both our Goderich mine expansion projects, to increase that mine’s annual production capacity, and activities to support the SOP evaporation plant expansion and yield improvement projects at the Great Salt Lake. The remaining capital expenditures were primarily for routine replacements.

Financing activities during the 2010 three-month period used $11.6 million of cash flows, primarily to make $12.9 million of dividend payments which was partially offset by proceeds received from stock option exercises. During 2009, we used $18.3 million in financing activities primarily to make $8.6 million of payments to reduce our outstanding debt drawn on our Revolving Credit Facility and $11.8 million of dividend payments.

### Sensitivity Analysis Related to EBITDA and Adjusted EBITDA

Management uses a variety of measures to evaluate the performance of CMP. While the consolidated financial statements, taken as a whole, provide an understanding of our overall results of operations, financial condition and cash flows, we analyze components of the consolidated financial statements to identify certain trends and evaluate specific performance areas. In addition to using U.S. generally accepted accounting principles (“GAAP”) financial measures, such as gross profit, net earnings and cash flows generated by operating activities, management uses EBITDA and EBITDA adjusted for items which management believes are not indicative of the Company’s ongoing operating performance (“Adjusted EBITDA”), both non-GAAP financial measures to evaluate the operating performance of our core business operations because our resource allocation, financing methods and cost of capital, and income tax positions are managed at a corporate level, apart from the activities of the operating segments, and the operating facilities are located in different taxing jurisdictions, which can cause considerable variation in net income. We also use EBITDA and Adjusted EBITDA to assess our operating performance and return on capital against other companies, and to evaluate expected returns on potential acquisitions or other capital projects. EBITDA and Adjusted EBITDA are not calculated under GAAP and should not be considered in isolation or as a substitute for net income, cash flows or other financial data prepared in accordance with GAAP or as a measure of our overall profitability or liquidity. EBITDA and Adjusted EBITDA exclude interest expense, income taxes and depreciation and amortization, each of which are an essential element of our cost structure and cannot be eliminated. Furthermore, Adjusted EBITDA excludes other cash and non-cash items of other (income) expense. Our borrowings are a significant component of our capital structure and interest expense is a continuing cost of debt. We are also required to pay income taxes, a required and on-going consequence of our operations. We have a significant investment in capital assets and depreciation and amortization reflect the utilization of those assets in order to generate revenues. Consequently, any measure that excludes these elements has material limitations. While EBITDA and Adjusted EBITDA are frequently used as measures of operating performance, these terms are not necessarily comparable to similarly titled measures of other companies due to the potential inconsistencies in the method of calculation. The calculation of EBITDA and Adjusted EBITDA as used by management is set forth in the table below (in millions).

|  | Three Months Ended March 31, 2010 | 2009 |
| --- | ---: | ---: |
| Net earnings | $58.9 | $61.6 |
| Interest expense | 5.9 | 7.5 |
| Income tax expense | 24.2 | 26.6 |
| Depreciation, depletion and amortization | 12.1 | 10.2 |
| EBITDA | $101.1 | $105.9 |
| Other non-operating expenses: |  |  |
| Other (income) expense, net | 3.7 | (1.1) |
| Adjusted EBITDA | $104.8 | $104.8 |

### Recent Accounting Pronouncements

In February 2010, the Financial Accounting Standards Board (“FASB”) issued an update regarding subsequent events. The amended guidance removes the requirement for a SEC registrant to disclose the date through which subsequent events were evaluated. Removal of this disclosure did not affect the nature or timing of subsequent events evaluations performed by the Company. This update was effective upon issuance.

In January 2010, the FASB issued guidance related to disclosures about fair value measurements. This guidance requires additional disclosures and clarification of existing disclosures for recurring and nonrecurring fair value measurements. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009. Accordingly, the Company has included the required disclosures in Note 12 of its consolidated financial statements. The adoption of this guidance did not have an impact on the Company’s financial position or results of operations.

### Effects of Currency Fluctuations

In addition to the United States, we conduct operations in Canada and the United Kingdom. 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 consolidated financial statements. Exchange rates between these currencies and the U.S. dollar have fluctuated significantly from time to time 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. Significant changes in the value of the Canadian dollar 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 secured credit facilities.

Although inflation has not had a significant impact on the Company’s operations, our efforts to recover cost increases due to inflation may be hampered as a result of the competitive industry in which we operate.

### Seasonality

We experience a substantial amount of seasonality in our sales, primarily with respect to our deicing products. Consequently, 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 and magnesium chloride products 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.

## Market risk

As filed, 867 characters.

Our business is subject to various types of market risks that include, but are not limited to, interest rate risk, foreign currency exchange rate risk and commodity pricing risk. Management has taken actions to mitigate our exposure to commodity pricing and interest rate risk by entering into forward derivative instruments and interest rate swap agreements, and may take further actions to mitigate our exposure to changes in the cost of transporting our products due to variations in our contracted carriers’ cost of fuel, which is typically diesel fuel. However, there can be no assurance that our hedging activities will eliminate or substantially reduce these risks. We do not enter into any financial instrument arrangements for speculative purposes. The Company’s market risk exposure related to these items has not changed materially since December 31, 2009.

## Controls and procedures

As filed, 1,111 characters.

*Evaluation of Disclosure Controls and Procedures –* As of the end of the period covered by this report, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) was performed under the supervision and with the participation of the Company’s management, including the CEO and CFO. Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2010 to ensure that information required to be disclosed in the reports it files and submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

*Changes in Internal Control Over Financial Reporting -* There has been no change in the Company’s internal control over financial reporting during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 152 characters.

There have been no material changes to the risk factors previously discussed in Item 1A of the Company’s Form 10-K for the year ended December 31, 2009.

Filed Apr 28, 2010.
Source: SEC EDGAR, the filing index for accession 0001227654-10-000019. Last ingested by Listed: Oct 24, 2026, 15:10 ET. No prices; not investment advice.