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 producer 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 and agricultural applications. Its plant nutrition products 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 plant nutrients, consisting of sulfate of potash (“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 to businesses located 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 year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”) in its Annual Report on Form 10-K on February 26, 2021. 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 deicing salt product sales. As a result, Salt segment sales and operating earnings are generally higher in the first and fourth quarters and lower during the second and third quarters of each calendar year. 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 second, third and fourth quarters of the calendar year 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.
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 Annual Report on Form 10-K for the year ended December 31, 2020. The Company reports its financial results from discontinued operations and continuing operations separately to recognize the financial impact of disposal transactions from ongoing operations. Discontinued operations reporting occurs when a component or a group of components of an entity has been disposed of or classified as held for sale and represents a strategic shift that has a major effect on the entity’s operations and financial results. In the Company’s Consolidated Statements of Cash Flows, the cash flows from discontinued operations are not separately classified. The Company has reclassified certain prior year amounts, including the results of discontinued operations, assets and liabilities held for sale and reportable segment information, to conform to the current year presentation. Unless otherwise indicated, amounts provided in these Notes pertain to continuing operations. See Note 2 for information on discontinued operations and Note 11 for information on the Company’s reportable segments.
Recent Accounting Pronouncements
The Company has evaluated all of the recently issued, but not yet effective, accounting standards that have been issued or proposed by the Financial Accounting Standards Board (“FASB”) or other standards-setting bodies through the filing date of these unaudited consolidated financial statements and does not believe the future adoption of any such pronouncements will have a material impact on its consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
Strategic Evaluation and Plan to Sell Businesses
During 2020, the Company initiated an evaluation of the strategic fit of certain of the Company’s businesses. On February 16, 2021, the Company announced its plan to restructure its former Plant Nutrition South America segment to enable targeted and separate sales processes for each portion of the former segment, including its chemicals and specialty plant nutrition businesses along with the Company’s equity method investment in Fermavi Eletroquímica Ltda. (“Fermavi”). Concurrently, to optimize its asset base in North America, the Company evaluated the strategic fit of its North America micronutrient product business. On March 16, 2021, the Board of the Directors of the Company approved a plan to sell the Company’s South America chemicals and specialty plant nutrition businesses, investment in Fermavi and North America micronutrient product business (collectively, the “Specialty Businesses”) with the goal of reducing the Company’s leverage and enabling increased focus on optimizing the Company’s core businesses. The South America chemicals and specialty plant nutrition businesses and investment in Fermavi were previously reported as the Company’s Plant Nutrition South America segment. The North America micronutrient product business was previously included as part of the Company’s Plant Nutrition North America segment, which has been renamed as the Plant Nutrition segment. The Company now has two reportable segments, Salt and Plant Nutrition, as discussed further in Note 11.
The Company concluded that the Specialty Businesses met the criteria for classification as held for sale upon receiving approval from its Board of Directors to sell the Specialty Businesses in the first quarter of 2021. In addition, the Company believes there is a single disposal plan representing a strategic shift that will have a material effect on its operations and financial results. Consequently, the Specialty Businesses qualify for presentation as assets and liabilities held for sale and discontinued operations in accordance with U.S. GAAP. Accordingly, current and noncurrent assets and liabilities of the Specialty Businesses are presented in the Consolidated Balance Sheets as assets and liabilities held for sale for both periods presented and their results of operations are presented as discontinued operations in the Consolidated Statements of Operations for each period presented. Interest expense attributed to discontinued operations represents interest expense for loans in Brazil by the Company’s South America chemicals and specialty plant nutrition businesses, which are expected to be fully repaid from proceeds received from the Company’s sale of its South America specialty plant nutrition businesses.
As described further in Note 2, on May 4, 2021, and July 1, 2021, the Company completed the sale of a component of its North America micronutrient business and the sale of its South America specialty plant nutrition business, respectively. In the second quarter of 2021, the Company abandoned the remaining inventory of its North America micronutrient product business and has reclassified its remaining product lines as discontinued operations for all periods presented. On June 28, 2021, the Company entered into a definitive agreement to sell its investment in Fermavi. The Company continues to actively pursue the sale of the South America chemicals business and believes the sale is probable to occur within the next twelve months.
Revisions to Prior Period Consolidated Financial Statements
As discussed further in Note 16, management corrected its interim inventory valuation methodology which resulted in a historical understatement of first-quarter Salt segment operating income, which is completely offset in subsequent quarters with no impact to full-year results.
Additionally, management corrected other immaterial items included in previously filed consolidated financial statements. These were adjustments for Canadian other post-employment benefit obligations (refer to Note 8 for more information), the valuation of bulk sulfate of potash (“SOP”) stockpile inventory at the Company's Ogden facility and transition taxes related to the U.S. Tax Cuts and Jobs Act (which is commonly referred to as “U.S. tax reform”), which was enacted in December 2017. In accordance with the guidance in FASB Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections, ASC Topic 250-10-S99-1, Assessing Materiality, and ASC Topic 250-10-S99-1, Considering the Effects of Prior Year Misstatements in Current Year Financial Statements, the Company concluded that its previously issued consolidated financial statements were not materially misstated as a result of these other immaterial adjustments.
The Company is working to revise its previously issued Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 (the “1Q 2021 Form 10-Q”) and Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”) to address all identified corrections. The historical periods presented in this Quarterly Report on Form 10-Q reflect adjustments to the information presented in the Company’s previously-filed Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and 2020 Form 10-K. Additionally, historical periods have been adjusted to reflect the application of assets and liabilities held for sale and discontinued operations in accordance with U.S. GAAP, as discussed above. See Note 16 for the effect of the revisions on each of the individual effected line items in the Company’s unaudited consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
Change in Fiscal Year
On June 23, 2021, the Board of Directors of the Company approved a change in the Company’s fiscal year end from December 31st to September 30th. As a result of this change, the Company will file a Transition Report on Form 10-K for the transition period ending September 30, 2021.
2. Discontinued Operations:
On March 23, 2021, the Company entered into a definitive agreement to sell its South America specialty plant nutrition business to ICL Brasil Ltda., a subsidiary of ICL Group Ltd. The transaction closed on July 1, 2021. Upon closing the Company received gross proceeds of approximately $432.3 million, including $12.7 million in working capital adjustments (in each case, based on exchange rates at the time of closing), comprised of a cash payment of approximately $325.5 million and an additional $106.8 million in net debt assumed by ICL Brasil Ltda. The terms of the definitive agreement provide for an additional earn-out payment of up to R$88 million Brazilian reais, payable in 2022 and which will be calculated on a sliding scale if the South America specialty plant nutrition business achieves certain full-year 2021 earnings before interest, taxes, depreciation and amortization (“EBITDA”) performance targets. At the closing of the transaction, the parties also entered into a Reverse Transition Services Agreement, which governs the parties’ respective rights and obligations with respect to the provision of certain transition services to the Company’s Brazil subsidiaries after closing. The Reverse Transition Services Agreement has a term of 18 months and allows the Company’s remaining Brazil subsidiaries to assign their rights and obligations with respect to the transition services to any buyer of a sufficient portion of their assets.
On April 7, 2021, the Company entered into a definitive agreement to sell a component of its North America micronutrient business (primarily consisting of intangible assets and certain inventory of the business) to Koch Agronomic Services, LLC (“KAS”), a subsidiary of Koch Industries, through an asset purchase and sale agreement. On May 4, 2021, the Company completed the sale for approximately $56.7 million, which resulted in the removal of the North America micronutrient business assets and liabilities from the unaudited consolidated financial statements, including $7.0 million in goodwill. The Company recognized a gain from the sale of $30.8 million, net of $2.8 million from the release of accumulated currency translation adjustment (“CTA”) upon substantial liquidation of the business.
On June 28, 2021, the Company entered into a definitive agreement to sell its investment in Fermavi for R$45 million Brazilian reais (including R$30 million Brazilian reais of deferred purchase price). The pending Fermavi sale is subject to the satisfaction of closing conditions, including receipt of necessary governmental approvals.
In measuring the assets and liabilities held for sale at fair value less estimated costs to sell, the Company completed an analysis when its Board of Directors committed to a plan to sell the Specialty Businesses and the Company will update the analysis each quarter until the businesses are sold. Management evaluated indicators of fair value of each of the Specialty Businesses, including the net proceeds expected to be realized at closing of the transactions to sell its South America specialty plant nutrition business, a component of its North America micronutrient business, its investment in Fermavi and the earn-out component of the proceeds from the sale of the South America specialty plant nutrition business, in addition to indications of fair value received from third parties in connection with the marketing of the remaining South America chemicals business.
The amount of CTA loss within accumulated other comprehensive loss (“AOCL”) on the Company’s Consolidated Balance Sheets related to the Specialty Businesses was considered in the Company’s determination of the adjustment to fair value less estimated costs to sell. The Company recognized a net (gain) loss from its adjustment to fair value less estimated costs to sell of $(14.6) million and $240.6 million included in its earnings (loss) from discontinued operations in its Consolidated Statements of Operations for the three and six months ended June 30, 2021, respectively. The net gain from adjustment to fair value less estimated costs to sell recognized for the three months ended June 30, 2021 reflects changes in the Company's net proceeds, both realized and estimated, and updated exchange rates that have impacted the CTA. The adjustment to fair value less estimated costs to sell for the six months ended June 30, 2021 is due primarily to the translation of the net assets of the Company’s Brazil subsidiaries from Brazilian reais to U.S. dollars, which has been reported in CTA. As of June 30, 2021, the adjustment to fair value less costs to sell for the Company’s South America chemicals and specialty plant nutrition businesses was $81.8 million and $148.4 million, respectively, inclusive of CTA. The amount of CTA recorded in AOCL will be eliminated upon substantial liquidation of each foreign entity. The Company also recognized a loss for the adjustment to fair value less estimated costs to sell of $10.4 million on its investment in Fermavi as of June 30, 2021. The Company recognized a
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
loss of $2.8 million upon abandonment of the remaining North America micronutrient product inventory not included in the purchase and sale agreement with KAS, which primarily consisted of product lines produced in South America.
The Company’s determination of the net proceeds to be realized at or after closing of each transaction involves certain estimates and judgments based on, among other items: (i) management’s interpretation and application of key terms of each definitive agreement, (ii) certain consolidated balance sheet amounts of the business or asset group as of June 30, 2021 and (iii) certain projections of costs to be incurred through an estimated future date. The balances of net working capital, cash, debt and deductions are subject to future changes based on the operations of the remaining businesses from June 30, 2021, through the closing date or earn-out determination date, and estimated proceeds and costs to sell the businesses could differ from actual results. Consequently, a change in the adjustment to fair value less estimated costs to sell associated with the Specialty Businesses could occur in a future period, including upon closing of the transactions described above or thereafter.
In addition to calculating an estimate of net proceeds expected to be realized at or after closing, as described above, certain additional judgments, estimates and other reporting matters related to discontinued operations include matters discussed in the following paragraphs.
As discussed in Note 1, the North America micronutrient product business was previously reported in the Company’s Plant Nutrition North America segment (which is now known as the Plant Nutrition segment), which aligns with the Plant Nutrition North America reporting unit for purposes of evaluating goodwill. Based on the Company’s assessment of the estimated relative fair values of the North America micronutrient product business and the remaining business from the former Plant Nutrition North America reporting unit, the Company performed an allocation of goodwill between the North America micronutrient product business classified as held for sale and the business being retained, which resulted in $6.8 million of goodwill allocated to the North America micronutrient product business as of December 31, 2020. See Note 6 for additional details.
The information below sets forth selected financial information related to the operating results of the Specialty Businesses classified as discontinued operations. While the reclassification of the Specialty Businesses’ revenue and expenses to net earnings (loss) from discontinued operations in prior periods has no impact upon previously reported results, the Consolidated Balance Sheets present the assets and liabilities that were reclassified from the specified line items to assets and liabilities held for sale and the Consolidated Statements of Operations present the revenue and expenses that were reclassified from the specified line items to discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
The following table represents summarized balance sheet information of assets and liabilities held for sale (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
Cash and cash equivalents
|
$
|
27.3
|
|
|
$
|
10.5
|
|
Receivables, less allowance for doubtful accounts of $8.3 in 2021 and $7.1 in 2020
|
106.8
|
|
|
111.5
|
|
Inventories
|
101.5
|
|
|
70.7
|
|
Property, plant and equipment, net
|
122.1
|
|
|
—
|
|
Goodwill
|
225.8
|
|
|
—
|
|
Loss recognized on held for sale classification
|
(240.6)
|
|
|
—
|
|
Other
|
88.0
|
|
|
13.8
|
|
Current assets held for sale
|
$
|
430.9
|
|
|
$
|
206.5
|
|
|
|
|
|
Property, plant and equipment, net
|
$
|
—
|
|
|
$
|
113.2
|
|
Goodwill
|
—
|
|
|
225.5
|
|
Other
|
—
|
|
|
65.4
|
|
Noncurrent assets held for sale
|
$
|
—
|
|
|
$
|
404.1
|
|
|
|
|
|
Current portion of long-term debt
|
$
|
105.8
|
|
|
$
|
53.7
|
|
Accounts payable
|
59.6
|
|
|
34.3
|
|
Accrued expenses and other current liabilities
|
84.3
|
|
|
23.4
|
|
Current liabilities held for sale
|
$
|
249.7
|
|
|
$
|
111.4
|
|
|
|
|
|
Long-term debt, net of current portion
|
$
|
—
|
|
|
$
|
38.6
|
|
Other noncurrent liabilities
|
—
|
|
|
37.5
|
|
Noncurrent liabilities held for sale
|
$
|
—
|
|
|
$
|
76.1
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
The following table represents summarized statements of operations information of discontinued operations (in millions), inclusive of the remaining North America micronutrient product lines abandoned during the three months ended June 30, 2021, as discussed above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Sales
|
$
|
103.8
|
|
|
$
|
81.0
|
|
|
$
|
189.7
|
|
|
$
|
149.0
|
|
Shipping and handling cost
|
4.8
|
|
|
3.6
|
|
|
8.7
|
|
|
7.0
|
|
Product cost
|
78.8
|
|
|
57.9
|
|
|
141.8
|
|
|
109.9
|
|
Gross profit
|
20.2
|
|
|
19.5
|
|
|
39.2
|
|
|
32.1
|
|
Selling, general and administrative expenses
|
12.7
|
|
|
11.9
|
|
|
26.1
|
|
|
25.2
|
|
Operating earnings
|
7.5
|
|
|
7.6
|
|
|
13.1
|
|
|
6.9
|
|
Interest expense
|
2.1
|
|
|
1.8
|
|
|
3.8
|
|
|
4.2
|
|
(Gain) loss on foreign exchange
|
(24.3)
|
|
|
0.6
|
|
|
(20.0)
|
|
|
4.3
|
|
Net (gain) loss on adjustment to fair value less estimated costs to sell
|
(14.6)
|
|
|
—
|
|
|
240.6
|
|
|
—
|
|
Net gain on sale of business
|
(30.8)
|
|
|
—
|
|
|
(30.8)
|
|
|
—
|
|
Other income, net
|
(0.6)
|
|
|
(0.4)
|
|
|
(0.9)
|
|
|
(0.5)
|
|
Earnings (loss) from discontinued operations before income taxes
|
75.7
|
|
|
5.6
|
|
|
(179.6)
|
|
|
(1.1)
|
|
Income tax expense
|
2.2
|
|
|
1.7
|
|
|
3.2
|
|
|
1.0
|
|
Net earnings (loss) from discontinued operations
|
$
|
73.5
|
|
|
$
|
3.9
|
|
|
$
|
(182.8)
|
|
|
$
|
(2.1)
|
|
The significant components included in our Consolidated Statements of Cash Flows for the discontinued operations are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
Depreciation, depletion and amortization
|
$
|
4.8
|
|
|
$
|
10.8
|
|
Deferred income taxes
|
(9.0)
|
|
|
(2.5)
|
|
Loss on impairment of long-lived assets
|
237.6
|
|
|
—
|
|
Gain on sale of business
|
(33.7)
|
|
|
—
|
|
Proceeds from sale of business
|
56.7
|
|
|
—
|
|
Capital expenditures
|
(5.4)
|
|
|
(3.0)
|
|
Changes in receivables
|
7.2
|
|
|
2.6
|
|
Changes in inventories
|
(25.7)
|
|
|
(11.4)
|
|
Changes in other assets
|
(15.1)
|
|
|
(7.2)
|
|
Changes in accounts payable and accrued expenses and other current liabilities
|
(29.6)
|
|
|
18.6
|
|
Proceeds from issuance of long-term debt
|
21.8
|
|
|
22.2
|
|
Principal payments on long-term debt
|
(12.0)
|
|
|
(16.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
3. Revenues:
Nature of Products and Services
The Company’s Salt segment products include salt and magnesium chloride for use in road deicing and dust control, food processing, water softeners, and agricultural and industrial applications and the Company’s Plant Nutrition segment products include various grades of SOP. In the U.K., the Company operates a records management business utilizing excavated areas of the Winsford salt mine with one other location in London, England.
Identifying the Contract
The Company accounts for a customer contract when there is approval and commitment from both parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable.
Identifying the Performance Obligations
At contract inception, the Company assesses the goods and services it has promised to its customers and identifies a performance obligation for each promise to transfer to the customer a distinct good or service (or bundle of goods or services). Determining whether products and services are considered distinct performance obligations that should be accounted for separately or aggregated together may require significant judgment.
Identifying and Allocating the Transaction Price
The Company’s revenues are measured based on consideration specified in the customer contract, net of any sales incentives and amounts collected on behalf of third parties such as sales taxes. In certain cases, the Company’s customer contracts may include promises to transfer multiple products and services to a customer. For multiple-element arrangements, the Company generally allocates the transaction price to each performance obligation in proportion to its stand-alone selling price.
When Performance Obligations Are Satisfied
The vast majority of the Company’s revenues are recognized at a point in time when the performance obligations are satisfied based upon transfer of control of the product or service to a customer. To determine when the control of goods is transferred, the Company typically assesses, among other things, the shipping terms of the contract, as shipping is an indicator of transfer of control. Some of the Company’s products are sold when the control of the goods transfers to the customer at the time of shipment. There are also instances when the Company provides shipping services to deliver its products. Shipping and handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs. The Company recognizes shipping and handling costs that are incurred after the customer obtains control of the goods as fulfillment costs which are accrued at the time of revenue recognition.
Significant Payment Terms
The customer contract states the final terms of the sale, including the description, quantity and price of each product or service purchased. Payment is typically due in full within 30 days of delivery. The Company does not adjust the consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the good or service is transferred to the customer and when the customer pays for that good or service will be one year or less.
Refunds, Returns and Warranties
The Company’s products are generally not sold with a right of return and the Company does not generally provide credits or incentives, which may be required to be accounted for as variable consideration when estimating the amount of revenue to be recognized. The Company uses historical experience to estimate accruals for refunds due to manufacturing or other defects.
See Note 11 for disaggregation of sales by segment, type and geographical region.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
4. Inventories:
Inventories consist of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
|
|
|
(Revised)
|
Finished goods
|
$
|
234.0
|
|
|
$
|
250.9
|
|
Raw materials and supplies
|
55.0
|
|
|
47.8
|
|
Total inventories
|
$
|
289.0
|
|
|
$
|
298.7
|
|
5. Property, Plant and Equipment, Net:
Property, plant and equipment, net, consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
Land, buildings and structures, and leasehold improvements
|
$
|
540.1
|
|
|
$
|
544.5
|
|
Machinery and equipment
|
1,076.1
|
|
|
1,035.4
|
|
Office furniture and equipment
|
55.1
|
|
|
50.7
|
|
Mineral interests
|
174.0
|
|
|
172.4
|
|
Construction in progress
|
43.6
|
|
|
43.7
|
|
|
1,888.9
|
|
|
1,846.7
|
|
Less: accumulated depreciation and depletion
|
(1,055.1)
|
|
|
(995.0)
|
|
Property, plant and equipment, net
|
$
|
833.8
|
|
|
$
|
851.7
|
|
6. Goodwill and Intangible Assets, Net:
Amounts related to the Company’s amortization of intangible assets are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Aggregate amortization expense
|
$
|
0.4
|
|
|
$
|
0.4
|
|
|
$
|
0.8
|
|
|
$
|
0.8
|
|
Amounts related to the Company’s goodwill are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
Plant Nutrition Segment
|
$
|
52.1
|
|
|
$
|
49.6
|
|
Other
|
6.1
|
|
|
6.1
|
|
Total
|
$
|
58.2
|
|
|
$
|
55.7
|
|
The change in goodwill between December 31, 2020, and June 30, 2021 was due to the impact from translating foreign-denominated amounts to U.S. dollars. As of June 30, 2021, there were no indicators necessitating an interim impairment test of the Company’s operating segments based on the Company’s review of operating performance.
7. 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), foreign income, mining and withholding taxes, global intangible low-taxed income and interest expense recognition differences for book and tax purposes.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
As of June 30, 2021, and December 31, 2020, the Company had $3.4 million of gross foreign federal net operating loss (“NOL”) carryforwards that have no expiration date, $0 and $0.1 million, respectively, of gross foreign federal NOL carryforwards which expire beginning in 2033, and $0.2 million of net operating tax-effected state NOL carryforwards which expire beginning in 2027.
Canadian provincial tax authorities have challenged tax positions claimed by one of the Company’s Canadian subsidiaries and have issued tax reassessments for years 2002-2016. The reassessments are a result of ongoing audits and total $168.7 million, including interest, through June 30, 2021. The Company disputes these reassessments and will continue 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 $123.5 million performance bond and has paid $40.1 million to the Canadian tax authorities (most of which is recorded in other assets in the Consolidated Balance Sheets at June 30, 2021, and December 31, 2020), which is necessary to proceed with future appeals or litigation.
The Company expects that it will 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 June 30, 2021, 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 Annual Report on Form 10-K for the year ended December 31, 2020.
Settlements
In 2017, the Company, the Canadian Revenue Authority (“CRA”) and the U.S. Internal Revenue Service (“IRS”) reached a settlement agreement on transfer pricing issues for the Company’s 2007-2012 tax years. During 2018, in accordance with the agreement, the Company’s U.S. subsidiary made intercompany cash payments of $85.7 million to its Canadian subsidiary and tax payments were made to Canadian taxing authorities of $17.5 million. Additional tax payments of $5.3 million were made during 2019 with the remaining liability of $1.5 million expected to be paid in 2021. Corresponding tax refunds of $22.3 million have been received through June 30, 2021, from U.S. taxing authorities, with the remaining refund of approximately $0.7 million expected in 2021 (recorded in other current assets in the Consolidated Balance Sheets).
In 2018, the Company, the CRA and the IRS reached a settlement agreement on transfer pricing and management fees as part of an advanced pricing agreement that covers tax years 2013-2021. During 2019, in accordance with the settlement agreement, the Company’s U.S. subsidiary made intercompany cash payments of $106.1 million to its Canadian subsidiary and tax payments to Canadian taxing authorities of $29.9 million, with the remaining $1.4 million balance paid during 2020. Corresponding tax refunds of $60.0 million have been received through June 30, 2021, from U.S. taxing authorities, with the remaining $1.7 million expected in 2021 (recorded in other current assets in the Consolidated Balance Sheets).
8. Pension Plans and Other Benefits:
The Company has a defined benefit pension plan for certain of its U.K. employees. Benefits of this pension plan are based on a combination of years of service and compensation levels. This plan was closed to new participants in 1992. Beginning December 1, 2008, future benefits ceased to accrue for the remaining active employee participants in the pension plan concurrent with the establishment of a defined contribution plan for these employees. For more information related to the U.K. pension plan, please refer to Note 9 of the Company’s Form 10-K for the year ended December 31, 2020. In addition, the Company has a defined benefit plan applicable to certain of its Brazil employees. The pension assets, obligations and net pension expense related to this plan are immaterial. The Company also provides retirement medical, dental and life insurance benefits and post-employment vacation benefits to certain Canadian employees (collectively, the “Canadian Benefits”), which are considered other post-employment benefit obligations.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
The Company expects to pay the following payments for the Canadian Benefits (in millions):
|
|
|
|
|
|
Calendar Year
|
Future Expected Benefit Payments
|
2021
|
$
|
0.5
|
|
2022
|
0.6
|
|
2023
|
0.6
|
|
2024
|
0.7
|
|
2025
|
0.6
|
|
2026-2030
|
3.9
|
|
The following table sets forth the Company’s benefit obligation, as of December 31 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Change in benefit obligation:
|
|
|
|
|
Benefit obligation as of January 1
|
|
$
|
9.4
|
|
|
$
|
8.4
|
|
Service cost
|
|
0.5
|
|
|
0.5
|
|
Interest cost
|
|
0.8
|
|
|
0.7
|
|
Benefits paid
|
|
(0.5)
|
|
|
(0.4)
|
|
Currency fluctuation adjustment
|
|
0.4
|
|
|
0.2
|
|
Benefit obligation as of December 31
|
|
$
|
10.6
|
|
|
$
|
9.4
|
|
The Company uses the Projected Unit Credit Method in determining its benefit obligation. Under this method, each participant’s benefits are attributed to years of service, taking into account the projection of benefit costs. The components of net periodic cost (benefit) are also shown above.
9. Long-Term Debt:
Long-term debt consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
4.875% Senior Notes due July 2024
|
$
|
250.0
|
|
|
$
|
250.0
|
|
Term Loan due January 2025
|
345.8
|
|
|
390.0
|
|
Revolving Credit Facility due January 2025
|
35.0
|
|
|
130.3
|
|
6.75% Senior Notes due December 2027
|
500.0
|
|
|
500.0
|
|
AR Securitization Facility expires June 2023
|
33.2
|
|
|
51.2
|
|
|
1,164.0
|
|
|
1,321.5
|
|
Less unamortized debt issuance costs
|
(11.2)
|
|
|
(12.4)
|
|
Total debt
|
1,152.8
|
|
|
1,309.1
|
|
Less current portion
|
—
|
|
|
(10.0)
|
|
Long-term debt
|
$
|
1,152.8
|
|
|
$
|
1,299.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021, the term loan and revolving credit facility under the Company’s 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 June 30, 2021, the weighted average interest rate on all borrowings outstanding under the term loan and revolving credit facility under the Company’s credit agreement was approximately 2.1%.
In July 2021, the Company utilized cash proceeds from the sale of a component of its North America micronutrient product business and its South America specialty plant nutrition business to repay amounts borrowed against its revolving credit facility of $35.0 million. The Company also utilized an additional $265.0 million of proceeds to pay down its term loan balance.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
In the first quarter of 2021, the Company made a $41.7 million required prepayment of its term loan for 2020 Excess Cash Flow (as such term is defined in the credit agreement). This prepayment, along with the prepayment made in the third quarter of 2021 described above, will reduce the future required term loan payments. As such, the Company will not have a scheduled term loan payment until January 2025.
Securitization
On June 30, 2020, certain of the Company’s U.S. subsidiaries entered into a three-year committed revolving accounts receivable financing facility (the “AR Facility”) of up to $100 million with PNC Bank, National Association (“PNC”), as administrative agent and lender, and PNC Capital Markets, LLC, as structuring agent.
In connection with the AR Facility, two of the Company’s U.S. subsidiaries, from time to time, sell and contribute receivables and certain related assets to a special purposes entity and wholly-owned U.S. subsidiary of the Company (the “SPE”). The SPE finances its acquisition of the receivables by obtaining secured loans from PNC and the other lenders party to a receivables financing agreement. A U.S. subsidiary of the Company services the receivables on behalf of the SPE for a fee. In addition, the Company has agreed to guarantee the performance by its subsidiaries. The Company and its subsidiaries do not guarantee the loan principal or interest under the receivables financing agreement or the collectability of the receivables under the AR Facility.
The purchase price for the sale of receivables consists of cash available to the SPE from loans under the AR Facility and from collections on previously sold receivables and, to the extent the SPE does not have funds available to pay the purchase price due on any day in cash, through an increase in the principal amount of a subordinated intercompany loan. The SPE pays monthly interest and fees with respect to amounts advanced by the lenders under the AR Facility.
The SPE’s sole business consists of the purchase or acceptance through capital contributions of the receivables and the subsequent granting of a security interest in these receivables and related rights to PNC on behalf of the lenders under the AR Facility. The SPE is a separate legal entity with its own separate creditors who will be entitled, upon its liquidation, to be satisfied out of the SPE’s assets prior to any assets or value in the SPE becoming available to the Company and the assets of the SPE are not available to pay creditors of the Company or any of its affiliates other than the SPE.
10. Commitments and Contingencies:
The Wisconsin Department of Agriculture, Trade and Consumer Protection (“DATCP”) and the Wisconsin Department of Natural Resources (“DNR”) have information indicating that agricultural chemicals are present within the subsurface area of the Company’s property located in Kenosha, Wisconsin. The agricultural chemicals were used by previous owners and operators of the site. None of the identified chemicals have been used in association with the Company’s operations since it acquired the property in 2002. DATCP and DNR have directed the Company to conduct further investigations into the environmental conditions at the Kenosha property. The Company continues on-property investigations and has provided the findings to DATCP and DNR as they have become available. All investigations and mitigation activities to date, and any potential future remediation work, are being conducted under the Wisconsin Agricultural Chemical Cleanup Program, which provides for reimbursement of some of the costs.
The Company conducts business operations in several countries and is subject to various federal and local labor, social security, environmental and tax laws. While the Company believes it complies with such laws, they are complex and subject to interpretation. In addition to the tax assessments discussed in Note 7, the Company’s Brazilian subsidiaries are party to administrative tax proceedings and claims which totaled $8.5 million and $7.9 million as of June 30, 2021 and December 31, 2020, respectively, and relate primarily to value added tax, state tax (ICMS) and social security tax (PIS and COFINS) assessments. The Company has assessed the likelihood of a loss at less than probable and therefore, has not established a reserve for these matters. The Company also assumed liabilities for labor-related matters in connection with the acquisition of Compass Minerals América do Sul Indústria e Comércio Ltda., which are primarily related to compensation, labor benefits and consequential tax claims that totaled $3.0 million and $3.5 million as of June 30, 2021 and December 31, 2020, respectively. The Company believes the maximum exposure for these other labor matters totaled approximately $14 million and $16 million as of June 30, 2021 and December 31, 2020, respectively. Amounts recorded are included in liabilities held for sale on the Consolidated Balance Sheets.
The Division of Enforcement of the SEC is investigating the Company’s disclosures primarily concerning the operation of the Goderich mine. The Company has cooperated with this investigation and will continue to do so. While it is not possible to
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
predict the timing or the outcome of the SEC inquiry, the Company believes that this matter will not have a material impact on its results of operation, cash flows or financial position.
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 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.
11. 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. In connection with the planned and executed disposals discussed in Note 1, the Company has identified two reportable segments. The Specialty Businesses that comprised the Company’s former Plant Nutrition South America reportable segment and the North America micronutrient product business previously reported within the former Plant Nutrition North America reportable segment were classified as discontinued operations for all periods presented. As part of the Company’s strategic shift, the Company has renamed the former Plant Nutrition North America segment as the Plant Nutrition segment.
For the three and six months ended June 30, 2021 and 2020, the Company has presented two reportable segments: Salt and Plant Nutrition. The Salt segment produces and markets salt, consisting of sodium chloride and magnesium chloride, for use in road deicing for winter roadway safety and for dust control, food processing, water softeners and other consumer, agricultural and industrial applications. The Plant Nutrition segment produces and markets plant nutrients, including various grades of SOP.
Segment information is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021
|
|
Salt
|
|
Plant
Nutrition
|
|
Corporate
& Other(a)
|
|
Total
|
Sales to external customers
|
|
$
|
142.6
|
|
|
$
|
53.8
|
|
|
$
|
3.0
|
|
|
$
|
199.4
|
|
Intersegment sales
|
|
—
|
|
|
2.5
|
|
|
(2.5)
|
|
|
—
|
|
Shipping and handling cost
|
|
44.3
|
|
|
7.3
|
|
|
—
|
|
|
51.6
|
|
Operating earnings (loss)
|
|
19.2
|
|
|
0.7
|
|
|
(19.0)
|
|
|
0.9
|
|
Depreciation, depletion and amortization
|
|
17.6
|
|
|
9.1
|
|
|
3.3
|
|
|
30.0
|
|
Total assets (as of end of period)
|
|
986.5
|
|
|
456.6
|
|
|
98.5
|
|
|
1,541.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020
|
|
Salt
|
|
Plant
Nutrition
|
|
Corporate
& Other(a)
|
|
Total
|
Sales to external customers
|
|
$
|
121.9
|
|
|
$
|
51.0
|
|
|
$
|
2.3
|
|
|
$
|
175.2
|
|
Intersegment sales
|
|
—
|
|
|
2.4
|
|
|
(2.4)
|
|
|
—
|
|
Shipping and handling cost
|
|
29.7
|
|
|
7.3
|
|
|
—
|
|
|
37.0
|
|
Operating earnings (loss) (restated)
|
|
22.5
|
|
|
6.3
|
|
|
(19.1)
|
|
|
9.7
|
|
Depreciation, depletion and amortization
|
|
17.2
|
|
|
9.6
|
|
|
3.0
|
|
|
29.8
|
|
Total assets (as of end of period)
|
|
947.7
|
|
|
515.0
|
|
|
36.4
|
|
|
1,499.1
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021
|
|
Salt
|
|
Plant
Nutrition
|
|
Corporate
& Other(a)
|
|
Total
|
Sales to external customers
|
|
$
|
511.6
|
|
|
$
|
107.5
|
|
|
$
|
5.8
|
|
|
$
|
624.9
|
|
Intersegment sales
|
|
—
|
|
|
3.0
|
|
|
(3.0)
|
|
|
—
|
|
Shipping and handling cost
|
|
159.7
|
|
|
15.0
|
|
|
—
|
|
|
174.7
|
|
Operating earnings (loss)
|
|
110.8
|
|
|
6.0
|
|
|
(39.9)
|
|
|
76.9
|
|
Depreciation, depletion and amortization
|
|
35.6
|
|
|
17.9
|
|
|
6.4
|
|
|
59.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020
|
|
Salt
|
|
Plant
Nutrition
|
|
Corporate
& Other(a)
|
|
Total
|
Sales to external customers
|
|
$
|
409.7
|
|
|
$
|
106.4
|
|
|
$
|
5.0
|
|
|
$
|
521.1
|
|
Intersegment sales
|
|
—
|
|
|
2.7
|
|
|
(2.7)
|
|
|
—
|
|
Shipping and handling cost
|
|
119.5
|
|
|
15.9
|
|
|
—
|
|
|
135.4
|
|
Operating earnings (loss) (restated)
|
|
90.3
|
|
|
10.9
|
|
|
(37.2)
|
|
|
64.0
|
|
Depreciation, depletion and amortization
|
|
31.8
|
|
|
19.4
|
|
|
6.0
|
|
|
57.2
|
|
Disaggregated revenue by product type is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021
|
|
Salt
|
|
Plant
Nutrition
|
|
Corporate
& Other(a)
|
|
Total
|
Highway Deicing Salt
|
|
$
|
71.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
71.9
|
|
Consumer & Industrial Salt
|
|
70.7
|
|
|
—
|
|
|
—
|
|
|
70.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOP
|
|
—
|
|
|
56.3
|
|
|
—
|
|
|
56.3
|
|
Eliminations & Other
|
|
—
|
|
|
(2.5)
|
|
|
3.0
|
|
|
0.5
|
|
Sales to external customers
|
|
$
|
142.6
|
|
|
$
|
53.8
|
|
|
$
|
3.0
|
|
|
$
|
199.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020
|
|
Salt
|
|
Plant
Nutrition
|
|
Corporate
& Other(a)
|
|
Total
|
Highway Deicing Salt
|
|
$
|
61.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
61.7
|
|
Consumer & Industrial Salt
|
|
60.2
|
|
|
—
|
|
|
—
|
|
|
60.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOP
|
|
—
|
|
|
53.4
|
|
|
—
|
|
|
53.4
|
|
Eliminations & Other
|
|
—
|
|
|
(2.4)
|
|
|
2.3
|
|
|
(0.1)
|
|
Sales to external customers
|
|
$
|
121.9
|
|
|
$
|
51.0
|
|
|
$
|
2.3
|
|
|
$
|
175.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021
|
|
Salt
|
|
Plant
Nutrition
|
|
Corporate
& Other(a)
|
|
Total
|
Highway Deicing Salt
|
|
$
|
363.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
363.2
|
|
Consumer & Industrial Salt
|
|
148.4
|
|
|
—
|
|
|
—
|
|
|
148.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOP
|
|
—
|
|
|
110.5
|
|
|
—
|
|
|
110.5
|
|
Eliminations & Other
|
|
—
|
|
|
(3.0)
|
|
|
5.8
|
|
|
2.8
|
|
Sales to external customers
|
|
$
|
511.6
|
|
|
$
|
107.5
|
|
|
$
|
5.8
|
|
|
$
|
624.9
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020
|
|
Salt
|
|
Plant
Nutrition
|
|
Corporate
& Other(a)
|
|
Total
|
Highway Deicing Salt
|
|
$
|
276.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
276.8
|
|
Consumer & Industrial Salt
|
|
132.9
|
|
|
—
|
|
|
—
|
|
|
132.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOP
|
|
—
|
|
|
109.1
|
|
|
—
|
|
|
109.1
|
|
Eliminations & Other
|
|
—
|
|
|
(2.7)
|
|
|
5.0
|
|
|
2.3
|
|
Sales to external customers
|
|
$
|
409.7
|
|
|
$
|
106.4
|
|
|
$
|
5.0
|
|
|
$
|
521.1
|
|
(a)Corporate and other includes corporate entities, records management operations 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, as well as costs for the human resources, information technology, legal and finance functions. Corporate assets in 2021 include assets under the Company’s AR Facility.
The Company’s revenue by geographic area is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
Revenue
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
United States(a)
|
|
$
|
158.3
|
|
|
$
|
145.1
|
|
|
$
|
475.2
|
|
|
$
|
401.8
|
|
Canada
|
|
34.0
|
|
|
24.2
|
|
|
104.7
|
|
|
101.6
|
|
United Kingdom
|
|
6.8
|
|
|
5.3
|
|
|
41.5
|
|
|
17.0
|
|
Other
|
|
0.3
|
|
|
0.6
|
|
|
3.5
|
|
|
0.7
|
|
Total revenue
|
|
$
|
199.4
|
|
|
$
|
175.2
|
|
|
$
|
624.9
|
|
|
$
|
521.1
|
|
(a)United States sales exclude product sold to foreign customers at U.S. ports.
12. Stockholders’ Equity and Equity Instruments:
In May 2020, the Company’s stockholders approved the 2020 Incentive Award Plan (the “2020 Plan”), which authorizes the issuance of 2,977,933 shares of Company common 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.
Options
Substantially all of the stock options granted vest ratably, in tranches, over a four-year service period. Unexercised options expire after seven years. Options do not have dividend or voting rights. Upon vesting, each option can be exercised to purchase one share of the Company’s common stock. The exercise price of options is equal to the closing stock price on the grant date.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
To estimate the fair value of options on the grant date, the Company uses the Black-Scholes option valuation model. Award recipients are grouped according to expected exercise behavior. Unless better information is available to estimate the expected term of the options, the estimate is based on historical exercise experience. The risk-free rate, using U.S. Treasury yield curves in effect at the time of grant, is selected based on the expected term of each group. The Company’s historical stock price is used to estimate expected volatility. The fair value and inputs used to calculate fair value for options granted for the six months ended June 30, 2021, are included in the table below:
|
|
|
|
|
|
|
|
Fair value of options granted
|
$13.46
|
Exercise price
|
$63.14
|
Expected term (years)
|
4.75
|
Expected volatility
|
36.1%
|
Dividend yield
|
3.7%
|
Risk-free rate of return
|
0.4%
|
RSUs
Typically, the RSUs granted under the 2015 Plan and the 2020 Plan vest after one to three years of service. RSUs entitle the holders to one share of common stock for each vested RSU. Unvested RSUs do not have voting rights but are entitled to receive non-forfeitable dividends (generally after a performance hurdle has been satisfied for the year of the grant) or other distributions equal to those declared on the Company’s common stock for RSUs that are earned as a result of the satisfaction of the performance hurdle. The closing stock price on the grant date is used to determine the fair value of RSUs.
PSUs
Substantially all of the PSUs granted under the 2015 Plan and the 2020 Plan are either total stockholder return PSUs (“TSR PSUs”), return on invested capital PSUs (“ROIC PSUs”) or EBITDA growth PSUs (“EBITDA Growth PSUs”). The actual number of shares of the Company’s common stock that may be earned with respect to TSR PSUs is calculated by comparing the Company’s total stockholder return to the total stockholder return for each company comprising the Company’s peer group over the three-year performance period and may range from 0% to 200% of the target number of shares based upon the attainment of these performance conditions. The actual number of shares of common stock that may be earned with respect to ROIC PSUs is calculated based on the average of the Company’s annual return on invested capital for each year in the three-year performance period and may range from 0% to 200% of the target number of shares based upon the attainment of these performance conditions. The actual number of shares of common stock that may be earned with respect to EBITDA Growth PSUs is calculated based on the attainment of EBITDA growth during the performance period and may range from 0% to 300% of the target number of shares based upon the attainment of these performance conditions.
PSUs represent a target number of shares of the Company’s common stock that may be earned before adjustment based upon the attainment of certain performance conditions. Holders of PSUs do not have voting rights but are entitled to receive non-forfeitable dividends or other distributions equal to those declared on the Company’s common stock for PSUs that are earned, which are paid when the shares underlying the PSUs are issued.
To estimate the fair value of the TSR PSUs on the grant date, the Company uses a Monte-Carlo simulation model, which simulates future stock prices of the Company as well as the Company’s peer group. This model uses historical stock prices to estimate expected volatility and the Company’s correlation to the peer group. The risk-free rate was determined using the same methodology as the option valuations as discussed above. The Company’s closing stock price on the grant date was used to estimate the fair value of the ROIC PSUs and EBITDA Growth PSUs. The Company will adjust the expense of the ROIC PSUs and EBITDA Growth PSUs based upon its estimate of the number of shares that will ultimately vest at each interim date during the vesting period.
During the six months ended June 30, 2021, the Company reissued the following number of shares from treasury stock: 20,657 shares related to the exercise of stock options, 33,562 shares related to the release of RSUs which vested, 16,496 shares related to the release of PSUs which vested, and 25,258 shares related to stock payments. In 2020, the Company issued 72,454 net shares from treasury stock. The Company withheld a total of 18,853 shares with a fair value of $1.3 million related to the vesting of RSUs, PSUs, and stock payments during the six months ended June 30, 2021. The fair value of the shares were valued at the closing price at the vesting date and represent the employee tax withholding for the employee’s compensation. The Company recognized a tax deficiency of $0.1 million from its equity compensation awards as an increase to income tax expense during the six months ended June 30, 2021. During the six months ended June 30, 2021 and 2020, the Company
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
recorded $7.7 million (includes $1.0 million paid in cash) and $5.6 million (includes $0.5 million paid in cash), respectively, of compensation expense pursuant to its stock-based compensation plans. No amounts have been capitalized. The following table summarizes stock-based compensation activity during the six months ended June 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
RSUs
|
|
PSUs(a)
|
|
|
Number
|
|
Weighted-average
exercise price
|
|
Number
|
|
Weighted-average
fair value
|
|
Number
|
|
Weighted-average
fair value
|
Outstanding at December 31, 2020
|
|
868,772
|
|
|
$
|
63.06
|
|
|
207,982
|
|
|
$
|
55.68
|
|
|
241,794
|
|
|
$
|
65.57
|
|
Granted
|
|
120,602
|
|
|
63.14
|
|
|
95,287
|
|
|
63.52
|
|
|
96,002
|
|
|
63.14
|
|
Exercised(b)
|
|
(20,657)
|
|
|
60.19
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Released from restriction(b)
|
|
—
|
|
|
—
|
|
|
(37,312)
|
|
|
55.01
|
|
|
(16,496)
|
|
|
69.71
|
|
Cancelled/expired
|
|
(90,430)
|
|
|
79.58
|
|
|
(6,132)
|
|
|
62.06
|
|
|
(32,581)
|
|
|
61.65
|
|
Outstanding at June 30, 2021
|
|
878,287
|
|
|
$
|
61.44
|
|
|
259,825
|
|
|
$
|
58.50
|
|
|
288,719
|
|
|
$
|
64.96
|
|
(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 earnings (loss), net amortization of the unrealized loss of the pension obligation, the change in the unrealized gain (loss) on natural gas and foreign currency cash flow hedges and CTA. The components of and changes in AOCL as of and for the three and six months ended June 30, 2021 and 2020, are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021(a)
|
Gains and
(Losses) on
Cash Flow
Hedges
|
|
Defined
Benefit
Pension
|
|
Foreign
Currency
|
|
Total
|
Beginning balance
|
$
|
0.3
|
|
|
$
|
(9.2)
|
|
|
$
|
(315.1)
|
|
|
$
|
(324.0)
|
|
Other comprehensive (loss) income before reclassifications(b)
|
1.2
|
|
|
—
|
|
|
26.5
|
|
|
27.7
|
|
Amounts reclassified from accumulated other comprehensive (loss) income
|
(0.2)
|
|
|
0.3
|
|
|
—
|
|
|
0.1
|
|
Net current period other comprehensive (loss) income
|
1.0
|
|
|
0.3
|
|
|
26.5
|
|
|
27.8
|
|
Ending balance
|
$
|
1.3
|
|
|
$
|
(8.9)
|
|
|
$
|
(288.6)
|
|
|
$
|
(296.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020(a)
|
Gains and
(Losses) on
Cash Flow
Hedges
|
|
Defined
Benefit
Pension
|
|
Foreign
Currency
|
|
Total
|
Beginning balance
|
$
|
(0.5)
|
|
|
$
|
(6.7)
|
|
|
$
|
(358.5)
|
|
|
$
|
(365.7)
|
|
Other comprehensive income before reclassifications(b)
|
0.9
|
|
|
—
|
|
|
2.5
|
|
|
3.4
|
|
Amounts reclassified from accumulated other comprehensive (loss) income
|
(0.2)
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
Net current period other comprehensive income
|
0.7
|
|
|
0.2
|
|
|
2.5
|
|
|
3.4
|
|
Ending balance
|
$
|
0.2
|
|
|
$
|
(6.5)
|
|
|
$
|
(356.0)
|
|
|
$
|
(362.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021(a)
|
Gains and
(Losses) on
Cash Flow
Hedges
|
|
Defined
Benefit
Pension
|
|
Foreign
Currency
|
|
Total
|
Beginning balance
|
$
|
0.2
|
|
|
$
|
(9.4)
|
|
|
$
|
(294.6)
|
|
|
$
|
(303.8)
|
|
Other comprehensive income before reclassifications(b)
|
3.1
|
|
|
—
|
|
|
6.0
|
|
|
9.1
|
|
Amounts reclassified from accumulated other comprehensive (loss) income
|
(2.0)
|
|
|
0.5
|
|
|
—
|
|
|
(1.5)
|
|
Net current period other comprehensive (loss) income
|
1.1
|
|
|
0.5
|
|
|
6.0
|
|
|
7.6
|
|
Ending balance
|
$
|
1.3
|
|
|
$
|
(8.9)
|
|
|
$
|
(288.6)
|
|
|
$
|
(296.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020(a)
|
Gains and
(Losses) on
Cash Flow
Hedges
|
|
Defined
Benefit
Pension
|
|
Foreign
Currency
|
|
Total
|
Beginning balance
|
$
|
(0.6)
|
|
|
$
|
(6.9)
|
|
|
$
|
(184.7)
|
|
|
$
|
(192.2)
|
|
Other comprehensive income (loss) before reclassifications(b)
|
3.6
|
|
|
—
|
|
|
(171.3)
|
|
|
(167.7)
|
|
Amounts reclassified from accumulated other comprehensive (loss) income
|
(2.8)
|
|
|
0.4
|
|
|
—
|
|
|
(2.4)
|
|
Net current period other comprehensive income (loss)
|
0.8
|
|
|
0.4
|
|
|
(171.3)
|
|
|
(170.1)
|
|
Ending balance
|
$
|
0.2
|
|
|
$
|
(6.5)
|
|
|
$
|
(356.0)
|
|
|
$
|
(362.3)
|
|
(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 income (loss) of $0.7 million and $(18.5) million in the three and six months ended June 30, 2021, respectively, and $(14.4) million and $(89.9) million in the three and six months ended June 30, 2020, 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 June 30, 2021 and 2020, are shown below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Reclassified from AOCL
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
Line Item Impacted in the
Consolidated Statements of Operations
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
Losses on cash flow hedges:
|
|
|
|
|
|
|
|
|
|
Natural gas instruments
|
$
|
(0.3)
|
|
|
$
|
(0.3)
|
|
|
$
|
(0.5)
|
|
|
$
|
(0.6)
|
|
|
Product cost
|
Foreign currency contracts
|
—
|
|
|
—
|
|
|
(2.5)
|
|
|
(3.6)
|
|
|
Interest expense
|
Income tax expense
|
0.1
|
|
|
0.1
|
|
|
1.0
|
|
|
1.4
|
|
|
|
Reclassifications, net of income taxes
|
(0.2)
|
|
|
(0.2)
|
|
|
(2.0)
|
|
|
(2.8)
|
|
|
|
Amortization of defined benefit pension:
|
|
|
|
|
|
|
|
|
|
Amortization of loss
|
0.4
|
|
|
0.2
|
|
|
0.7
|
|
|
0.4
|
|
|
Product cost
|
Income tax benefit
|
(0.1)
|
|
|
—
|
|
|
(0.2)
|
|
|
—
|
|
|
|
Reclassifications, net of income taxes
|
0.3
|
|
|
0.2
|
|
|
0.5
|
|
|
0.4
|
|
|
|
Total reclassifications, net of income taxes
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
(1.5)
|
|
|
$
|
(2.4)
|
|
|
|
13. 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. Currently, the Company manages a portion of its commodity pricing risks by using derivative instruments. The Company does not seek to engage in trading activities or take speculative positions with any financial instrument arrangement. The Company has entered into natural gas 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 the Consolidated Balance Sheets. The assets and liabilities recorded as of June 30, 2021 and December 31, 2020 were not material.
Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the derivative instrument and the related change in value of the underlying hedged item. Depending on the exposure being hedged, the Company must designate the hedging instrument as a fair value hedge, a cash flow hedge or a net investment in foreign operations hedge. For the qualifying derivative instruments that have been designated as hedges, the change in fair value is recognized through earnings when the underlying transaction being hedged affects earnings, allowing a derivative’s gains and losses to offset related results from the hedged item in the statements of operations. Any ineffectiveness related to these hedges was not material for any of the periods presented. For derivative instruments that have not been designated as hedges, the entire change in fair value is recorded through earnings in the period of change.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
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’s objective is 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 June 30, 2021, the Company had entered into natural gas derivative instruments to hedge a portion of its natural gas purchase requirements through December 2022. As of June 30, 2021 and December 31, 2020, the Company had agreements in place to hedge forecasted natural gas purchases of 2.3 million and 2.5 million MMBtus, respectively. All natural gas derivative instruments held by the Company as of June 30, 2021 and December 31, 2020 qualified and were designated as cash flow hedges. As of June 30, 2021, the Company expects to reclassify from AOCL to earnings during the next twelve months $1.6 million of net gains on derivative instruments related to its natural gas hedges.
Foreign Currency Instrument
In April 2021, the Company entered into a non-deliverable foreign currency forward of R$500.0 million Brazilian reais to buy U.S. dollars and to sell Brazilian reais. The forward matured on July 1, 2021, which coincides with the closing of the sale of the South America specialty plant nutrition business. As of June 30 2021, the Company has recorded a payable of $9.6 million included in accrued expenses and other current liabilities in its Consolidated Balance Sheet related to this instrument (see Note 14).
14. 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 upon the sale of 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).
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 13). 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
Level One
|
|
Level Two
|
|
Level Three
|
Asset Class:
|
|
|
|
|
|
|
|
Mutual fund investments in a non-qualified savings plan(a)
|
$
|
1.9
|
|
|
$
|
1.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivatives – natural gas instruments, net
|
1.8
|
|
|
—
|
|
|
1.8
|
|
|
—
|
|
Total Assets
|
$
|
3.7
|
|
|
$
|
1.9
|
|
|
$
|
1.8
|
|
|
$
|
—
|
|
Liability Class:
|
|
|
|
|
|
|
|
Derivative - foreign exchange instrument
|
$
|
(9.6)
|
|
|
$
|
—
|
|
|
$
|
(9.6)
|
|
|
$
|
—
|
|
Liabilities related to non-qualified savings plan
|
(1.9)
|
|
|
(1.9)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
$
|
(11.5)
|
|
|
$
|
(1.9)
|
|
|
$
|
(9.6)
|
|
|
$
|
—
|
|
(a)Includes mutual fund investments of approximately 30% in common stock of large-cap U.S. companies, 10% in common stock of small to mid-cap U.S. companies, 10% in international companies, 15% in bond funds, 5% in short-term investments and 30% in blended funds.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2020
|
|
Level One
|
|
Level Two
|
|
Level Three
|
Asset Class:
|
|
|
|
|
|
|
|
Mutual fund investments in a non-qualified savings plan(a)
|
$
|
1.9
|
|
|
$
|
1.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivatives – natural gas instruments, net
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
Total Assets
|
$
|
2.1
|
|
|
$
|
1.9
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
Liability Class:
|
|
|
|
|
|
|
|
Liabilities related to non-qualified savings plan
|
$
|
(1.9)
|
|
|
$
|
(1.9)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
$
|
(1.9)
|
|
|
$
|
(1.9)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(a)Includes mutual fund investments of approximately 30% in the common stock of large-cap U.S. companies, 10% in the common stock of small to mid-cap U.S. companies, 5% in the common stock of international companies, 15% in bond funds, 15% in short-term investments and 25% in blended funds.
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 nonqualified savings plan of $1.9 million at both June 30, 2021 and December 31, 2020, are stated at fair value based on quoted market prices. As of June 30, 2021 and December 31, 2020, the estimated fair value of the Company’s fixed-rate 4.875% Senior Notes due July 2024, based on available trading information (Level 2), totaled $258.8 million and $260.3 million, respectively, compared with the aggregate principal amount at maturity of $250.0 million. As of June 30, 2021 and December 31, 2020, the estimated fair value of the Company’s fixed-rate 6.75% Senior Notes due December 2027, based on available trading information (Level 2), totaled $537.5 million and $543.1 million, respectively, compared with the aggregate principal amount at maturity of $500.0 million. The fair value at June 30, 2021 and December 31, 2020 of amounts outstanding under the Company’s term loans and revolving credit facility, based upon available bid information received from the Company’s lender (Level 2), totaled approximately $376.6 million and $513.8 million, respectively, compared with the aggregate principal amount at maturity of $380.8 million and $520.3 million, respectively.
Management performed an analysis for our Specialty Businesses as of March 31, 2021 and June 30, 2021, which resulted in the recognition of a loss related to an adjustment to fair value less estimated costs to sell the Specialty Businesses. The fair value measurements used in this analysis were a combination of Level 2 and Level 3 inputs. Refer to Note 2 for a discussion of fair value as it relates to the Company’s Specialty Businesses.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
15. Earnings (loss) per Share:
The Company calculates earnings (loss) per share using the two-class method. The two-class method requires allocating the Company’s net earnings (loss) to both common shares and participating securities. The following table sets forth the computation of basic and diluted earnings (loss) per common share (in millions, except for share and per-share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
(Restated)
|
|
|
|
(Restated)
|
Numerator:
|
|
|
|
|
|
|
|
Net (loss) earnings from continuing operations
|
$
|
(16.4)
|
|
|
$
|
(7.2)
|
|
|
$
|
25.5
|
|
|
$
|
32.8
|
|
Less: net loss allocated to participating securities(a)
|
(0.3)
|
|
|
(0.3)
|
|
|
(0.6)
|
|
|
(0.5)
|
|
Net (loss) earnings from continuing operations available to common stockholders
|
(16.7)
|
|
|
(7.5)
|
|
|
24.9
|
|
|
32.3
|
|
Net earnings (loss) from discontinued operations available to common stockholders
|
72.6
|
|
|
3.9
|
|
|
(182.8)
|
|
|
(2.1)
|
|
Net earnings (loss) available to common stockholders
|
$
|
55.9
|
|
|
$
|
(3.6)
|
|
|
$
|
(157.9)
|
|
|
$
|
30.2
|
|
|
|
|
|
|
|
|
|
Denominator (in thousands):
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding, shares for basic earnings per share
|
34,020
|
|
|
33,915
|
|
|
33,997
|
|
|
33,903
|
|
Weighted-average awards outstanding(b)
|
58
|
|
|
—
|
|
|
48
|
|
|
—
|
|
Shares for diluted earnings per share
|
34,078
|
|
|
33,915
|
|
|
34,045
|
|
|
33,903
|
|
|
|
|
|
|
|
|
|
Basic net (loss) earnings from continuing operations per common share
|
$
|
(0.49)
|
|
|
$
|
(0.22)
|
|
|
$
|
0.73
|
|
|
$
|
0.95
|
|
Basic net earnings (loss) from discontinued operations per common share
|
2.13
|
|
|
0.11
|
|
|
(5.38)
|
|
|
(0.06)
|
|
Basic net earnings (loss) per common share
|
$
|
1.64
|
|
|
$
|
(0.11)
|
|
|
$
|
(4.65)
|
|
|
$
|
0.89
|
|
|
|
|
|
|
|
|
|
Diluted net (loss) earnings from continuing operations per common share
|
$
|
(0.49)
|
|
|
$
|
(0.22)
|
|
|
$
|
0.73
|
|
|
$
|
0.94
|
|
Diluted net earnings (loss) from discontinued operations per common share
|
2.12
|
|
|
0.11
|
|
|
(5.38)
|
|
|
(0.06)
|
|
Diluted net earnings (loss) per common share
|
$
|
1.63
|
|
|
$
|
(0.11)
|
|
|
$
|
(4.65)
|
|
|
$
|
0.88
|
|
(a)Weighted participating securities include RSUs and PSUs that receive non-forfeitable dividends and consist of 432,000 and 439,000 weighted participating securities for the three and six months ended June 30, 2021, respectively, and 411,000 and 412,000 weighted participating securities for the three and six months ended June 30, 2020, respectively.
(b)For the calculation of diluted net (loss) earnings per share, the Company uses the more dilutive of either the treasury stock method or the two-class method to determine the weighted-average number of outstanding common shares. In addition, the Company had 1,171,000 and 1,225,000 weighted-average equity awards outstanding for the three and six months ended June 30, 2021, respectively, and 1,255,000 and 1,265,000 weighted-average equity awards outstanding for the three and six months ended June 30, 2020, respectively, that were anti-dilutive.
16. Revisions to Prior Period Consolidated Financial Statements:
The Company’s financial statements for the three- and six-month periods ended June 30, 2020 have been restated to correct an error in our interim inventory valuation methodology related to the capitalization of inventory variances at our Salt production mines, which resulted in a historical understatement of our first-quarter consolidated and Salt segment operating income that is completely offset in subsequent quarters with no impact to full-year operating results. This correction resulted in shifting previously reported Salt segment product costs from the first quarter to subsequent quarters.
The Company's consolidated financial statements for the three and six months ended June 30, 2020 have also been restated to correct certain immaterial items, the cumulative effect of which was considered to be too material to correct in fiscal 2021 earnings; however, the errors were not material to any annual historical periods. These adjustments primarily relate to an
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
understatement of our Canadian post-employment benefit obligations, overvaluation of bulk SOP stockpile inventory at the Company's Ogden facility, and transition taxes related to U.S. tax reform.
In the tables below, the amounts As Previously Reported represent the amounts as reported in the Company's previously filed Form 10-Q for the quarter ended June 30, 2020. The Amounts As Restated reflect adjustments to correct the errors noted above. The amounts As Currently Reported reflect the Specialty Businesses being reported as discontinued operations.
The effects of the revisions described above on the Company’s Consolidated Balance Sheet as of December 31, 2020, are as follows (in millions, except share data). The amounts As Previously Reported below reflect the impact of discontinued operations previously reported in the Form 10-Q for the quarter ended March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
The effects of the revisions described above on the Company’s Consolidated Balance Sheet as of December 31, 2020, are as follows (in millions, except share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously
Reported
|
|
|
|
As
Revised
|
ASSETS
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
10.6
|
|
|
|
|
$
|
10.6
|
|
Receivables, less allowance for doubtful accounts
|
185.1
|
|
|
|
|
185.1
|
|
Inventories(a)
|
299.9
|
|
|
|
|
298.7
|
|
Current assets held for sale
|
206.5
|
|
|
|
|
206.5
|
|
Other(b)
|
55.1
|
|
|
|
|
55.4
|
|
Total current assets
|
757.2
|
|
|
|
|
756.3
|
|
Property, plant and equipment, net
|
851.7
|
|
|
|
|
851.7
|
|
Intangible assets, net
|
49.9
|
|
|
|
|
49.9
|
|
Goodwill
|
55.7
|
|
|
|
|
55.7
|
|
Noncurrent assets held for sale
|
404.1
|
|
|
|
|
404.1
|
|
Other
|
143.8
|
|
|
|
|
143.8
|
|
Total assets
|
$
|
2,262.4
|
|
|
|
|
$
|
2,261.5
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
Current liabilities:
|
|
|
|
|
|
Current portion of long-term debt
|
$
|
10.0
|
|
|
|
|
$
|
10.0
|
|
Accounts payable
|
82.6
|
|
|
|
|
82.6
|
|
Accrued salaries and wages(c)
|
21.7
|
|
|
|
|
22.2
|
|
Income taxes payable
|
5.1
|
|
|
|
|
5.1
|
|
Accrued interest
|
9.0
|
|
|
|
|
9.0
|
|
Current liabilities held for sale
|
111.5
|
|
|
|
|
111.4
|
|
Accrued expenses and other current liabilities
|
56.4
|
|
|
|
|
56.4
|
|
Total current liabilities
|
296.3
|
|
|
|
|
296.7
|
|
Long-term debt, net of current portion
|
1,299.1
|
|
|
|
|
1,299.1
|
|
Deferred income taxes, net(d)
|
60.0
|
|
|
|
|
57.3
|
|
Noncurrent liabilities held for sale
|
76.1
|
|
|
|
|
76.1
|
|
Other noncurrent liabilities(c)
|
143.9
|
|
|
|
|
154.0
|
|
Commitments and contingencies (Note 10)
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
Common stock: $0.01 par value, 200,000,000 authorized shares; 35,367,264 issued shares
|
0.4
|
|
|
|
|
0.4
|
|
Additional paid-in capital
|
127.0
|
|
|
|
|
127.0
|
|
Treasury stock, at cost — 1,407,926 shares at December 31, 2020
|
(4.4)
|
|
|
|
|
(4.4)
|
|
Retained earnings(e)
|
567.3
|
|
|
|
|
559.1
|
|
Accumulated other comprehensive loss(f)
|
(303.3)
|
|
|
|
|
(303.8)
|
|
Total stockholders’ equity
|
387.0
|
|
|
|
|
378.3
|
|
Total liabilities and stockholders’ equity
|
$
|
2,262.4
|
|
|
|
|
$
|
2,261.5
|
|
(a) Amount in As Revised column reflects decrease of $1.2 million related to the SOP inventory correction.
(b) Amount in As Revised column reflects a $0.3 million tax benefit related to the SOP inventory correction.
(c) Amount in As Revised column reflects Canadian Benefits obligation, consisting of $0.4 million of current liabilities and $10.1 million of noncurrent liabilities.
(d) Amount in As Revised column reflects $2.7 million reduction of deferred tax liability related to the Canadian Benefits obligation.
(e) Amount in As Revised column reflects retained earnings reductions of $7.4 million related to the Canadian Benefits obligation and $0.8 million related to the SOP inventory correction, net of related tax effects.
(f) Amount in As Revised column reflects a $0.5 million impact of translating the Canadian Benefits obligation into U.S. dollars.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
The effects of the revisions described above on the Company’s Consolidated Statements of Operations for the three and six months ended June 30, 2020, are as follows (in millions, except share and per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2020
|
|
Six Months Ended
June 30, 2020
|
|
As
Previously
Reported
|
|
As
Restated
|
|
As
Currently
Reported
|
|
As
Previously
Reported
|
|
As
Restated
|
|
As
Currently
Reported
|
Sales
|
$
|
256.1
|
|
|
$
|
256.1
|
|
|
$
|
175.2
|
|
|
$
|
670.0
|
|
|
$
|
670.0
|
|
|
$
|
521.1
|
|
Shipping and handling cost
|
40.5
|
|
|
40.5
|
|
|
37.0
|
|
|
142.3
|
|
|
142.3
|
|
|
135.4
|
|
Product cost(a)
|
149.3
|
|
|
156.5
|
|
|
98.6
|
|
|
374.1
|
|
|
371.9
|
|
|
262.0
|
|
Gross profit
|
66.3
|
|
|
59.1
|
|
|
39.6
|
|
|
153.6
|
|
|
155.8
|
|
|
123.7
|
|
Selling, general and administrative expenses
|
41.8
|
|
|
41.8
|
|
|
29.9
|
|
|
84.9
|
|
|
84.9
|
|
|
59.7
|
|
Operating earnings
|
24.5
|
|
|
17.3
|
|
|
9.7
|
|
|
68.7
|
|
|
70.9
|
|
|
64.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense (income):
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
17.2
|
|
|
17.2
|
|
|
15.4
|
|
|
36.2
|
|
|
36.2
|
|
|
32.0
|
|
Loss (gain) on foreign exchange
|
5.0
|
|
|
5.0
|
|
|
4.4
|
|
|
(9.3)
|
|
|
(9.3)
|
|
|
(13.6)
|
|
Other (income) expense, net
|
(0.6)
|
|
|
(0.6)
|
|
|
(0.2)
|
|
|
(0.4)
|
|
|
(0.4)
|
|
|
0.1
|
|
Earnings (loss) from continuing operations before income taxes
|
2.9
|
|
|
(4.3)
|
|
|
(9.9)
|
|
|
42.2
|
|
|
44.4
|
|
|
45.5
|
|
Income tax expense (benefit) for continuing operations(b)
|
1.2
|
|
|
(1.0)
|
|
|
(2.7)
|
|
|
12.9
|
|
|
13.7
|
|
|
12.7
|
|
Net earnings (loss) from continuing operations
|
1.7
|
|
|
(3.3)
|
|
|
(7.2)
|
|
|
29.3
|
|
|
30.7
|
|
|
32.8
|
|
Net earnings (loss) from discontinued operations
|
—
|
|
|
—
|
|
|
3.9
|
|
|
—
|
|
|
—
|
|
|
(2.1)
|
|
Net earnings (loss)
|
$
|
1.7
|
|
|
$
|
(3.3)
|
|
|
$
|
(3.3)
|
|
|
$
|
29.3
|
|
|
$
|
30.7
|
|
|
$
|
30.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings (loss) from continuing operations per common share
|
$
|
0.04
|
|
|
$
|
(0.11)
|
|
|
$
|
(0.22)
|
|
|
$
|
0.85
|
|
|
$
|
0.89
|
|
|
$
|
0.95
|
|
Basic net earnings (loss) from discontinued operations per common share
|
—
|
|
|
—
|
|
|
0.11
|
|
|
—
|
|
|
—
|
|
|
(0.06)
|
|
Basic net earnings (loss) per common share
|
$
|
0.04
|
|
|
$
|
(0.11)
|
|
|
$
|
(0.11)
|
|
|
$
|
0.85
|
|
|
$
|
0.89
|
|
|
$
|
0.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings (loss) from continuing operations per common share
|
$
|
0.04
|
|
|
$
|
(0.11)
|
|
|
$
|
(0.22)
|
|
|
$
|
0.84
|
|
|
$
|
0.88
|
|
|
$
|
0.94
|
|
Diluted net earnings (loss) from discontinued operations per common share
|
—
|
|
|
—
|
|
|
0.11
|
|
|
—
|
|
|
—
|
|
|
(0.06)
|
|
Diluted net earnings (loss) per common share
|
$
|
0.04
|
|
|
$
|
(0.11)
|
|
|
$
|
(0.11)
|
|
|
$
|
0.84
|
|
|
$
|
0.88
|
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
33,915
|
|
|
33,915
|
|
|
33,915
|
|
|
33,903
|
|
|
33,903
|
|
|
33,903
|
|
Diluted
|
33,915
|
|
|
33,915
|
|
|
33,915
|
|
|
33,903
|
|
|
33,903
|
|
|
33,903
|
|
(a) Amounts in As Restated columns reflect impacts of $7.0 million and $(4.1) million related to the correction in inventory valuation methodology for the three and six months ended June 30, 2020, respectively, and $0.2 million and $0.4 million related to the Canadian Benefits obligation for the three and six months ended June 30, 2020, respectively. Also reflected in the six months ended June 30, 2020 is an impact of $1.5 million related to the SOP inventory correction.
(b) Amounts in As Restated columns reflect changes in income tax expense of $(2.1) million and $1.2 million related to the correction in inventory valuation methodology for the three and six months ended June 30, 2020, respectively, and $(0.1) million related to Canadian Benefits obligation for the three and six months ended June 30, 2020. Also reflected in the six months ended June 30, 2020 is an impact of $(0.3) million related to the SOP inventory correction.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
The following table presents the effects of the revisions to the Company’s Consolidated Statements of Stockholders’ Equity (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained Earnings
|
|
Accumulated Other
Comprehensive Loss
|
(In millions)
|
|
As
Previously
Reported
|
|
As
Revised
|
|
As
Previously
Reported
|
|
As
Revised
|
Balance, December 31, 2019(a)
|
|
$
|
607.4
|
|
|
$
|
595.6
|
|
|
$
|
(192.1)
|
|
|
$
|
(192.2)
|
|
Balance, March 31, 2020(b) (restated)
|
|
610.1
|
|
|
604.7
|
|
|
(365.3)
|
|
|
(365.7)
|
|
Balance, June 30, 2020(c) (restated)
|
|
587.0
|
|
|
576.7
|
|
|
(362.3)
|
|
|
(362.3)
|
|
Balance, March 31, 2021(d) (restated)
|
|
319.5
|
|
|
320.5
|
|
|
(323.5)
|
|
|
(324.0)
|
|
(a) Amount in As Revised column under the Retained Earnings heading reflects retained earnings reductions of $6.8 million related to the SOP inventory correction and $9.3 million related to the Canadian Benefits obligation, both offset by related tax effects.
(b) Restated amount in As Revised column under the Retained Earnings heading reflects retained earnings reductions of $8.3 million related to the SOP inventory correction and $8.9 million related to the Canadian Benefits obligation, as well as a retained earnings increase of $11.1 million related to the correction in inventory valuation methodology, all offset by related tax effects. Restated amount in As Revised column under the Accumulated Other Comprehensive Loss heading reflects the impact of translating the salt inventory correction and the Canadian Benefits obligation into U.S. dollars of $(0.7) million and $0.3 million, respectively.
(c) Amount in As Revised column under the Retained Earnings heading reflects the retained earnings reductions of $8.3 million related to the SOP inventory correction and $9.5 million related to the Canadian Benefits obligation, as well as a retained earnings increase of $7.0 million related to the correction in inventory valuation methodology, all offset by related tax effects.
(d) Restated amount in As Revised column under the Retained Earnings heading reflects the retained earnings increase of $11.7 million related to the correction in inventory valuation methodology, as well as a retained earnings reduction of $10.9 million related to the Canadian Benefits obligation, both offset by related tax effects. Restated amount in As Revised column under the Accumulated Other Comprehensive Loss heading reflects the impact of translating the Canadian Benefits obligation and the change in inventory valuation methodology of $(0.6) million and $0.1 million, respectively.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|
The effects of the adjustments described above on the Company’s Consolidated Statement of Cash Flows for the six months ended June 30, 2020, are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2020
|
|
As
Previously
Reported
|
|
|
|
As
Restated
|
Cash flows from operating activities:
|
|
|
|
|
|
Net earnings
|
$
|
29.3
|
|
|
|
|
$
|
30.7
|
|
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
|
|
|
|
|
|
Depreciation, depletion and amortization
|
68.0
|
|
|
|
|
68.0
|
|
Finance fee amortization
|
1.5
|
|
|
|
|
1.5
|
|
Stock-based compensation
|
5.1
|
|
|
|
|
5.1
|
|
Deferred income taxes(a)
|
6.6
|
|
|
|
|
6.5
|
|
Unrealized foreign exchange gain
|
(12.6)
|
|
|
|
|
(12.6)
|
|
Other, net
|
4.0
|
|
|
|
|
4.0
|
|
Changes in operating assets and liabilities, net of sale:
|
|
|
|
|
|
Receivables
|
139.2
|
|
|
|
|
139.2
|
|
Inventories(b)
|
(35.4)
|
|
|
|
|
(38.0)
|
|
Other assets(c)
|
33.7
|
|
|
|
|
33.0
|
|
Accounts payable and accrued expenses and other current liabilities(d)
|
(1.5)
|
|
|
|
|
0.1
|
|
Other liabilities(e)
|
(4.0)
|
|
|
|
|
(3.6)
|
|
Net cash provided by operating activities
|
233.9
|
|
|
|
|
233.9
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Capital expenditures
|
(42.7)
|
|
|
|
|
(42.7)
|
|
Other, net
|
(1.3)
|
|
|
|
|
(1.3)
|
|
Net cash used in investing activities
|
(44.0)
|
|
|
|
|
(44.0)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds from revolving credit facility borrowings
|
64.2
|
|
|
|
|
64.2
|
|
Principal payments on revolving credit facility borrowings
|
(165.2)
|
|
|
|
|
(165.2)
|
|
Proceeds from issuance of long-term debt
|
22.2
|
|
|
|
|
22.2
|
|
Principal payments on long-term debt
|
(21.7)
|
|
|
|
|
(21.7)
|
|
Dividends paid
|
(49.5)
|
|
|
|
|
(49.5)
|
|
Deferred financing costs
|
(0.1)
|
|
|
|
|
(0.1)
|
|
Shares withheld to satisfy employee tax obligations
|
(0.7)
|
|
|
|
|
(0.7)
|
|
Other, net
|
(0.9)
|
|
|
|
|
(0.9)
|
|
Net cash used in financing activities
|
(151.7)
|
|
|
|
|
(151.7)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
(5.7)
|
|
|
|
|
(5.7)
|
|
Net change in cash and cash equivalents
|
32.5
|
|
|
|
|
32.5
|
|
Cash and cash equivalents, beginning of the year
|
34.7
|
|
|
|
|
34.7
|
|
Cash and cash equivalents, end of period
|
67.2
|
|
|
|
|
67.2
|
|
Less: cash and cash equivalents included in current assets held for sale
|
—
|
|
|
|
|
(27.4)
|
|
Cash and cash equivalents of continuing operations, end of period
|
$
|
67.2
|
|
|
|
|
$
|
39.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
Interest paid, net of amounts capitalized
|
$
|
32.5
|
|
|
$
|
32.5
|
|
Income taxes paid, net of refunds
|
$
|
(37.7)
|
|
|
$
|
(37.7)
|
|
(a) Amount in As Restated column reflects the impact of deferred taxes related to the Canadian Benefits obligation.
(b) Amount in As Restated column reflects the impact of the SOP inventory correction of $1.5 million and the correction in inventory valuation methodology of $(4.1) million.
(c) Amount in As Restated column reflects reductions related to the SOP inventory correction of $0.4 million and the correction in inventory valuation methodology of $0.3 million.
(d) Amount in As Restated column reflects the impact of the correction in inventory valuation methodology.
(e) Amount in As Restated column reflects the impact of recording deferred taxes related to the Canadian Benefits obligation.
|
|
|
|
|
|
|
|
|
|
|
COMPASS MINERALS INTERNATIONAL, INC.
|