Company Records Significant Insurance
Settlement Gain
Compass Minerals (NYSE: CMP) announces the following results of
its third-quarter 2014 operations:
- Net earnings rose to $87.9 million, or
$2.60 per diluted share, from $15.4 million, or $0.46 per diluted
share, in the third quarter of 2013. These results include a gain
from the final insurance settlement related to a 2011 tornado that
struck the company’s operations in Goderich, Ontario. Excluding
this special item, net earnings in the current quarter were $27.3
million, or $0.81 per diluted share.
- Higher sales volumes and improved
average selling prices in both the salt and plant nutrition
segments lifted total sales to $240.5 million from $184.7 million
in the prior year.
- Operating earnings totaled $123.0
million compared to $23.1 million in the 2013 quarter. The 2014
result includes a pre-tax gain of $83.3 million from the Goderich
tornado insurance settlement.
- Adjusted EBITDA* rose to $59.7 million
from $41.1 million in the third quarter of 2013 primarily as a
result of higher year-over-year price realization and sales
volumes.
“A rebound in pre-season deicing demand coupled with improved
pricing drove strong salt segment results this quarter, while our
plant nutrition business continues to benefit from strong demand
for its differentiated products,” said Fran Malecha, Compass
Minerals president and CEO. “Additionally, the gain we reported
from the Goderich tornado insurance settlement marks a full
recovery of the insurable losses we incurred. Our attention
continues to be on executing the initiatives which will further
increase our profitability as well as our ability to respond to
market opportunities and weather variability.”
*Earnings before interest, taxes, depreciation and amortization.
This is a non-GAAP financial measure. Reconciliations to GAAP
measures of performance are provided in tables at the end of this
release.
Compass Minerals Financial
Results(in millions, except for earnings per share)
Three months endedSeptember
30,
Nine months endedSeptember
30,
2014 2013
2014 2013 Sales $ 240.5 $
184.7 $ 849.1 $ 742.2 Sales less shipping and handling costs
(product sales) $ 183.0 $ 140.3 $ 616.1 $ 542.2 Operating
earnings(a) $ 123.0 $ 23.1 $ 203.4 $ 105.3 Operating margin(a) 51 %
13 % 24 % 14 % Net earnings $ 87.9 $ 15.4 $ 137.4 $ 72.4 Net
earnings, excluding special items(b) $ 27.3 $ 15.4 $ 81.9 $ 72.4
Diluted earnings per share $ 2.60 $ 0.46 $ 4.07 $ 2.15 Diluted
earnings per share, excluding special items(b) $ 0.81 $ 0.46 $ 2.27
$ 2.15 EBITDA(a)(b) $ 146.1 $ 41.2 $ 259.7 $ 161.9 Adjusted
EBITDA(b) $ 59.7 $ 41.1 $ 177.3
$ 158.7
(a)
The three and nine months ended September
30, 2014 includes a pre-tax gain of $83.3 million from an insurance
settlement relating to damage sustained by the company as a result
of a tornado that struck the company’s rock salt mine and
evaporated-salt plant in Goderich, Ontario, in 2011.
(b)
These are non-GAAP financial measures.
Reconciliations to GAAP measures of performance are provided in
tables at the end of this release.
SALT SEGMENT
Sales of salt products increased $32.8 million, or 23 percent,
from third-quarter 2013 results due to improved average selling
prices and higher sales volumes when compared to the prior-year
period. The average selling price for highway deicing products
jumped 20 percent from prior-year results, while consumer and
industrial sales prices rose 8 percent. Healthy pre-season
restocking orders of deicing products pushed sales volumes up 12
percent for consumer and industrial products and five percent for
highway deicing products. Strong North American demand for highway
deicing salt was partially offset by lower year-over-year sales of
rock salt to chemical customers and reduced demand in the U.K.
following a very mild winter in that region.
Salt segment EBITDA increased $91.5 million to $128.1 million in
the third quarter of 2014. This result includes an $82.3 million
gain from insurance proceeds resulting from the 2011 Goderich
tornado. Excluding this benefit, salt segment EBITDA was $45.8
million, which was 25 percent higher than the 2013 results.
Salt Segment Performance(in
millions, except for sales volumes and prices per short ton)
Three months endedSeptember
30,
Nine months endedSeptember
30,
2014 2013
2014 2013 Sales $ 175.4 $
142.6 $ 647.3 $ 597.4 Sales less shipping and handling (product
sales) $ 123.8 $ 102.4 $ 435.6 $ 412.4 Operating earnings* $ 116.7
$ 25.4 $ 187.0 $ 106.5 Operating margin* 67 % 18 % 29 % 18 %
Adjusted Segment EBITDA $ 45.8 $ 36.6 $ 138.2 $ 139.2 Sales volumes
(in thousands of tons): Highway deicing 1,460 1,392 7,192 6,907
Consumer and industrial 612 544
1,823 1,581 Total salt 2,072 1,936 9,015 8,488
Average sales prices (per ton): Highway deicing $ 57.19 $ 47.83 $
53.24 $ 53.77 Consumer and industrial $ 150.16 $ 139.61 $ 145.04 $
142.94 Total salt $ 84.65 $ 73.64
$ 71.80 $ 70.38
*The three and nine months ended September
30, 2014 include an $82.3 million gain from an insurance settlement
relating to damage sustained by the company as a result of a
tornado that struck the company’s rock salt mine and
evaporated-salt plant in Goderich, Ontario, in 2011.
PLANT NUTRITION SEGMENT
Plant nutrition segment sales rose to $62.7 million, which was a
60 percent improvement from the 2013 quarter. Demand for the
company’s sulfate of potash products improved significantly from
the prior-year period when the company’s sales volumes were
suppressed because growers delayed purchases due to price
uncertainty throughout much of the broader fertilizer market.
Average selling prices for the company’s plant nutrition products
improved $90 per ton from the 2013 quarter due to increased sulfate
of potash prices and the inclusion of higher-priced Wolf Trax®
micronutrient products.
Plant nutrition segment EBITDA surged 69 percent from 2013
results to $26.1 million. The increase was driven by improved
average selling prices and volumes partially offset by higher
year-over-year per-unit product costs and higher sales and
marketing expenses.
Specialty Fertilizer Segment
Performance(in millions, except for sales volumes and prices
per short ton)
Three months endedSeptember
30,
Nine months endedSeptember
30,
2014 2013
2014 2013 Sales $ 62.7 $
39.1 $ 194.4 $ 137.2 Sales less shipping and handling (product
sales) $ 56.8 $ 34.9 $ 173.1 $ 122.2 Operating earnings $ 19.0 $
9.6 $ 53.2 $ 39.0 Operating margin 30 % 25 % 27 % 28 % Segment
EBITDA $ 26.1 $ 15.4 $ 73.2 $ 56.6 Sales volume (in thousands of
tons) 86 61 291 217 Average sales price (per ton) $ 736
$ 646 $ 669 $ 631
OTHER FINANCIAL
HIGHLIGHTS
Selling, general and administrative expenses were $26.8 million,
a $4.1 million increase from prior-year results. This increase was
driven by the higher sales and marketing expenses associated with
the micronutrient business as well as greater variable compensation
costs in the 2014 period.
Other income in the 2014 quarter increased $3.0 million from the
prior-year period primarily as a result of foreign exchange
gains.
Cash flow from operations was $129.7 million for the nine months
ending September 2014 compared to $142.1 million for the 2013
period.
OUTLOOK
The company’s current outlook remains consistent with prior
guidance for both the salt and plant nutrition businesses.
Assuming average winter weather events, the company anticipates
total salt segment sales volumes of four million tons for the
fourth quarter of 2014. Average selling price for all salt products
in the fourth quarter is expected to increase approximately 15
percent from 2013 results. The expected price improvement is
principally driven by the results of the recently completed bidding
process for 2014-2015 North American highway deicing contracts. On
average, contract pricing for Compass Minerals’ awarded bids
increased approximately 25 percent from the 2013 bid season.
Operating margin percentage for the salt segment is expected to
expand to between 26 and 28 percent in the fourth quarter, as
improved pricing and lower production costs should more than offset
the impact of purchased salt and the higher logistics costs which
are impacting manufacturers throughout North America.
The company expects positive market fundamentals for specialty
plant nutrients to continue for the remainder of 2014. The company
anticipates fourth-quarter plant nutrition segment sales volumes of
sulfate of potash and micronutrients to total 90,000 to 100,000
tons at average selling prices between $725 and $750 per ton. With
consistent operating rates and the continued use of potassium
chloride to supplement pond-based production, the company expects
to generate an operating margin between 28 and 30 percent in the
fourth quarter of 2014.
A summary of Compass Minerals’ third-quarter performance and
current outlook is available on the company’s website at
www.CompassMinerals.com/Presentations.
Conference Call
The company will discuss its results on a conference call
tomorrow morning at 10:00 a.m. ET. To access the conference call,
interested parties should visit the company’s website at
www.CompassMinerals.com or dial (877) 614-0009. Callers must
provide the conference ID number 1500717. Outside of the U.S. and
Canada, callers may dial (913) 643-4075. Replays of the call will
be available on the company’s website for two weeks. An audio
replay will be available on the company’s website for two weeks or
may be accessed by phone for seven days at (888) 203-1112,
conference ID 1500717. Outside of the U.S. and Canada, callers may
dial (719) 457-0820.
About Compass Minerals
Compass Minerals is a leading provider of essential minerals
that address nature’s challenges, including salt for winter roadway
safety and other consumer, industrial and agricultural uses, and
specialty plant nutrition minerals that improve the quality and
yield of crops. The company produces its minerals at locations
throughout the U.S. and Canada and in the U.K. For more information
about Compass Minerals and its products, please visit
www.compassminerals.com.
Non-GAAP Measures
Management uses a variety of measures to evaluate the company’s
performance. While the consolidated financial statements provide an
understanding of the company’s overall results of operations,
financial condition and cash flows, management analyzes components
of the consolidated financial statements to identify certain trends
and evaluate specific performance areas. In addition to using U.S.
generally accepted accounting principles (“GAAP”) financial
measures, management uses EBITDA and EBITDA adjusted for items
which management believes are not indicative of the company’s
ongoing operating performance (“adjusted EBITDA”). Both EBITDA and
adjusted EBITDA are non-GAAP financial measures used to evaluate
the operating performance of the company’s core business
operations. Our resource allocation, financing methods and cost of
capital, and income tax positions are managed at a corporate level,
apart from the activities of the operating segments, and the
operating facilities are located in different taxing jurisdictions,
which can cause considerable variation in net earnings. The company
also uses EBITDA and adjusted EBITDA to assess its operating
performance and return on capital, and to evaluate potential
acquisitions or other capital projects. EBITDA and adjusted EBITDA
are not calculated under GAAP and should not be considered in
isolation or as a substitute for net earnings, cash flows or other
financial data prepared in accordance with GAAP or as a measure of
overall profitability or liquidity. EBITDA and adjusted EBITDA
exclude interest expense, income taxes and depreciation and
amortization, each of which is an essential element of the
company’s cost structure and cannot be eliminated. Consequently,
any measure that excludes these elements has material
limitations. While EBITDA and adjusted EBITDA are frequently
used as measures of operating performance, these terms are not
necessarily comparable to similarly titled measures of other
companies due to the potential inconsistencies in the method of
calculation. The calculations of EBITDA and adjusted EBITDA as used
by management are set forth in the following table.
Excluding special items from net earnings and adjusted EBITDA is
meaningful to investors because it provides insight with respect to
the ongoing operating results of the company. The 2014 special
items include charges associated with early redemption of the
company’s senior notes due in 2019 in the June quarter and a gain
in the September quarter from an insurance settlement resulting
from the tornado that struck the company’s salt mine and evaporated
salt plant in Goderich, Ontario, in August 2011.
This press release may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements are based on the company's current
expectations and involve risks and uncertainties that could cause
the company's actual results to differ materially. The differences
could be caused by a number of factors including those factors
identified in the "Risk Factors" sections of our Annual and
Quarterly Reports on Forms 10-K and 10-Q. The company undertakes no
obligation to update any forward-looking statements made in this
press release to reflect future events or developments.
Reconciliation for EBITDA and Adjusted
EBITDA (unaudited)(in millions)
Three months endedSeptember
30,
Nine months endedSeptember
30,
2014 2013
2014 2013 Net earnings $
87.9 $ 15.4 $ 137.4 $ 72.4 Interest expense 5.5 4.4 14.4 13.2
Income tax expense 32.7 3.4 50.7 22.9 Depreciation, depletion and
amortization 20.0 18.0 57.2
53.4 EBITDA $ 146.1 $ 41.2 $ 259.7 $ 161.9
Adjustments to EBITDA: Gain from insurance settlement(1) (83.3 ) −
(83.3 ) − Other (income) expense(2) (3.1 ) (0.1 )
0.9 (3.2 ) Adjusted EBITDA $ 59.7 $
41.1 $ 177.3 $ 158.7
(1) In the three and nine
months ended September 30, 2014, the company recorded an $83.3
million gain from an insurance settlement relating to damage
sustained by the company as a result of a tornado that struck the
company’s rock salt mine and evaporated-salt plant in Goderich,
Ontario, in 2011. (2) In June 2014, the company redeemed early $100
million in senior notes for pre-tax costs of $6.9 million.
Reconciliation for Net Earnings,
Excluding Special Items (unaudited)(in millions)
Three months endedSeptember
30,
Nine months endedSeptember
30,
2014 2013
2014 2013 Net earnings $ 87.9 $
15.4 $ 137.4 $ 72.4 Gain from insurance settlement, net of taxes
(1) (60.6 ) − (60.6 ) − Costs of early debt redemption, net of
taxes(2) − − 5.1 − Net
earnings, excluding special items $ 27.3 $ 15.4 $ 81.9
$ 72.4
(1)
In the three and nine months ended September 30, 2014, the company
recorded an $83.3 million gain ($60.6 million after applicable
income taxes) from an insurance settlement relating to damage
sustained by the company as a result of a tornado that struck the
company’s rock salt mine and evaporated-salt plant in Goderich,
Ontario, in 2011. (2) In June 2014, the company redeemed early $100
million in senior notes for pre-tax costs of $6.9 million ($5.1
million after applicable income taxes).
Reconciliation for Salt Segment EBITDA
and Adjusted EBITDA (unaudited)(in millions)
Three months endedSeptember
30
Nine months endedSeptember
30,
2014 2013
2014 2013 Segment Operating
Earnings $ 116.7 $ 25.4 $ 187.0 $ 106.5 Depreciation, depletion and
amortization 11.4 11.2 33.5
32.7 Segment EBITDA $ 128.1 $ 36.6 $ 220.5 $ 139.2
Adjustments to EBITDA: Gain from insurance settlement (1)
(82.3 ) − (82.3 ) − Adjusted Segment EBITDA $
45.8 $ 36.6 $ 138.2 $ 139.2
(1) In the three and nine months ended
September 30, 2014, the company reported a gain from an insurance
settlement relating to damage sustained by the company as a result
of a tornado that struck the company’s rock salt mine and
evaporated-salt plant in Goderich, Ontario.
Reconciliation for Plant Nutrition
Segment EBITDA (unaudited)(in millions)
Three months endedSeptember
30,
Nine months endedSeptember
30,
2014 2013 2014
2013 Segment Operating Earnings $ 19.0 $ 9.6 $
53.2 $ 39.0 Depreciation, depletion and amortization 7.1
5.8 20.0 17.6 Segment EBITDA $ 26.1 $ 15.4 $
73.2 $ 56.6
COMPASS
MINERALS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (unaudited) (in millions, except share data)
Three months endedSeptember
30,
Nine months endedSeptember
30,
2014 2013
2014 2013 Sales $ 240.5 $ 184.7
$ 849.1 $ 742.2 Shipping and handling cost 57.5 44.4 233.0 200.0
Product cost 33.2 94.5 336.5
363.2 Gross profit 149.8 45.8 279.6 179.0
Selling, general and administrative expenses 26.8
22.7 76.2 73.7 Operating
earnings 123.0 23.1 203.4 105.3 Other (income) expense:
Interest expense 5.5 4.4 14.4 13.2 Other, net (3.1 )
(0.1 ) 0.9 (3.2 ) Earnings before income taxes 120.6
18.8 188.1 95.3 Income tax expense 32.7 3.4
50.7 22.9 Net earnings $ 87.9 $
15.4 $ 137.4 $ 72.4 Basic net earnings per
share $ 2.60 $ 0.46 $ 4.07 $ 2.15 Diluted net earnings per share $
2.60 $ 0.46 $ 4.07 $ 2.15 Cash dividends per share $ 0.60 $ 0.545 $
1.80 $ 1.635 Weighted-average common shares outstanding (in
thousands): (1) Basic 33,575 33,469 33,542 33,378 Diluted
33,601 33,484
33,566 33,402 (1)
Excludes participating securities. Participating securities
include options, PSUs and RSUs that receive non-forfeitable
dividends. Net earnings were allocated to 209,000 and 214,000
participating securities for the three and nine months ended
September 30, 2014, respectively, and 275,000 and 305,000
participating securities for the three and nine months ended
September 30, 2013.
COMPASS MINERALS INTERNATIONAL,
INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in millions) September
30, December 31, 2014 2013
ASSETS Cash and cash equivalents $ 220.0 $ 159.6
Receivables, net 145.3 211.9 Inventories 217.8 180.7 Other current
assets 27.8 25.2 Property, plant and equipment, net 691.3 677.3
Intangible and other noncurrent assets 244.3 150.1
Total assets $ 1,546.5 $ 1,404.8
LIABILITIES AND
STOCKHOLDERS' EQUITY Current portion of long-term debt $ 3.9 $
3.9 Other current liabilities 166.3 253.7 Long-term debt, net of
current portion 623.5 474.7 Deferred income taxes and other
noncurrent liabilities 136.8 118.3 Total stockholders' equity
616.0 554.2 Total liabilities and stockholders'
equity $ 1,546.5 $ 1,404.8
COMPASS MINERALS
INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (unaudited) (in millions)
Nine Months Ended September 30,
2014 2013 Net cash
provided by operating activities $ 129.7 $ 142.1
Cash flows from investing activities: Capital expenditures
(83.5 ) (83.1 ) Acquisition of a business (86.5 ) - Insurance
receipts for investment purposes, Goderich tornado 19.4 11.9 Other,
net 3.1 2.5 Net cash used in investing
activities (147.5 ) (68.7 ) Cash flows from
financing activities: Proceeds from issuance of long-term debt
250.0 - Principal payments on long-term debt (101.4 ) (2.9 )
Premium and other payments to refinance debt (5.5 ) - Deferred
financing costs (4.1 ) - Dividends paid (60.6 ) (54.9 ) Proceeds
received from stock option exercises 6.1 10.6 Excess tax benefits
(deficiencies) from equity compensation awards (0.2 )
0.7 Net cash provided by (used in) financing activities
84.3 (46.5 ) Effect of exchange rate
changes on cash and cash equivalents (6.1 ) (3.1 )
Net change in cash and cash equivalents 60.4 23.8 Cash and
cash equivalents, beginning of the year 159.6
100.1 Cash and cash equivalents, end of period $
220.0 $ 123.9
COMPASS MINERALS
INTERNATIONAL, INC. SEGMENT INFORMATION (unaudited)
(in millions)
Three Months Ended September 30, 2014
Salt
PlantNutrition
Corporateand
Other(a)
Total Sales to external customers $ 175.4 $
62.7 $ 2.4 $ 240.5 Intersegment sales 0.3 1.5 (1.8 ) – Shipping and
handling cost 51.6 5.9 – 57.5 Operating earnings (loss)(b) 116.7
19.0 (12.7 ) 123.0 Depreciation, depletion and amortization 11.4
7.1 1.5 20.0 Total assets (as of end of period) 970.1 517.7 58.7
1,546.5
Three Months Ended September 30, 2013
Salt
PlantNutrition
Corporateand
Other(a)
Total Sales to external customers $ 142.6 $
39.1 $ 3.0 $ 184.7 Intersegment sales 0.1 1.6 (1.7 ) – Shipping and
handling cost 40.2 4.2 – 44.4 Operating earnings (loss) 25.4 9.6
(11.9 ) 23.1 Depreciation, depletion and amortization 11.2 5.8 1.0
18.0 Total assets (as of end of period) 842.0 393.0 77.3 1,312.3
Nine Months Ended September 30, 2014
Salt
PlantNutrition
Corporateand
Other(a)
Total Sales to external customers $ 647.3 $
194.4 $ 7.4 $ 849.1 Intersegment sales 0.7 4.7 (5.4 ) – Shipping
and handling cost 211.7 21.3 – 233.0 Operating earnings (loss) (b)
187.0 53.2 (36.8 ) 203.4 Depreciation, depletion and amortization
33.5 20.0 3.7 57.2
Nine Months Ended September 30,
2013 Salt
PlantNutrition
Corporateand
Other(a)
Total Sales to external customers $ 597.4 $
137.2 $ 7.6 $ 742.2 Intersegment sales 0.6 4.5 (5.1 ) – Shipping
and handling cost 185.0 15.0 – 200.0 Operating earnings (loss)
106.5 39.0 (40.2 ) 105.3 Depreciation, depletion and amortization
32.7 17.6
3.1 53.4
(a)
Includes corporate entities, the records
management business, other incidental business operations and
eliminations. Corporate assets include deferred tax assets,
deferred financing fees, investments related to the non-qualified
retirement plan and other assets not allocated to the operating
segments.
(b)
The salt segment and corporate and other
include a gain of $82.3 million and $1.0 million, respectively, in
the three and nine months ended September 30, 2014 resulting from
an insurance settlement related to a tornado at its salt facilities
in Goderich, Ontario in August 2011.
Compass MineralsRodney L. Underdown, 913-344-9395Chief Financial
OfficerorTheresa Womble, 913-344-9362Director of Investor
Relations
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