# Compass Minerals International Inc: Form 10-Q for the period ended Jun 30, 2023

- Company: [Compass Minerals International Inc](/companies/cmp.md) (CIK 1227654)
- Form: 10-Q
- Filed: 2023-08-08
- Accepted by EDGAR: Aug 8, 2023, 20:54 ET
- Period: 2023-06-30
- Accession: 0001227654-23-000163
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1227654/000122765423000163/cmp-20230630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1227654/000122765423000163/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $207.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-10-01 to 2023-06-30 | $971.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Gross profit | 3 months, 2023-04-01 to 2023-06-30 | $34.6m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-10-01 to 2023-06-30 | $189.8m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-04-01 to 2023-06-30 | $35.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2022-10-01 to 2023-06-30 | $114.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | −$600.0k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-10-01 to 2023-06-30 | $75.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-04-01 to 2023-06-30 | $14.3m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-10-01 to 2023-06-30 | $42.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | −$42.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-10-01 to 2023-06-30 | $24.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | $39.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-10-01 to 2023-06-30 | $18.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.96 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-10-01 to 2023-06-30 | $0.44 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.96 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-10-01 to 2023-06-30 | $0.44 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 41,142,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-10-01 to 2023-06-30 | 40,663,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-10-01 to 2023-06-30 | $121.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-10-01 to 2023-06-30 | $78.9m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 9 months, 2022-10-01 to 2023-06-30 | $18.7m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2023-06-30 | $58.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $532.1m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $1.73bn | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $246.0m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-06-30 | $716.0m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-06-30 | $5.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-06-30 | $536.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 64,281 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; the inability to fund necessary capital expenditures or successfully complete capital projects; strikes, other forms of work stoppage or slowdown or other union activities; 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; our payment of any dividends; financial assurance requirements; the impact of competition on the sales of our products; inflation risks; increasing costs or a lack of availability of transportation services; the seasonal demand for our products; risks associated with our international operations and sales, including changes in currency exchange rates; the impact of anticipated changes in potash 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 environmental, health and safety laws and regulations; environmental liabilities; compliance with foreign and United States (“U.S.”) laws and regulations related to import and export requirements and anti-corruption laws; changes in laws, industry standards and regulatory requirements; product liability claims and product recalls; misappropriation or infringement claims relating to intellectual property; inability to obtain required product registrations or increased regulatory requirements; our ability to successfully implement our strategies; plans to develop our lithium resource, including market entry and market changes from potential competing technologies; 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 continued ability to access ambient lake brine in the Great Salt Lake; our ability to expand our business through acquisitions and investments, realize anticipated benefits from acquisitions and investments and integrate acquired businesses; outbreaks of contagious disease or similar public health threats; 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 Annual Report on Form 10-K for the annual period ended September 30, 2022.

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 or recently enacted 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; realization of potential savings from our restructuring activities; 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; and the effects of climate change. 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 for lithium quantities which are stated in metric tons or 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 and one metric ton equals 2,204.6 pounds. Compass Minerals and Protassium+ and combinations thereof, are trademarks of CMI or its subsidiaries in the U.S. and other countries.

### Discontinued Operations

On March 16, 2021, the Board of Directors approved a plan to sell our South America chemicals and specialty plant nutrition businesses, our investment in Fermavi Eletroquímica Ltda. (“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 3 of our Consolidated Financial Statements, we sold 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.

We believe these dispositions were conducted through a single disposal plan representing a strategic shift that has had a material effect on our operations and financial results. Consequently, the Specialty Businesses qualify for presentation as discontinued operations in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The dispositions were completed during fiscal 2022; accordingly, the results of operations of the Specialty Businesses are presented as discontinued operations in the Consolidated Statements of Operations for the three and nine months ended June 30, 2022.

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.

### 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 Annual Report on Form 10-K for the annual period ended September 30, 2022, 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 and Item 1, Note 2 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, 2023, 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.

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+.

In May 2023, we completed the purchase of Fortress North America, LLC (“Fortress”), a next-generation fire retardant company dedicated to developing and producing a portfolio of magnesium chloride-based aerial and ground fire retardant products to help combat wildfires (see Item 1, Note 2 of our Consolidated Financial Statements). Magnesium chloride is an existing product stream out of our Ogden, Utah, solar evaporation facility. During the third quarter of fiscal 2023, Fortress entered into an agreement with the U.S. Forest Service to supply product and provide associated services for the 2023 fire season, as described further in Item 1, Note 4 of our Consolidated Financial Statements.

Additionally, we are pursuing development of a sustainable lithium brine resource near Ogden, UT to support the North American battery market.

### 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, 2023 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 Earnings (Loss) 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, 2023 Compared to Three Months Ended June 30, 2022

- Completed the acquisition of Fortress, a next-generation fire retardant company, in May 2023.
- Total sales decreased 3%, or $7.1 million, due to lower Plant Nutrition and Salt segment sales. The decrease in sales for Plant Nutrition and Salt reflected lower sales volumes and lower Plant Nutrition average sales prices, which were partially offset by higher Salt average sales prices and the addition of sales related to our Fortress business acquisition.
- Operating loss of $0.6 million improved $2.9 million, reflecting higher Salt operating earnings and lower corporate and other expenses which were partially offset by lower Plant Nutrition operating earnings. Salt operating earnings increased due primarily to higher average sales prices, which were partially offset by higher per-unit product and logistics costs. Plant Nutrition operating earnings decreased due primarily to lower average sales prices, lower sales volumes due to a combination of lingering impacts from weather events in key markets and uncertainty about future fertilizer prices causing users to cancel or delay purchases, and higher per-unit product costs. The Plant Nutrition decrease in operating earnings was partially offset by lower per-unit distribution costs. Corporate and Other segment operating loss declined from the prior year quarter primarily reflecting the prior year accrued loss reserve associated

with the SEC investigation, net of legal fee reimbursement, which was partially offset by higher corporate information technology spending and corporate restructuring costs in the current period..

- Earnings before interest, taxes, depreciation and amortization (“EBITDA”)\* adjusted for items management believes are not indicative of our ongoing operating performance (“Adjusted EBITDA”)\* decreased 1.0%, or $0.3 million.
- Diluted net earnings per common share of $0.96 improved by $1.28 from diluted net loss of $0.32 per common share.

### Commentary: Nine Months Ended June 30, 2023 Compared to Nine Months Ended June 30, 2022

- Total sales decreased 2%, or $23.6 million, due to a decrease in our Plant Nutrition segment sales, which was partially offset by slightly higher Salt segment sales and sales related to our Fortress acquisition. The decline in Plant Nutrition sales was primarily driven by lower sales volumes, partially offset by higher average sales prices. The increase in Salt sales primarily reflects higher sales prices, partially offset by lower sales volumes.
- Operating earnings increased $38.3 million, due to an increase in the Salt segment driven primarily by higher average sales prices, which were partially offset by higher per-unit product and distribution costs. The Salt increase in operating earnings was partially offset by a decrease in our Plant Nutrition segment due to lower sales volumes and higher per-unit product costs, partially offset by higher average sales price. Corporate and Other segment SG&A expenses decreased primarily reflecting an accrued loss reserve associated with the SEC investigation in fiscal 2022 and lower consulting costs, partially offset by costs related to current year restructuring activities.
- Adjusted EBITDA increased 10%, or $15.7 million.
- Diluted net earnings per common share of $0.44 improved by $1.38 from diluted net loss of $0.94 per common share.

### THREE AND NINE MONTHS ENDED JUNE 30

### Commentary: Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

### Gross Profit: Increased 2%, or $0.7 million; Gross Margin increased 1 percentage point to 17%

- Salt segment gross profit increased $8.9 million primarily due to higher average sales prices, which were partially offset by lower sales volumes and higher per-unit product and logistics costs (see Salt operating results).
- The gross profit of the Plant Nutrition segment decreased $8.7 million due to higher per-unit product costs and lower average sales prices and sales volumes, which were partially offset by lower per-unit distribution costs (see Plant Nutrition operating results).

### Commentary: Nine Months Ended June 30, 2023 Compared to Nine Months Ended June 30, 2022

### Gross Profit: Increased 20%, or $31.4 million; Gross Margin increased 4 percentage points to 20%

- Salt segment gross profit increased $43.5 million primarily due to higher average sales prices, which were partially offset by higher per-unit product and distribution costs (see Salt operating results).
- The gross profit of the Plant Nutrition segment decreased $12.5 million due to higher per-unit product and distribution costs and lower sales volumes, which were partially offset by higher average sales prices (see Plant Nutrition operating results).

### OTHER EXPENSES AND INCOME

### Commentary: Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

### SG&A: Decreased $2.2 million; decreased 0.4 percentage points as a percentage of sales from 17.4% to 17.0%

- The decrease in SG&A expense was primarily due to lower corporate legal expenses due to higher costs in the prior period related to the completed SEC investigation, partially offset by costs related to our recently announced restructuring activities and higher costs resulting from the recent acquisition of the Fortress business.

### Interest Income: Increased $1.5 million to $1.7 million

- The increase in interest income during the current period is primarily due to higher interest rates and cash balance resulting from proceeds received from the private placement of our common stock.

### Interest Expense: Increased $0.9 million to $14.3 million

- Interest expense increased $0.9 million as higher interest rates in the current period were mostly offset by lower debt levels.

### Loss (Gain) on Foreign Exchange: Changed $8.4 million from a gain of $6.1 million to a loss of $2.3 million

- We realized loss on foreign exchange of $2.3 million in the third quarter of fiscal 2023 compared to a gain of $6.1 million in the same quarter of the prior fiscal year, primarily reflecting changes in translating our intercompany loans from Canadian dollars to U.S. dollars.

### Net Loss in Equity Investees: Decreased $0.5 million

- We realized a net loss in equity investees of $0.8 million in the third fiscal quarter of 2023 compared to a net loss of $1.3 million in the prior-year period reflecting our share of losses related to our equity investments as these development stage businesses position themselves for commercialization. Additionally, the purchase of our largest equity investee, Fortress, was completed during the current fiscal period. Fortress’ results are now consolidated and no longer included in this line item.

### Gain from Remeasurement of Equity Method Investment

- We recognized a gain of $16.2 million for the three months ended June 30, 2023 related to our previously held equity investment in Fortress, which was remeasured to fair value upon our full acquisition of the business in May 2023.

### Other Expense: Increased to an expense of $2.7 million

- The increase is due primarily to losses recorded in non-qualified savings plan during the current quarter.

### Income Tax Benefit: Improved $41.6 million from $1.1 million to $42.7 million

- Income tax benefit improved primarily due to the impact in the quarter of the acquisition of the Fortress business to the full year effective tax rate and the discrete impact of a change in Canadian tax law which allows for deductibility of certain interest expense items, which was partially offset by tax expense recorded for the remeasurement gain of our Fortress equity investment.
- Our effective tax rate of 1,525% for the three months ended June 30, 2023 is primarily driven by the impact of the above items on the relatively small net loss in the current period.
- Our income tax provision for the three months ended June 30, 2023 and 2022 differs from the U.S. statutory rate primarily due to U.S. statutory depletion, state income taxes, base erosion and anti-abuse tax, nondeductible executive compensation, foreign income, mining and withholding taxes and valuation allowance expense. Additionally, the income tax provision for the three months ended June 30, 2022 included interest expense recognition differences for tax and financial reporting purposes, global intangible low-taxed income tax and nondeductible SEC contingent loss accrual.

### Net Earnings from Discontinued Operations: $2.8 million in the second quarter of fiscal 2022

- The net earnings from discontinued operations for the prior period includes the results from our chemicals business in South America net of an impairment loss recognized prior to the April 20, 2022 sale date.
- The prior period net earnings of the South America chemicals business included gain of $1.6 million to record the net assets of the South America chemical business at fair value less cost to sell which reflected the foreign currency translation adjustment. Refer to Item 1, Note 3 to the Consolidated Financial Statements for additional details.

### Commentary: Nine Months Ended June 30, 2023 Compared to Nine Months Ended June 30, 2022

### SG&A: Decreased $6.9 million; Decreased 0.4 percentage points as a percentage of sales from 12.2% to 11.8%

- The decrease in SG&A expense was primarily due to higher legal costs and accrued loss reserve in the prior period related to the recently completed SEC investigation and executive transition costs, partially offset by higher current year stock-based compensation, costs related to restructuring activities in the current period and costs resulting from our recently acquired Fortress business.

### Interest Income: Increased $4.2 million from $0.5 million to $4.7 million

- The increase in interest income during the current period is primarily due to higher interest rates and cash balance resulting from proceeds received from the private placement of our common stock.

### Interest Expense: Increased $1.2 million to $42.4 million

- Interest expense increased as lower debt levels in the current period were offset by higher interest rates.

### Loss (Gain) on Foreign Exchange: Changed $8.1 million from a gain of $3.5 million to a loss of $4.6 million

- We realized a loss on foreign exchange of $4.6 million in the first nine months of 2023, compared to a gain of $3.5 million in the same period of the prior fiscal year, due primarily to changes in translating our intercompany loans from Canadian dollars to U.S. dollars.

### Net Loss in Equity Investees: Decreased $0.3 million to $3.1 million

- We realized a net loss in equity investees of $3.1 million for the nine months ended June 30, 2023 compared to $3.4 million in the prior-year period reflecting our share of losses related to our equity investments as these development stage businesses position themselves for commercialization. Additionally, the purchase of our largest equity investee, Fortress, was completed during the current fiscal period. Fortress’ results are now consolidated and no longer included in this line item.

### Gain from Remeasurement of Equity Method Investment

- We recognized a gain of $16.2 million for the nine months ended June 30, 2023 related to our previously held equity investment in Fortress, which was remeasured to fair value upon our full acquisition of the business in May 2023.

### Other Expense: Increased to $3.7 million

- The increase is due primarily to losses recorded on our non-qualified savings plan during the current period.

### Income Tax Expense: Decreased $3.8 million from $28.1 million to $24.3 million

- Income tax expense decreased primarily due to $18.1 million of valuation allowance recorded in the nine months ended June 30, 2022 against the beginning of year deferred tax assets that are no longer considered more likely than not to be realized, which was partially offset by higher pretax book income in the nine months ended June 30, 2023 as compared to the same period in 2022.
- Our effective tax rate of 57% for the nine months ended June 30, 2023 is primarily driven by the income mix by country with income recognized in foreign jurisdictions partially offset by losses recognized in the U.S., for which a valuation allowance has been recorded against the U.S. tax benefit carryforward. Additionally, a tax benefit was recorded in the nine months ended June 30, 2023 related to the change in Canadian tax law permitting the deductibility of certain interest expense items.
- Our income tax provision for the nine months ended June 30, 2023 and 2022 differs from the U.S. statutory rate primarily due to U.S. statutory depletion, state income taxes, base erosion and anti-abuse tax, nondeductible executive compensation, foreign income, mining and withholding taxes and valuation allowance expense. Additionally, the income tax provision for the nine months ended June 30, 2022 included interest expense recognition differences for tax and financial reporting purposes, global intangible low-tax income tax and nondeductible SEC contingent loss accrual.

### Net Earnings from Discontinued Operations: $14.2 million in the first nine months of fiscal 2022

- The net earnings from our discontinued operations for the nine months ended June 30, 2022 includes the results of the South America Chemicals business prior to the April 20, 2022 sale date.
- The prior 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 to record the net assets of the South America business at its fair value less cost to sell. Refer to Item 1, Note 3 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 Fortress business include sales of $1.9 million for the three and nine months ended June 30, 2023. The results of operations of the records management business and other incidental revenues include sales of $2.7 million and $2.9 million for the three months ended June 30, 2023 and 2022, respectively, and $8.3 million and $8.8 million for the nine months ended June 30, 2023 and 2022, 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 2023 | QTD 2022 | YTD 2023 | YTD 2022 |
| --- | ---: | ---: | ---: | ---: |
| **Salt Sales (in millions)** | $155.5 | $156.2 | $824.1 | $821.4 |
| **Salt Operating Earnings (in millions)** | $21.7 | $12.4 | $141.9 | $101.1 |
| **Salt Sales Volumes (thousands of tons)** |  |  |  |  |
| Highway deicing | 1,070 | 1,232 | 7,886 | 8,854 |
| Consumer and industrial | 421 | 451 | 1,529 | 1,600 |
| Total tons sold | 1,491 | 1,683 | 9,415 | 10,454 |
| **Average Salt Sales Price (per ton)** |  |  |  |  |
| Highway deicing | $73.86 | $63.73 | $68.86 | $61.25 |
| Consumer and industrial | $181.66 | $172.41 | $183.81 | $174.47 |
| Combined | $104.28 | $92.83 | $87.53 | $78.58 |

### Commentary: Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

- Salt sales decreased $0.7 million, primarily due to lower sales volumes, mostly offset by higher average sales prices.
- Salt sales volumes decreased 11%, or 192,000 tons, reducing sales by approximately $15.5 million. Highway deicing sales volumes decreased 13%, largely reflecting our 2022 bidding strategy emphasizing pricing over volume resulting in lower sales commitments in North America. Consumer and industrial sales volumes decreased 7% due to lower consumer and deicing volumes.
- Average sales prices increased 12% offsetting the volume decline by approximately $14.7 million with increases in both highway and consumer and industrial average sales prices.
- Highway deicing average sales price increased 16% across all product categories as we have sought to restore profitability and offset the impact of inflation on costs by executing a 2022 commercial bidding strategy emphasizing pricing over volume. Consumer and industrial average sales price increased 5% due to price increases taken to offset inflation. Additionally, the higher average sales prices are also reflective of the period’s product and logistical sales mix.
- Salt operating earnings increased 75%, or $9.3 million, primarily due to higher average sales prices.

### Commentary: Nine Months Ended June 30, 2023 Compared to Nine Months Ended June 30, 2022

- Salt sales increased $2.7 million, primarily due to higher Salt average sales prices, which were mostly offset by lower sales volumes for both highway and consumer and industrial products.
- Average sales prices increased 11% and contributed $74.3 million to the increase in Salt sales due to increases in both highway and consumer and industrial average sales prices.
- Highway deicing average sales prices increased 12% due to higher North American highway deicing contract prices for the 2023 winter season. Consumer and industrial average sales prices increased 5% primarily due to higher sales prices primarily in response to the recent inflationary environment.
- Salt sales volumes decreased 10% reducing sales by approximately $71.6 million. Highway deicing sales volumes decreased 11% largely reflecting our 2022 bidding strategy emphasizing pricing over volume resulting in a decrease in North American sales commitments. Consumer and industrial sales volumes decreased 4% due to a decrease in deicing sales volumes.
- Salt operating earnings increased 40%, or $40.8 million, due primarily to higher average sales prices for both highway and consumer and industrial products, which were partially offset by higher per-unit product and logistics costs and $1.5 million of restructuring costs recognized in the current period. Lower sales volumes compared to the prior period partially offset the increase in operating earnings.

### Plant Nutrition

### THREE AND NINE MONTHS ENDED JUNE 30

|  | QTD 2023 | QTD 2022 | YTD 2023 | YTD 2022 |
| --- | ---: | ---: | ---: | ---: |
| **Plant Nutrition Sales (in millions)** | $47.5 | $55.6 | $136.8 | $164.5 |
| **Plant Nutrition Operating Earnings (in millions)** | $2.5 | $10.6 | $12.8 | $24.5 |
| **Plant Nutrition Sales Volumes (thousands of tons)** | 63 | 67 | 168 | 224 |
| **Plant Nutrition Average Sales Price (per ton)** | $752 | $827 | $814 | $735 |

### Commentary: Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

- Plant Nutrition sales decreased 15%, or $8.1 million due to lower average sales prices and sales volumes.
- Plant Nutrition sales volumes decreased 6% year over year driven by lower demand due to a combination of lingering impacts from weather events in key markets and uncertainty about future fertilizer prices causing customers to cancel or delay purchases. The decline in sales volumes decreased sales by approximately $3.3 million.
- Plant Nutrition average sales prices decreased 9%, which contributed approximately $4.8 million to the volume decline. Average sales prices decreased from the prior period due to global supply and demand dynamics for fertilizer products resulting in weakening pricing year over year following a strong, steadily increasing pricing trend throughout fiscal 2022.
- Plant Nutrition operating earnings decreased $8.1 million to $2.5 million primarily due to higher per-unit product costs driven by higher energy and other input costs, and proportionately fewer sales to more profitable regions, which were partially offset by lower SG&A expenses and lower per-unit logistics costs.

### Commentary: Nine Months Ended June 30, 2023 Compared to Nine Months Ended June 30, 2022

- Plant Nutrition sales decreased 17%, or $27.7 million, from the prior year as lower sales volumes were partially offset by higher average sales prices.
- Plant Nutrition sales volumes decreased 25%, or 56,000 tons, which resulted in a $41.1 million decrease in sales due to a combination of weather conditions in select key markets, including California, and uncertainty about future fertilizer prices causing customers to cancel or delay purchases.
- Plant Nutrition average sales prices increased 11%, which partially offset the decrease in sales volume by $13.1 million. Average sales prices increased from the prior period due to the prior year strong worldwide economic climate for fertilizer products which resulted in steadily increasing sales prices throughout fiscal 2022, although prices have recently declined from the peak.
- Plant Nutrition operating earnings decreased $11.7 million to $12.8 million primarily reflecting higher per-unit product costs primarily due to higher energy and other input costs, $2.8 million expenses associated with the small fire at Ogden and proportionately fewer sales to more profitable regions, which were partially offset by significantly higher average sales prices and lower SG&A expenses.

### Outlook

- With the bulk of the winter season over, Salt segment sales volumes for the fiscal year are expected to range from 11.0 million to 11.55 million tons, with EBITDA expected to range from $220 million to $235 million.
- Plant Nutrition segment product demand has been adversely impacted throughout the year by a combination of drought conditions and significant rainfall and flooding impacting fertilizer application rates in California, our largest market for SOP. Global pricing dynamics for SOP and similar products have shown signs of softening year to date, resulting in a direct impact on profitability due to lower pricing and an indirect negative impact on volumes, as customers have adopted just-in-time buying behaviors in anticipation of lower pricing. Plant Nutrition segment sales volumes and EBITDA are expected to range from 200,000 to 225,000 tons and $40 million to $50 million, respectively, in fiscal year 2023.
- Fiscal year 2023 capital expenditures are expected to range from a total of $130 million to $150 million. This amount includes $40 million to $50 million in connection with advancing phase-one of our lithium development.
- On May 5, 2023, we completed the acquisition of the remaining 55% of Fortress not previously owned, which is expected to generate between $20 million and $25 million of revenue and operating profit with EBITDA in the low double digit millions of dollars in fiscal 2023 assuming a typical cadence of fire activity in the Western United States.

### 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, 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 $375 million revolving credit facility and our $100 million revolving AR Securitization Facility. As of June 30, 2023, we had liquidity of approximately $417.9 million, comprised of $58.0 million of cash and cash equivalents and $359.9 million of availability under our $375 million revolving credit 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, 2023, we had $13.8 million of cash and cash equivalents that was either held directly or indirectly by foreign subsidiaries. As a result of U.S. tax reform, we revised our permanently reinvested assertion, expecting to repatriate approximately $150 million of unremitted foreign earnings from Canada. In fiscal 2022, we revised our permanently reinvested assertion, expecting to repatriate an additional approximately $10 million of unremitted foreign earnings from our U.K. operations and in the second quarter of fiscal 2023 we revised it again expecting to repatriate an additional approximately $6 million of unremitted foreign earnings from our U.K. operations. During the first quarter of fiscal 2023, $89.2 million was repatriated from Canada. Net income tax expense of $3.8 million has been recorded for foreign withholding tax, state income tax and foreign exchange losses on these changes in assertion as of June 30, 2023, consisting of a tax benefit of $0.7 million recorded in the first nine months of fiscal year 2023, a $0.2 million tax benefit recorded in fiscal 2022 and tax expense of $4.7 million recorded in years prior to fiscal 2022. 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. 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 9 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 March 31, 2023. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future income. On the basis of this evaluation, during the nine months ended June 30, 2023, an additional valuation allowance of $10.8 million has been recorded to recognize only the portion of the U.S. 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.

#### Indebtedness

As of June 30, 2023, we had $730.2 million of outstanding indebtedness, consisting of $500.0 million outstanding under our 6.75% Senior Notes due 2027, $200.0 million of borrowings outstanding under our senior secured credit facilities under the Credit Agreement, consisting entirely of term loans, and $30.2 million of outstanding loans under the accounts receivable financing facility (see Item 1, Note 10 of our Consolidated Financial Statements for more detail regarding our debt). Outstanding letters of credit totaling $15.1 million as of June 30, 2023 reduced available borrowing capacity under our revolving credit facility to $359.9 million.

On May 5, 2023, we entered into an agreement to amend and restate our credit agreement entered into on November 26, 2019 (as in effect prior to such restatement, the “Existing Credit Agreement”) with a new $575 million senior secured credit agreement due May 5, 2028 (as amended, the “2023 Credit Agreement”), comprised of a $375 million revolving credit facility and $200 million term loan. The term loan is payable in quarterly installments of interest and principal beginning September 30, 2023. The 2023 Credit Agreement increases the Applicable Margins by 25 basis points over those defined in the Existing Credit Agreement and added an additional level at a consolidated total leverage ratio of greater than 4.00 to 1.00. Consolidated total net debt includes the aggregate principal amount of total debt, net of unrestricted cash of up to $75 million as per the 2023 Credit Agreement. Proceeds from the 2023 Credit Agreement were used to redeem our $250 million 4.875% Senior Notes on May 10, 2023 and pay off the Existing Credit Agreement term loan balance of $16.9 million. Refer to Item 1, Note 10 of our Consolidated Financial Statements for additional details.

During the quarter ended December 31, 2022, we paid off the outstanding revolving credit facility balance utilizing proceeds from a private placement of common stock. Refer to Item 1, Note 13 of our Consolidated Financial Statements for additional details of the private placement transaction.

In November 2022, we entered into the third amendment to the Credit Agreement, principally to affect a transition from the London Inter-Bank Offered Rate to the Secured Overnight Financing Rate pricing benchmark provisions.

In January 2023, certain of our U.S. subsidiaries entered into the second amendment to the AR Securitization Facility with PNC Bank, which temporarily eases the restrictions of certain covenants contained in the agreement through March 2023. The amendment made certain adjustments to the financial tests including: (i) the default ratio and (ii) the delinquency ratio to make compliance with such tests more likely.

In the future, including during fiscal 2023, 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, climate-related, 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. 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 6.75% Senior Notes due December 2027, which limit the amount of dividends we can pay to our stockholders.

Pursuant to the terms of the 2023 Credit Agreement, the maximum allowed consolidated total net leverage ratio (as defined and calculated under the terms of the 2023 Credit Agreement and discussed further below) was 5.0x for the quarter ended June 30, 2023, which steps down to 4.75x in the quarter ending March 31, 2024, and to 4.5x for the fiscal quarter ended June 30, 2024 and thereafter. The consolidated total net leverage ratio represents the ratio of (a) consolidated total net debt to (b) consolidated adjusted EBITDA. Consolidated total net debt includes the aggregate principal amount of total debt, net of unrestricted cash not to exceed $75.0 million. As of June 30, 2023, our consolidated total net leverage ratio was approximately 3.10x.

Although we are in compliance with our debt covenants as of June 30, 2023, we can make no assurance that we will remain in compliance with these ratios. 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.

#### Capital Allocation

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 required spending to sustain our business. During the first quarter of fiscal 2021, we reduced our dividend by approximately 80% to provide additional liquidity and align our capital allocation policy with our corporate strategy. 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.

During fiscal 2023, we expect to spend between $90 million and $100 million of sustaining capital in our Salt and Plant Nutrition businesses. Additionally, we continue to develop our recently identified lithium resource at our Ogden facility and have spent approximately $21.7 million of capital thus far in fiscal 2023 towards the development phase of this sustainable lithium development project. For the full year of fiscal 2023, we have allocated between $40 million to $50 million for further development. 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 further engineering and design plans. For more information, refer to Part I, Item 1A, “Risk Factors” in our Form 10-K for the for the annual period ended September 30, 2022.

On October 18, 2022, we received aggregate net proceeds of approximately $240.7 million, net of transaction costs, from Koch Minerals & Trading, LLC (“KM&T”) as part of a strategic equity partnership. We expect to use approximately $200 million of the proceeds from the private placement to advance the first development phase of the lithium project. We used the remaining $40.7 million of proceeds to reduce debt.

In connection with our strategy to strengthen and grow our essential minerals businesses, during the first and second quarters of fiscal 2022, we made $45 million equity investments in Fortress, building upon a previous $5 million investment. Fortress is a development stage company that has achieved commercialization of its magnesium chloride-based fire-retardant products to help combat wildfires during fiscal 2023. As of March 31, 2023, we had invested $50 million in Fortress in exchange for an ownership interest of approximately 45%.

On May 5, 2023, we acquired the remaining 55% interest in Fortress not previously owned in exchange for an initial cash payment of approximately $18.9 million (net of cash held by Fortress of $6.5 million), up to $28 million to be paid in cash and/or Compass Minerals common stock upon the achievement of certain performance measures, and a cash earn-out based on volumes of Fortress fire retardant products sold over a 10-year period. Building upon the previous 45% minority ownership stake in Fortress, the transaction provides us full ownership of all Fortress assets, contracts, and intellectual property. The Company recognized a $16.2 million non-cash gain as a result of remeasuring its prior equity interest in Fortress held before the business combination. During the third quarter of fiscal 2023, Fortress entered into an agreement with the U.S. Forest Service to supply product and provide associated services for the 2023 fire season.

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

| NINE MONTHS ENDED JUNE 30, 2023 | NINE MONTHS ENDED JUNE 30, 2022 |
| --- | --- |
| **Operating Activities:** |  |
| Net cash provided by operating activities were $121.3 million | Net cash provided by operating activities were $148.9 million |
| » Net earnings were $18.0 million. | » Net losses were $17.6 million. |
| » Non-cash depreciation and amortization expense was $72.7 million. | » Non-cash depreciation and amortization expense was $83.2 million. |
| » Non-cash stock-based compensation expense was $17.2 million. | » Non-cash stock-based compensation expense was $11.7 million. |
| » Non-cash remeasurement gain of $16.2 million related to the acquisition of Fortress. | » Non-cash impairment loss was $23.1 million. |
| » Working capital items were a source of operating cash flows of $19.8 million. | » Working capital items were a source of operating cash flows of $44.8 million. |
| » Non-cash net loss in equity investees was $3.1 million. | » Non-cash net loss in equity investees was $3.4 million. |
| **Investing Activities:** |  |
| Net cash flows used in investing activities were $100.3 million | Net cash flows used in investing activities were $53.1 million |
| » Net cash flows used in investing activities included $78.9 million of capital expenditures. | » Net cash flows used in investing activities included $68.9 million of capital expenditures. |
| » Included cash payment of $18.9 million, net of cash held by Fortress, for the acquisition of the remaining interest in Fortress. | » 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. |
|  | » Included investment in equity method investee of $46.3 million. |
| **Financing Activities:** |  |
| Net cash flows used in financing activities were $10.1 million | Net cash flows used in financing activities were $69.8 million |
| » Included net payments on our debt of $225.7 million. | » Included net payments on our debt of $51.2 million. |
| » Included net proceeds from private placement of common stock of $240.7 million. | » Included the payment of dividends of $15.7 million. |
| » Included the payment of dividends of $18.7 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 prior to the start of the winter season and 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 operating cash flows during the nine months ended June 30, 2023 reflect the Plant Nutrition build of inventory at higher costs and reduced accounts receivable as compared to the beginning of the year reflective of the reduced demand in that segment partially offset by a decline in Salt inventory levels following the end of the winter season. Additionally Salt accounts receivable also declined as the prior season early fill winter season sales were collected.

### Other Matters

See Item 1, Notes 9 and 11 of our Consolidated Financial Statements for a discussion regarding labor, environmental and litigation matters.

### Reconciliation of Net Earnings (Los)s 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 3 to our 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, interest income, (gain) loss on foreign exchange, other (income) expense, net and other infrequent items that management does not consider indicative of normal operations. Other infrequent items, such as executive transition costs, restructuring charges and gain from remeasurement of equity method investment involve distinct initiatives that are not reflective of future operations and affect the comparability of our operational results across reporting periods. 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, 2023 | 2022 | Nine Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net earnings (loss) from continuing operations | $39.9 | $(10.7) | $18.0 | $(31.8) |
| Interest expense | 14.3 | 13.4 | 42.4 | 41.2 |
| Income tax (benefit) expense | (42.7) | (1.1) | 24.3 | 28.1 |
| Depreciation, depletion and amortization | 24.3 | 27.0 | 72.7 | 83.2 |
| EBITDA from continuing operations | 35.8 | 28.6 | 157.4 | 120.7 |
| Adjustments to EBITDA from continuing operations: |  |  |  |  |
| Stock-based compensation - non cash | 3.5 | 3.9 | 17.2 | 11.6 |
| Interest income | (1.7) | (0.2) | (4.7) | (0.5) |
| Loss (gain) on foreign exchange | 2.3 | (6.1) | 4.6 | (3.5) |
| Gain from remeasurement of equity method investment | (16.2) | — | (16.2) | — |
| Executive transition costs(a) | — | — | — | 4.3 |
| Restructuring charges(b) | 2.2 | — | 5.9 | — |
| Accrued loss and legal costs related to SEC investigation(c) | — | 2.8 | (0.1) | 19.5 |
| Other expense (income), net | 2.7 | (0.1) | 3.7 | — |
| Adjusted EBITDA from continuing operations | 28.6 | 28.9 | 167.8 | 152.1 |
| Adjusted EBITDA from discontinued operations | — | 3.1 | — | 19.0 |
| Adjusted EBITDA including discontinued operations | $28.6 | $32.0 | $167.8 | $171.1 |

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

(b) We incurred severance and related charges related to a reduction of its workforce.

(c) We recognized costs, net of reimbursements, related to the settled SEC investigation.

### 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 have experienced increases in logistics costs, prices for energy and other costs that have only been partially recovered through price increases for our products. While we don’t believe our third quarter logistics or product costs have been materially impacted by inflation as compared to the prior year, we estimate that the impact of inflation increased logistics costs by approximately $5 million to $7 million and product costs by approximately $7 million to $9 million for the nine months ended June 30, 2023. 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 Annual Report on Form 10-K for the annual period ended September 30, 2022 and Part II, Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.

### 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). Lastly, the results of Fortress, our newly acquired fire retardant business, is also seasonal with peak demand for its fire retardant products and services occurring from June through September.

### 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 or excessive precipitation 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 affect our operations and necessitate capital expenditures in the future, although capital expenditures for climate-related projects are not expected to be material in fiscal 2023. 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 Annual Report on Form 10-K for the annual period ended September 30, 2022.

## Market risk

As filed, 942 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 fuel consumed at our production locations or 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, 2022.

## Controls and procedures

As filed, 5,060 characters.

#### Disclosure Controls and Procedures

The Company maintains 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.

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 ineffective as of June 30, 2023, due to the material weaknesses described below.

1\. During the fourth quarter ended September 30, 2022, the Company identified a material weakness in the design and operating effectiveness of information technology general controls (“ITGCs”) related to certain systems that support the Company’s internal controls over financial reporting. Specifically, the Company did not maintain effective controls over privileged user access to certain systems. Automated and manual business process controls were therefore also deemed ineffective because they could have been adversely impacted by the ineffective ITGCs.

2\. During the fourth quarter ended September 30, 2022, the Company identified a material weakness in the design and operating effectiveness of controls related to the sales process. Specifically, the Company did not maintain effective controls over pricing and order entry.

3\. During the fourth quarter ended September 30, 2022, a material weakness was identified in the design and operating effectiveness of controls related to the existence of inventory held at certain locations.

A material weakness, as defined in Rule 12b-2 under the Exchange Act, is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Notwithstanding such material weaknesses in internal control over financial reporting, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

#### Remediation of Material Weaknesses

The Company has further defined and enhanced its management review attributes and increased the frequency of its privileged access reviews. Testing of these controls over privileged user access is currently underway.

The Company has assessed, implemented and is executing enhanced internal controls over the sales and inventory processes in accordance with the remediation plans for those material weaknesses. Further enhancements related to inventory existence, sales pricing, and order entry are underway. These enhanced controls will be tested for effectiveness in future periods.

#### Changes in Internal Control Over Financial Reporting

Other than the matters noted above, there were no changes in the Company’s internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company is in the process of integrating Fortress’ operations, including integration of financial reporting processes and procedures and internal controls over financial reporting. Because of the complexity and timing of the Fortress acquisition, the internal controls over financial reporting of Fortress have been excluded from the Company’s assessment of the effectiveness of its internal control over financial reporting as of June 30, 2023 (as described above).

## Risk factors

As filed, 310 characters.

For a discussion of the risk factors applicable to Compass Minerals, please refer to Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the annual period ended September 30, 2022, and Part II, Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.

Filed Aug 8, 2023.
Source: SEC EDGAR, the filing index for accession 0001227654-23-000163. Last ingested by Listed: Oct 24, 2026, 15:10 ET. No prices; not investment advice.