# Compass Minerals International Inc: Form 10-Q for the period ended Dec 31, 2023

- Company: [Compass Minerals International Inc](/companies/cmp.md) (CIK 1227654)
- Form: 10-Q
- Filed: 2024-02-08
- Accepted by EDGAR: Feb 7, 2024, 22:56 ET
- Period: 2023-12-31
- Accession: 0001227654-24-000036
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1227654/000122765424000036/cmp-20231231.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1227654/000122765424000036/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-10-01 to 2023-12-31 | $341.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Gross profit | 3 months, 2023-10-01 to 2023-12-31 | $70.6m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-10-01 to 2023-12-31 | $45.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-10-01 to 2023-12-31 | −$55.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-10-01 to 2023-12-31 | $15.8m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-10-01 to 2023-12-31 | $1.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-10-01 to 2023-12-31 | −$75.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-10-01 to 2023-12-31 | −$1.83 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-10-01 to 2023-12-31 | −$1.83 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-10-01 to 2023-12-31 | 41,205,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-10-01 to 2023-12-31 | −$65.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-10-01 to 2023-12-31 | $35.3m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2023-10-01 to 2023-12-31 | $6.4m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2023-12-31 | $38.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-12-31 | $627.8m | us-gaap:AssetsCurrent |
| Total assets | at 2023-12-31 | $1.81bn | us-gaap:Assets |
| Current liabilities | at 2023-12-31 | $204.3m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-12-31 | $908.7m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-12-31 | $5.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-12-31 | $459.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 48,975 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; our continued ability to access ambient lake brine in the Great Salt Lake; the termination of our lithium development project; geological conditions; dependency on a limited number of key production and distribution facilities and critical equipment; weather conditions; the inability to fund necessary capital expenditures or successfully complete capital projects; uncertainties in estimating our economically recoverable reserves and resources; the useful life of our mine properties; our expectation of extending the Goderich mine mineral lease; conversion of mineral resources into mineral reserves; 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 seasonal demand for our products; the impact of anticipated changes in potash product prices and customer application rates; the impact of competition on the sales of our products; inflation risks; increasing costs or a lack of availability of transportation services; risks associated with our international operations and sales, including changes in currency exchange 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; 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 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, 2023 (“2023 Form 10-K”).

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 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.

### Critical Accounting Estimates

Preparation of our consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (“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 2023 Form 10-K, describe the significant accounting estimates and policies used in preparation of our consolidated financial statements.

As previously disclosed in the 2023 Form 10-K and as discussed in Item 1, Note 5 of our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, the Company indefinitely paused new investment in its lithium salt project pending greater clarity on the evolving regulatory environment in Utah. In December of 2023, a revised draft of rules was proposed, project engineering estimates were refined and, taken together with the decline in market price of lithium products, the Company determined to terminate the lithium development. Consequently, the Company evaluated the capitalized assets and recorded an impairment charge of $74.8 million, including $7.6 million associated with future commitments, for the three months ended December 31, 2023 to value the assets at estimated fair value, considering equipment expected to be used by the on-going business and amounts estimated to be recoverable through returns or salvage value. The determination of fair value of these assets requires us to make estimates and assumptions that include, but are not limited to, estimated proceeds to be received upon sale or return of the equipment, assumptions about the ability to redeploy equipment and materials to other parts of the business and estimates regarding the utility value and replacement cost of the equipment redeployed. Actual proceeds received from asset sales or returns and our ability to utilize the assets may vary from the Company’s estimates resulting in further impairment.

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 December 31, 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. December 31, 2023 marked the end of Fortress's first commercially operating fire season with the U.S. Forest Service (“USFS”).

Additionally, we had been pursuing development of a sustainable lithium salt resource near Ogden, UT to support the North American battery market. However, as discussed above in Critical Accounting Policies and in Item 1, Note 5 of our Consolidated Financial Statements, we have terminated our pursuit of the lithium development and recognized a $74.8 million loss on impairment of long-lived assets, including $7.6 million associated with future commitments, during the three months ended December 31, 2023.

### Consolidated Results of Continuing Operations

The following is a summary of our consolidated results of continuing operations for the three months ended December 31, 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 MONTHS ENDED DECEMBER 31

\* 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 December 31, 2023 Compared to Three Months Ended December 31, 2022

- Total sales decreased 3%, or $10.7 million, due to lower Salt segment sales, partially offset by sales by the Fortress fire retardant business and higher Plant Nutrition segment sales. The decrease in sales for Salt reflected lower sales volumes. Plant Nutrition sales increased from the prior year due to an increase in sale volumes, partially offset by lower average sales prices. In addition, we recognized $14.5 million in sales related to the completion of our 2023 contract with the USFS.
- Operating loss of $55.3 million decreased $83.2 million from operating income of $27.9 million in the prior-year period, reflecting the lithium asset impairment, lower Plant Nutrition operating earnings, partially offset by Fortress earnings (as a result of our acquisition and subsequent consolidation in May 2023) and higher Salt operating earnings. Plant Nutrition operating earnings decreased due primarily to lower average sales prices and higher per-unit product costs, which were partially offset by higher sales volumes due to a combination of lingering weather impacts in key markets in the first quarter of 2023 and uncertainty about future fertilizer prices in that same quarter causing users to cancel or delay purchases. Salt operating earnings increased due primarily to higher average sales prices, which were partially offset by lower sales volumes and higher highway per-unit product costs. Corporate and Other segment operating loss decreased from the prior year quarter primarily reflecting the acquisition of the Fortress business, which was partially offset by higher lithium and corporate SG&A.
- Earnings before interest, taxes, depreciation and amortization (“EBITDA”)\* adjusted for items management believes are not indicative of our ongoing operating performance (“Adjusted EBITDA”)\* decreased 3.9%, or $2.4 million.
- Diluted net loss per common share of $1.83 declined by $1.82 due to the lithium asset impairment recognized in the current year.

### THREE MONTHS ENDED DECEMBER 31

### Commentary: Three Months Ended December 31, 2023 Compared to Three Months Ended December 31, 2022

### Gross Profit: Increased 1%, or $0.6 million; Gross Margin increased 1 percentage point to 21%

- Salt segment gross profit increased $2.0 million primarily due to higher average sales prices, which were partially offset by lower sales volumes and higher per-unit product costs (see Salt operating results).
- The gross profit of the Plant Nutrition segment decreased $13.5 million due to higher per-unit product costs and lower average sales prices, which were partially offset by lower per-unit distribution costs (see Plant Nutrition operating results).
- Gross profit was also favorably impacted by the acquisition of the Fortress fire retardant business in May 2023.

### OTHER EXPENSES AND INCOME

### Commentary: Three Months Ended December 31, 2023 Compared to Three Months Ended December 31, 2022

### SG&A: Increased $3.9 million; increased 1.5 percentage points as a percentage of sales from 11.9% to 13.4%

- The increase in SG&A expense was primarily due to expenses related to our Fortress fire retardant business that was acquired in May 2023 and higher corporate incentive compensation expense.

### Loss on Impairment of Long-Lived Assets, net: $74.8 million in the current-year period

- We recognized an impairment loss of $74.8 million for the three months ended December 31, 2023 related to the termination of the lithium development (see Item 1, Note 5).

### Other Operating Expense: Increased $5.1 million to $5.4 million

- The increase in other operating expense was due to an increase in the contingent consideration related to the Fortress acquisition and severance costs resulting from the decision to discontinue the pursuit of the lithium development in the current period.

### Interest Income: Decreased $0.7 million to $0.4 million

- The decrease in interest income during the current period is primarily due to the higher cash balance in the prior year resulting from proceeds received from a private placement of our common stock.

### Interest Expense: Increased $1.9 million to $15.8 million

- Interest expense increased $1.9 million due to higher interest rates and debt levels in the current period.

### Loss on Foreign Exchange: Decreased $0.6 million from $2.5 million to $1.9 million

- We realized loss on foreign exchange of $1.9 million in the first quarter of fiscal 2024 compared to $2.5 million in the same quarter of the prior-year period, primarily reflecting changes in translating our intercompany loans from British Pounds to U.S. Dollars.

### Net Loss in Equity Investees: $0.9 million in the prior-year period

- We realized a net loss of $0.9 million in the prior-year period reflecting our share of losses related to our equity investments as these development stage businesses positioned themselves for commercialization.

### Other Expense, net: Increased to $0.7 million

- The increase is due primarily to losses recorded for derivatives not accounted for as hedges during the current quarter.

### Income Tax Expense: Decreased $10.1 million from $11.9 million to $1.8 million

- The decrease in income tax expense was due primarily to lower pretax book income, excluding the impairment of lithium assets, in the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. The net tax benefit recorded on the impairment of the lithium assets impairment was offset entirely by tax expense for a valuation allowance on the related deferred tax asset.
- Our effective tax rate was (2.5)% for the three months ended December 31, 2023, which is primarily driven by the income mix by country with income recognized in foreign jurisdictions offset by losses recognized in the U.S. for which a valuation allowance has been recorded against the U.S. tax benefit carryforward.
- Our income tax provision for the three months ended December 31, 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.

### Operating Segment Performance

The following financial results represent consolidated financial information with respect to the operations of our Salt and Plant Nutrition segments. Sales primarily include revenue from the sales of our products, or “product sales,” and the impact of shipping and handling costs incurred to deliver our salt and plant nutrition products to our customers.

The results of operations of the Fortress business include sales of $14.5 million for the three months ended December 31, 2023. The results of operations of the consolidated records management business and other incidental revenues include sales of $3.2 million and $2.7 million for the three months ended December 31, 2023 and 2022, respectively. These sales are not material to our consolidated financial results and are not included in the following operating segment financial data.

### Salt Results

|  | QTD 2023 | QTD 2022 |
| --- | ---: | ---: |
| **Salt Sales (in millions)** | $274.3 | $308.1 |
| **Salt Operating Earnings (in millions)** | $50.5 | $47.1 |
| **Salt Sales Volumes (thousands of tons)** |  |  |
| Highway deicing | 2,266 | 2,901 |
| Consumer and industrial | 589 | 620 |
| Total tons sold | 2,855 | 3,521 |
| **Average Salt Sales Price (per ton)** |  |  |
| Highway deicing | $70.36 | $65.60 |
| Consumer and industrial | $194.94 | $190.04 |
| Combined | $96.08 | $87.51 |

### Commentary: Three Months Ended December 31, 2023 Compared to Three Months Ended December 31, 2022

- Salt sales decreased $33.8 million, primarily due to lower sales volumes, partially offset by higher average sales prices.
- Salt sales volumes decreased 19% in total, or 666,000 tons, reducing sales by approximately $47.5 million. Highway deicing sales volumes decreased 22%, reflecting a combination of exceptionally mild weather and the impact of 5%

lower total committed bid volumes year over year compared to the prior-year bid season. Consumer and industrial sales volumes decreased 5% primarily due to lower consumer deicing volumes.

- Average sales prices increased 10% partially offsetting the volume decline by approximately $13.7 million with increases in both highway and consumer and industrial average sales prices.
- Highway deicing average sales price increased 7% across all product categories as we have sought to restore profitability and offset the impact of prior year inflation on costs by executing a commercial bidding strategy emphasizing pricing over volume. Consumer and industrial average sales price increased 3% due to price increases taken to offset inflation realized in prior years. The higher average sales prices are also reflective of sales mix.
- Salt operating earnings increased 7%, or $3.4 million, primarily due to higher average sales prices, which was partially offset by higher highway per-unit product costs.

### Plant Nutrition Results

|  | QTD 2023 | QTD 2022 |
| --- | ---: | ---: |
| **Plant Nutrition Sales (in millions)** | $49.7 | $41.6 |
| **Plant Nutrition Operating (Loss) Earnings (in millions)** | $(2.3) | $11.0 |
| **Plant Nutrition Sales Volumes (thousands of tons)** | 75 | 45 |
| **Plant Nutrition Average Sales Price (per ton)** | $660 | $924 |

### Commentary: Three Months Ended December 31, 2023 Compared to Three Months Ended December 31, 2022

- Plant Nutrition sales increased 19%, or $8.1 million due to higher sales volumes, partially offset by lower average sales prices.
- Plant Nutrition sales volumes increased 67% year over year driven by normalization of demand levels in fiscal 2024 following lower demand in fiscal 2023 reflective of impacts from weather events in key markets and uncertainty about future fertilizer prices causing customers to cancel or delay purchases. The higher sales volumes increased sales by approximately $27.9 million.
- Plant Nutrition average sales prices decreased 29%, offsetting the increase in sales by approximately $19.8 million. Average sales prices decreased throughout fiscal 2023 due to global supply and demand dynamics for fertilizer products resulting in weakening pricing year over year following a strong, steadily increasing price trend throughout fiscal 2022.
- Plant Nutrition operating earnings decreased $13.3 million to a $2.3 million operating loss primarily due to lower averages sales prices and higher per-unit product costs driven by higher cost carryover inventory reflective of lower production volume and higher energy and other input costs in fiscal 2023, which were partially offset by higher sales volumes.

### Outlook

- The North American highway deicing season is off to a weak start due to mild winter weather across our core service markets. However, with an estimated 70% of the deicing season yet to be completed, we are maintaining our expectations for the Salt segment in fiscal year 2024. In the event of a normal winter season, we expect sales volumes and adjusted EBITDA to range from 11.3 million to 12.2 million tons and $230 million to $270 million, respectively, in fiscal year 2024. In the event of a relatively strong winter season we expect sales volumes and adjusted EBITDA ranging from 12.2 million to 13.2 million tons and $270 million to $290 million, respectively, and sales volumes and adjusted EBITDA ranging from 10.0 million to 11.3 million tons and $205 million to $230 million, respectively, in the event of a relatively mild winter season.
- There are several factors adversely impacting the outlook for our Plant Nutrition segment. First, muriate of potash prices continue to be under pressure in the market, which as a potential substitute impacts our SOP pricing. Second, continuing weakness in fertilizer pricing is resulting in buyers deferring purchases in anticipation of lower prices, which adds risk to our sales outlook. Lastly, first-quarter pond-based production tracked toward the lower end of our initial projections. As a result, we now expect Plant Nutrition segment sales volumes and adjusted EBITDA to be within a range of 280,000 to 310,000 tons and $15 million to $35 million, respectively, in fiscal year 2024.
- Fiscal year 2024 capital expenditures were expected to be in the $120 million to $130 million range. This includes approximately $80 million to $90 million in sustaining capital for the core Salt and Plant Nutrition businesses. In the fire retardant business, approximately $10 million of growth capital is anticipated to be spent in fiscal year 2024. Finally, we expect capital expenditures of roughly $30 million related to the now-terminated lithium project for items that had been committed to prior to the project’s suspension in November 2023. As a result of the termination of the

lithium project and the related impairment in the first quarter of fiscal 2024, a portion of the expenditures related to committed items that had not been received by quarter-end and will not be classified as capital expenditures within the Consolidated Statements of Cash Flows when paid.

### 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 December 31, 2023, we had liquidity of approximately $245.8 million, comprised of $38.3 million of cash and cash equivalents and $207.5 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 indefinitely reinvest earnings in our foreign jurisdictions or efficiently repatriate those funds to the U.S. As of December 31, 2023, we had $5.5 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. Throughout fiscal years 2022 and 2023, we increased our repatriation expectation to include an additional $16 million from our U.K. operations. During the first quarter of fiscal 2023, $89.2 million was repatriated from Canada and in the third quarter of fiscal 2023, $15.6 million was repatriated from the U.K. 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 December 31, 2023, consisting of a tax benefit of $0.7 million recorded in fiscal 2023 and tax expense of $4.5 million, most of which was recorded in years prior to 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. 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 December 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 three months ended December 31, 2023, an additional valuation allowance of $19.6 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 December 31, 2023, we had $919.2 million of outstanding indebtedness, consisting of $500.0 million outstanding under our 6.75% Senior Notes due 2027, $349.9 million of borrowings outstanding under our senior secured credit facilities under the Credit Agreement, consisting of $197.5 million of term loans and $152.4 million borrowed against our revolving credit facility, and $69.3 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 $15.1 million as of December 31, 2023 further reduced available borrowing capacity under our revolving credit facility to $207.5 million.

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 2023 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 December 31, 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 December 31, 2023, our consolidated total net leverage ratio was approximately 4.33x.

Although we are in compliance with our debt covenants as of December 31, 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, required spending to sustain our business and focus on generating adequate returns on capital. 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 2024, we expect to spend between $80 million and $90 million of sustaining capital in our Salt and Plant Nutrition businesses, including approximately $7 million to $12 million towards replacing the existing underground mill at Goderich mine over multiple years, which will be located in a built-for-purpose area of the mine and is expected to improve operating efficiencies. We also expect to spend approximately $10 million of growth capital on our fire retardant business. Additionally, we incurred approximately $20.0 million, including amounts accrued and unpaid, of previously committed capital in the first quarter of fiscal 2024 (approximately $71.3 million cumulatively) towards the development phase of our sustainable lithium development project. However, during the first quarter of fiscal 2024, we ceased further development of the lithium project. For more information, refer to Item 1, Note 5 of our Consolidated Financial Statements and Part I, Item 1A, “Risk Factors” in our 2023 Form 10-K.

The table below provides a summary of our cash flows by category:

| THREE MONTHS ENDED DECEMBER 31, 2023 | THREE MONTHS ENDED DECEMBER 31, 2022 |
| --- | --- |
| **Operating Activities:** |  |
| Net cash used in operating activities were $65.6 million | Net cash provided by operating activities were $2.1 million |
| » Net loss was $75.1 million. | » Net loss was $0.3 million. |
| » Non-cash depreciation and amortization expense was $25.5 million. | » Non-cash depreciation and amortization expense was $23.9 million. |
| » Non-cash stock-based compensation expense was $11.9 million. | » Non-cash stock-based compensation expense was $10.6 million. |
| » Non-cash loss on impairment of lithium assets was $74.8 million. | » Working capital items were a use of operating cash flows of $31.3 million. |
| » Working capital items were a use of operating cash flows of $107.1 million. | » Non-cash net loss in equity investees was $0.9 million. |
| **Investing Activities:** |  |
| Net cash flows used in investing activities were $36.0 million | Net cash flows used in investing activities were $20.1 million |
| » Net cash flows used in investing activities included $35.3 million of capital expenditures. | » Net cash flows used in investing activities included $19.9 million of capital expenditures. |
| **Financing Activities:** |  |
| Net cash flows provided by financing activities were $100.9 million | Net cash flows provided by financing activities were $117.7 million |
| » Included net proceeds from the issuance of debt of $108.1 million. | » Included net payments on our debt of $116.1 million. |
| » Included the payment of dividends of $6.4 million. | » Included net proceeds from private placement of common stock of $240.7 million. |
|  | » Included the payment of dividends of $6.3 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 three months ended December 31, 2023, reflect the seasonal increase in accounts receivable due to the beginning of the winter season. During the first quarter of fiscal 2024, the Company also paid liabilities accrued as of September 30, 2023, including the remaining $10 million settlement payment to the SEC, accrued incentive compensation, interest on our debt, income taxes and other liabilities. Additionally, at the end of Fortress’ contract term with the USFS, the Company recognized revenue previously deferred in accrued liabilities.

### 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 Earnings (Loss) 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. 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, asset impairment charges and severance associated with the cessation of the lithium development 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 December 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net loss | $(75.1) | $(0.3) |
| Interest expense | 15.8 | 13.9 |
| Income tax expense | 1.8 | 11.9 |
| Depreciation, depletion and amortization | 25.5 | 23.9 |
| EBITDA | (32.0) | 49.4 |
| Adjustments to EBITDA: |  |  |
| Stock-based compensation - non cash | 11.9 | 10.6 |
| Interest income | (0.4) | (1.1) |
| Loss on foreign exchange | 1.9 | 2.5 |
| Restructuring charges(a) | 2.5 | — |
| Loss on impairment of long-lived assets, net(a) | 74.8 | — |
| Accrued loss and legal costs related to SEC investigation(b) | — | 0.3 |
| Other expense, net | 0.7 | 0.1 |
| Adjusted EBITDA | $59.4 | $61.8 |

(a) In connection with the termination of our pursuit of the lithium development project, we incurred severance and related charges for a reduction of workforce and a loss on impairment of long-lived assets, which were determined to be no longer probable of recovery.

(b) 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.

Although inflation has not had a significant impact on our operations in the current period, 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 2023 Form 10-K.

### 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 our fire retardant business are also seasonal with peak demand for 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 2024. 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 2023 Form 10-K.

## 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, 2023.

## Controls and procedures

As filed, 2,262 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.

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 December 31, 2023, at the reasonable assurance level.

#### 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 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.

## Risk factors

As filed, 198 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, 2023.

Filed Feb 8, 2024.
Source: SEC EDGAR, the filing index for accession 0001227654-24-000036. Last ingested by Listed: Oct 24, 2026, 15:10 ET. No prices; not investment advice.