Compass Minerals(CMP) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, cash flows, and accompanying notes, for the quarter ended December 31, 2021 Consolidated Balance Sheets The company's total assets increased to $1.69 billion, while total stockholders' equity slightly decreased to $288.0 million as of December 31, 2021 Consolidated Balance Sheet Highlights (in millions) | Account | Dec 31, 2021 | Sep 30, 2021 | | :--- | :--- | :--- | | Total Current Assets | $585.2 | $531.4 | | Total Assets | $1,693.1 | $1,630.9 | | Total Current Liabilities | $197.4 | $195.4 | | Long-Term Debt | $1,004.9 | $935.4 | | Total Liabilities | $1,405.1 | $1,387.8 | | Total Stockholders' Equity | $288.0 | $293.1 | Consolidated Statements of Operations Sales increased to $331.5 million, but operating earnings decreased to $20.4 million and net earnings fell to $2.4 million for the three months ended December 31, 2021 Consolidated Statement of Operations (in millions, except per share data) | Metric | Q1 FY2022 (ended Dec 31, 2021) | Q1 FY2021 (ended Dec 31, 2020) | | :--- | :--- | :--- | | Sales | $331.5 | $309.2 | | Gross Profit | $59.9 | $58.5 | | Operating Earnings | $20.4 | $28.1 | | Net Earnings from Continuing Operations | $7.9 | $14.7 | | Net (Loss) from Discontinued Operations | ($5.5) | $13.4 | | Net Earnings | $2.4 | $28.1 | | Diluted EPS | $0.07 | $0.81 | Consolidated Statements of Cash Flows Net cash used in operating activities was $14.3 million, while net cash provided by financing activities was $63.3 million for the three months ended December 31, 2021 Cash Flow Summary (in millions) | Cash Flow Activity | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($14.3) | ($13.3) | | Net Cash Used in Investing Activities | ($41.2) | ($23.0) | | Net Cash Provided by Financing Activities | $63.3 | $22.1 | | Net Change in Cash and Cash Equivalents | $7.9 | ($13.1) | Notes to Consolidated Financial Statements The notes detail significant accounting policies, discontinued operations, segment performance, debt, and ongoing legal and regulatory matters, including an SEC investigation and Canadian tax disputes - The company transitioned to a September 30 fiscal year end in 2021, with fiscal year 2022 commencing on October 1, 2021[31] - The company's South America chemicals and specialty plant nutrition businesses, investment in Fermavi, and North America micronutrient business have been classified as held for sale and are reported as discontinued operations[37][38][40] - The company is under investigation by the SEC's Division of Enforcement regarding disclosures concerning the Goderich mine, its South American business, and related accounting matters, with several executives receiving Wells Notices from the SEC staff[75][76][77] - Canadian provincial tax authorities have issued tax reassessments totaling $167.0 million (including interest) for fiscal years 2002-2016, which the company is disputing[68] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for the first quarter of fiscal 2022, highlighting increased sales but decreased operating earnings, along with the fiscal 2022 outlook and liquidity position Consolidated Results of Continuing Operations Total sales increased by 7% to $331.5 million, but operating earnings decreased by 27% to $20.4 million due to higher SG&A and lower Salt segment gross profit - Total sales increased by 7% ($22.3 million), primarily due to the Salt segment[131] - Operating earnings decreased by 27% ($7.7 million) due to higher corporate SG&A expenses (executive transition, lithium project, SEC investigation costs) and lower Salt segment operating earnings[131][136] - Adjusted EBITDA from continuing operations decreased by 6% ($3.6 million) to $58.4 million[131][179] Operating Segment Performance Salt segment sales increased 20% to $273.9 million with an 11% drop in operating earnings, while Plant Nutrition sales decreased 30% to $54.6 million but operating earnings rose 188% Salt Segment Performance | Metric | Q1 FY2022 | Q1 FY2021 | % Change | | :--- | :--- | :--- | :--- | | Sales (in millions) | $273.9 | $228.5 | +20% | | Operating Earnings (in millions) | $39.4 | $44.5 | -11% | | Total Tons Sold (thousands) | 3,440 | 2,783 | +24% | Plant Nutrition Segment Performance | Metric | Q1 FY2022 | Q1 FY2021 | % Change | | :--- | :--- | :--- | :--- | | Sales (in millions) | $54.6 | $78.2 | -30% | | Operating Earnings (in millions) | $9.5 | $3.3 | +188% | | Sales Volumes (thousands of tons) | 83 | 143 | -42% | | Average Sales Price (per ton) | $660 | $548 | +20% | Fiscal 2022 Outlook The company provides its fiscal 2022 outlook, projecting Salt segment sales volumes between 11.8 million and 12.8 million tons, and capital expenditures between $100 million and $110 million - Salt segment sales volumes for fiscal 2022 are expected to range from 11.8 million to 12.8 million tons[152] - Plant Nutrition segment sales volumes for fiscal 2022 are expected to range from 280,000 to 320,000 tons[152] - Fiscal 2022 capital expenditures are expected to be between $100 million and $110 million[152] Liquidity and Capital Resources As of December 31, 2021, total outstanding debt was $1.01 billion, with $158.6 million available under the revolving credit facility, and the dividend was reduced to support strategic investments - As of Dec 31, 2021, total outstanding debt was $1.01 billion, with $158.6 million available under the revolving credit facility[159] - The company reduced its dividend by approximately 80% in November 2021 to provide liquidity for strategic expansion opportunities[171] - Key capital projects for fiscal 2022 include a $15 million upgrade to the Cote Blanche mine barge dock and a $15 million allocation for a direct lithium extraction plant at the Ogden facility[172] - The company completed a $50 million total equity investment in Fortress North America, a fire-retardant products company, reaching a 45% ownership interest in January 2022[173] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from interest rates, foreign currency exchange rates, and commodity pricing, which are partially mitigated by derivative instruments - The company is subject to market risks from interest rates, foreign currency exchange rates (Canadian dollar, British pound), and commodity prices[189] - Derivative instruments are used to mitigate exposure to natural gas prices and foreign currency fluctuations[189] Controls and Procedures Management concluded that disclosure controls and procedures were effective, and the company has remediated a previously reported material weakness in internal controls over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of December 31, 2021[191] - The company has remediated the previously reported material weakness in internal controls over financial reporting related to interim inventory valuation[192] PART II. OTHER INFORMATION Legal Proceedings This section refers to disclosures in Notes 7 and 9 of the financial statements, detailing ongoing legal matters including Canadian tax disputes and an SEC investigation - The company is involved in legal proceedings detailed in Notes 7 and 9, which include Canadian tax disputes and an SEC investigation[195] Risk Factors There have been no material changes to previously disclosed risk factors, with readers referred to the Transition Report on Form 10-KT for a full discussion - The company refers to its Transition Report on Form 10-KT for the period ended September 30, 2021, for a full discussion of applicable risk factors[196]