# Compass Minerals International Inc: Form 10-Q for the period ended Jun 30, 2022

- Company: [Compass Minerals International Inc](/companies/cmp.md) (CIK 1227654)
- Form: 10-Q
- Filed: 2022-08-05
- Accepted by EDGAR: Aug 4, 2022, 23:13 ET
- Period: 2022-06-30
- Accession: 0001227654-22-000228
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1227654/000122765422000228/cmp-20220630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1227654/000122765422000228/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-04-01 to 2022-06-30 | $214.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2021-10-01 to 2022-06-30 | $994.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Gross profit | 3 months, 2022-04-01 to 2022-06-30 | $33.9m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2021-10-01 to 2022-06-30 | $158.4m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2022-04-01 to 2022-06-30 | $37.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2021-10-01 to 2022-06-30 | $121.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-04-01 to 2022-06-30 | −$3.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2021-10-01 to 2022-06-30 | $36.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-04-01 to 2022-06-30 | $13.4m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2021-10-01 to 2022-06-30 | $41.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-04-01 to 2022-06-30 | −$1.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2021-10-01 to 2022-06-30 | $28.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-04-01 to 2022-06-30 | −$7.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2021-10-01 to 2022-06-30 | −$17.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-04-01 to 2022-06-30 | −$0.23 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2021-10-01 to 2022-06-30 | −$0.52 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-04-01 to 2022-06-30 | −$0.23 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2021-10-01 to 2022-06-30 | −$0.52 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-04-01 to 2022-06-30 | 34,154,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2021-10-01 to 2022-06-30 | 34,110,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2021-10-01 to 2022-06-30 | $148.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2021-10-01 to 2022-06-30 | $68.9m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 9 months, 2021-10-01 to 2022-06-30 | $15.7m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2022-06-30 | $47.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-06-30 | $479.3m | us-gaap:AssetsCurrent |
| Total assets | at 2022-06-30 | $1.58bn | us-gaap:Assets |
| Current liabilities | at 2022-06-30 | $189.4m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2022-06-30 | $885.9m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-06-30 | $0 | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-06-30 | $300.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 63,205 characters.

All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q 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 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: our mining and industrial operations; geological conditions; dependency on a limited number of key production and distribution facilities and critical equipment; weather conditions; uncertainties in estimating our economically recoverable reserves and resources; strikes, other forms of work stoppage or slowdown or other union activities; the inability to fund necessary capital expenditures or successfully complete capital projects; supply constraints or price increases for energy and raw materials used in our production processes; our indebtedness and inability to pay our indebtedness; restrictions in our debt agreements that may limit our ability to operate our business or require accelerated debt payments; tax liabilities; the inability of our customers to access credit or a default by our customers of trade credit extended by us or financing we have guaranteed; our payment of any dividends; financial assurance requirements; risks related to the potential phasing out of LIBOR; the impact of competition on the sales of our products; inflation risks; risks associated with our international operations and sales, including changes in currency exchange rates; increasing costs or a lack of availability of transportation services, equipment, raw materials or other supplies; the seasonal demand for our products; the impact of anticipated changes in plant nutrition product prices and customer application rates; conditions in the sectors where we sell products and supply and demand imbalances for competing products; our rights and governmental authorizations to mine and operate our properties; risks related to unanticipated litigation or investigations or pending litigation or investigations or other contingencies; compliance with foreign and United States (“U.S.”) laws and regulations related to import and export requirements and anti-corruption laws; compliance with environmental, health and safety laws and regulations; environmental liabilities; product liability claims and product recalls; changes in laws, industry standards and regulatory requirements; misappropriation or infringement claims relating to intellectual property; inability to obtain required product registrations or increased regulatory requirements; the impact of the COVID-19 pandemic, or other outbreaks of infectious disease or similar public health threats; our ability to successfully implement our strategies; plans to develop our lithium resource, including market entry; the useful life of our mine properties; our expectation of extending the Goderich mineral lease; conversion of mineral resources into mineral reserves; risks related to labor shortages and the loss of key personnel; a compromise of our computer systems, information technology or operations technology or the inability to protect confidential or proprietary data; climate change and related laws and regulations; our ability to expand our business through acquisitions, integrate acquired businesses and realize anticipated benefits from acquisitions; domestic and international general business and economic conditions; and other risks referenced from time to time in this report and our other filings with the Securities and Exchange Commission (the “SEC”), including Part I, Item 1A, “Risk Factors” of our Transition Report on Form 10-KT for the transition period ended September 30, 2021.

In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” the negative of these terms or other comparable terminology. Forward-looking statements include without limitation statements about our outlook, including expected sales volumes and costs; existing or potential capital expenditures; capital projects and investments; the industry and our competition; projected sources of cash flow; potential legal liability; proposed legislation and regulatory action; the seasonal distribution of working capital requirements; our reinvestment of foreign earnings outside the U.S.; payment of future dividends and ability to reinvest in our business; our ability to optimize cash accessibility, minimize tax expense and meet debt service requirements; future tax payments, tax refunds and valuation allowances; leverage ratios; ability to obtain a waiver or amendment to our credit agreement; outcomes of matters with taxing authorities; the effects of currency fluctuations and inflation, including our ability to recover inflation-based cost increases; the seasonality of our business; the effects of climate change; and the impact of the global economy, COVID-19 pandemic and the war in Ukraine on us. These forward-looking 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 to the “Company,” “Compass Minerals,” “our,” “us” and “we” refer to Compass Minerals International, Inc. (“CMI,” the parent holding company) and its consolidated subsidiaries. Except where otherwise noted, references to North America include only the continental U.S. and Canada, and references to the United

Kingdom (“U.K.”) include only England, Scotland and Wales. Except where otherwise noted, all references to tons refer to “short tons” and all amounts are in U.S. dollars. One short ton equals 2,000 pounds. Compass Minerals and Protassium+ and combinations thereof, are trademarks of CMI or its subsidiaries in the U.S. and other countries.

### Discontinued Operations

During 2020, we initiated an evaluation of the strategic fit of certain of our businesses. On February 16, 2021, we announced our plan to restructure our former Plant Nutrition South America segment to enable targeted and separate sales processes for each portion of the former segment, including our chemicals and specialty plant nutrition businesses along with our equity method investment in Fermavi Eletroquímica Ltda. (“Fermavi”). Concurrently, to optimize our asset base in North America, we evaluated the strategic fit of our North America micronutrient product business. On March 16, 2021, the Board of the Directors approved a plan to sell our South America chemicals and specialty plant nutrition businesses, our investment in Fermavi and our North America micronutrient product business (collectively, the “Specialty Businesses”) with the goal of reducing our leverage and enabling increased focus on optimizing our core businesses.

As described further in Item 1, Note 2 to the Consolidated Financial Statements, on March 23, 2021, April 7, 2021, June 28, 2021 and April 20, 2022, we entered into definitive agreements to sell our South America specialty plant nutrition business, a component of our North America micronutrient business, our Fermavi investment and our South America chemicals business, respectively. The South America specialty plant nutrition business sale closed on July 1, 2021, the North America micronutrient sale closed on May 4, 2021, the sale of our Fermavi investment closed on August 20, 2021, and the sale of our South America chemicals business closed on April 20, 2022.

We believe these dispositions were conducted through a single disposal plan representing a strategic shift that will have a material effect on our operations and financial results. Consequently, the Specialty Businesses qualify for presentation as assets and liabilities held for sale and discontinued operations in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Accordingly, current and noncurrent assets and liabilities of the Specialty Businesses are presented in the Consolidated Balance Sheets as assets and liabilities held for sale for both periods presented and their results of operations are presented as discontinued operations in the Consolidated Statements of Operations for each period presented.

### Fiscal Year

During 2021, we transitioned to a September 30 fiscal year end. The nine-month period from January 1, 2021 to September 30, 2021, served as a transition period, and we filed one-time, nine-month transitional financial statements for the transition period in a Transition Report on Form 10-KT filed with the SEC on November 30, 2021. Prior to the transition period, our fiscal year was the calendar year ending on December 31. Our fiscal year 2022 (or “fiscal 2022”) commenced on October 1, 2021 and ends on September 30, 2022.

### Critical Accounting Estimates

Preparation of our consolidated financial statements in accordance with U.S. GAAP 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. Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 8, Note 2 to the Consolidated Financial Statements included in our Transition Report on Form 10-KT for the transition period ended September 30, 2021, describe the significant accounting estimates and policies used in preparation of our consolidated financial statements. For a further description of our critical accounting policies, see Item 1, Note 1 of our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Actual results in these areas could differ from management’s estimates.

### Company Overview

Compass Minerals is a leading producer of essential minerals, including salt, sulfate of potash (“SOP”) specialty fertilizer and magnesium chloride. As of June 30, 2022, we operated 12 production and packaging facilities, including:

- The largest rock salt mine in the world in Goderich, Ontario, Canada;
- The largest dedicated rock salt mine in the U.K. in Winsford, Cheshire;
- A solar evaporation facility located near Ogden, Utah, which is both the largest sulfate of potash specialty fertilizer production site and the largest solar salt production site in the Western Hemisphere; and
- Several mechanical evaporation facilities producing consumer and industrial salt.

In March 2021, we concluded that certain of our assets met the criteria for classification as held for sale and discontinued operations. As a result, we are now presenting two reportable segments in continuing operations, Salt and Plant Nutrition (which was previously known as the Plant Nutrition North America segment) in this Form 10-Q. See Item 1, Note 10 to the Consolidated Financial Statements for more information. Unless otherwise indicated, the information and amounts provided in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” pertain to continuing operations.

Our Salt segment provides highway deicing salt to customers in North America and the U.K. as well as consumer deicing and water conditioning products, ingredients used in consumer and commercial food preparation, and other salt-based products for consumer, industrial, chemical and agricultural applications in North America. In the U.K., we operate a records management business utilizing excavated areas of our Winsford salt mine with one other location in London, England.

Our Plant Nutrition segment produces and markets SOP products in various grades worldwide to distributors and retailers of crop inputs, as well as growers and for industrial uses. We market our SOP under the trade name Protassium+.

### Consolidated Results of Continuing Operations

The following is a summary of our consolidated results of continuing operations for the three and nine months ended June 30, 2021 and 2022, respectively. The following discussion should be read in conjunction with the information contained in our consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q.

### THREE AND NINE MONTHS ENDED JUNE 30

\* Refer to “—Reconciliation of Net (Loss) Earnings from Continuing Operations to EBITDA and Adjusted EBITDA” for a reconciliation to the most directly comparable U.S. GAAP financial measure and the reasons we use this non-GAAP measure.

### Commentary: Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

- Total sales increased 8%, or $15.3 million, due to increases in our Salt and Plant Nutrition segments. The increase in Salt sales reflects higher average sales prices and commitment levels, while the increase in Plant Nutrition sales was driven by higher pricing.
- Operating earnings decreased 489%, or $4.4 million, to an operating loss of $3.5 million, reflecting lower Salt operating earnings due primarily to higher product and distribution costs and higher corporate SG&A expenses related to a contingent loss accrual associated with the SEC investigation and our lithium development project. This reduction was mostly offset by higher Plant Nutrition operating earnings driven by increased average sales prices.
- Earnings before interest, taxes, depreciation and amortization (“EBITDA”)\* adjusted for items management believes are not indicative of our ongoing operating performance (“Adjusted EBITDA”)\* decreased 13%, or $4.4 million.
- Diluted net loss per share improved $0.17 to a net loss of $0.32.

### Commentary: Nine Months Ended June 30, 2022 Compared to Nine Months Ended June 30, 2021

- Total sales increased 6%, or $60.6 million, due to an increase in our Salt segment sales, which was partially offset by lower Plant Nutrition sales. The increase in Salt sales primarily reflects higher commitment levels. The decline in Plant Nutrition sales was primarily driven by lower production volumes which limited inventory available for sale.
- Operating earnings decreased 65%, or $68.1 million, due to a decrease in the Salt segment, driven primarily by higher product and distribution costs. The decrease in operating earnings was partially offset by an increase in our Plant Nutrition segment due to higher pricing, partially offset by lower sales volumes. Corporate and Other segment SG&A expenses also increased primarily due to a contingent loss accrual in fiscal 2022 and increased legal expenses related to the SEC investigation, executive transition costs and costs incurred for the lithium development project.
- Adjusted EBITDA decreased 27%, or $55.7 million.
- Diluted net loss of $0.94 decreased from diluted net earnings of $1.15 per common share.

### THREE AND NINE MONTHS ENDED JUNE 30

### Commentary: Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

### Gross Profit: Increased 12%, or $3.7 million; Gross Margin increased 1 percentage point to 16%

- Salt segment gross profit decreased $5.7 million primarily due to higher per-unit product and logistics costs, which were partially offset by higher average sales prices and slightly higher sales volumes (see Salt operating results).
- The gross profit of the Plant Nutrition segment increased $9.9 million due to higher average sales prices, which were partially offset by higher per-unit product costs, lower sales volumes and higher per-unit logistics costs (see Plant Nutrition operating results).

### Commentary: Nine Months Ended June 30, 2022 Compared to Nine Months Ended June 30, 2021

### Gross Profit: Decreased 20%, or $38.7 million; Gross Margin decreased 5 percentage points to 16%

- Salt segment gross profit decreased $52.2 million primarily due to higher per-unit product and logistics costs, which were partially offset by higher sales volumes (see Salt operating results).
- The gross profit of the Plant Nutrition segment increased $13.3 million due to higher average sales prices, which were partially offset by lower sales volumes and higher per-unit product costs and logistics costs (see Plant Nutrition operating results).

### OTHER EXPENSES AND INCOME

### Commentary: Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

### SG&A: Increased $8.1 million; increased 2.7 percentage point as a percentage of sales from 14.7% to 17.4%

- The increase in SG&A expense was primarily due to a contingent loss accrual associated with the SEC investigation, net of legal fee reimbursement, and increased legal and consulting expenses and costs related to our lithium development project.

### Interest Expense: Decreased $1.6 million to $13.4 million

- The decrease was primarily due to a decrease in borrowings outstanding under the credit agreement we entered into on November 26, 2019 (as amended, the “Credit Agreement”).

### (Gain) Loss on Foreign Exchange: Decreased $7.2 million from a loss of $1.1 million to a gain of $6.1 million

- We realized foreign exchange gains of $6.1 million in the third quarter of fiscal 2022 compared to losses of $1.1 million in the same quarter of the prior fiscal year, which primarily reflect changes in translating our intercompany loans from Canadian dollars to U.S. dollars.

### Other Expense (Income): Increased $1.5 million from income of $0.5 million to an expense of $1.0 million

- The increase in other expense is primarily due to our share of losses in the current period related to our equity investments.

### Income Tax Expense (Benefit): Decreased $2.8 million from an expense of $1.7 million to a benefit of $1.1 million

- Income tax expense decreased primarily due to tax expense in the three months ended June 30, 2021 to adjust U.K. deferred taxes for an increase in the U.K. tax rate and the effects of refinement of the tax rate.
- Our effective tax rate increased from an negative 12% in the prior fiscal year to a positive 9% in the third quarter of fiscal 2022 reflecting a $2.4 million valuation allowance in the three months ended June 30, 2022 and the effects of the refinement of the tax rate in the three months ended June 30, 2021. See Item 1, Note 7 to the Consolidated Financial Statements.
- Our income tax provision for the three months ended June 30, 2022 differs from the U.S. statutory rate primarily due to the recorded valuation allowance, U.S. statutory depletion, state income taxes, global intangible low-taxed income, nondeductible executive compensation, foreign income, mining and withholding taxes, a nondeductible contingent loss accrual and interest expense recognition differences for tax and financial reporting purposes.

### Net Earnings from Discontinued Operations: Decreased from $73.5 million to $2.8 million

- The net earnings from our discontinued operations for the three months ended June 30, 2022 includes only the results from our chemicals business in South America through the April 20, 2022 sale date, whereas the net loss for the three months ended June 30, 2021 includes the results of all of the South America businesses and the North America specialty plant nutrition business.
- The current period earnings of the South America chemicals business includes a $0.2 million foreign currency exchange gain and an impairment loss recovery of $1.6 million compared to the prior period foreign currency exchange gain of $24.3 million and a $45.4 million net gain on the sale of a business and impairment loss recovery to record the net assets of the South America businesses at their fair value less cost to sell which considers the foreign currency translation adjustment. Refer to Item 1, Note 2 to the Consolidated Financial Statements for additional details.

### Commentary: Nine Months Ended June 30, 2022 Compared to Nine Months Ended June 30, 2021

### SG&A: Increased $29.4 million; increased 2.3 percentage points as a percentage of sales from 9.9% to 12.2%

- The increase in SG&A expense was primarily due to a contingent loss accrual in fiscal 2022 and increased legal expenses related to the SEC investigation, executive transition costs and costs related to our lithium development project.

### Interest Expense: Decreased $5.0 million to $41.2 million

- The decrease was primarily due to a decrease in outstanding borrowings under the Credit Agreement.

### (Gain) Loss on Foreign Exchange: Improved $12.9 million from a loss of $9.4 million to a gain of $3.5 million

- We realized a foreign exchange gain of $3.5 million in the first nine months of 2022 compared to a loss of $9.4 million in the first nine months of 2021 due primarily to changes in translating our intercompany loans from Canadian dollars to U.S. dollars.

### Other Expense (Income): Increased $3.0 million from income of $0.1 million to an expense of $2.9 million

- The increase is due primarily to our share of losses in the current period related to our equity investments.

### Income Tax Expense: Increased $18.8 million from $9.3 million to $28.1 million

- The increase in income tax expense was primarily due to $30.4 million of valuation allowance recorded in the nine months ended June 30, 2022 against the portion of our deferred tax assets that are no longer considered more likely than not to be realized, partially offset by a decrease due to lower pretax book income for the nine months ended June 30, 2022 compared to the nine months ended June 30, 2021.
- Our effective tax rate decreased from 19% for the nine months ended June 30, 2021, reflecting $30.4 million of valuation allowance recorded in fiscal 2022. See Item 1, Note 7 to the Consolidated Financial Statements.
- Our income tax provision for the nine months ended June 30, 2022 differs from the U.S. statutory rate primarily due to the valuation allowance, U.S. statutory depletion, state income taxes, global intangible low-taxed income, nondeductible executive compensation, foreign income, mining and withholding taxes, nondeductible contingent loss accrual and interest expense recognition differences for tax and financial reporting purposes.

### Net Earnings (Loss) from Discontinued Operations: Increased from a loss of $169.4 million to income of $14.2 million

- The net earnings from our discontinued operations for the nine months ended June 30, 2022 includes only the results from our chemicals business in South America through the April 20, 2022 sale date, but includes the results of all the South America businesses and the North America specialty plant nutrition businesses for the nine months ended June 30, 2022.
- The current period results of the South America chemicals business includes a foreign currency exchange rate gain of $17.5 million offset by an impairment loss of $23.1 million compared to the prior period foreign currency exchange rate gain of $21.4 million and net impairment loss of $209.8 million to record the net assets of the South America businesses at their fair value less cost to sell net of a gain on the sale of the Plant Nutrition micronutrient business. Refer to Item 1, Note 2 to the Consolidated Financial Statements for additional details.

### Operating Segment Performance

The following financial results represent consolidated financial information with respect to the operations of our Salt and Plant Nutrition segments. The results of operations of the records management business and other incidental revenues, include sales of $2.9 million and $3.0 million for the three months ended June 30, 2022 and 2021, respectively, and $8.8 million and $8.3 million for the nine months ended June 30, 2022 and 2021, respectively. These revenues are not material to our consolidated financial results and are not included in the following operating segment financial data.

### Salt

### THREE AND NINE MONTHS ENDED JUNE 30

|  | QTD 2022 | QTD 2021 | YTD 2022 | YTD 2021 |
| --- | ---: | ---: | ---: | ---: |
| **Salt Sales (in millions)** | $156.2 | $142.6 | $821.4 | $740.1 |
| **Salt Operating Earnings (in millions)** | $12.4 | $19.2 | $101.1 | $155.3 |
| **Salt Sales Volumes (thousands of tons)** |  |  |  |  |
| Highway deicing | 1,232 | 1,212 | 8,854 | 7,966 |
| Consumer and industrial | 451 | 445 | 1,600 | 1,502 |
| Total tons sold | 1,683 | 1,657 | 10,454 | 9,468 |
| **Average Salt Sales Price (per ton)** |  |  |  |  |
| Highway deicing | $63.73 | $59.42 | $61.25 | $61.98 |
| Consumer and industrial | $172.41 | $158.78 | $174.47 | $164.08 |
| Combined | $92.83 | $86.12 | $78.58 | $78.17 |

### Commentary: Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

- Salt sales increased 10%, or $13.6 million, primarily due to higher Salt average sales prices and volumes, which were primarily due to product sales mix and price increases for consumer and industrial products, and higher commitment levels, respectively.
- Average sales prices increased 8% and contributed $11.5 million to the increase in Salt sales.
- Highway deicing average sales prices increased 7% primarily due to product sales mix. Consumer and industrial average sales prices increased 9% due to an increase in sales prices in the first nine months of fiscal 2022 to help offset the impact of inflation and product sales mix.
- Salt sales volumes increased 2%, or 26,000 tons, which contributed $2.1 million to the sales increase. Highway deicing sales volumes increased 2%, primarily as a result of higher commitment volumes for the fiscal 2022 winter season while consumer and industrial sales volumes increased 1%.
- Salt operating earnings decreased 35%, or $6.8 million, primarily due to higher per-unit product and logistics costs. Higher freight costs and inflationary pressures for energy and certain materials and supplies were only partially recovered through increased consumer and industrial sales prices during the period. Additionally, as a result of a maintenance outage at our Cote Blanche mine during the three months ended March 31, 2022, we incurred additional costs to fulfill demand with salt from other sources. These increases were partially offset by higher Salt average sales prices.

### Commentary: Nine Months Ended June 30, 2022 Compared to Nine Months Ended June 30, 2021

- Salt sales increased 11%, or $81.3 million, primarily due to higher Salt sales volumes.
- Average sales prices increased 1% and contributed $10.2 million to the increase in Salt sales due to increases in consumer and industrials average sales prices.
- Highway deicing average sales prices decreased 1% due to lower North American highway deicing contract prices for the 2022 winter season, which was mostly offset by favorable product sales mix. Consumer and industrial average

sales prices increased 6% primarily due to higher sales prices primarily in response to the high inflationary environment.

- Salt sales volumes increased 10% and contributed $71.1 million to the sales increase. Highway deicing sales volumes increased 11% primarily as a result of an increase in sales commitments. Consumer and industrial sales volumes increased 7% due to increases in both deicing and non-deicing sales volumes.
- Salt operating earnings decreased 35%, or $54.2 million, due primarily to higher per-unit product and logistics costs and lower highway deicing sales prices. We are experiencing higher freight costs and inflationary pressures for certain materials and supplies that were not recovered through increased consumer and industrial sales prices during the period. Additionally, as a result of a maintenance outage at our Cote Blanche mine during the three months ended March 31, 2022, we incurred additional logistics costs to fulfill seasonal demand with salt from other sources. Higher sales volumes compared to the prior period partially offset the decrease in operating earnings.

### Plant Nutrition

### THREE AND NINE MONTHS ENDED JUNE 30

|  | QTD 2022 | QTD 2021 | YTD 2022 | YTD 2021 |
| --- | ---: | ---: | ---: | ---: |
| **Plant Nutrition Sales (in millions)** | $55.6 | $53.8 | $164.5 | $185.7 |
| **Plant Nutrition Operating Earnings (in millions)** | $10.6 | $0.7 | $24.5 | $9.3 |
| **Plant Nutrition Sales Volumes (thousands of tons)** | 67 | 88 | 224 | 325 |
| **Plant Nutrition Average Sales Price (per ton)** | $827 | $610 | $735 | $572 |

### Commentary: Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

- Plant Nutrition sales increased 3%, or $1.8 million due to higher average sales prices, which were mostly offset by lower sales volumes.
- Plant Nutrition sales volumes were lower than the same period of the prior fiscal year as feedstock inconsistencies over the past year have reduced production volumes and available inventory levels. The decline in sales volumes partially offset the increase in sales by $12.8 million.
- Plant Nutrition average sales prices increased 36%, which contributed $14.6 million to sales. Average sales prices increased from the prior period due to the strong worldwide economic climate for fertilizer products.
- Plant Nutrition operating earnings increased $9.9 million to $10.6 million primarily due to significantly higher average sales prices, which were partially offset by higher product and per-unit logistics costs primarily due to lower production volumes at our Ogden facility as well as higher energy and other input costs.

### Commentary: Nine Months Ended June 30, 2022 Compared to Nine Months Ended June 30, 2021

- Plant Nutrition sales were $21.2 million lower than prior year as lower sales volumes were partially offset by higher average sales prices.
- Plant Nutrition sales volumes decreased 31%, or 101,000 tons, which resulted in a $57.8 million decrease in sales as feedstock inconsistencies at our Ogden facility have reduced production volumes and available inventory levels.
- Plant Nutrition average sales prices increased 29%, which partially offset the decrease in sales by $36.6 millions. Average sales prices increased from the prior period due to the strong worldwide economic climate for fertilizer products.
- Plant Nutrition operating earnings increased $15.2 million to $24.5 million primarily reflecting the higher sales prices which were partially offset by higher product and per-unit logistics costs and lower sales volumes. The increase in per unit product costs was primarily due to lower production yields resulting from feedstock inconsistencies at our Ogden facility.

### Outlook

- We expect Salt segment sales volumes for fiscal 2022 to range from 12.3 million tons to 12.6 million tons.
- Plant Nutrition segment sales volumes for fiscal 2022 are expected to range from 270,000 tons to 280,000 tons. We expect to continue to be impacted by feedstock inconsistencies at our Ogden facility, which could also impact our costs.
- Fiscal 2022 capital expenditures are expected to be approximately $100 million.

### Liquidity and Capital Resources

Historically, our cash flows from operating activities have generally been adequate to fund our basic operating requirements, ongoing debt service and sustaining investment in our property, plant and equipment. We have also used cash generated from operations to fund capital expenditures which strengthen our operational position, pay dividends, fund smaller acquisitions and repay our debt. To a certain extent, our ability to meet our short- and long-term liquidity and capital needs is subject to general economic, financial, competitive and weather conditions, effects of climate change, geological variations in our mine deposits and other factors that are beyond our control. Historically, our working capital requirements have been the highest in the first fiscal quarter (ending December 31) and lowest in the third fiscal quarter (ending June 30). When needed, we may fund short-term working capital requirements by accessing our $300 million revolving credit facility and our $100 million revolving accounts receivable financing facility (our “AR Facility”).

We have been able to manage our cash flows generated and used across Compass Minerals to permanently reinvest earnings in our foreign jurisdictions or efficiently repatriate those funds to the U.S. As of June 30, 2022, we had $10.7 million of cash and cash equivalents (in our Consolidated Balance Sheets) that was either held directly or indirectly by foreign subsidiaries. As a result of U.S. tax reform, we revised our permanently reinvested assertion and we now expect to repatriate approximately $150 million of unremitted foreign earnings on which $4.7 million of income tax expense has been recorded for foreign withholding tax and state income taxes as of June 30, 2022. Additionally, we changed our permanently reinvested assertion and repatriated $42.5 million of unremitted foreign earnings from our U.K. operations in September 2021 on which $0.1 million of income tax expense was recorded during fiscal 2021. Due to our ability to generate adequate levels of U.S. cash flow on an annual basis, it is our current intention to continue to reinvest the remaining undistributed earnings of our foreign subsidiaries indefinitely. We review our tax circumstances on a regular basis with the intent of optimizing cash accessibility and minimizing tax expense.

In addition, the amount of permanently reinvested earnings is influenced by, among other things, the profits generated by our foreign subsidiaries and the amount of investment in those same subsidiaries. The profits generated by our U.S. and foreign subsidiaries are impacted by the transfer price charged on the transfer of our products between them. During fiscal 2018, we reached a settlement agreement with federal Canadian and U.S. tax authorities on transfer pricing and management fees as part of an advanced pricing agreement covering our fiscal 2013-2021 tax years. Canadian provincial taxing authorities continue to challenge our transfer prices of certain items. The final resolution of these challenges may not occur for several years. We currently expect the outcome of these matters will not have a material impact on our results of operations. However, it is possible the resolution could materially impact the amount of earnings attributable to our foreign subsidiaries, which could impact the amount of permanently reinvested foreign earnings. See Item 1, Note 7 of our Consolidated Financial Statements for a discussion regarding our Canadian tax reassessments.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred in the U.S. over the three-year period ended June 30, 2022. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future income. On the basis of this evaluation, as of June 30, 2022, a valuation allowance of $30.4 million has been recorded to recognize only the portion of the deferred tax assets that are more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased or reduced or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for income. We expect additional valuation allowances will be required through the remainder of the fiscal year assuming our earnings are in line with our current expectations.

Cash and cash equivalents as of June 30, 2022 was $47.2 million. We have $148.9 million of operating cash flows during the nine months ended June 30, 2022, including decreases in our working capital. During the period ended June 30, 2022, we used cash on hand, cash flows from operations and cash proceeds from the sales of a business to fund capital expenditures of $68.9 million, to pay down debt of $51.2 million, to invest $46.3 million in equity investments and to pay dividends on our common stock of $15.7 million. Cash and cash equivalents from continuing operations of $47.2 million increased $29.1 million from September 30, 2021. Cash flows from continuing operations totaled $139.4 million during the nine months ended June 30, 2022, including a net loss from continuing operations of $31.8 million which included depreciation, depletion and amortization of $83.2 million, and a net working capital decrease of $70.6 million driven primarily by the seasonality of our Salt business. Our working capital decrease primarily reflects the sales of Salt inventory throughout the winter season which begins in the first quarter (ending December 31) of each fiscal year with only a modest inventory replenishment through June 30, 2022.

#### Dispositions

On March 23, 2021, we entered into a definitive agreement to sell our South America specialty plant nutrition business to ICL Brasil Ltda., a subsidiary of ICL Group Ltd. The transaction closed on July 1, 2021. Upon closing we received gross proceeds of approximately $421.1 million, following a reduction in proceeds of $6.2 million in working capital adjustments (finalized during the quarter ended September 30, 2021), comprised of cash in the amount of approximately $318.4 million and an additional $102.7 million in net debt assumed by ICL Brasil Ltd. The Brazilian debt was deducted from gross proceeds from the transaction. The terms of the definitive agreement provided for an additional earnout payment of up to R$88 million Brazilian reais. On April 7, 2022, we received the maximum earnout possible under the terms of the sale, or $18.5 million based on exchange rates at the time.

On April 7, 2021, we entered into a definitive agreement to sell a component of our North America micronutrient business to Koch Agronomic Services, LLC, a subsidiary of Koch Industries. On May 4, 2021, we completed the sale for approximately $56.7 million and we paid fees totaling $0.5 million.

On June 28, 2021, we entered into a definitive agreement to sell our investment in Fermavi for R$45 million Brazilian reais (including R$30 million Brazilian reais of deferred purchase price due in annual installments through August 2025). The transaction closed on August 20, 2021, and we received cash proceeds of approximately $2.9 million.

On April 20, 2022, we completed the sale of our South America chemicals business to a subsidiary of Cape Acquisitions LLC. Upon closing of the all-cash sale, we received gross proceeds of approximately $51.5 million based on exchange rates at the time of receipt, including a post-closing adjustment and compensation for $6.4 million cash on hand that transferred to the buyer. The sale included all of our remaining operations in Brazil, concluding the previously announced plan to exit the South American market.

We recorded losses on the sales of the South American specialty plant nutrition business, the South America chemicals business and the investment in Fermavi totaling approximately $323.1 million. These losses were partially offset by approximately $30.6 million of gain from the sale of a component of the North America micronutrient business.

#### Indebtedness

As of June 30, 2022, we had $894.8 million of outstanding indebtedness, consisting of $250.0 million outstanding under our 4.875% Senior Notes due 2024, $500.0 million outstanding under our 6.75% Senior Notes due 2027, $109.9 million of borrowings outstanding under our senior secured credit facilities under the Credit Agreement, consisting of $16.9 million of term loans and $93.0 million borrowed against our revolving credit facility, and $34.9 million of outstanding loans under the accounts receivable financing facility (see Item 1, Note 8 of our Consolidated Financial Statements for more detail regarding our debt). Outstanding letters of credit totaling $13.8 million as of June 30, 2022, reduced available borrowing capacity under our revolving credit facility to $193.2 million. In April 2022, we utilized earnout proceeds from the 2021 sale of our South America specialty plant nutrition business and proceeds from the sale of our South America chemicals business, discussed in *Dispositions* above, to repay approximately $60.6 million of our term loan balance.

On June 27, 2022, certain of our U.S. subsidiaries entered into an amendment to our $100.0 million AR Facility with PNC Bank, National Association, extending the facility to June 2025.

In the quarter ended March 31, 2021, we made a $41.7 million required prepayment of our term loan for 2020 Excess Cash Flow (as such term is defined in the Credit Agreement). This prepayment, along with the prepayment made in the last quarter of fiscal 2021 described above, will reduce the future required term loan payments. As such, we do not have a scheduled term loan payment until January 2025.

In July 2021, we utilized cash proceeds from the sale of the South America specialty plant nutrition business noted above in *Dispositions* to repay amounts borrowed against our revolving credit facility of $35.0 million. An additional $265.0 million of proceeds was utilized to pay down our term loan balance.

In the future, including in fiscal 2022, we may borrow amounts under the revolving credit facility or enter into additional financing to fund our working capital requirements, potential acquisitions and capital expenditures and for other general corporate purposes.

Our ability to make scheduled interest and principal payments on our indebtedness, to refinance our indebtedness, to fund planned capital expenditures and to fund acquisitions will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations, we believe that cash flow from operations and available cash, together with available borrowings under our revolving credit facility, will be adequate to meet our liquidity needs over the next 12 months.

Our debt service obligations could, under certain circumstances, materially affect our financial condition and prevent us from fulfilling our debt obligations. As a holding company, CMI’s investments in its operating subsidiaries constitute substantially all of its assets. Consequently, our subsidiaries conduct substantially all of our consolidated operating activities 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 the Credit Agreement governing our credit facilities, including the consolidated total net leverage ratio and interest coverage ratio, in order to pay dividends to our stockholders. We must also comply with the terms of our indenture governing our 4.875% Senior Notes due July 2024 and our 6.75% Senior Notes due December 2027, which limit the amount of dividends we can pay to our stockholders.

In June 2022, the Company entered into an amendment to its Credit Agreement, which eased the restrictions of certain covenants contained in the agreement. The amendment included increasing the maximum allowed consolidated total net leverage ratio (as defined and calculated under the terms of the Credit Agreement) to 5.5x as of the last day of any quarter through fiscal 2022, stepping down to 5.0x for the subsequent quarter ending December 31, 2022, stepping further down to 4.75x for subsequent quarters through March 31, 2024, and to 4.5x for the fiscal quarter ending June 30, 2024 and thereafter. As of June 30, 2022, our consolidated total net leverage ratio was approximately 4.4x (including discontinued operations). In April 2022, we paid down additional debt of $60.6 million with cash received from the earnout payment from the sale of our South America specialty plant nutrition business and sale of our South America chemicals business.

Although we are in compliance with our debt covenants as of June 30, 2022, we can make no assurance that we will remain in compliance with these ratios nor can we make any assurance 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 principal or interest payments on our debt when due. Furthermore, we may need to refinance all or a portion of our indebtedness on or before maturity; however, we cannot provide assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

Principally due to the nature of our deicing business, our cash flows from operations have historically been 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 revolving credit facility. We expect to meet the ongoing requirements for debt service, any declared dividends and capital expenditures from these sources. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We manage our capital allocation considering our long term strategic objectives and spending required to sustain our business. We announced on November 15, 2021, that we reduced our dividend by approximately 80% to provide additional liquidity to support the business and invest in strategic expansion opportunities. We expect to reinvest the cash we anticipate retaining from this dividend reduction toward an expansion of our product portfolio, continued investment in our existing core assets and other uses. While our equipment and facilities are generally not impacted by rapid technology changes, our operations require refurbishments and replacements to maintain structural integrity and reliable production and shipping capabilities. When possible, we incorporate efficiency, environmental and safety improvement capabilities into our routine capital projects and we plan the timing of larger projects to balance with our liquidity and capital resources. Changes in our operating cash flows may affect our future capital allocation and spending. For fiscal 2022 we have substantially completed approximately $15 million of our planned capital spending to upgrade the barge dock at our Cote Blanche mine and have incorporated efficiency and safety features into the design. Additionally, we intend to continue to develop our recently identified lithium resource at our Ogden facility and expect to spend between $5 million to $7 million of capital in fiscal 2022 for the construction of a direct lithium extraction plant. These large projects are expected to be balanced with other sustaining and efficiency projects to result in capital spending totaling approximately $100 million in fiscal 2022. We expect to achieve market entry with a lithium product by 2025 and expect significant capital and other expenditures would be required to achieve this market entry; however, the full amount of this expenditure is currently unknown and will depend on a number of factors, including the outcome of our strategic evaluation of development options for our lithium resource. For more information, refer to Part I, Item 1A, “Risk Factors” in our Form 10-KT for the for the transition period ended September 30, 2021.

On November 2, 2021, we announced a $45 million equity investment in Fortress North America, LLC (“Fortress”), building upon a previous $5 million investment. As of June 30, 2022, we had invested $50 million in Fortress in exchange for an ownership interest of approximately 45%. Fortress is a development stage company that intends to achieve commercialization of its magnesium chloride-based fire-retardant products to help combat wildfires. We may make further investments or make other acquisitions to grow our business.

The table below provides a summary of our cash flows by category, including cash flows from discontinued operations:

| NINE MONTHS ENDED JUNE 30, 2022 | NINE MONTHS ENDED JUNE 30, 2021 |
| --- | --- |
| **Operating Activities:** |  |
| Net cash provided by operating activities were $148.9 million | Net cash provided by operating activities were $197.1 million |
| » Net losses were $17.6 million. | » Net losses were $129.2 million. |
| » Non-cash depreciation and amortization expense was $83.2 million. | » Non-cash depreciation and amortization expense was $99.0 million. |
| » Non-cash impairment loss was $23.1 million. | » Non-cash impairment loss was $237.6 million. |
| » Working capital items were a source of operating cash flows of $44.8 million. | » Working capital items were a source of operating cash flows of $41.5 million. |
| **Investing Activities:** |  |
| Net cash flows used in investing activities were $53.1 million | Net cash flows used in investing activities were $5.1 million |
| » Net cash flows used in investing activities included $68.9 million of capital expenditures. | » Net cash flows used in investing activities included $61.0 million of capital expenditures. |
| » Investing activity outflows were partially offset by proceeds of $61.2 million from the sale of our South America chemicals business and specialty plant nutrition earnout. | » Investing activity outflows were offset by proceeds of $56.7 million from the sale of a component of our North America micronutrient business. |
| » Included investment in equity method investee of $46.3 million. |  |
| **Financing Activities:** |  |
| Net cash flows used in financing activities were $69.8 million | Net cash flows used in financing activities were $175.4 million |
| » Included net payments on our debt of $51.2 million. | » Included net payment on our debt of $100.5 million. |
| » Included the payment of dividends of $15.7 million. | » Included the payment of dividends of $73.6 million. |

As mentioned above, our Salt segment’s business is seasonal and our Salt segment results and working capital needs are heavily impacted by the severity and timing of the winter weather, which generally occurs from December through March of each year. Customers tend to replenish their inventory following snow events, consequently the number and timing of snow events during the winter season will impact the amount of our accounts receivable and inventory at the end of each quarter. Our cash flows during the nine months ended June 30 of each year reflect the seasonal decrease in inventory due to the end of the winter season.

### Other Matters

See Item 1, Notes 7 and 9 of our Consolidated Financial Statements for a discussion regarding labor, environmental and litigation matters.

### Reconciliation of Net (Loss) Earnings from Continuing Operations to EBITDA and Adjusted EBITDA

Management uses a variety of measures to evaluate our performance. While our 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. GAAP financial measures, such as gross profit, net earnings and cash flows generated by operating activities, management uses EBITDA and Adjusted EBITDA. We have presented Adjusted EBITDA for both continuing operations and consolidated including discontinued operations for comparability purposes (see Item 1, Note 2 to the Consolidated Financial Statements for a discussion of discontinued operations). Both EBITDA and Adjusted EBITDA are non-GAAP financial measures used to evaluate the operating performance of our core business operations because our resource allocation, financing methods, cost of capital and income tax positions are managed at a corporate level, apart from the activities of the operating segments, and our operating facilities are located in different taxing jurisdictions, which can cause considerable variation in net earnings. We also use EBITDA and Adjusted EBITDA to assess our operating performance and return on capital against other companies, and to evaluate potential acquisitions or other capital projects. EBITDA and Adjusted EBITDA are not calculated under U.S. GAAP and should not be considered in isolation or as a substitute for net earnings, cash flows or other financial data prepared in accordance with U.S. 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, including stock-based compensation, (gain) loss on foreign exchange, other (income) expense and other infrequent items that management does not consider indicative of normal operations. 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 ongoing 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. Our employees are vital to our operations and we utilize various stock-based awards to compensate and incentivize our employees. 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 June 30, 2022 | 2021 | Nine Months Ended June 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Net (loss) earnings from continuing operations | $(10.7) | $(16.4) | $(31.8) | $40.2 |
| Interest expense | 13.4 | 15.0 | 41.2 | 46.2 |
| Income tax (benefit) expense | (1.1) | 1.7 | 28.1 | 9.3 |
| Depreciation, depletion and amortization | 27.0 | 30.0 | 83.2 | 90.0 |
| EBITDA from continuing operations | 28.6 | 30.3 | 120.7 | 185.7 |
| Adjustments to EBITDA from continuing operations: |  |  |  |  |
| Stock-based compensation - non cash | 3.9 | 2.3 | 11.6 | 8.2 |
| (Gain) loss on foreign exchange | (6.1) | 1.1 | (3.5) | 9.4 |
| Executive transition costs(a) | — | — | 4.3 | — |
| Accrued loss and legal costs related to SEC investigation(b) | 2.8 | 0.3 | 19.5 | 4.7 |
| Other income, net | (0.3) | (0.7) | (0.5) | (0.2) |
| Adjusted EBITDA from continuing operations | 28.9 | 33.3 | 152.1 | 207.8 |
| Adjusted EBITDA from discontinued operations | 3.1 | 8.5 | 19.0 | 44.9 |
| Adjusted EBITDA including discontinued operations | $32.0 | $41.8 | $171.1 | $252.7 |

(a) We incurred severance and other costs related to executive transition.

(b) We recorded a contingent loss accrual during the three and nine months ended June 30, 2022, and recognized costs, net of reimbursements, related to the ongoing SEC investigation during the three and nine months ended June 30, 2022 and 2021.

### Recent Accounting Pronouncements

See Part 1, Note 1 of our Consolidated Financial Statements for a discussion of recent accounting pronouncements.

### Effects of Currency Fluctuations and Inflation

Our operations outside of the U.S. are conducted primarily in Canada and the U.K. 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 enters 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 revenues and costs are denominated in U.S. dollars, with Canadian dollars and British pounds sterling also being significant. Significant changes in the value of the Canadian dollar or British 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.

We are experiencing increases in logistics costs, prices for energy and other costs that have only been partially recovered through price increases for our products. During the nine months ended June 30, 2022, the Company estimates that the impact of inflation increased logistics costs by approximately $21 million to $23 million (approximately $6 million to $8 million for the three months ended June 30, 2022) and product costs by approximately $14 million to $16 million (approximately $5 million to $7 million for the three months ended June 30, 2022). Our efforts to recover inflation-based cost increases from our customers may be hampered as a result of the structure of our contracts and the contract bidding process as well as the competitive industries, economic conditions and countries in which we operate. For more information, see Part I, Item 1A, “Risk Factors” in our Transition Report on Form 10-KT for the transition period ended September 30, 2021 and Part II, Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

### Seasonality

We experience a substantial amount of seasonality in our sales, including our salt deicing product sales. Consequently, our Salt segment sales and operating income are generally higher in the first and second fiscal quarters (ending December 31 and March 31) and lower during the third and fourth fiscal quarters of each year (ending June 30 and September 30). 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 and the U.K., we seek to stockpile sufficient quantities of deicing salt throughout the first, third and fourth fiscal quarters (ending December 31, June 30 and September 30) to meet the estimated requirements for the winter season. Our plant nutrition business is also seasonal. As a result, we and our customers generally build inventories during the plant nutrition business’ low demand periods of the year (which are typically winter and summer, but can vary due to weather and other factors) to ensure timely product availability during the peak sales seasons (which are typically spring and autumn, but can also vary due to weather and other factors).

### Climate Change

The potential impact of climate change on our operations, product demand and the needs of our customers remains uncertain. Significant changes to weather patterns, a reduction in average snowfall or regional drought within our served markets or at our Ogden facility could negatively impact customer demand for our products and our costs, as well as our ability to produce our products. For example, prolonged periods of mild winter weather could reduce the demand for our deicing products. Drought conditions could similarly impact demand for our SOP products, as well as continue to impact the amount and quality of feedstock used to produce SOP at our Ogden facility due to changes in brine levels, mineral concentrations or other factors, which could have a material impact on our Plant Nutrition results of operations. Climate change could also lead to disruptions in the production or distribution of our products due to major storm events or prolonged adverse conditions, changing temperature levels, lake level fluctuations or flooding from sea level changes. Climate change or governmental initiatives to address climate change may necessitate capital expenditures in the future, although capital expenditures for climate-related projects are not expected to be material in fiscal 2022. For more information, see Part I, Item 1A, “Risk Factors” and Part I, Item 1 “Business—Environmental, Health and Safety and Other Regulatory Matters” in our Transition Report on Form 10-KT for the transition period ended September 30, 2021.

### Global Economy

The ongoing COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. We have continued producing and delivering essential products that support critical industries such as transportation, agriculture, chemical, food, pharmaceutical and animal nutrition. We have instituted several measures in response to the COVID-19 pandemic and have experienced negative impacts to our business from COVID-19, but our results of operations for the three and nine months ended June 30, 2022, and 2021, were not materially affected by COVID-19, although the recent supply chain shortages and cost increases may be linked to the COVID-19 pandemic. Also, while we have no operations in Russia or Ukraine, we are continuing to monitor any broader impact from the current war in Ukraine, particularly with respect to energy costs and implications on global fertilizer market supply and demand conditions.

The ultimate impact that COVID-19 or the war in Ukraine will have on our future results is unknown at this time. For more information, see Part I, Item 1A, “Risk Factors” in our Transition Report on Form 10-KT for the transition period ended September 30, 2021.

## Market risk

As filed, 885 characters.

Our business is subject to various types of market risks that include interest rate risk, foreign currency exchange rate risk and commodity pricing risk. Management has taken actions to mitigate our exposure to commodity pricing and foreign currency exchange rate risk by entering into natural gas derivative instruments and foreign currency contracts. We may take further actions to mitigate our exposure to interest rates, exchange rates and 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. Our market risk exposure related to these items has not changed materially since September 30, 2021.

## Controls and procedures

As filed, 2,161 characters.

#### Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our President and Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. Management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation of the effectiveness of the design and operation of our 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 Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2022.

#### Changes in Internal Control Over Financial Reporting

There were no changes 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, 319 characters.

For a discussion of the risk factors applicable to Compass Minerals, please refer to Part I, Item 1A, “Risk Factors” in our Transition Report on Form 10-KT for the transition period ended September 30, 2021, and Part II, Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

Filed Aug 5, 2022.
Source: SEC EDGAR, the filing index for accession 0001227654-22-000228. Last ingested by Listed: Oct 24, 2026, 15:10 ET. No prices; not investment advice.