SEC Form 10-Q filed by Compass Minerals Intl Inc
$CMP
Mining & Quarrying of Nonmetallic Minerals (No Fuels)
Industrials
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended March 31, 2025
or
For the transition period from _______________________ to __________________________
Commission File Number 001-31921
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | ||||
(913 ) 344-9200
(Address of principal executive offices, zip code and telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such | ||||||||||||||
reports), and (2) has been subject to such filing requirements for the past 90 days. | ☑ | No | ☐ | |||||||||||
| Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that | ||||||||||||||
the registrant was required to submit such files). | ☑ | No | ☐ | |||||||||||
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | |||||||||||||||||||||||
| Large accelerated filer | ☐ | ☑ | Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||||||||
| Emerging growth company | |||||||||||||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | |||||||||||||
| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | Yes | ☐ | No | |||||||||||
The number of shares outstanding of the registrant’s common stock, $0.01 par value per share, as of May 5, 2025, was 41,620,522 shares.
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
TABLE OF CONTENTS
| PART I. FINANCIAL INFORMATION | Page | |||||||
| PART II. OTHER INFORMATION | ||||||||
1
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
| (Unaudited) | |||||||||||
| March 31, 2025 | September 30, 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Receivables, less allowance for doubtful accounts of $ | |||||||||||
Inventories, less allowance of $ | |||||||||||
Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
Other noncurrent assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Accrued salaries and wages | |||||||||||
| Income taxes payable | |||||||||||
| Accrued interest | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt, net of current portion | |||||||||||
| Deferred income taxes, net | |||||||||||
| Other noncurrent liabilities | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock: $ | |||||||||||
| Additional paid-in capital | |||||||||||
Treasury stock, at cost — | ( | ( | |||||||||
Retained (loss) earnings | ( | ||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
2
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except share and per share data)
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Sales | $ | $ | $ | $ | |||||||||||||||||||
| Shipping and handling cost | |||||||||||||||||||||||
| Product cost | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||
Loss on impairments, net | |||||||||||||||||||||||
Other operating income | ( | ( | ( | ( | |||||||||||||||||||
Operating loss | ( | ( | ( | ( | |||||||||||||||||||
| Other (income) expense: | |||||||||||||||||||||||
| Interest income | ( | ( | ( | ( | |||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
Gain on foreign exchange | ( | ( | ( | ( | |||||||||||||||||||
| Other expense, net | |||||||||||||||||||||||
Loss before income taxes | ( | ( | ( | ( | |||||||||||||||||||
Income tax expense (benefit) | ( | ( | |||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Basic net loss per common share | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Diluted net loss per common share | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted-average common shares outstanding (in thousands): | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
3
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in millions)
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||
Unrealized gain from change in pension obligations, net of tax of $ | |||||||||||||||||||||||
Unrealized loss from change in other postretirement benefits, net of tax of $ | ( | ||||||||||||||||||||||
Unrealized income (loss) on cash flow hedges, net of tax of $ | ( | ||||||||||||||||||||||
| Cumulative translation adjustment | ( | ( | |||||||||||||||||||||
Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
4
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the three and six months ended March 31, 2025 and 2024
(Unaudited, in millions)
| Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings (Loss) | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||
Balance, September 30, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
Comprehensive loss | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||
| Shares issued for stock units, net of shares withheld for taxes | — | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Balance, December 31, 2024 | $ | $ | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||
Comprehensive (loss) income | — | — | — | ( | ( | ||||||||||||||||||||||||||||||
| Shares issued for stock units, net of shares withheld for taxes | — | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Balance, March 31, 2025 | $ | $ | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||
Balance, September 30, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
Comprehensive (loss) income | — | — | — | ( | ( | ||||||||||||||||||||||||||||||
Dividends on common stock ($ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Shares issued for stock units, net of shares withheld for taxes | — | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Balance, December 31, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
Comprehensive loss | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||
Dividends on common stock ($ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Shares issued for stock units, net of shares withheld for taxes | — | ( | ( | — | — | ( | |||||||||||||||||||||||||||||
| Stock-based compensation | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||
Balance, March 31, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
5
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
| Six Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash flows from operating activities: | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash flows provided by operating activities: | |||||||||||
| Depreciation, depletion and amortization | |||||||||||
| Amortization of deferred financing costs | |||||||||||
| Stock-based compensation | |||||||||||
| Deferred income taxes | |||||||||||
Unrealized foreign exchange gain | ( | ( | |||||||||
Loss on impairments, net | |||||||||||
Net gain from remeasurement of contingent consideration | ( | ( | |||||||||
| Other, net | |||||||||||
Changes in operating assets and liabilities: | |||||||||||
| Receivables | ( | ( | |||||||||
| Inventories | |||||||||||
| Other assets | ( | ||||||||||
| Accounts payable and accrued expenses and other current liabilities | ( | ||||||||||
| Other liabilities | ( | ||||||||||
Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Other, net | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from revolving credit facility borrowings | |||||||||||
| Principal payments on revolving credit facility borrowings | ( | ( | |||||||||
| Proceeds from issuance of long-term debt | |||||||||||
| Principal payments on long-term debt | ( | ( | |||||||||
| Payments for contingent consideration | ( | ||||||||||
| Dividends paid | ( | ||||||||||
| Deferred financing costs | ( | ( | |||||||||
| Shares withheld to satisfy employee tax obligations | ( | ( | |||||||||
| Other, net | ( | ( | |||||||||
Net cash (used in) provided by financing activities | ( | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Net change in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents, beginning of the year | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
| Supplemental cash flow information: | |||||||||||
| Interest paid, net of amounts capitalized | $ | $ | |||||||||
| Income taxes paid, net of refunds | $ | $ | |||||||||
Net change to property, plant and equipment through accounts payable and accrued expenses and other current liabilities | $ | $ | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
6
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Policies and Basis of Presentation:
Compass Minerals International, Inc. (“CMI”), through its subsidiaries (collectively, the “Company”), is a leading global provider of essential minerals focused on safely delivering where and when it matters to help solve nature’s challenges for customers and communities. The Company’s salt products help keep roadways safe during winter weather and are used in numerous other consumer, industrial, chemical and agricultural applications. Its plant nutrition business is the leading North American producer of sulfate of potash (“SOP”), which is used in the production of specialty fertilizers for high-value crops and turf and helps improve the quality and yield of crops, while supporting sustainable agriculture. The Company’s principal products are salt, consisting of sodium chloride and magnesium chloride, and SOP. The Company’s production sites are located in the United States (“U.S.”), Canada and the United Kingdom (“U.K.”). The Company also provides records management services in the U.K. Except where otherwise noted, references to North America include only the continental U.S. and Canada, and references to the U.K. include only England, Scotland and Wales. References to “Compass Minerals,” “our,” “us” and “we” refer to CMI and its consolidated subsidiaries.
CMI is a holding company with no significant operations other than those of its wholly-owned subsidiaries. The consolidated financial statements include the accounts of CMI and its wholly-owned domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the annual period ended September 30, 2024, as filed with the Securities and Exchange Commission in its Annual Report on Form 10-K on December 16, 2024 (“2024 Form 10-K”). In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included.
The Company experiences a substantial amount of seasonality in its sales, including its salt deicing product sales. Consequently, 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 (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 products are used. Following industry practice in North America and the U.K., the Company seeks 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. Production of deicing salt can also vary based on the severity or mildness of the preceding winter season. Due to the seasonal nature of the deicing product lines, operating results for the interim periods are not necessarily indicative of the results that may be expected for the full fiscal year. The Company’s plant nutrition business is also seasonal. As a result, the Company and its 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).
Impairment
On March 25, 2025, the Company took measures to align the Company’s cost structure to its current business needs as part of a larger strategic refocus to improve the profitability of the Company’s core Salt and Plant Nutrition businesses. Specifically, the Company reduced the headcount of its corporate workforce and began the process of exiting the Fortress North America, LLC (“Fortress”) fire retardant business, terminating the employment of all Fortress employees. As such, the Company will no longer allocate capital and resources to the Fortress fire retardant business and is no longer pursuing an approved fire retardant product.
As a result of the above items impacting Fortress, the Company determined that there were indicators of impairment with the associated Fortress intangible assets. Therefore, the Company tested these intangibles for impairment. As there were no future cash flows expected related to these intangible assets, customer relationships was determined to have a fair value of zero using an income approach under ASC 820, Fair Value Measurement (Level 3 inputs, see Note 12). Consequently, the Company recognized a full impairment loss of $53.0
7
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
Additionally, the Company performed an impairment test on the remaining Fortress asset group (including property, plant, and equipment (“PP&E”), inventory and in-process research and development (“IPR&D”)), with a carrying amount of $19.7 million. The impairment test under ASC 360, Property, Plant Equipment and Other Assets, compared the asset group’s undiscounted cash flows to its carrying amount. The Company determined the fair value of the asset group using a market approach under ASC 820, Fair Value Measurement. The fair value of the asset group was based on relevant third-party non-binding offers received for the specific asset group (Level 2 inputs, see Note 12). The asset group (PP&E, inventory and IPR&D) was not impaired as its fair value, based on market indications, approximated or exceeded its carrying value. The fair value estimates involved significant estimates and assumptions, which may differ from actual outcomes.
Significant Accounting Policies
The Company’s significant accounting policies are detailed in “Note 2 – Summary of Significant Accounting Policies” within Part II, Item 8 of its 2024 Form 10-K. There were no material changes in the Company’s significant accounting policies from those described in its 2024 Form 10-K.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which updates reportable segment disclosure requirements primarily to include enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. Management is currently evaluating this ASU to determine its impact on the Company's disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which updates income tax disclosures by requiring consistent categories and additional disaggregation of information in the rate reconciliation and income taxes paid by jurisdiction. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied prospectively; however, retrospective application is permitted. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures.
In November 2024, the FASB issued amended guidance related to disclosure of disaggregated expenses (“ASU 2024-03”). This amendment requires public business entities to provide detailed disclosures in the notes to financial statements disaggregating specific expense categories, including employee compensation, depreciation, and intangible asset amortization, as well as certain other disclosures to provide enhanced transparency into the nature and function of expenses. This new guidance is effective for annual periods beginning in the Company’s fiscal 2028 and interim periods following annual adoption, with early adoption permitted. This guidance will be applied on a prospective basis with retrospective application permitted. Management is currently evaluating ASU 2024-03 to determine its impact on the Company’s disclosures.
2. Revenues:
Deferred Revenue
8
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
3. Inventories:
Inventories consist of the following (in millions):
| March 31, 2025 | September 30, 2024 | ||||||||||
| Finished goods | $ | $ | |||||||||
Work in process | |||||||||||
Raw materials and supplies(a) | |||||||||||
Total inventories | $ | $ | |||||||||
4. Property, Plant and Equipment, Net:
Property, plant and equipment, net, consists of the following (in millions):
| March 31, 2025 | September 30, 2024 | ||||||||||
| Land, buildings and structures, and leasehold improvements | $ | $ | |||||||||
| Machinery and equipment | |||||||||||
| Office furniture and equipment | |||||||||||
| Mineral interests | |||||||||||
| Construction in progress | |||||||||||
| Less: accumulated depreciation and depletion | ( | ( | |||||||||
| Property, plant and equipment, net | $ | $ | |||||||||
5. Goodwill and Intangible Assets:
Changes in the carrying amount of goodwill are summarized as follows (in millions):
| Corporate & Other | ||||||||
| Balance as of September 30, 2024 | $ | |||||||
| Foreign currency translation adjustment | ( | |||||||
| Balance as of December 31, 2024 | $ | |||||||
| Foreign currency translation adjustment | ||||||||
Balance as of March 31, 2025 | $ | |||||||
In connection with the Fortress acquisition, the Company acquired identifiable intangible assets which consisted of customer relationships, developed technology, in-process research and development and trade name. The fair values were determined using Level 3 inputs (see Note 12 for a discussion of the levels in the fair value hierarchy). Upon acquisition, the fair value of the customer relationships was estimated using an income approach method while the fair values of developed technology, in-process research and development and trade name were estimated using the relief from royalty method.
9
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
6. Income Taxes:
The Company’s effective income tax rate differs from the U.S. statutory federal income tax rate primarily due to U.S. statutory depletion, state income taxes (net of federal tax benefit), nondeductible executive compensation over $1 million, foreign income, mining and withholding taxes, base erosion and anti-abuse tax, and valuation allowances recorded on deferred tax assets.
The effective tax rates applied to the six months ended March 31, 2025 were determined by excluding the U.S. losses from the overall estimated annual effective tax rate computations and a separate estimated annual effective tax rate was computed and applied to the ordinary U.S. losses.
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, 2025. Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections for future income. On the basis of this evaluation, during the six months ended March 31, 2025, an additional valuation allowance of $23.5 million has been recorded to recognize only the portion of the U.S. deferred tax assets that is more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as the Company’s projections for income.
As of March 31, 2025 and September 30, 2024, the Company had $74.3 million and $76.4 million, respectively of gross federal NOL carryforwards that have no expiration date and $6.7 million and $6.1 million at March 31, 2025 and September 30, 2024, respectively of net operating tax-effected state NOL carryforwards which expire beginning in 2031.
Canadian provincial tax authorities have challenged tax positions claimed by one of the Company’s Canadian subsidiaries and have issued tax reassessments for fiscal years 2002-2019. The reassessments are a result of ongoing audits and total $196.2 million, including interest, through March 31, 2025. The Company disputes these reassessments and continues to work with the appropriate authorities in Canada to resolve the dispute. There is a reasonable possibility that the ultimate resolution of this dispute, and any related disputes for other open tax years, may be materially higher or lower than the amounts the Company has reserved for such disputes. In connection with this dispute, local regulations require the Company to post security with the tax authority until the dispute is resolved. The Company has posted collateral in the form of a $152.2 million performance bond and has paid $34.6
The Company could be required by local regulations to provide security for additional interest on the above unresolved disputed amounts and for any future reassessments issued by these Canadian tax authorities in the form of cash, letters of credit, performance bonds, asset liens or other arrangements agreeable with the tax authorities until the disputes are resolved.
The Company expects that the ultimate outcome of these matters will not have a material impact on its results of operations or financial condition. However, the Company can provide no assurance as to the ultimate outcome of these matters, and the impact could be material if they are not resolved in the Company’s favor. As of March 31, 2025, the Company believes it has adequately reserved for these reassessments.
Additionally, the Company has other uncertain tax positions as well as assessments and disputed positions with taxing authorities in its various jurisdictions, which are consistent with those matters disclosed in the Company’s 2024 Form 10-K.
10
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
7. Long-Term Debt:
Long-term debt consists of the following (in millions):
| March 31, 2025 | September 30, 2024 | ||||||||||
| $ | $ | ||||||||||
| Term Loan due May 2028 | |||||||||||
| Revolving Credit Facility due May 2028 | |||||||||||
| AR Securitization Facility expires March 2027 | |||||||||||
| Less unamortized debt issuance costs | ( | ( | |||||||||
| Total debt | |||||||||||
| Less current portion | ( | ( | |||||||||
| Long-term debt | $ | $ | |||||||||
On December 12, 2024, the Company entered into an amendment to its 2023 Credit Agreement, which, among other things, eased the restrictions of certain covenants contained in the agreement. The amendment included increasing the maximum allowed consolidated total net leverage ratio (as defined and calculated under the terms of the amended 2023 Credit Agreement) to 6.5 x as of the last day of any quarter through the fiscal quarter ended September 30, 2025, then gradually stepping down to 4.50 x for the fiscal quarter ended December 31, 2026 and thereafter. The amendment also decreased the Revolving Commitments (as defined in the Existing Credit Agreement) from $375 million to $325 million with additional reductions stepping down to $250 million on July 1, 2026. In connection with this amendment, the Company paid fees totaling $2.0 million which were capitalized as deferred financing costs. Additional arrangement and legal fees of $1.0 million were expensed as of December 31, 2024.
As of March 31, 2025, the term loan and revolving credit facility under the 2023 Credit Agreement were secured by substantially all existing and future U.S. assets of the Company, the Goderich mine in Ontario, Canada and capital stock of certain subsidiaries. As of March 31, 2025 and September 30, 2024, the weighted average interest rate on all borrowings outstanding under the 2023 Credit Agreement was approximately 7.9 % and 7.7 %, respectively. Depending on the type, borrowings under the 2023 Credit Agreement accrue interest at a rate per annum equal to the Adjusted Term SOFR Rate, the Adjusted EURIBO Rate, Prime Rate or the CDO Rate (as defined in the credit agreement), as applicable, plus Applicable Margins (as defined in the credit agreement) which resulted in interest rates of 7.9 % as of March 31, 2025, and interest rates between 7.3 % and 9.5 % as of September 30, 2024.
Outstanding letters of credit totaling $15.4 million as of March 31, 2025 further reduced available borrowing capacity under the Company’s $325 million revolving credit facility to $279.1 million. The 2023 Credit Agreement requires the Company to maintain certain financial ratios, including a minimum interest coverage ratio and a maximum total net leverage ratio. The Company was in compliance as of March 31, 2025 with its debt covenants under the 2023 Credit Agreement and its AR Securitization Facility. The consolidated total net leverage ratio represents the ratio of (a) consolidated total net debt to (b) consolidated adjusted earnings before interest, taxes, depreciation and amortization. Consolidated total net debt includes the aggregate principal amount of total debt, net of unrestricted cash not to exceed $75.0 million.
8. Commitments and Contingencies:
On October 21, 2022, a putative securities class was filed in the United States District Court for the District of Kansas. The lawsuit alleges that the Company and certain former executives of the Company made misleading statements and that shareholders were damaged by these statements. Plaintiffs filed an Amended Complaint on March 13, 2023. On February 7, 2025, the parties reached an agreement in principle to resolve the matter. The Company’s insurers have consented to and committed to pay the agreed upon settlement. The agreement is preliminary and subject to final approval after a court hearing. The Company has recorded an estimated liability and estimated insurance recoveries in its Consolidated Balance Sheets as of March 31, 2025.
On February 1, 2023, a shareholder derivative lawsuit was filed in the District of Kansas by an individual shareholder, purportedly on behalf of the Company. The lawsuit alleges that certain directors and executives breached their fiduciary duties to shareholders by failing to prevent the dissemination of misstatements and omissions from October 30, 2017, to November
11
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
18, 2018. The parties have stipulated to stay this matter through the discovery stage of the putative securities class action. On October 30, 2024, an additional shareholder derivative lawsuit was filed in the District of Kansas by an individual shareholder, purportedly on behalf of the Company. The lawsuit alleges that certain directors and executives breached their fiduciary duties to shareholders by willfully or recklessly causing the Company to make false and/or misleading statements and/or omissions of material fact from October 31, 2017, to October 21, 2022.
On April 24, 2024, a putative securities class action was filed in the United States District Court for the District of Kansas. The complaint alleges that the Company and certain individuals made materially false and misleading statements regarding Fortress North America and that shareholders were damaged by these statements. On December 12, 2024, the Court appointed lead plaintiff and counsel. Plaintiffs filed an Amended Complaint on February 10, 2025. The parties reached an agreement in principle to resolve the matter, which settlement has been consented to by the Company’s insurers. There are other related lawsuits in the earliest stages, and the Company is currently unable to assess with any certainty, what if any damages could be awarded in those matters.
The Company is also involved in legal and administrative proceedings and claims of various types from the ordinary course of the Company’s business.
Management cannot predict the outcome of legal claims and proceedings with certainty. Nevertheless, management believes that the outcome of legal proceedings and claims, which are pending or known to be threatened, even if determined adversely, will not, individually or in the aggregate, have a material adverse effect on the Company’s results of operations, cash flows or financial position given current insurance coverage, except as otherwise described in Note 6 and this Note 8.
The Company previously had contingent consideration liabilities related to the Fortress acquisition. As a result of the Company’s exit of the Fortress business, a non-cash gain of $7.9 zero . Refer to Note 12 for additional information.
On October 25, 2024, the Company issued a recall for specific production lots of food-grade salt produced at its Goderich Plant following a customer report of a non-organic, foreign material in its product. The Company subsequently expanded the voluntary recall to include food products from the Goderich Plant between September 18 and November 6, 2024. The Company followed recall protocol and notified its BRCGS Global Standard for Food Safety certifying body, the Canadian Food Inspection Agency (“CFIA”) and the U.S. Food and Drug Administration (“FDA”). The Company has been working to obtain and assess the reported foreign material, complete the necessary investigation, and determine the next steps. The recall in the United States, supervised by the FDA, is complete and the matter is closed with FDA.
The Company continues to assess the scope and magnitude of additional customer claims. At this time, based on currently available information and its applicable insurance coverage, the Company does not believe any incremental losses will have a material adverse effect on its results of operations or cash flows in future periods.
9. Operating Segments:
The Company’s reportable segments are strategic business units that offer different products and services, and each business requires different technology and marketing strategies. For the three and six months ended March 31, 2025 and 2024, the Company has presented two
12
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
Segment information is as follows (in millions):
| Three Months Ended March 31, 2025 | Salt | Plant Nutrition | Corporate & Other(a) | Total | ||||||||||||||||||||||
| Sales to external customers | $ | $ | $ | $ | ||||||||||||||||||||||
| Intersegment sales | ( | — | ||||||||||||||||||||||||
| Shipping and handling cost | ||||||||||||||||||||||||||
Operating earnings (loss)(b)(c)(d) | ( | ( | ( | |||||||||||||||||||||||
| Depreciation, depletion and amortization | ||||||||||||||||||||||||||
| Total assets (as of end of period) | ||||||||||||||||||||||||||
| Three Months Ended March 31, 2024 | Salt | Plant Nutrition | Corporate & Other(a) | Total | ||||||||||||||||||||||
| Sales to external customers | $ | $ | $ | $ | ||||||||||||||||||||||
| Intersegment sales | ( | — | ||||||||||||||||||||||||
| Shipping and handling cost | ||||||||||||||||||||||||||
Operating earnings (loss)(b)(c)(d) | ( | ( | ( | |||||||||||||||||||||||
| Depreciation, depletion and amortization | ||||||||||||||||||||||||||
| Total assets (as of end of period) | ||||||||||||||||||||||||||
| Six Months Ended March 31, 2025 | Salt | Plant Nutrition | Corporate & Other(a) | Total | ||||||||||||||||||||||
| Sales to external customers | $ | $ | $ | $ | ||||||||||||||||||||||
| Intersegment sales | ( | — | ||||||||||||||||||||||||
| Shipping and handling cost | ||||||||||||||||||||||||||
Operating earnings (loss)(b)(c)(d) | ( | ( | ( | |||||||||||||||||||||||
| Depreciation, depletion and amortization | ||||||||||||||||||||||||||
| Six Months Ended March 31, 2024 | Salt | Plant Nutrition | Corporate & Other(a) | Total | ||||||||||||||||||||||
| Sales to external customers | $ | $ | $ | $ | ||||||||||||||||||||||
| Intersegment sales | ( | — | ||||||||||||||||||||||||
| Shipping and handling cost | ||||||||||||||||||||||||||
Operating earnings (loss)(b)(c)(d) | ( | ( | ( | |||||||||||||||||||||||
| Depreciation, depletion and amortization | ||||||||||||||||||||||||||
Disaggregated revenue by product type is as follows (in millions):
| Three Months Ended March 31, 2025 | Salt | Plant Nutrition | Corporate & Other(a) | Total | ||||||||||||||||||||||
| Highway Deicing Salt | $ | $ | $ | $ | ||||||||||||||||||||||
| Consumer & Industrial Salt | ||||||||||||||||||||||||||
| SOP | ||||||||||||||||||||||||||
| Eliminations & Other | ( | |||||||||||||||||||||||||
| Sales to external customers | $ | $ | $ | $ | ||||||||||||||||||||||
13
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
| Three Months Ended March 31, 2024 | Salt | Plant Nutrition | Corporate & Other(a) | Total | ||||||||||||||||||||||
| Highway Deicing Salt | $ | $ | $ | $ | ||||||||||||||||||||||
| Consumer & Industrial Salt | ||||||||||||||||||||||||||
| SOP | ||||||||||||||||||||||||||
| Fire Retardant | ||||||||||||||||||||||||||
| Eliminations & Other | ( | |||||||||||||||||||||||||
| Sales to external customers | $ | $ | $ | $ | ||||||||||||||||||||||
| Six Months Ended March 31, 2025 | Salt | Plant Nutrition | Corporate & Other(a) | Total | ||||||||||||||||||||||
| Highway Deicing Salt | $ | $ | $ | $ | ||||||||||||||||||||||
| Consumer & Industrial Salt | ||||||||||||||||||||||||||
| SOP | ||||||||||||||||||||||||||
| Eliminations & Other | ( | |||||||||||||||||||||||||
| Sales to external customers | $ | $ | $ | $ | ||||||||||||||||||||||
| Six Months Ended March 31, 2024 | Salt | Plant Nutrition | Corporate & Other(a) | Total | ||||||||||||||||||||||
| Highway Deicing Salt | $ | $ | $ | $ | ||||||||||||||||||||||
| Consumer & Industrial Salt | ||||||||||||||||||||||||||
| SOP | ||||||||||||||||||||||||||
| Fire Retardant | ||||||||||||||||||||||||||
| Revenue from Services | ||||||||||||||||||||||||||
| Eliminations & Other | ( | |||||||||||||||||||||||||
| Sales to external customers | $ | $ | $ | $ | ||||||||||||||||||||||
(a)Corporate and Other includes corporate entities, records management operations, the Fortress fire retardant business, equity method investments, prior-year lithium costs and other incidental operations and eliminations. Operating earnings (loss) for corporate and other includes indirect corporate overhead, including costs for general corporate governance and oversight, prior-year lithium-related expenses, as well as costs for the human resources, information technology, legal and finance functions.
(b)Corporate operating results were impacted by costs related to a product recall of $0.9 million and $1.8 million for the three and six months ended March 31, 2025, respectively. Corporate operating results were also impacted by declines in the valuation of the Fortress contingent consideration. The Company recognized net gains of $7.9 23.8 million and $22.2 million for the three and six months ended March 31, 2024, respectively, related to the Fortress contingent consideration valuation.
(c)The Company recognized an impairment of $53.0 101.0 million and $175.8 million related to the impairment of Plant Nutrition goodwill, Fortress assets and goodwill and lithium development assets for the three and six months ended March 31, 2024, respectively, which impacted operating results.
14
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
The Company’s revenue by geographic area is as follows (in millions):
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||||||||
| Revenue | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
United States(a) | $ | $ | $ | $ | |||||||||||||||||||
| Canada | |||||||||||||||||||||||
| United Kingdom | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
(a)United States sales exclude product sold to foreign customers at U.S. ports.
10. Stockholders’ Equity and Equity Instruments:
Equity Compensation Awards
In May 2020, the Company’s stockholders approved the 2020 Incentive Award Plan (as amended, the “2020 Plan”), which authorized the issuance of 2,977,933 shares of Company common stock. In February 2022, the Company’s stockholders approved an amendment to the 2020 Plan authorizing an additional 750,000 shares of Company stock. In March 2024, the Company’s stockholders approved an amendment to the 2020 Plan authorizing an additional 3,000,000 shares of Company stock. In March 2025, the Company’s stockholders approved an amendment to the 2020 Plan authorizing an additional 1,700,000 shares of Company stock. Since the date the 2020 Plan was approved, the Company ceased issuing equity awards under the 2015 Incentive Award Plan (as amended, the “2015 Plan”). Since the approval of the 2015 Plan in May 2015, the Company ceased issuing equity awards under the 2005 Incentive Award Plan (as amended, the “2005 Plan”). The 2005 Plan, the 2015 Plan and the 2020 Plan allow for grants of equity awards to executive officers, other employees and directors, including restricted stock units (“RSUs”), performance stock units (“PSUs”), stock options and deferred stock units. For additional information regarding equity awards issued under the Company’s incentive plans refer to “Note 15 – Stockholder’s Equity and Equity Instruments” within Part II, Item 8 of its 2024 Form 10-K.
During the six months ended March 31, 2025, the Company reissued the following number of shares from treasury stock: 316,614 shares related to the release of RSUs which vested and 42,466 shares issued for Board of Director compensation. In fiscal 2024, the Company issued 222,155 net shares from treasury stock. The Company withheld a total of 106,300 shares with a fair value of $1.2 million related to the vesting of RSUs during the six months ended March 31, 2025. The fair value of the shares was valued at the closing price at the vesting date and represent the employee tax withholding for the employee’s compensation. The Company recognized tax expense of $0.9 million from its equity compensation awards during the six months ended March 31, 2025. During the six months ended March 31, 2025 and 2024, the Company recorded $6.7 million and $8.3 million (includes $0.0 million and $1.3 million paid in cash), respectively, of compensation expense pursuant to its stock-based compensation plans. No amounts have been capitalized.
15
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
PSUs
During the six months ended March 31, 2025, the Company issued new performance stock units (“PSUs”) based upon certain performance criteria and metrics (“Scorecard PSUs”). The actual number of shares of common stock that may be earned with respect to Scorecard PSUs is calculated based upon the attainment of certain thresholds for free cash flow and return on capital employed during each year of the three-year performance period and may range from 0 % to 200 % for each measure. Additionally, a modifier will increase or decrease the payout by 20 % based upon relative total shareholder return against the Company’s peer group.
The following table summarizes stock-based compensation activity during the six months ended March 31, 2025:
| Stock Options | RSUs | PSUs(a) | ||||||||||||||||||||||||||||||||||||
| Number | Weighted-average exercise price | Number | Weighted-average fair value | Number | Weighted-average fair value | |||||||||||||||||||||||||||||||||
Outstanding at September 30, 2024 | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Granted | ||||||||||||||||||||||||||||||||||||||
Exercised(b) | ||||||||||||||||||||||||||||||||||||||
Released from restriction(b) | ( | |||||||||||||||||||||||||||||||||||||
| Cancelled/expired | ( | ( | ( | |||||||||||||||||||||||||||||||||||
Outstanding at March 31, 2025 | $ | $ | $ | |||||||||||||||||||||||||||||||||||
(a)Until the performance period is completed, PSUs are included in the table at the target level at their grant date and at that level represent one share of common stock per PSU.
(b)Common stock issued for exercised options and for vested and earned RSUs and PSUs was issued from treasury stock.
Accumulated Other Comprehensive Loss (“AOCL”)
The Company’s comprehensive income (loss) is comprised of net loss, net amortization of the unrealized loss of the pension obligation, the change in the unrealized gain in other postretirement benefits, the change in the unrealized gain (loss) on natural gas and foreign currency cash flow hedges and currency translation adjustment (“CTA”). The components of and changes in AOCL are as follows (in millions):
Three Months Ended March 31, 2025(a) | Gains and (Losses) on Cash Flow Hedges | Defined Benefit Pension | Other Post-Employment Benefits | Foreign Currency | Total | ||||||||||||||||||||||||
| Beginning balance | $ | ( | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||
Other comprehensive income before reclassifications(b) | |||||||||||||||||||||||||||||
| Amounts reclassified from AOCL | |||||||||||||||||||||||||||||
Net current period other comprehensive income | |||||||||||||||||||||||||||||
| Ending balance | $ | ( | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||
Three Months Ended March 31, 2024(a) | Gains and (Losses) on Cash Flow Hedges | Defined Benefit Pension | Other Post-Employment Benefits | Foreign Currency | Total | ||||||||||||||||||||||||
| Beginning balance | $ | ( | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||
Other comprehensive loss before reclassifications(b) | ( | ( | ( | ||||||||||||||||||||||||||
| Amounts reclassified from AOCL | |||||||||||||||||||||||||||||
Net current period other comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||
| Ending balance | $ | ( | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||
16
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
Six Months Ended March 31, 2025(a) | Gains and (Losses) on Cash Flow Hedges | Defined Benefit Pension | Other Post-Employment Benefits | Foreign Currency | Total | ||||||||||||||||||||||||
| Beginning balance | $ | ( | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||
Other comprehensive loss before reclassifications(b) | ( | ( | ( | ||||||||||||||||||||||||||
| Amounts reclassified from AOCL | ( | ||||||||||||||||||||||||||||
| Net current period other comprehensive income (loss) | ( | ( | ( | ||||||||||||||||||||||||||
| Ending balance | $ | ( | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||
Six Months Ended March 31, 2024(a) | Gains and (Losses) on Cash Flow Hedges | Defined Benefit Pension | Other Post-Employment Benefits | Foreign Currency | Total | ||||||||||||||||||||||||
| Beginning balance | $ | ( | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||
Other comprehensive (loss) income before reclassifications(b) | ( | ( | |||||||||||||||||||||||||||
| Amounts reclassified from AOCL | |||||||||||||||||||||||||||||
| Net current period other comprehensive (loss) income | ( | ||||||||||||||||||||||||||||
| Ending balance | $ | ( | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||||||
(a)With the exception of the CTA, for which no tax effect is recorded, the changes in the components of AOCL presented in the tables above are reflected net of applicable income taxes.
(b)The Company recorded foreign exchange gain (loss) of $0.1 million and $5.5 million in the three and six months ended March 31, 2025, respectively, and $2.3 million and $0.0 million in the three and six months ended March 31, 2024, respectively, in AOCL related to intercompany notes which were deemed to be of a long-term investment nature.
The amounts reclassified from AOCL to expense (income) for the three and six months ended March 31, 2025 and 2024, are shown below (in millions):
| Amount Reclassified from AOCL | |||||||||||||||||||||||||||||
| Three Months Ended March 31, | Six Months Ended March 31, | Line Item Impacted in the Consolidated Statements of Operations | |||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||
| Loss (gain) on cash flow hedges: | |||||||||||||||||||||||||||||
| Natural gas instruments | $ | $ | $ | $ | Product cost | ||||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||||||||
| Reclassifications, net of income taxes | |||||||||||||||||||||||||||||
| Amortization of defined benefit pension: | |||||||||||||||||||||||||||||
| Amortization of loss | Product cost | ||||||||||||||||||||||||||||
| Income tax benefit | ( | ( | ( | ||||||||||||||||||||||||||
| Reclassifications, net of income taxes | |||||||||||||||||||||||||||||
| Amortization of other post-employment benefits: | |||||||||||||||||||||||||||||
| Amortization of gain | ( | Product cost | |||||||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||||||||
| Reclassifications, net of income taxes | ( | ||||||||||||||||||||||||||||
| Total reclassifications, net of income taxes | $ | $ | $ | $ | |||||||||||||||||||||||||
17
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
11. Derivative Financial Instruments:
The Company is subject to various types of market risks, including interest rate risk, foreign currency exchange rate transaction and translation risk and commodity pricing risk. Management may take actions to mitigate the exposure to these types of risks, including entering into forward purchase contracts and other financial instruments. The Company manages a portion of its commodity pricing risks and foreign currency exchange rate risks by using derivative instruments. From time to time, the Company may enter into foreign exchange contracts to mitigate foreign exchange risk. The Company does not seek to engage in trading activities or take speculative positions with any financial instrument arrangement. The Company enters into natural gas derivative instruments and foreign currency derivative instruments with counterparties it views as creditworthy. However, the Company does attempt to mitigate its counterparty credit risk exposures by, among other things, entering into master netting agreements with some of these counterparties. The Company records derivative financial instruments as either assets or liabilities at fair value in its Consolidated Balance Sheets. The assets and liabilities recorded as of March 31, 2025 and September 30, 2024 were not material.
Natural Gas Derivative Instruments
Natural gas is consumed at several of the Company’s production facilities, and changes in natural gas prices impact the Company’s operating margin. The Company seeks to reduce the earnings and cash flow impacts of changes in market prices of natural gas by fixing the purchase price of up to 90 % of its forecasted natural gas usage. It is the Company’s policy to consider hedging portions of its natural gas usage up to 36 months in advance of the forecasted purchase. As of March 31, 2025, the Company had entered into natural gas derivative instruments to hedge a portion of its natural gas purchase requirements through September 2026. As of March 31, 2025 and September 30, 2024, the Company had agreements in place to hedge forecasted natural gas purchases of 2.0 million and 2.3 million MMBtus, respectively. All natural gas derivative instruments held by the Company as of March 31, 2025 and September 30, 2024 qualified and were designated as cash flow hedges. As of March 31, 2025, the Company expects to reclassify from AOCL to earnings during the next twelve months $0.4 million of net losses on derivative instruments related to its natural gas hedges. Refer to Note 12 for the estimated fair value of the Company’s natural gas derivative instruments as of March 31, 2025 and September 30, 2024.
The following tables present the fair value of the Company’s derivatives (in millions):
| Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||
| Consolidated Balance Sheet Location | March 31, 2025 | Consolidated Balance Sheet Location | March 31, 2025 | |||||||||||||||||||||||
| Derivatives designated as hedging instruments: | ||||||||||||||||||||||||||
| Commodity contracts | Other current assets | $ | Accrued expenses and other current liabilities | $ | ||||||||||||||||||||||
| Commodity contracts | Other assets | Other noncurrent liabilities | ||||||||||||||||||||||||
Total derivatives(a) | $ | $ | ||||||||||||||||||||||||
(a)The Company has master netting agreements with its commodity hedge counterparties and accordingly has netted in its Consolidated Balance Sheets $1.8 million of its commodity contracts that are in receivable positions against its contracts in payable positions.
18
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
| Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||
| Consolidated Balance Sheet Location | September 30, 2024 | Consolidated Balance Sheet Location | September 30, 2024 | |||||||||||||||||||||||
| Derivatives designated as hedging instruments: | ||||||||||||||||||||||||||
| Commodity contracts | Other current assets | $ | Accrued expenses and other current liabilities | $ | ||||||||||||||||||||||
| Commodity contracts | Other assets | Other noncurrent liabilities | ||||||||||||||||||||||||
Total derivatives(a) | $ | $ | ||||||||||||||||||||||||
(a)The Company has master netting agreements with its commodity hedge counterparties and accordingly has netted in its Consolidated Balance Sheets $0.6 million of its commodity contracts that are in receivable positions against its contracts in payable positions.
12. Fair Value Measurements:
The Company’s financial instruments are measured and reported at their estimated fair values. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction. When available, the Company uses quoted prices in active markets to determine the fair values for its financial instruments (Level 1 inputs) or, absent quoted market prices, observable market-corroborated inputs over the term of the financial instruments (Level 2 inputs). The Company does not have any unobservable inputs that are not corroborated by market inputs (Level 3 inputs), except as stated below.
The Company holds marketable securities associated with its defined contribution and pre-tax savings plans, which are valued based on readily available quoted market prices. The Company utilizes derivative instruments to manage its risk of changes in natural gas prices and foreign exchange rates (see Note 11). The fair values of the natural gas and foreign currency derivative instruments are determined using market data of forward prices for all of the Company’s contracts.
The estimated fair values for each type of instrument are presented below (in millions):
| March 31, 2025 | Level One | Level Two | Level Three | ||||||||||||||||||||
| Asset Class: | |||||||||||||||||||||||
Mutual fund investments in a non-qualified savings plan(a) | $ | $ | $ | $ | |||||||||||||||||||
| Derivatives – natural gas instruments, net | |||||||||||||||||||||||
| Total Assets | $ | $ | $ | $ | |||||||||||||||||||
| Liability Class: | |||||||||||||||||||||||
| Derivatives - natural gas instruments, net | $ | ( | $ | $ | ( | $ | |||||||||||||||||
| Liabilities related to non-qualified savings plan | ( | ( | |||||||||||||||||||||
| Total Liabilities | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
(a)Includes mutual fund investments of approximately 25 % in common stock of large-cap U.S. companies, 5 % in common stock of small to mid-cap U.S. companies, 10 % in bond funds, 20 % in short-term investments and 40 % in blended funds.
| September 30, 2024 | Level One | Level Two | Level Three | ||||||||||||||||||||
| Asset Class: | |||||||||||||||||||||||
Mutual fund investments in a non-qualified savings plan(a) | $ | $ | $ | $ | |||||||||||||||||||
| Derivatives - natural gas instruments, net | |||||||||||||||||||||||
| Total Assets | $ | $ | $ | $ | |||||||||||||||||||
| Liability Class: | |||||||||||||||||||||||
| Derivatives - natural gas instruments, net | $ | ( | $ | $ | ( | $ | |||||||||||||||||
| Liabilities related to non-qualified savings plan | ( | ( | |||||||||||||||||||||
| Total Liabilities | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
(a)Includes mutual fund investments of approximately 35 % in the common stock of large-cap U.S. companies, 5 % in the common stock of small to mid-cap U.S. companies, 5 % in the common stock of international companies, 10 % in bond funds, 5 % in short-term investments and 40 % in blended funds.
19
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
Cash and cash equivalents, receivables (net of allowance for doubtful accounts) and accounts payable are carried at cost, which approximates fair value due to their liquid and short-term nature. The Company’s investments related to its non-qualified retirement plan of $3.2 million at March 31, 2025 and $3.1 million at September 30, 2024, are stated at fair value based on quoted market prices. As of March 31, 2025 and September 30, 2024, the estimated fair value of the Company’s fixed-rate 6.75 480.0 million and $497.0 million, respectively, compared with the aggregate principal amount at maturity of $500.0 219.3 million and $379.1 million, respectively, compared with the aggregate principal amount at maturity of $221.8 million and $383.9 million, respectively.
In connection with the acquisition of Fortress on May 5, 2023, the Company entered into a contingent consideration arrangement for up to $28 million to be paid in cash and/or Compass Minerals common stock upon the achievement of certain performance measures over the next five years , and a cash earn-out based on volumes of certain Fortress fire retardant products sold over a 10-year period. As discussed further in Note 1, the Company has begun the process of exiting the Fortress fire retardant business and terminated the employment of all Fortress employees on March 25, 2025. As a result, the fair value of the contingent consideration was reduced to $0 as of March 31, 2025 given the business has ceased operations. For the three and six months ended March 31, 2025, the Company recorded income of $7.9 23.8 million and $22.2 million, respectively. The change in the second quarter of fiscal 2024 is reflective of milestone and earn-out payments made related to calendar year 2023 activity and developments related to the Company’s magnesium chloride-based fire retardants at the time. The changes are recorded in other operating (income) expense in the Consolidated Statements of Operations.
The following table presents the fair value of the Company’s total contingent consideration arrangement (in millions):
| Consolidated Balance Sheet Location | March 31, 2025 | September 30, 2024 | ||||||||||||
| Accrued expenses and other current liabilities | $ | $ | ||||||||||||
| Other noncurrent liabilities | ||||||||||||||
| Total contingent consideration | $ | $ | ||||||||||||
The Company has certain assets, including goodwill and other intangible assets, which are measured at fair value on a non-recurring basis and are adjusted to fair value only if an impairment charge is recognized. The categorization of the framework used to measure fair value of the assets is considered to be within the Level 3 valuation hierarchy due to the subjective nature of the unobservable inputs used. Refer to Note 5 for details of the Company’s remaining goodwill and for details of the Company’s intangible asset impairment related to Fortress.
13. Earnings per Share:
On April 22, 2024, the Board of Directors determined not to declare dividends for the foreseeable future in order to align the Company’s capital allocation priorities with its corporate focus on accelerating cash flow generation and debt reduction. The Company calculated earnings per share using the treasury stock method during the three and six months ended March 31, 2025. The Company calculated earnings per share using the two-class method during the three and six months ended March 31, 2024. The two-class method requires allocating the Company’s net earnings to both common shares and participating securities. The following table sets forth the computation of basic and diluted earnings per common share (in millions, except for share and per-share data):
20
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Less: net earnings allocated to participating securities(a) | ( | ( | |||||||||||||||||||||
Net loss available to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Denominator (in thousands): | |||||||||||||||||||||||
Weighted-average common shares outstanding, shares for basic earnings per share(b) | |||||||||||||||||||||||
Weighted-average awards outstanding | |||||||||||||||||||||||
| Shares for diluted earnings per share | |||||||||||||||||||||||
| Basic net loss per common share | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Diluted net loss per common share | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(a)Weighted participating securities include RSUs and PSUs that receive non-forfeitable dividends and consist of 684,000 and 732,000 weighted participating securities for the three and six months ended March 31, 2024, respectively.
14. Related Party Transactions:
21
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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; weather conditions; our continued ability to access ambient lake brine in the Great Salt Lake; dependency on a limited number of key production and distribution facilities and critical equipment; 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; 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; financial assurance requirements; our payment of any dividends; 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 the impact of any tariffs and changes in currency exchange rates; conditions in the sectors where we sell products and supply and demand imbalances for competing products, including the impact of any tariffs; 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, including any changes in tariffs imposed; 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; our ability to successfully remediate the material weakness in our internal controls over financial reporting disclosed in this Form 10-Q; 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, 2024 (“2024 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
22
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
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
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting practices (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the reporting date and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from these estimates. We have identified the critical accounting policies and estimates that we believe are most important to the portrayal of our financial condition and results of operations. The policies set forth below require significant subjective or complex judgments by management, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
As discussed in Item 1, Note 1 of our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, on March 25, 2025, we took measures to align our cost structure to our current business needs as part of a larger strategic refocus to improve the profitability of our core Salt and Plant Nutrition businesses, including the process of exiting the Fortress North America, LLC (“Fortress”) fire retardant business and terminating the employment of all Fortress employees.
As a result of the above items impacting Fortress, we determined that there were indicators of impairment with the associated Fortress intangible assets. Therefore, we tested these intangibles for impairment. As there were no future cash flows expected related to these intangible assets, customer relationships was determined to have a fair value of zero using an income approach under ASC 820, Fair Value Measurement (Level 3 inputs, see Item 1, Note 12). Consequently, we recognized a full impairment loss of $53.0 million, recorded in Loss on impairments, net on the Consolidated Statements of Operations for the three and six months ended March 31, 2025.
Additionally, we performed an impairment test on the remaining Fortress asset group (including property, plant, and equipment (“PP&E”), inventory and in-process research and development (“IPR&D”)), with a carrying amount of $19.7 million. The impairment test under ASC 360, Property, Plant Equipment and Other Assets, compared the asset group’s undiscounted cash flows to its carrying amount. We determined the fair value of the asset group using a market approach under ASC 820, Fair Value Measurement. The fair value of the asset group was based on relevant third-party non-binding offers received for the specific asset group (Level 2 inputs, see Item 1, Note 12). The asset group (PP&E, inventory and IPR&D) was not impaired as its fair value, based on market indications, approximated or exceeded its carrying value. The fair value estimates involved significant estimates and assumptions, which may differ from actual outcomes.
A discussion of our critical accounting estimates used in preparation of our consolidated financial statements is presented under the heading "Management’s Discussion of Critical Accounting Policies and Estimates" in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Form 10-K.
Company Overview
Compass Minerals is a leading global provider of essential minerals, including salt, sulfate of potash (“SOP”) specialty fertilizer and magnesium chloride. As of March 31, 2025, we operate 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+®.
23
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
In May 2023, we completed the purchase of Fortress, a fire retardant company working to develop long-term aerial and ground fire retardant products to help combat wildfires. As discussed above in Critical Accounting Policies and in Item 1, Note 1 of our Consolidated Financial Statements, we are exiting the fire retardant business and recognized a $53.0 million loss on impairment of long-lived assets during the three and six months ended March 31, 2025.
We continue to monitor the effects of the recent tariffs imposed by the U.S. administration during the second quarter of 2025, the reciprocal tariffs and retaliatory tariffs imposed by other countries, and the impact on our business. Our salt and fertilizer production in Canada is qualified under the United States-Mexico-Canada (“USMCA”) trade agreement. Accordingly, our exports from Canada into the United States are exempt from tariffs at this time.
Consolidated Results of Continuing Operations
The following is a summary of our consolidated results of continuing operations for the three and six months ended March 31, 2025 and 2024, 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 SIX MONTHS ENDED MARCH 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 March 31, 2025 Compared to Three Months Ended March 31, 2024
•Total sales increased 36%, or $130.6 million, due to higher Salt and Plant Nutrition segment sales. The increase in sales for Salt reflected higher deicing sales volumes, which was partially offset by lower average sales prices. Plant Nutrition sales increased from the prior year due to an increase in sales volumes, partially offset by lower average sales prices.
•Operating loss of $3.1 million improved $36.2 million from an operating loss of $39.3 million in the prior-year period, primarily reflecting the larger net impairments of our Fortress business and Plant Nutrition segment in the prior-year period, which was partially offset by a further impairment of our Fortress business in the current period (see Item 1, Note 1). Salt operating earnings were essentially flat with the prior period as higher deicing sales volumes were offset
24
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
by lower average sales prices and higher per-unit product costs. Plant Nutrition operating loss improved from the prior period primarily due to the $51.0 million impairment recorded in the second fiscal quarter of the prior year. Additionally, higher Plant Nutrition sales volumes and lower per-unit product costs were partially offset by lower average sales prices and higher per-unit distribution costs.
•Earnings before interest, taxes, depreciation and amortization (“EBITDA”)* adjusted for items management believes are not indicative of our ongoing operating performance (“Adjusted EBITDA”)* decreased 12.1%, or $11.6 million due to a decrease of $15.9 million in the gain in contingent consideration for the Fortress business.
•Diluted net loss per common share of $0.77 improved by $0.17 from net loss of $0.94 per common share in the prior-year period.
Commentary: Six Months Ended March 31, 2025 Compared to Six Months Ended March 31, 2024
•Total sales increased 14%, or $96.1 million, due to higher Salt and Plant Nutrition segment sales, partially offset by lower sales by the Fortress fire retardant business. The increase in Salt sales was primarily driven by higher sales volumes, partially offset by lower average sales prices. The increase in Plant Nutrition sales from the prior year primarily reflects higher sales volumes, partially offset by lower average sales price. We recognized $14.6 million in sales related to the completion of 2023 contract with the U.S. Forest Service in the prior-year period. On March 25, 2025, we began the process of exiting the Fortress fire retardant business, terminating the employment of all Fortress employees.
•Operating loss of $2.6 million decreased $90.3 million from operating loss of $92.9 million in the prior-year period, primarily reflecting the impairment related to the exit of the Fortress fire retardant business (see Item 1, Note 1). Corporate and Other operating loss decreased from the prior year primarily due to the prior year $74.8 million lithium asset impairment and $50.0 million of goodwill, long-lived asset and inventory impairments related to the Fortress business, partially offset by the current year Fortress long-lived asset impairment of $53.0 million. The operating losses were partially offset by the net non-cash reduction in our Fortress-related contingent consideration of $7.9 million in the current year and $22.2 million in the prior year. Plant Nutrition operating loss decreased due primarily to a prior year $51.0 million goodwill impairment, higher current year sales prices and lower per-unit product costs, which were partially offset by higher distribution costs. In addition, Salt operating earnings decreased due to lower average sales prices and higher per-unit product costs, which were partially offset by higher Salt sales volumes.
•Adjusted EBITDA decreased by 26%, or $41.7 million, with the prior year benefiting from higher impairment add-backs, discussed above and a decrease in the gain on Fortress contingent consideration of $14.3 million.
•Diluted net loss per common share of $1.34 decreased by $1.43 from net loss of $2.77 per common share in the prior-year period.
THREE AND SIX MONTHS ENDED MARCH 31
Commentary: Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
Gross Profit: Increased 7%, or $5.0 million; Gross Margin decreased 4 percentage points to 16%
•Salt segment gross profit increased $2.1 million primarily due to higher sales volumes, which were partially offset by lower average sales prices and higher per-unit product costs (see Salt operating results).
•The gross profit of the Plant Nutrition segment decreased $0.1 million due to higher distribution costs and lower average sales prices, which were partially offset by higher sales volumes and lower per-unit product costs (see Plant Nutrition operating results).
25
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
•The loss in the Fortress business decreased $2.9 million as a result of the decision to exit this business.
Commentary: Six Months Ended March 31, 2025 Compared to Six Months Ended March 31, 2024
•Salt segment gross profit decreased $20.1 primarily due to lower average sales prices and higher per-unit product costs, which were partially offset by higher sales volumes (see Salt operating results).
•The gross profit of the Plant Nutrition segment decreased $1.2 million due to lower average sales prices and higher per-unit distribution costs, which were partially offset by lower per-unit product costs and higher sales volumes (see Plant Nutrition operating results).
•Gross profit was also unfavorably impacted by earnings in the prior period related to the Fortress fire retardant business in May 2023.
OTHER EXPENSES AND INCOME
Commentary: Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
SG&A: Decreased $3.7 million; Decreased 3.1 percentage points as a percentage of sales from 9.1% to 6.0%
•The decrease in SG&A expense was primarily due to lower corporate professional services and compensation.
Loss on Impairments, net: Decreased $45.6 million to $53.0 million
•We recognized an impairment loss of $53.0 million for the three months ended March 31, 2025 related to the exit of the Fortress fire retardant business (see Item 1, Note 1).
•During the three months ended March 31, 2024, we performed an interim impairment test of our reporting units. As a result, we recognized goodwill impairments of $51.0 million related to our Plant Nutrition segment and $32.0 million related to our Fortress operations (within the Corporate and Other segment). The Plant Nutrition impairment was primarily the result of reduced cash flow assumptions impacting expected profitability of the Plant Nutrition segment. The Fortress impairment was primarily related to uncertainty surrounding our magnesium chloride-based fire retardants which impacted projected future revenues and cash flows. Also, during the three months ended March 31, 2024, we recognized a $15.6 million long-lived asset impairment, net, related to Fortress magnesium chloride-based products.
Other Operating Income: Decreased $18.1 million from $20.8 million to $2.7 million
•The decrease in other operating income was primarily the result of changes to contingent consideration related to the Fortress acquisition and a net increase in severance costs resulting from the decision to discontinue the Fortress fire retardant business in the current period partially offset by the lithium development in the prior period.
Interest Expense: Increased $0.7 million to $18.0 million
•Interest expense increased $0.7 million due to higher interest rates and debt levels in the current period.
Gain on Foreign Exchange: Decreased $2.4 million from $2.5 million to $0.1 million
•We realized a gain on foreign exchange of $0.1 million in the second quarter of fiscal 2025 compared to a gain of $2.5 million in the same quarter of the prior-year period, primarily reflecting the translation of our intercompany loans from Canadian dollars to U.S. dollars.
Other Expense, net: Increased $0.5 million to $1.4 million
•The increase is due primarily to the write-off of fees paid to modify our debt agreements in fiscal 2025.
Income Tax Expense (Benefit): Increased $25.7 million from a benefit of $15.9 million to an expense of $9.8 million
•Tax expense increased by $25.7 million for the three months ended March 31, 2025 versus the three months ended March 31, 2024 primarily due to a change in the annual effective tax rate calculations with the US loss jurisdiction having a separate annual effective tax rate applied to US losses and a foreign annual effective tax applied to foreign income. The change in the annual effective tax rate calculation began with the interim period ended June 30, 2024.
•Our effective tax rate was (44%) for the three months ended March 31, 2025, which is primarily driven by the income mix by country with income recognized in foreign jurisdictions, for which tax expense was recorded, offset by losses recognized in the U.S. for which a valuation allowance has been recorded against the U.S. tax benefit carryforward.
26
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
•Our income tax provision for the three months ended March 31, 2025 and 2024 differs from the U.S. statutory rate primarily due to U.S. statutory depletion, state income taxes, nondeductible executive compensation, foreign income, mining and withholding taxes, valuation allowance expense and base erosion and anti-abuse tax.
Commentary: Six Months Ended March 31, 2025 Compared to Six Months Ended March 31, 2024
•The decrease in SG&A expense was primarily due to lower corporate compensation and lower lithium expenses.
Loss on Impairments, net: Decreased $120.4 million to $53.0 million
•We recognized an impairment loss of $53.0 million for the six months ended March 31, 2025 related to the exit of the Fortress fire retardant business (see Item 1, Note 1).
•During the six months ended March 31, 2024, we recognized goodwill impairments of $51.0 million related to our Plant Nutrition segment and $32.0 million related to our Fortress operations (within the Corporate and Other segment). The Plant Nutrition impairment was primarily the result of reduced cash flow assumptions impacting expected profitability of the Plant Nutrition segment. The Fortress impairment was primarily related to uncertainty surrounding our magnesium chloride-based fire retardants which impacted projected future revenues and cash flows. Also, during the six months ended March 31, 2024, we recognized a $15.6 million long-lived asset impairment, net, related to Fortress magnesium chloride-based products.
•We recognized an impairment loss of $74.8 million for the six months ended March 31, 2024 related to the termination of the lithium development.
Other Operating Income: Decreased $14.4 million from $16.6 million to $2.2 million
•The decrease in other operating expense was due to a decrease in the contingent consideration related to the Fortress acquisition, partially offset by severance costs resulting from the decision to discontinue the pursuit of the lithium development and corporate restructuring charges in the current period.
Interest Expense: Increased $1.7 million to $34.9 million
•Interest expense increased due to higher debt levels and higher interest rates in the current period.
Gain on Foreign Exchange: Rose by $4.7 million from $0.6 million to $5.3 million
•We realized a gain on foreign exchange of $5.3 million in the six months ended March 31, 2025, compared to a loss of $0.6 million in the same period of the prior fiscal year, due primarily reflecting the translation of our intercompany loans from Canadian dollars to U.S. dollars.
Other Expense, net: Increased $2.9 million to $4.5 million
•The increase is due primarily to fees paid and the write-off of previously capitalized fees when we modified our debt agreements in the current period, which was partially offset by losses on cash flow hedges.
Income Tax Expense (Benefit): Increased $31.8 million from a benefit of $12.3 million to an expense of $19.5 million
•The increase in income tax expense was due primarily due to a change in the annual effective tax rate calculations with the US loss jurisdiction having a separate annual effective tax rate applied to US losses and a foreign annual effective tax applied to foreign income. The change in the annual effective tax rate calculation began with the interim period ended June 30, 2024. Additionally, the majority of the impairments recorded in the six months ended March 31, 2025 and March 31, 2024 were either not tax deductible or the tax benefit was offset by tax expense for a valuation allowance on the related deferred tax asset.
•Our effective tax rate of (54%) for the six months ended March 31, 2025 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. Additionally, the majority of the impairments recorded in the six months ended March 31, 2025 and March 31, 2024 were either not tax deductible or the tax benefit was offset by tax expense for a valuation allowance on the related deferred tax asset. See Item 1, Note 6 to the Consolidated Financial Statements.
•Our income tax provision for the six months ended March 31, 2025 and 2024 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.
27
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
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 $0.1 million and $14.6 million for the three and six months ended March 31, 2024 and no sales in fiscal 2025. The results of operations of the consolidated records management business and other incidental revenues include sales of $3.6 million and $3.4 million for the three months ended March 31, 2025 and 2024, respectively, and $7.2 million and $6.6 million for the six months ended March 31, 2025 and 2024, 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 2025 | QTD 2024 | YTD 2025 | YTD 2024 | ||||||||||||||||||||
Salt Sales (in millions) | $ | 432.7 | $ | 310.4 | $ | 674.9 | $ | 584.7 | |||||||||||||||
Salt Operating Earnings (in millions) | $ | 66.9 | $ | 65.8 | $ | 96.3 | $ | 116.7 | |||||||||||||||
Salt Sales Volumes (thousands of tons) | |||||||||||||||||||||||
| Highway deicing | 4,583 | 3,045 | 6,570 | 5,311 | |||||||||||||||||||
| Consumer and industrial | 522 | 421 | 1,028 | 1,010 | |||||||||||||||||||
| Total tons sold | 5,105 | 3,466 | 7,598 | 6,321 | |||||||||||||||||||
Average Salt Sales Price (per ton) | |||||||||||||||||||||||
| Highway deicing | $ | 70.86 | $ | 74.72 | $ | 70.45 | $ | 72.86 | |||||||||||||||
| Consumer and industrial | $ | 206.71 | $ | 196.93 | $ | 206.25 | $ | 195.77 | |||||||||||||||
| Combined | $ | 84.76 | $ | 89.55 | $ | 88.83 | $ | 92.50 | |||||||||||||||
Commentary: Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
•Salt sales increased $122.3 million, or 39%, primarily due to higher sales volumes, which was partially offset by lower average sales prices for our highway deicing products.
•Salt sales volumes increased 47% in total, or 1,639,000 tons, which increased sales by approximately $134.9 million. Highway deicing sales volumes increased 51%, reflecting an increase winter weather events when compared to the prior period. Consumer and industrial sales volumes increased 24% primarily due to higher non-deicing volumes.
•Average sales prices decreased 5% partially offsetting the volume increase by approximately $12.6 million with decreases in combined average sales prices.
•Highway deicing average sales price decreased 5% across all product categories reflecting higher inventory levels in the market entering the 2024/2025 highway deicing season. Consumer and industrial average sales price increased 5% due to price increases taken to offset inflation realized in prior years.
•Salt operating earnings increased $1.1 million, as higher sales volumes and lower per-unit distribution costs were offset by lower average sales prices and higher per-unit product costs.
Commentary: Six Months Ended March 31, 2025 Compared to Six Months Ended March 31, 2024
•Salt sales increased $90.2 million, or 15%, primarily due to higher sales volumes, partially offset by lower average sales prices.
•Salt sales volumes increased 20% increasing sales by approximately $95.3 million. Highway deicing sales volumes increased 24% reflecting more winter weather events in the second quarter of 2025 compared to the same period of the prior year. Consumer and industrial sales volumes increased 2% primarily due to higher consumer deicing volumes.
•Average sales prices decreased 4% partially offsetting the volume increase by approximately $5.1 million with decreases in highway average sales prices.
•Highway deicing average sales prices decreased 3% across all product categories. Consumer and industrial average sales prices increased 5% due to price increases taken to offset inflation realized in prior years. The lower average sales prices are also reflective of sales mix.
28
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
•Salt operating earnings decreased $20.4 million, due primarily to lower combined average sales prices and higher per-unit product costs, which were partially offset by higher sales volumes for both highway and consumer and industrial products and lower per-unit distribution costs.
Plant Nutrition Results
| QTD 2025 | QTD 2024 | YTD 2025 | YTD 2024 | ||||||||||||||||||||
Plant Nutrition Sales (in millions) | $ | 58.3 | $ | 50.1 | $ | 119.7 | $ | 99.8 | |||||||||||||||
Plant Nutrition Operating Loss (in millions) | $ | (1.8) | $ | (53.0) | $ | (4.9) | $ | (55.3) | |||||||||||||||
Plant Nutrition Sales Volumes (thousands of tons) | 93 | 74 | 195 | 149 | |||||||||||||||||||
Plant Nutrition Average Sales Price (per ton) | $ | 626 | $ | 680 | $ | 614 | $ | 670 | |||||||||||||||
Commentary: Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
•Plant Nutrition sales increased 16%, or $8.2 million, due to higher sales volumes, which were partially offset by lower average sales prices.
•Plant Nutrition sales volumes increased 26% year over year driven by a return to more normalized sales volumes following a year in which customers delayed or reduced purchases. The higher sales volumes increased sales by approximately $13.3 million.
•Plant Nutrition average sales prices decreased 8%, which contributed approximately $5.1 million to the decrease in sales. Global supply and demand dynamics for fertilizer products resulted in weakening average sales prices versus the comparable prior year period.
•Plant Nutrition operating loss decreased $51.2 million to $1.8 million primarily due to the $51.0 million impairment recorded in the prior period. In addition, Plant Nutrition operating earnings were impacted by lower average sales prices due to global supply conditions and higher per-unit distribution costs, which was partially offset by higher sales volumes and lower per-unit product costs.
Commentary: Six Months Ended March 31, 2025 Compared to Six Months Ended March 31, 2024
•Plant Nutrition sales increased 20%, or $19.9 million, due to higher sales volumes, which was partially offset by lower average sales prices.
•Plant Nutrition sales volumes increased 31%, or 46,000 tons, which resulted in a $31.0 million increase in sales 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 regarding future fertilizer prices causing customers to cancel or delay purchases.
•Plant Nutrition average sales prices decreased 8%, partially offsetting the increase in sales volume by $11.1 million. Average sales prices decreased throughout fiscal 2024 due to global supply and demand dynamics for fertilizer products resulting in weakening pricing year over year.
•Plant Nutrition operating loss decreased $50.4 million to $4.9 million, primarily reflecting the 2024 write-off of goodwill, lower average sales prices and higher per-unit distribution costs, which were partially offset by lower per-unit product costs and higher sales volumes.
Outlook
•Following the stronger winter weather in the second quarter, we believe that there were significant drawdowns of salt inventory across our served markets. As we approach the 2025/2026 bid season, we're well positioned to optimize production and inventory levels across our platform. We expect Salt segment sales volumes and adjusted EBITDA to range from 10.5 million to 10.9 million tons and $215 million to $230 million, respectively, in fiscal year 2025.
•Plant Nutrition segment sales volumes are expected to improve to a range of 295,000 to 315,000 tons in fiscal year 2025, improving from fiscal year 2024 levels. We expect lower average selling prices throughout fiscal 2025 due to anticipated weakness in global potash prices. For fiscal year 2025, we expect adjusted EBITDA in a range of $17 million to $24 million.
•Fiscal year 2025 capital expenditures are expected to be in the $75 million to $85 million range.
29
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
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 $325 million revolving credit facility and our $100.0 million revolving AR Securitization Facility. As of March 31, 2025, we had liquidity of approximately $328.6 million, comprised of $49.5 million of cash and cash equivalents and $279.1 million of availability under our $325 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 March 31, 2025, we had $28.0 million of cash and cash equivalents that was either held directly or indirectly by foreign subsidiaries. In fiscal 2024 we did not repatriate any unremitted foreign earnings. During the second quarter of fiscal 2025, we revised our permanently reinvested assertion, expecting to repatriate approximately $11 million of unremitted foreign earnings from our U.K. operations. A net income tax benefit of $0.1 million was recorded for state income tax and foreign exchange losses on this change in assertion as of March 31, 2025. 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 6 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, 2025. 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 six months ended March 31, 2025, an additional valuation allowance of $23.5 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 March 31, 2025, we had $813.0 million of outstanding indebtedness, consisting of $500.0 million outstanding under our 6.75% Senior Notes due 2027, $221.8 million of borrowings outstanding under our senior secured credit facilities under the Credit Agreement, consisting of $191.3 million of term loans and $30.5 million borrowed against our revolving credit facility, and $91.2 million of outstanding loans under the accounts receivable financing facility (see Item 1, Note 7 of our Consolidated Financial Statements for more detail regarding our debt). Outstanding letters of credit totaling $15.4 million as of March 31, 2025 further reduced available borrowing capacity under our revolving credit facility to $279.1 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 modify 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.
30
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
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.
On December 12, 2024, we entered into an amendment to our 2023 Credit Agreement, which, among other things, eased the restrictions of certain covenants contained in the agreement. The amendment included increasing the maximum allowed consolidated total net leverage ratio (as defined and calculated under the terms of the amended 2023 Credit Agreement) to 6.5x as of the last day of any quarter through the fiscal quarter ended September 30, 2025, then gradually stepping down to 4.50x for the fiscal quarter ended December 31, 2026 and thereafter. The amendment also decreased the Revolving Commitments (as defined in the Existing Credit Agreement) from $375 million to $325 million with additional reductions stepping down to $250 million on July 1, 2026. In connection with this amendment, we paid fees totaling $2.0 million which were capitalized as deferred financing costs. Additional arrangement and legal fees of $1.0 million were expensed as of December 31, 2024. As of March 31, 2025, our consolidated total net leverage ratio was approximately 4.5x.
Although we are in compliance with our debt covenants as of March 31, 2025, we can make no assurance that we will remain in compliance with these ratios. Furthermore, we may need to modify all or a portion of our indebtedness on or before maturity; however, we cannot provide assurance that we will be able to modify 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. On April 22, 2024, our Board of Directors determined not to declare dividends for the foreseeable future in order to align our capital allocation policy with our corporate focus on accelerating cash flow generation and debt reduction. 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.
31
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
The table below provides a summary of our cash flows by category:
SIX MONTHS ENDED MARCH 31, 2025 | SIX MONTHS ENDED MARCH 31, 2024 | ||||
| Operating Activities: | |||||
Net cash provided by operating activities were $182.8 million | Net cash provided by operating activities were $33.9 million | ||||
» Net loss was $55.6 million. | » Net loss was $114.2 million. | ||||
» Non-cash depreciation and amortization expense was $53.3 million. | » Non-cash depreciation and amortization expense was $52.3 million. | ||||
» Non-cash stock-based compensation expense was $6.7 million. | » Non-cash stock-based compensation expense was $7.0 million. | ||||
» Non-cash loss on impairments, net, was $53.0 million. | » Non-cash loss on impairments, net, was $173.4 million. | ||||
» Non-cash gain from remeasurement of contingent consideration was $7.9 million. | » Non-cash gain from remeasurement of contingent consideration was $22.2 million. | ||||
» Unrealized foreign exchange gain of $6.4 million. | » Working capital items were a use of operating cash flows of $65.8 million. | ||||
» Working capital items were a source of operating cash flows of $135.7 million. | |||||
Investing Activities: | |||||
Net cash flows used in investing activities were $35.9 million. | Net cash flows used in investing activities were $79.7 million. | ||||
» Net cash flows used in investing activities included $35.8 million of capital expenditures. | » Net cash flows used in investing activities included $78.6 million of capital expenditures. | ||||
Financing Activities: | |||||
Net cash flows used in financing activities were $116.8 million. | Net cash flows provided by financing activities were $45.3 million. | ||||
» Included net payments on our debt of $109.8 million. | » Included net proceeds from the issuance of debt of $72.1 million. | ||||
» Included the payment of deferred financing costs of $2.4 million. | » Included the payment of dividends of $12.7 million. | ||||
» Included the payment of contingent consideration of $9.1 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 for the six months ended March 31, 2025, reflect the seasonal decrease in inventory due to the end of the winter season. During the six months ended March 31, 2024, we 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, we recognized revenue previously deferred in accrued liabilities and decreased our contingent consideration liability.
Product Recall
On October 25, 2024, we issued a recall for specific production lots of food-grade salt produced at our Goderich Plant following a customer report of a non-organic, foreign material in its product. We subsequently expanded the voluntary recall to include food products from the Goderich Plant between September 18 and November 6, 2024. The products recalled included both products sold prior and subsequent to September 30, 2024. We followed recall protocol and notified our BRCGS Global Standard for Food Safety certifying body, the Canadian Food Inspection Agency (“CFIA”) and the U.S. Food and Drug Administration (“FDA”). We worked with the CIFA to obtain and assess the reported foreign material, complete the necessary investigation, and determine the next steps. The recall in the United States, supervised by the FDA, is complete and the matter is closed with FDA. Refer to Item 1, Note 8 for additional details.
We continue to assess the scope and magnitude of additional customer claims. At this time, based on currently available information and our applicable insurance coverage, we do not believe any incremental losses will have a material adverse effect on our results of operations or cash flows in future periods.
32
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
Other Matters
See Item 1, Notes 6 and 8 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 significant items that management does not consider indicative of normal operations. Other significant items, such as executive transition costs, restructuring charges and impairment charges involve distinct initiatives that are not reflective of core operating activities 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.
33
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
The calculation of EBITDA and Adjusted EBITDA as used by management is set forth in the table below (in millions):
| Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
Net loss | $ | (32.0) | $ | (38.9) | $ | (55.6) | $ | (114.2) | |||||||||||||||
| Interest expense | 18.0 | 17.3 | 34.9 | 33.2 | |||||||||||||||||||
Income tax expense (benefit) | 9.8 | (15.9) | 19.5 | (12.3) | |||||||||||||||||||
| Depreciation, depletion and amortization | 26.5 | 26.8 | 53.3 | 52.3 | |||||||||||||||||||
| EBITDA | 22.3 | (10.7) | 52.1 | (41.0) | |||||||||||||||||||
| Adjustments to EBITDA: | |||||||||||||||||||||||
| Stock-based compensation - non-cash | 2.8 | (4.9) | 6.7 | 7.0 | |||||||||||||||||||
| Interest income | (0.2) | (0.2) | (0.6) | (0.6) | |||||||||||||||||||
Gain on foreign exchange | (0.1) | (2.5) | (5.3) | (0.6) | |||||||||||||||||||
Product recall costs(a) | 0.9 | — | 1.8 | — | |||||||||||||||||||
Restructuring charges(b) | 4.0 | 12.1 | 4.0 | 15.7 | |||||||||||||||||||
Loss on impairments, net(c) | 53.0 | 101.0 | 53.0 | 175.8 | |||||||||||||||||||
| Other expense, net | 1.4 | 0.9 | 4.5 | 1.6 | |||||||||||||||||||
| Adjusted EBITDA | $ | 84.1 | $ | 95.7 | $ | 116.2 | $ | 157.9 | |||||||||||||||
(a)We recognized costs related to a recall of food-grade salt produced at our Goderich plant. Refer to Item 1, Note 8 for additional details.
(b)We incurred severance and related charges due to reductions in workforce and changes to executive leadership and additional restructuring costs related to the exit of the Fortress fire retardant business during the three and six months ended March 31, 2025. We also incurred severance and related charges for the three and six months ended March 31, 2024, related to reductions in workforce and changes to executive leadership and additional restructuring costs related to the termination of our lithium development project.
(c)For the three and six months ended March 31, 2025, we recognized impairments of intangible assets related to the exit of the Fortress fire retardant business. For the three and six months ended March 31, 2024, we recognized impairments of long-lived assets related to the termination of the lithium development project; Fortress goodwill, intangible assets and inventory; and Plant Nutrition goodwill.
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 2024 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
34
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
quantities of deicing salt throughout the first, third and fourth fiscal quarters (ending December 31, June 30 and September 30) to meet the estimated requirements for the winter season. Our plant Nutrition business is also seasonal. As a result, we and our customers generally build inventories during the plant Nutrition business’ low demand periods of the year (which are typically winter and summer, but can vary due to weather and other factors) to ensure timely product availability during the peak sales seasons (which are typically spring and autumn, but can also vary due to weather and other factors).
Climate Change
The potential impact of climate change on our operations, product demand and the needs of our customers remains uncertain. Significant changes to weather patterns, a reduction in average snowfall or regional drought within our served markets or at our Ogden facility could negatively impact customer demand for our products and our costs, as well as our ability to produce our products. For example, prolonged periods of mild winter weather could reduce the demand for our deicing products. Drought 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 2025. 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 2024 Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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, 2024.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as amended (the Exchange Act) under the supervision and with the participation of the Company’s management. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as a result of the material weaknesses in internal control over financial reporting as described below, the Company’s disclosure controls and procedures were ineffective as of September 30, 2024.
Per Rules 13a-15(e) and 15d-15(e), the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our Chief Executive Officer and Chief Financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud due to inherent limitations of internal controls. Because of such limitations, there is a risk that material misstatements will not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
35
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
In light of the material weaknesses described below, management performed additional analysis and other procedures to ensure that our consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP). Accordingly, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s Consolidated Financial Statements included in this 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.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness, as defined in Rule 12b-2 under the Exchange Act, is a deficiency, or combination of control 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.
As disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, we previously identified material weaknesses in our internal control over financial reporting. The Company, due to a limited allocation of trained, knowledgeable resources, did not conduct an effective risk assessment process to identify and evaluate at a sufficient level of detail all relevant risks of material misstatement, including fraud risks associated with the necessary approval of transactions. Additionally, the Company did not have an effective information and communication process that identified and assessed the source of and controls necessary to ensure the reliability of information used in financial reporting and that ensured complete, reliable information was made available to financial reporting personnel on a timely basis to fulfill their roles and responsibilities. As a consequence of the material weaknesses described above, internal control deficiencies related to the design and operation of process-level controls were determined to be ineffective throughout the Company’s financial reporting processes.
Remediation Efforts and Status of Material Weakness
We are in the process of implementing a number of measures to address the material weaknesses that have been identified including the following:
•We are enhancing our risk assessment process to ensure it is sufficiently robust to identify and analyze all relevant risks of material misstatements, including the impact of significant changes in the business on the identification of risks and the internal control structure.
•We have hired additional accounting professionals who possess the requisite technical accounting and internal control over financial reporting knowledge.
•We are educating and training control owners regarding internal control processes to mitigate identified risks and to fulfill internal control over financial reporting responsibilities.
•We are implementing a policy and internal controls to ensure that all manual journal entries are properly approved, specifically we are redesigning and implementing process level control activities over manual journal entries.
•We are redesigning and implementing a balance sheet account reconciliation policy, including an approval process and additional process level controls, that includes the appropriate level of precision around aging, thresholds, support and documentation.
•We are establishing monitoring and oversight controls to identify non-recurring, complex transactions and designing and implementing process level controls to ensure the accuracy and completeness of our financial statements and related disclosures.
•We are redesigning our corporate organization structure to ensure effective information and communication across the organization and to support financial reporting processes and internal controls.
36
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
Changes in Internal Control Over Financial Reporting
Other than the remediation efforts 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.
37
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in the legal proceedings described in Part I, Item 1, Note 6 and Part I, Item 1, Note 8 of our Consolidated Financial Statements and, from time to time, various routine legal proceedings and claims arising from the ordinary course of our business. These primarily involve tax assessments, disputes with former employees and contract labor, commercial claims, product liability claims, personal injury claims and workers’ compensation claims. Management cannot predict the outcome of legal proceedings and claims with certainty. Nevertheless, management believes that the outcome of legal proceedings and claims, which are pending or known to be threatened, even if determined adversely, will not, either individually or in the aggregate, have a material adverse effect on our results of operations, cash flows or financial condition, except as otherwise described in Part I, Item 1, Note 6 and Part I, Item 1, Note 8 of our Consolidated Financial Statements. There have been no material developments since September 30, 2024 with respect to our legal proceedings, except as described in Part I, Item 1, Note 6 and Part I, Item 1, Note 8 of our Consolidated Financial Statements.
Item 1A. Risk Factors
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, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a)None.
(b)None.
(c)None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Quarterly Report on Form 10-Q.
Item 5. Other Information
Rule 10b5-1 Trading Plans
During the three and six months ended March 31, 2025, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted terminated
38
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
Item 6. Exhibits
| Exhibit No. | Exhibit Description | |||||||
| 101** | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements. | |||||||
| 104 | Cover Page Interactive Data File (contained in Exhibit 101). | |||||||
* Filed herewith | ||||||||
** Furnished herewith | ||||||||
39
| COMPASS MINERALS INTERNATIONAL, INC. | ||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| COMPASS MINERALS INTERNATIONAL, INC. | |||||||||||
| Date: May 8, 2025 | By: | /s/ Peter Fjellman | |||||||||
| Peter Fjellman | |||||||||||
| Chief Financial Officer | |||||||||||
| (Principal Financial Officer) | |||||||||||
40