Compass Minerals(CMP) - 2024 Q3 - Quarterly Results

Preliminary Fiscal 2024 Third-Quarter Results Overview Management Commentary Management highlighted strong Q3 results in core segments, despite accounting delays, focusing on operational excellence and deleveraging - The core Salt and Plant Nutrition businesses produced strong Q3 results, with Salt showing robust earnings potential and Plant Nutrition improving prices and margins[3] - The company's strategic focus is on building a culture of operational excellence, improving cash generation, and deleveraging the balance sheet[3] - Financial results release was delayed due to historical accounting issues, which management finds disappointing[3] Financial Restatement Update Company is undergoing financial restatement for multiple periods due to misstatements, primarily from Fortress North America acquisition - The company identified misstatements and material weaknesses in financial statements for periods from June 30, 2023, to March 31, 2024[4] - Misstatements primarily relate to contingent consideration from Fortress North America acquisition, but do not materially impact adjusted EBITDA or core business fundamentals[4] - The restatement process requires additional audit procedures for fiscal years 2021-2023, prolonging the process and delaying the Q3 2024 Form 10-Q filing[5] Preliminary Quarterly Financial Results Q3 2024 preliminary results show revenue of $202.9 million, a net loss of $43.6 million, and adjusted EBITDA of $32.8 million Preliminary Q3 2024 Financial Results (Three Months Ended June 30, 2024) | Metric | Value (in millions, except per share data) | | :--- | :--- | | Revenue | $202.9 | | Operating earnings | $5.9 | | Adjusted operating earnings | $7.4 | | Adjusted EBITDA | $32.8 | | Net loss | $(43.6) | | Net loss per diluted share | $(1.05) | | Adjusted net loss | $(42.1) | | Adjusted net loss per diluted share | $(1.01) | - The Salt segment delivered strong performance with an adjusted EBITDA per ton of $28.05[8] - The average sales price for sulfate of potash increased for the second consecutive quarter to $691.27 per ton[8] Business Segment Performance Salt Business Summary The Salt segment generated preliminary Q3 2024 revenue of $160.6 million and adjusted EBITDA of $41.6 million, with strong $28.05 adjusted EBITDA per ton Salt Segment Preliminary Q3 2024 Performance | Metric | Value (in millions, tons, or per ton) | | :--- | :--- | | Revenue | $160.6 million | | Operating Earnings | $25.9 million | | Adjusted EBITDA | $41.6 million | | Adjusted EBITDA per ton | $28.05 | | Highway Deicing Sales Volume | 1.09 million tons | | Highway Deicing Avg. Selling Price | $77.20 per ton | | C&I Sales Volume | 393 thousand tons | | C&I Avg. Selling Price | $194.35 per ton | Plant Nutrition Business Summary The Plant Nutrition segment reported a preliminary Q3 operating loss of $1.4 million, adjusted EBITDA of $7.2 million, and revenue of $38.8 million Plant Nutrition Segment Preliminary Q3 2024 Performance | Metric | Value (in millions, tons, or per ton) | | :--- | :--- | | Revenue | $38.8 million | | Operating Loss | $(1.4) million | | Adjusted EBITDA | $7.2 million | | Sales Volumes | 56 thousand tons | | Average Sales Price | $691.27 per ton | Fortress North America Update Company is evaluating strategic alternatives for Fortress North America and remains in discussions with USFS regarding fire retardant testing - The company is actively evaluating various strategic alternatives for Fortress North America[11] - Discussions are ongoing with the U.S. Forest Service (USFS) concerning the testing of aerial fire retardants[11] Financial Position and 2024 Outlook Financial Position and Liquidity As of June 30, 2024, total liquidity was $220.8 million, with a net leverage ratio of 4.3 times, and credit agreements were amended due to restatement Liquidity Position as of June 30, 2024 | Component | Value (in millions) | | :--- | :--- | | Cash and cash equivalents | $12.8 | | Revolving credit facility availability | $208.0 | | Total Liquidity | $220.8 | - The preliminary consolidated total net leverage ratio was 4.3 times, remaining within the 6.5 times covenant[12] Preliminary Updated 2024 Outlook The company updated its 2024 outlook, raising Salt segment adjusted EBITDA to $215-$225 million and revising Plant Nutrition to $21-$26 million Salt Segment Outlook The Salt segment's 2024 adjusted EBITDA guidance was raised to $215-$225 million due to lower Goderich mine curtailment costs 2024 Salt Segment Outlook | Metric | 2024 Range (k tons or millions) | | :--- | :--- | | Highway deicing sales volumes (k tons) | 7,400 - 7,500 | | C&I sales volumes (k tons) | 1,800 - 1,900 | | Total salt sales volumes (k tons) | 9,200 - 9,400 | | Revenue (in millions) | $900 - $910 | | Adj. EBITDA (in millions) | $215 - $225 | - The improved adjusted EBITDA outlook is due to lower anticipated costs in 2024 related to the curtailment of the Goderich mine[15] 2024/2025 North American Bid Season For 2024/2025, average contract selling price is expected to be 2% lower, with market bid volumes down 7-10% due to high inventory - Average contract selling price for the 2024/2025 winter season is expected to be approximately 2% lower than fiscal 2024[16] - Market bid volumes are expected to be down 7% to 10% compared to fiscal 2024, consistent with high inventory levels[16] Plant Nutrition Segment Outlook Plant Nutrition segment's 2024 guidance revised to $21-$26 million adjusted EBITDA due to lower volumes and higher costs, partially offset by pricing 2024 Plant Nutrition Segment Outlook | Metric | 2024 Range (k tons or millions) | | :--- | :--- | | Sales volumes (k tons) | 265 - 275 | | Revenue (in millions) | $175 - $185 | | Adj. EBITDA (in millions) | $21 - $26 | Consolidated Outlook and Capital Expenditures Total company 2024 adjusted EBITDA is projected at $195-$216 million, with capital expenditures unchanged at $115-$130 million Total Compass Minerals 2024 Outlook | Metric | 2024 Range (in millions) | | :--- | :--- | | Adj. EBITDA | $195 - $216 | | Capital Expenditures | $115 - $130 | 2024 Capital Expenditures Breakdown | Category | Amount (in millions) | | :--- | :--- | | Sustaining | $80 - $90 | | Lithium | ~$30 | | Fortress | $5 - $10 | | Total | $115 - $130 | Other Assumptions The 2024 outlook includes assumptions for DDA of $100-$110 million, net interest expense of $65-$70 million, and an effective tax rate of (25%)-(20%) 2024 Other Financial Assumptions | Metric | 2024 Range (in millions or percentage) | | :--- | :--- | | Depreciation, depletion and amortization | $100 - $110 | | Interest expense, net | $65 - $70 | | Effective income tax rate (excl. items) | (25%) - (20%) | Financial Statements and Reconciliations Non-GAAP Measures Explanation Company uses non-GAAP measures like Adjusted EBITDA to evaluate core operational performance by excluding non-indicative items, supplementing GAAP figures - Management uses non-GAAP measures like Adjusted EBITDA to evaluate core business operating performance, as financing and taxes are managed corporately[27] - Adjusted metrics eliminate the impact of items not indicative of underlying operating performance, aiding year-over-year normalized comparisons[29] Reconciliations of Non-GAAP Measures This section provides detailed GAAP to non-GAAP reconciliations for Q3 2024, including adjustments for restructuring charges, leading to adjusted operating earnings and EBITDA Reconciliation for Adjusted Operating Earnings (Q3 2024) | Item (in millions) | Amount | | :--- | :--- | | Operating earnings (GAAP) | $5.9 | | Restructuring charges | $1.5 | | Adjusted operating earnings (Non-GAAP) | $7.4 | Reconciliation for Adjusted Net Loss (Q3 2024) | Item (in millions) | Amount | | :--- | :--- | | Net loss (GAAP) | $(43.6) | | Restructuring charges | $1.5 | | Adjusted net loss (Non-GAAP) | $(42.1) | Reconciliation to Adjusted EBITDA (Q3 2024) | Item (in millions) | Amount | | :--- | :--- | | Net loss (GAAP) | $(43.6) | | Interest expense | $17.2 | | Income tax expense | $32.7 | | Depreciation, depletion and amortization | $26.1 | | EBITDA (Non-GAAP) | $32.4 | | Adjustments | $0.4 | | Adjusted EBITDA (Non-GAAP) | $32.8 | Consolidated Financial Statements Preliminary consolidated financial statements for Q3 2024 show $202.9 million in sales, a $43.6 million net loss, and $1,595.2 million in total assets Consolidated Statements of Operations Q3 2024 consolidated operations show $202.9 million in sales, $32.6 million gross profit, and a $43.6 million net loss Consolidated Statement of Operations (Q3 2024, in millions) | Line Item | Amount | | :--- | :--- | | Sales | $202.9 | | Gross profit | $32.6 | | Operating earnings | $5.9 | | Loss before income taxes | $(10.9) | | Net loss | $(43.6) | | Diluted net loss per common share | $(1.05) | Condensed Consolidated Balance Sheets As of June 30, 2024, total assets were $1,595.2 million, with $1,243.1 million in liabilities and $352.1 million in stockholders' equity Condensed Balance Sheet (June 30, 2024, in millions) | Category | Amount | | :--- | :--- | | Total Assets | $1,595.2 | | Cash and cash equivalents | $12.8 | | Inventories | $407.5 | | Property, plant and equipment, net | $787.9 | | Total Liabilities | $1,243.1 | | Long-term debt, net of current portion | $868.8 | | Total Stockholders' Equity | $352.1 | Segment Information Q3 2024 segment information shows Salt as the primary revenue driver with $160.6 million in sales and $25.9 million operating earnings Segment Information (Three Months Ended June 30, 2024, in millions) | Segment | Sales to External Customers | Operating Earnings (Loss) | Total Assets (as of end of period) | | :--- | :--- | :--- | :--- | | Salt | $160.6 | $25.9 | $1,013.3 | | Plant Nutrition | $38.8 | $(1.4) | $408.1 | | Corporate & Other | $3.5 | $(18.6) | $173.8 | | Total | $202.9 | $5.9 | $1,595.2 |