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Compass Minerals(CMP) - 2024 Q4 - Annual Report
CMPCompass Minerals(CMP)2024-12-16 22:19
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Sales and Market Position - Salt segment sales accounted for 40% of fiscal 2024 Salt segment sales, with consumer and industrial products being a significant contributor[20] - Approximately 75% of highway deicing customers in the U.K. have multi-year contracts, highlighting the company's strong market position[20] - Two-thirds of deicing product sales occur during the North American and European winter months (November through March) on average over the last three years[20] - The Plant Nutrition segment generated nearly all of its sales and earnings through SOP, with 92% of fiscal 2024 sales made to U.S. customers[23] - International sales accounted for 26% of total fiscal 2024 sales, with significant operations in Canada and the UK[81] - The company's fire retardant business relies heavily on one primary customer, the USFS, and any loss of this customer would adversely affect the business[77] - No single customer or group of affiliated customers accounted for more than 10% of the company's sales or receivables during fiscal years 2024, 2023, or 2022[365] Production and Operations - Global SOP capacity is estimated at 10.7 million tons, with 55% located in China, positioning the company as a leading SOP producer in North America[26] - The company's Protassium+ product line is sold in various grades, targeting crop input distributors and dealers, with a focus on agronomic benefits[24] - Approximately 70% of the company's salt production capacity comes from two North American salt mines, with any production interruption potentially affecting contract fulfillment and future contracts[58] - The company's plant nutrition product, SOP, is produced at only two locations, with potential disruptions at these facilities leading to reduced sales and revenue loss[58] - The Ogden facility's production of SOP, sodium chloride, and magnesium chloride is dependent on sufficient lake brine levels in the Great Salt Lake, with drought or lower lake levels potentially disrupting production[55] - The company has made significant capital expenditures, including a shaft relining project and barge dock upgrades, with future capital projects potentially requiring temporary production suspensions[59] - The company's operations depend on environmental and mineral extraction permits, with potential risks from permit revocations or modifications[83] Financial Performance and Debt - The company employed 1,894 employees as of September 30, 2024, with nearly 50% represented by collective bargaining agreements[32] - As of September 30, 2024, the company had 922.8millionofoutstandingindebtedness,withsignificantinterestpaymentsandpotentialrisksassociatedwithadditionaldebtorrefinancing[65]−Thecompany′sabilitytomakepaymentsonitsindebtednessandfundcapitalexpendituresdependsongeneratingfuturecashflows,whichissubjecttovariousexternalfactorsbeyonditscontrol[67]−Thecompany′stotalnetleverageratioasofSeptember30,2024,was4.89x,withadefaultthresholdof6.5xthroughSeptember30,2025,steppingdownto4.5xbyDecember31,2026[68]−Thecompanyceasedpayingcashdividendsinfiscal2024toprioritizecashflowgenerationanddebtreduction,withfuturedividendsdependentonfinancialconditionsandboarddiscretion[73]−Thecompany′sabilitytopaydividendsisrestrictedbydebtagreements,andfuturedividendsarecontingentonearningsandsubsidiarydistributions[73]−Totalassetsdecreasedfrom922.8 million of outstanding indebtedness, with significant interest payments and potential risks associated with additional debt or refinancing[65] - The company's ability to make payments on its indebtedness and fund capital expenditures depends on generating future cash flows, which is subject to various external factors beyond its control[67] - The company's total net leverage ratio as of September 30, 2024, was 4.89x, with a default threshold of 6.5x through September 30, 2025, stepping down to 4.5x by December 31, 2026[68] - The company ceased paying cash dividends in fiscal 2024 to prioritize cash flow generation and debt reduction, with future dividends dependent on financial conditions and board discretion[73] - The company's ability to pay dividends is restricted by debt agreements, and future dividends are contingent on earnings and subsidiary distributions[73] - Total assets decreased from 1,816.9 million in 2023 to 1,640.1millionin2024,adeclineof9.71,640.1 million in 2024, a decline of 9.7%[325] - Net loss for 2024 was 206.1 million, compared to a net earnings of 10.5millionin2023[327]−Salesdeclinedfrom10.5 million in 2023[327] - Sales declined from 1,204.7 million in 2023 to 1,117.4millionin2024,adecreaseof7.21,117.4 million in 2024, a decrease of 7.2%[327] - Long-term debt increased from 800.3 million in 2023 to 910.0millionin2024,ariseof13.7910.0 million in 2024, a rise of 13.7%[325] - Cash and cash equivalents decreased from 38.7 million in 2023 to 20.2millionin2024,adropof47.820.2 million in 2024, a drop of 47.8%[325] - Gross profit decreased from 232.0 million in 2023 to 195.0millionin2024,adeclineof16.0195.0 million in 2024, a decline of 16.0%[327] - Retained earnings dropped significantly from 220.9 million in 2023 to 2.2millionin2024[325]−Comprehensivelossfor2024was2.2 million in 2024[325] - Comprehensive loss for 2024 was 197.8 million, compared to a comprehensive income of 21.1millionin2023[329]−Selling,generalandadministrativeexpensesdecreasedfrom21.1 million in 2023[329] - Selling, general and administrative expenses decreased from 150.2 million in 2023 to 137.8millionin2024,areductionof8.3137.8 million in 2024, a reduction of 8.3%[327] - Interest expense increased from 55.5 million in 2023 to 69.5millionin2024,ariseof25.269.5 million in 2024, a rise of 25.2%[327] - Comprehensive loss for fiscal year 2024 was 197.8 million, primarily driven by a net loss of 206.1millionanda206.1 million and a 191.0 million loss on impairments[333] - Net cash provided by operating activities decreased significantly to 14.4millionin2024,comparedto14.4 million in 2024, compared to 106.0 million in 2023 and 120.4millionin2022[333]−Capitalexpenditureswere120.4 million in 2022[333] - Capital expenditures were 114.2 million in 2024, a decrease from 154.3millionin2023and154.3 million in 2023 and 96.6 million in 2022[333] - The company raised 240.7millionthroughaprivateplacementofcommonstockin2023[331]−Totalstockholders′equitydecreasedfrom240.7 million through a private placement of common stock in 2023[331] - Total stockholders' equity decreased from 521.0 million in 2023 to 316.6millionin2024,mainlyduetothecomprehensiveloss[331]−Dividendspaiddecreasedto316.6 million in 2024, mainly due to the comprehensive loss[331] - Dividends paid decreased to 12.6 million in 2024 (0.30pershare)from0.30 per share) from 24.9 million in 2023 (0.60pershare)[331][333]−Depreciation,depletionandamortizationexpensesincreasedto0.60 per share)[331][333] - Depreciation, depletion and amortization expenses increased to 105.0 million in 2024 from 98.6millionin2023[333]−Thecompany′scashandcashequivalentsdecreasedto98.6 million in 2023[333] - The company's cash and cash equivalents decreased to 20.2 million at the end of 2024 from 38.7millionattheendof2023[333]−Stock−basedcompensationexpensesdecreasedto38.7 million at the end of 2023[333] - Stock-based compensation expenses decreased to 8.1 million in 2024 from 20.6millionin2023[333]EnvironmentalandRegulatoryCompliance−Thetotalrecordableinjuryrate(TRIR)forfiscal2024was1.28,reflectingthecompany′sfocusonsafetyandhealth[33]−Thecompany′senvironmental,social,andgovernancegoalsincludesafety,employeedevelopment,anddiversityandinclusion,withspecifictargetssetforfiscal2025[32]−Environmentalcapitalexpendituresforfiscal2024were20.6 million in 2023[333] Environmental and Regulatory Compliance - The total recordable injury rate (TRIR) for fiscal 2024 was 1.28, reflecting the company's focus on safety and health[33] - The company's environmental, social, and governance goals include safety, employee development, and diversity and inclusion, with specific targets set for fiscal 2025[32] - Environmental capital expenditures for fiscal 2024 were 3.8 million, with an expected 3.6millionforfiscal2025[40]−AccrualsforenvironmentalliabilitiesasofSeptember30,2024,totaled3.6 million for fiscal 2025[40] - Accruals for environmental liabilities as of September 30, 2024, totaled 1.8 million[40] - The company holds numerous environmental and mineral extraction permits, which are subject to renewals and reissuances[41] - The Cote Blanche mine is subject to regulation by the Mine Safety and Health Administration (MSHA) and is considered a "gaseous mine," posing heightened risks of explosion and fire[43] - The company has post-closure reclamation obligations, requiring financial surety bonds to fund reclamation and site cleanup[43] - A binding Voluntary Agreement with the Utah Division of Forestry, Fire and State Lands outlines brine withdrawal caps based on annual lake elevation[43] - The company has incurred and expects to continue to incur costs and liabilities related to environmental remediation activities under CERCLA and similar laws[44] - Compliance with EHS laws and regulations could lead to increased costs, fines, or operational modifications[86] - Environmental liabilities from past and present operations could result in significant remediation costs[87] - The company donated non-production-related water rights totaling approximately 201,000 acre feet annually, resulting in an impairment of approximately 17.6million[341]−Thecompanyholdswaterrightsvaluedat17.6 million[341] - The company holds water rights valued at 0.2 million as of September 30, 2024, down from 17.8millionin2023[393]RisksandChallenges−Materialweaknessesininternalcontroloverfinancialreportingwereidentified,potentiallyleadingtofinancialmisstatementsandcomplianceissues[50]−Thecompany′sminingoperationsaresubjecttosignificantrisks,includingenvironmentalhazards,industrialaccidents,andnaturaldisasters[51]−Geologicalconditionsatsaltminingoperationscouldleadtomineshutdowns,increasedcosts,andproductiondelays[53]−Weatherconditionssignificantlyimpactsales,production,andoperationalresults,withprolongedchangespotentiallyleadingtomaterialimpactsonoperations[54]−Nearly5017.8 million in 2023[393] Risks and Challenges - Material weaknesses in internal control over financial reporting were identified, potentially leading to financial misstatements and compliance issues[50] - The company's mining operations are subject to significant risks, including environmental hazards, industrial accidents, and natural disasters[51] - Geological conditions at salt mining operations could lead to mine shutdowns, increased costs, and production delays[53] - Weather conditions significantly impact sales, production, and operational results, with prolonged changes potentially leading to material impacts on operations[54] - Nearly 50% of the workforce in the U.S., Canada, and the U.K. is represented by collective bargaining agreements, with potential labor disruptions impacting operations and financial results[63] - Energy costs, primarily natural gas and electricity, represent a substantial part of production costs, with significant price increases or supply interruptions potentially adversely affecting the business[64] - The company faces financial assurance requirements, including performance bonds for tax disputes and site cleanup, which could materially affect its business if not satisfied[72] - Seasonal demand fluctuations for salt, plant nutrition, and fire retardant products can lead to excess inventory, increased storage costs, or inventory write-downs[75] - Anticipated changes in potash prices and customer application rates significantly impact demand and pricing for the company's plant nutrition products[76] - The company's transportation costs, particularly for salt products, are a significant component of total delivered product cost, with potential adverse effects from increased rates or reduced availability[80] - Inflation could result in higher costs for transportation, energy, materials, and labor, potentially decreasing profitability[79] - Exchange rate fluctuations, particularly with Canadian dollars and British pounds, significantly impact financial results due to translation into US dollars[81] - The agricultural sector's demand for products is influenced by crop prices, planted acreage, and crop yields, with SOP demand tied to high-value crops like almonds and citrus[82] - Over-supply of MOP or SOP could lead to price disparities, potentially reducing sales volume and operational results[82] - The company faces ongoing litigation, including a securities class action lawsuit, with potential financial impacts[84][85] - Compliance with anti-corruption laws like the FCPA and UK Bribery Act increases operational costs and risks[90] - Changes in trade laws, tariffs, or state-specific legislation could adversely affect salt sales and financial performance[91] - The company faces significant product liability risks, including potential recalls due to contamination or failure to meet specifications, which could result in substantial financial losses and reputational damage[92] - Intellectual property risks include potential misappropriation, infringement claims, and challenges to patent rights, which could weaken the company's competitive advantage and impact financial performance[93][94] - The company's success depends on the effective implementation of business strategies, including cost savings initiatives and the commercialization of new products like Fortress North America's fire retardants[95] - Labor shortages or the loss of key personnel could lead to higher costs, decreased productivity, and reputational harm, impacting the company's performance[96] - Disruptions or compromises in computer systems and IT infrastructure could adversely affect business operations, financial reporting, and customer relationships[98] - Climate change and related regulations could negatively impact product demand, production costs, and the ability to distribute products, particularly for deicing and plant nutrition products[99] - Acquisitions and investments may not perform as expected, leading to increased debt obligations, integration challenges, and potential loss of key employees[100][102] - Outbreaks of contagious diseases, such as COVID-19, could disrupt operations, supply chains, and customer demand, adversely affecting the company's financial condition[103] - The company is exposed to interest rate risk, with a 100 basis point increase potentially raising interest expenses by 3.8 million on 383.9millionofvariableratedebt[284]−Foreigncurrencyfluctuationscouldimpactoperatingearnings,withahypothetical10383.9 million of variable rate debt[284] - Foreign currency fluctuations could impact operating earnings, with a hypothetical 10% unfavorable change in exchange rates estimated to reduce earnings by 0.6 million[285] - The company has hedged 2.3 MMBtus of natural gas purchases, with 2.0 MMBtus expiring within one year, all designated as cash flow hedges[287] - A hypothetical 10% adverse change in natural gas prices would increase product costs by approximately 0.6millionforthefiscalyearendedSeptember30,2024[287]−Thecompanyrecordedunrecognizedtaxbenefitsof0.6 million for the fiscal year ended September 30, 2024[287] - The company recorded unrecognized tax benefits of 37.1 million as of September 30, 2024, with a portion related to provincial taxes in Canada[297] - Material weaknesses in internal control over financial reporting were identified as of September 30, 2024, affecting the design and operation of process-level controls[301] - The company may hedge up to approximately 90% of its expected natural gas usage to mitigate price fluctuations[287] - The company does not engage in hedging for speculative investment purposes[287] - The company's internal control over financial reporting was deemed ineffective as of September 30, 2024, due to material weaknesses[314] - The company's audit included increased sample selections and testing of underlying records due to material weaknesses in internal controls[303] - The company's financial statements for the fiscal year ended September 30, 2024, were audited and found to be in conformity with U.S. GAAP[292] - The company's financial reporting processes were affected by ineffective internal controls related to risk assessment and information communication[316] Impairments and Discontinued Operations - The company disposed of its South America chemicals and specialty plant nutrition businesses in fiscal 2021, which were reclassified as discontinued operations[336] - The company recorded an impairment charge of 74.8millionrelatedtotheterminationofitslithiumdevelopmentproject[339]−Thecompanyimpairedallmagnesiumchloride−relatedassets,resultinginalong−livedassetimpairmentof74.8 million related to the termination of its lithium development project[339] - The company impaired all magnesium chloride-related assets, resulting in a long-lived asset impairment of 15.6 million and an inventory impairment of 2.4million[341]−Thecompanyrecognizedgoodwillimpairmentchargestotaling2.4 million[341] - The company recognized goodwill impairment charges totaling 83.0 million, with 51.0millionrelatedtothePlantNutritionsegmentand51.0 million related to the Plant Nutrition segment and 32.0 million related to the Fortress reporting unit[341] - The company donated non-production-related water rights totaling approximately 201,000 acre feet annually, resulting in an impairment of approximately 17.6million[341]−TotalimpairmentsforthefiscalyearendedSeptember30,2024,amountedto17.6 million[341] - Total impairments for the fiscal year ended September 30, 2024, amounted to 193.4 million[341] - The company recorded foreign exchange losses of 0.2millionforthefiscalyearendedSeptember30,2024[346]−Thecompany′srevenuearrangementsgenerallyconsistofasingleperformanceobligationtotransferpromisedgoodsorservices[348]−Thecompanymaintainsthemajorityofitscashinbankdepositaccountswithseveralcommercialbankswithhighcreditratings[349]−Thecompany′sinventoriesarestatedatthelowerofcostornetrealizablevalue,withfinishedgoodsprimarilycomprisedofsalt,magnesiumchloride,SOPproducts,andfireretardants[351]−Thecompany′sproperty,plant,andequipmentincludesmineralinterests,withtheweightedaverageamortizationperiodforleasedprobablemineralreservesbeing85years[353]−Thecompany′sprobableownedmineralreserveshaveaweightedaveragelifeof33yearsasofSeptember30,2024,basedoncurrentproductionestimates[354]−Capitalizedcomputersoftwarecostswere0.2 million for the fiscal year ended September 30, 2024[346] - The company's revenue arrangements generally consist of a single performance obligation to transfer promised goods or services[348] - The company maintains the majority of its cash in bank deposit accounts with several commercial banks with high credit ratings[349] - The company's inventories are stated at the lower of cost or net realizable value, with finished goods primarily comprised of salt, magnesium chloride, SOP products, and fire retardants[351] - The company's property, plant, and equipment includes mineral interests, with the weighted average amortization period for leased probable mineral reserves being 85 years[353] - The company's probable owned mineral reserves have a weighted average life of 33 years as of September 30, 2024, based on current production estimates[354] - Capitalized computer software costs were 3.0 million and 3.7millionasofSeptember30,2024and2023,respectively,withamortizationexpensesof3.7 million as of September 30, 2024 and 2023, respectively, with amortization expenses of 1.6 million, 3.3million,and3.3 million, and 7.6 million for fiscal years 2024, 2023, and 2022[354] - The company recorded an impairment charge of 74.8millionrelatedtoitslithiumdevelopmentfortheyearendedSeptember30,2024[354]−Othernoncurrentassetsincludeinventoriesofspareparts,netofreserve,of74.8 million related to its lithium development for the year ended September 30, 2024[354] - Other noncurrent assets include inventories of spare parts, net of reserve, of 42.2 million and 35.8millionatSeptember30,2024and2023,respectively[357]−Investmentsinmarketablesecuritiestotaled35.8 million at September 30, 2024 and 2023, respectively[357] - Investments in marketable securities totaled 3.1 million and 2.6millionasofSeptember30,2024and2023,respectively[358]−Thecompanyacquiredtheremaining552.6 million as of September 30, 2024 and 2023, respectively[358] - The company acquired the remaining 55% interest in Fortress for an initial cash payment of 18.9 million and additional contingent consideration of up to 28million[368]−Thecompanyceasedpayingdividendsinthesecondfiscalquarterof2024[363]−Thecompany′sforeignsubsidiariesfileseparatetaxreturnsintheirrespectivejurisdictions[359]−Thecompany′senvironmentalcostswerenotmaterialatSeptember30,2024or2023[361]−ThecompanysolditsSouthAmericaspecialtyplantnutritionbusinessfornetcashofapproximately28 million[368] - The company ceased paying dividends in the second fiscal quarter of 2024[363] - The company's foreign subsidiaries file separate tax returns in their respective jurisdictions[359] - The company's environmental costs were not material at September 30, 2024 or 2023[361] - The company sold its South America specialty plant nutrition business for net cash of approximately 318.4 million, with an additional earnout payment of up to R88millionBrazilianreais,ofwhich88 million Brazilian reais, of which 18.5 million was received on April 7, 2022[369] - The company completed the sale of its North America micronutrient business for approximately 56.7millionincashproceedsanditsinvestmentinFermaviforR56.7 million in cash proceeds and its investment in Fermavi for R45 million Brazilian reais, with 2.9millionincashproceedsand2.9 million in cash proceeds and 4.8 million in deferred proceeds receivable[369] - The company sold its South America chemicals business for gross proceeds of approximately 51.5million,includingapost−closingadjustmentof51.5 million, including a post-closing adjustment of 6.4 million, and recognized an incremental loss of 23.1millionfromthesale[369]−Discontinuedoperationsforfiscalyear2022generatedsalesof23.1 million from the sale[369] - Discontinued operations for fiscal year 2022 generated sales of 53.6 million, gross profit of 22.4million,andnetearningsof22.4 million, and net earnings of 12.2 million[371] - Proceeds from the sale of businesses in discontinued operations amounted to 61.2millionforfiscalyear2022[371]−DeferredrevenueasofSeptember30,2024,wasapproximately61.2 million for fiscal year 2022[371] - Deferred revenue as of September 30, 2024, was approximately 3.6 million, down from 8.5millionin2023[382]−OperatingleaseassetsasofSeptember30,2024,were8.5 million in 2023[382] - Operating lease assets as of September 30, 2024, were 50.0 million, down from 54.7millionin2023[384]−TotalleaseliabilitiesasofSeptember30,2024,were54.7 million in 2023[384] - Total lease liabilities as of September 30, 2024, were 68.3 million, up from 63.9millionin2023[384]−TotalleasecostforSeptember30,2024is63.9 million in 2023[384] - Total lease cost for September 30, 2024 is 40.1 million, with operating lease cost at 20.9millionandfinanceleasecostat20.9 million and finance lease cost at 2.8 million[386] - Total lease payments for the years ending September 30, 2025 to 2029 and after 2029 amount to 79.7million,withoperatingleasesat79.7 million, with operating leases at 59.1 million and finance leases at 20.6million[386]−Weighted−averageremainingleasetermforoperatingleasesis5.1yearsandforfinanceleasesis7.8yearsasofSeptember30,2024[386]−TotalinventoriesasofSeptember30,2024are20.6 million[386] - Weighted-average remaining lease term for operating leases is 5.1 years and for finance leases is 7.8 years as of September 30, 2024[386] - Total inventories as of September 30, 2024 are 414.1 million, with finished goods at 336.5millionandrawmaterialsandsuppliesat336.5 million and raw materials and supplies at 71.2 million[388] - Property, plant and