Compass Minerals(CMP) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Compass Minerals International, Inc. for the three and nine months ended June 30, 2025, and June 30, 2024, covering balance sheets, operations, cash flows, and related notes Consolidated Balance Sheets Total assets decreased to $1,537.4 million as of June 30, 2025, from $1,640.1 million as of September 30, 2024, primarily due to reduced inventories and intangible assets, while total stockholders' equity declined to $249.8 million Consolidated Balance Sheet Summary (in millions) | Account | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $79.4 | $20.2 | | Inventories | $264.7 | $414.1 | | Total current assets | $570.6 | $587.3 | | Property, plant and equipment, net | $773.8 | $806.5 | | Total assets | $1,537.4 | $1,640.1 | | Liabilities & Equity | | | | Total current liabilities | $265.1 | $217.0 | | Long-term debt, net | $825.3 | $910.0 | | Total stockholders' equity | $249.8 | $316.6 | | Total liabilities and stockholders' equity | $1,537.4 | $1,640.1 | Consolidated Statements of Operations Sales for the three months ended June 30, 2025, increased to $214.6 million, with net loss narrowing to $(17.0) million, while nine-month sales grew to $1,016.4 million, and net loss significantly decreased to $(72.6) million due to lower impairment charges Consolidated Statements of Operations Summary (in millions, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales | $214.6 | $202.9 | $1,016.4 | $908.6 | | Gross profit | $41.2 | $32.6 | $152.3 | $175.5 | | Operating income (loss) | $15.9 | $5.9 | $13.3 | $(87.0) | | Net loss | $(17.0) | $(43.6) | $(72.6) | $(157.8) | | Diluted net loss per common share | $(0.41) | $(1.05) | $(1.74) | $(3.83) | Consolidated Statements of Cash Flows Net cash provided by operating activities for the nine months ended June 30, 2025, significantly improved to $204.6 million from $27.1 million in the prior year, while financing activities used $111.5 million primarily for debt restructuring Consolidated Cash Flow Summary (in millions) | Cash Flow Activity | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $204.6 | $27.1 | | Net cash used in investing activities | $(34.7) | $(95.0) | | Net cash (used in) provided by financing activities | $(111.5) | $42.2 | | Net change in cash and cash equivalents | $59.2 | $(25.9) | | Cash and cash equivalents, end of period | $79.4 | $12.8 | Notes to Consolidated Financial Statements The notes detail accounting policies, segment information, debt, and legal contingencies, highlighting the strategic exit from the Fortress business, significant debt refinancing in June 2025, and a securities class action settlement covered by insurance - The company is exiting the Fortress fire retardant business, which resulted in impairment charges of $53.7 million for the nine months ended June 30, 2025. Substantially all Fortress assets were subsequently sold for $20.0 million in cash[26][27][32] - In June 2025, the company issued $650.0 million of 8.00% Senior Notes due 2030. Proceeds were used to repay the term loan, redeem $350.0 million of its 6.75% Senior Notes due 2027, and for general corporate purposes[55][56] - The company reached an agreement to settle a securities class action lawsuit for $48.0 million. The company's insurers have consented to and committed to pay the settlement amount[67][68] - A valuation allowance of $29.0 million was recorded against U.S. deferred tax assets during the nine months ended June 30, 2025, due to a cumulative loss position in the U.S. over the last three years[47] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 and nine-month fiscal 2025 financial results, highlighting improved operating income from higher sales and lower impairment charges, segment performance, the Fortress business exit, significant debt refinancing, and the full fiscal year 2025 outlook Consolidated Results of Operations Q3 fiscal 2025 total sales increased 6% to $214.6 million, with operating income rising to $15.9 million, while nine-month sales grew 12% to $1,016.4 million, achieving $13.3 million operating income, a significant turnaround from a prior-year loss due to lower impairment charges Q3 Financial Performance Comparison (in millions) | Metric | Q3 2025 | Q3 2024 | Change | | :--- | :--- | :--- | :--- | | Total Sales | $214.6 | $202.9 | +$11.7M (+6%) | | Operating Income | $15.9 | $5.9 | +$10.0M | | Net Loss | $(17.0) | $(43.6) | +$26.6M | | Diluted EPS | $(0.41) | $(1.05) | +$0.64 | Nine-Month Financial Performance Comparison (in millions) | Metric | YTD 2025 | YTD 2024 | Change | | :--- | :--- | :--- | :--- | | Total Sales | $1,016.4 | $908.6 | +$107.8M (+12%) | | Operating Income (Loss) | $13.3 | $(87.0) | +$100.3M | | Net Loss | $(72.6) | $(157.8) | +$85.2M | | Diluted EPS | $(1.74) | $(3.83) | +$2.09 | - The significant improvement in nine-month operating income was primarily due to lower impairment charges. The current period included a $53.7 million impairment for the Fortress business exit, whereas the prior year had $173.4 million in impairments related to lithium, Fortress, and Plant Nutrition goodwill[10][135][153] Operating Segment Performance The Salt segment's Q3 sales increased 3% to $166.0 million with operating earnings of $28.1 million, while nine-month operating earnings fell to $124.4 million; Plant Nutrition's Q3 sales rose 15% to $44.8 million, achieving a $5.2 million profit, and nine-month operating results improved to $0.3 million earnings Salt Segment Performance | Metric | Q3 2025 | Q3 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales (in millions) | $166.0 | $160.6 | $840.9 | $745.3 | | Operating Earnings (in millions) | $28.1 | $25.9 | $124.4 | $142.6 | | Total Tons Sold (thousands) | 1,544 | 1,483 | 9,142 | 7,804 | Plant Nutrition Segment Performance | Metric | Q3 2025 | Q3 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales (in millions) | $44.8 | $38.8 | $164.5 | $138.6 | | Operating Earnings (Loss) (in millions) | $5.2 | $(1.4) | $0.3 | $(56.7) | | Sales Volumes (thousands of tons) | 68 | 56 | 263 | 205 | Outlook For fiscal year 2025, the company projects Salt segment sales volumes of 10.7M-11.0M tons and adjusted EBITDA of $220M-$229M, Plant Nutrition sales volumes of 320K-325K tons and adjusted EBITDA of $24M-$27M, with capital expenditures of $75M-$85M - Fiscal Year 2025 Guidance: - Salt Segment: Sales volumes of 10.7M to 11.0M tons; Adjusted EBITDA of $220M to $229M - Plant Nutrition Segment: Sales volumes of 320,000 to 325,000 tons; Adjusted EBITDA of $24M to $27M - Capital Expenditures: Expected to be $75M to $85M[174] - Based on bidding for the upcoming winter season, the company expects its average North American highway deicing contract selling price to be 2% to 4% higher than in fiscal 2025, with committed bid volumes up 3% to 5%[174] Liquidity and Capital Resources As of June 30, 2025, total liquidity was $388.7 million, with nine-month net cash from operations significantly increasing to $204.6 million; the company completed a major debt refinancing by issuing $650 million in new 8.00% Senior Notes and suspended dividends to prioritize debt reduction - Total liquidity as of June 30, 2025, was $388.7 million, comprising $79.4 million of cash and $309.3 million of availability under its revolving credit facility[178] - The company issued $650.0 million of 8.00% Senior Notes due 2030 and used proceeds to repay its term loan and redeem $350.0 million of its 6.75% Senior Notes due 2027, resulting in a $7.6 million loss on debt extinguishment[187][188][142] - The credit agreement was amended to fix revolving commitments at $325.0 million and modify financial covenants, replacing the total net leverage ratio with a first lien net leverage ratio and lowering the interest coverage ratio requirement[190] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate fluctuations, foreign currency (CAD, GBP), and commodity pricing (natural gas), using derivatives to mitigate some exposures, with no material change in risk since the last fiscal year-end - The company's primary market risks are interest rate risk, foreign currency exchange rate risk, and commodity pricing risk. It uses derivatives to hedge commodity and foreign currency risks and does not engage in speculative trading[207] Item 4. Controls and Procedures Management deemed disclosure controls and procedures ineffective as of September 30, 2024, due to material weaknesses in risk assessment and information/communication processes, with active remediation efforts underway including enhanced risk assessment and new accounting personnel - The CEO and CFO concluded that disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting[208] - The material weaknesses stem from an ineffective risk assessment process and an ineffective information and communication process, which led to deficiencies in process-level controls throughout financial reporting[214] - Remediation efforts are in progress, including enhancing the risk assessment process, hiring additional accounting professionals with technical expertise, and redesigning controls over manual journal entries and balance sheet reconciliations[216] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to detailed disclosures on legal proceedings in Note 6 (Income Taxes) and Note 8 (Commitments and Contingencies) of the financial statements, with no material developments since September 30, 2024, beyond those notes - The company is involved in various legal proceedings, with detailed information provided in Note 6 (Income Taxes) and Note 8 (Commitments and Contingencies) of the financial statements[217] Item 1A. Risk Factors This section directs readers to the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024, for a comprehensive discussion of applicable business risk factors - For a discussion of applicable risk factors, the report refers to Part I, Item 1A of the company's Annual Report on Form 10-K for the year ended September 30, 2024[218] Item 4. Mine Safety Disclosures This section indicates that information on mine safety violations and related regulatory matters, as required by the Dodd-Frank Act, is included in Exhibit 95 of this Quarterly Report - Information regarding mine safety violations as required by Section 1503(a) of the Dodd-Frank Act is included in Exhibit 95 to this Form 10-Q[220] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including the indenture for the new 8.000% Senior Notes, the fifth amendment to the credit agreement, and CEO/CFO certifications - Key exhibits filed include the Indenture for the 8.000% Senior Notes due 2030 (Exhibit 4.1) and Amendment No. 5 to the Credit Agreement (Exhibit 10.1)[223]