Strong salt performance despite mild weather
partially offsets agriculture sector weakness
First-Quarter Highlights:
- Salt segment operating earnings
increased 7 percent year-over-year, partially offsetting a 75
percent year-over-year decline in plant nutrition segment operating
earnings
- Seventh consecutive quarter of
year-over-year salt segment operating earnings margin improvement,
adjusted for special items
- Restructuring plan, previously
announced, underway to reduce costs and streamline structure
In the 2016 OUTLOOK table, the "Operating earnings margin" for
the "Salt Segment" should read "13% to 14.5%" (instead of "16.5% to
18%").
The corrected release reads:
COMPASS MINERALS POSTS SOLID FIRST-QUARTER
EARNINGS
Strong salt performance despite mild weather
partially offsets agriculture sector weakness
First-Quarter Highlights:
- Salt segment operating earnings
increased 7 percent year-over-year, partially offsetting a 75
percent year-over-year decline in plant nutrition segment operating
earnings
- Seventh consecutive quarter of
year-over-year salt segment operating earnings margin improvement,
adjusted for special items
- Restructuring plan, previously
announced, underway to reduce costs and streamline structure
Compass Minerals (NYSE: CMP), a leading producer of essential
minerals, announced a decline in first quarter earnings as a result
of continued mild winter weather and agricultural market
weakness.
“Our strong 2015-2016 highway deicing bid season results helped
mitigate the headwinds from mild winter weather in our salt
business, while the sluggish agriculture market continued to impact
our plant nutrition business this quarter,” said Fran Malecha,
Compass Minerals’ president and CEO. “We are making progress with
our initiatives to reduce costs, streamline the organization and
build better businesses based on our strong assets. Following this
down cycle, I believe Compass Minerals will be even better
positioned to deliver increasing value for shareholders.”
First-quarter net income declined to $49.7 million, or $1.46 per
diluted share, from $60.6 million, or $1.79 per diluted share, in
the first quarter of 2015.
Revenue in the first quarter totaled $345.7 million, which was
12 percent below 2015 first-quarter results, as both of the
company’s business segments reported lower sales volumes and
average selling prices.
Salt segment EBITDA* increased 6 percent compared to the first
quarter of 2015 as improved margins more than offset the sales
volume impact of mild winter weather. These results represent the
seventh consecutive quarter of year-over-year salt segment EBITDA*
margin improvement.
Weak demand in the agriculture market combined with expected,
higher per-unit costs resulted in a 53 percent reduction in plant
nutrition segment EBITDA* compared to the first quarter of
2015.
The company’s consolidated operating earnings of $74.3 million
were $10.4 million below first-quarter 2015 results, a decline of
12 percent.
Compass Minerals Financial Results
(in millions, except for earnings per
share)
Three months endedMarch
31,
2016 2015 Sales $ 345.7 $ 393.0 Sales less
shipping and handling costs (product sales) 256.3 291.1 Operating
earnings 74.3 84.7 Operating margin 21.5 % 21.6 % Net earnings $
49.7 $ 60.6 Diluted earnings per share 1.46 1.79 EBITDA* 95.4 107.3
Adjusted EBITDA* 94.6 103.8
* 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.
SALT SEGMENT
Mild winter weather throughout North America and the U.K.
resulted in an 8 percent year-over-year decline in salt segment
total revenue. First quarter highway deicing sales volumes were 3
percent lower than first-quarter 2015 sales volumes, which was more
than explained by a substantial decline in U.K. sales volumes.
Consumer and industrial sales volumes decreased 5 percent compared
to the first quarter of 2015. As expected, average selling price
for highway deicing products declined 6 percent in the 2016 quarter
from 2015 results while the average price for consumer and
industrial products was essentially unchanged.
Salt segment operating earnings increased 7 percent compared to
the first quarter of 2015, despite lower sales volumes and average
selling price. This increase resulted in an operating margin of
28.3 percent in the quarter compared to 24.3 percent in the first
quarter of 2015. The improvements this quarter were driven
primarily by year-over-year benefits in consumer and industrial
logistics costs and a strong highway deicing bid season, which
produced increased commitment volumes in freight-logical
geographies. In addition, prior-year salt operating earnings were
negatively impacted by short-term costs associated with imported
salt usage and unplanned, weather-driven downtime in the company’s
Goderich, Ontario rock salt mine.
Salt Segment Performance
(in millions, except for sales volumes and
prices per short ton)
Three months endedMarch 31, 2016
2015 Sales $ 292.1 $ 316.7 Sales less shipping and handling
(product sales) 209.1 222.2 Operating earnings 82.7 77.0 Operating
margin 28.3 % 24.3 % Segment EBITDA* $ 93.4 $ 87.9 Segment EBITDA*
margin 32.0 % 27.8 % Sales volumes (in thousands of tons): Highway
deicing 3,724 3,847 Consumer and industrial 482 507
Total salt 4,206 4,354 Average sales prices (per ton): Highway
deicing $ 59.51 $ 62.99 Consumer and industrial 146.12 146.77 Total
salt 69.45 72.74
*These are non-GAAP financial measures.
Reconciliations to GAAP measures of performance are provided in
tablesfollowing this release.
Winter Weather Effect
Winter weather in the regions we serve was very mild for the
full season as snow activity remained limited and warmer
temperatures continued in the first quarter of 2016. As a result,
the company estimates the variations from average winter weather
negatively impacted sales and earnings for the quarter and the full
season.
Estimated Effect of Winter Weather on
Salt Segment Performance
(dollars in millions)
Three months endedMarch
31,
Winter season ended March
31,*
2016 2015 2015-2016
2014-2015
Favorable (unfavorable) to average
weather:
Sales
($70) to ($80) ($33) to ($37) ($145) to ($165) negligible Operating
earnings ($35) to ($40) ($14) to ($18) ($70)
to ($80) negligible *“Winter season” is the six-month period
ended March 31.
PLANT NUTRITION SEGMENT
Plant nutrition segment revenue in the first quarter of 2016
declined $22.5 million from first-quarter 2015 results. The company
sold 74,000 tons of plant nutrition products in the 2016 first
quarter, which was 24 percent below year-ago sales volume. Average
selling prices were 9 percent lower than in the first quarter of
2015. While these results were below prior-year levels, they were
in line with company expectations.
First-quarter 2016 plant nutrition segment EBITDA* declined 53
percent to $13.2 million from $27.8 million in the 2015 first
quarter. The 2016 results include a $1.9 million gain from
disposition of property at our Ogden, UT facility. Lower selling
prices for sulfate of potash combined with higher per-unit costs
reduced EBITDA* margin to 25.8 percent, down from 37.8 percent in
the first quarter of 2015. Production costs remained elevated due
to high-cost, carry-over inventory from 2015.
Plant Nutrition Segment Performance
(dollars in millions, except for prices
per short ton)
Three months endedMarch 31, 2016
2015 Sales $ 51.1 $ 73.6 Sales excluding shipping and
handling (product sales) 44.7 66.2 Operating earnings 5.3 20.8
Operating margin 10.4 % 28.3 % Segment EBITDA* $ 13.2 $ 27.8
Segment EBITDA margin* 25.8 % 37.8 % Sales volumes (in
thousands of tons) 74 97 Average sales price (per ton) $ 689
$ 759 *These are non-GAAP financial measures.
Reconciliations to GAAP measures of performance are provided in
tables following this release.
OTHER FINANCIAL
HIGHLIGHTS
The company generated $92.6 million in cash flow from operations
in the current quarter, compared to $122.4 million in the same
period of 2015.
Lower gains from foreign exchange reduced other income in the
first quarter of 2016 to $0.8 million from $3.5 million in the
first quarter of 2015.
As announced in February 2016, the company has initiated a
restructuring to reduce ongoing costs. This resulted in a charge of
$3.2 million in the first quarter of 2016 related to the
elimination of approximately 150 positions. A significant portion
of the reductions are due to the company's investment in continuous
mining at its Goderich location. In total these actions are
expected to result in ongoing, annualized savings of approximately
$15 million by the end of 2017.
In April, the company completed the refinancing of its secured
credit facilities. The new secured facilities, which include a $400
million term loan and a $300 million revolver, carry an interest
rate of LIBOR plus 1.5 percent based on the company's current
leverage. These new credit facilities are expected to lower
interest expense going forward.
OUTLOOK
A summary of the company’s second-quarter and full-year outlook
is summarized in the table below. Full-year guidance remains
unchanged from the company’s April 7, 2016 update.
The company expects the upcoming highway deicing bid season in
North America will be influenced by the mild weather of the
2015-2016 winter season. The company continues to expect a modest
recovery in full-year plant nutrition sales volumes compared to
2015 results and improving production costs throughout the
year.
2016 OUTLOOK:FULL YEAR EPS -
$3.25 to $3.65
Salt Segment 2Q16 FY16 Volumes
1.3 million to 1.7 million tons 11.0 million to 11.8
million tons Average selling price (per ton) $76 to $78 Operating
earnings margin
13% to 14.5%
Plant Nutrition Segment Volumes
90,000 to 100,000 tons 320,000 to 360,000 tons Average selling
price (per ton) $640 to $660 Operating earnings margin 13.5% to
15.5%
Corporate Corporate and
other expense ~$56 million Interest expense ~$25 million Capital
expenditures $175 million to $190 million Effective tax rate
~28%
Conference Call
Compass Minerals will discuss its results on a conference call
tomorrow morning, Tuesday, April 26, at 9:00 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 9383614. 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.
An updated summary of the company’s performance is included in a
presentation available on the company’s website at
www.compassminerals.com/presentation.
About Compass Minerals
Compass Minerals is a leading provider of essential minerals
that provide solutions to 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.
Certain statements in this press release, including without
limitation the company’s or management’s beliefs, expectations or
opinions and statements about the company’s ability to reduce
costs, streamline the organization, build better businesses and
deliver value for shareholders and its outlook for the second
quarter of 2016 and full-year 2016, including expectations about
the highway deicing bid season, production costs, earnings per
share (“EPS”), volumes, average selling prices, operating earnings
margin, corporate and other expense, interest expense, capital
expenditures and tax rates, are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements are those that predict or describe
future events or trends and that do not relate solely to historical
matters. We use words such as “may,” “would,” “could,” “should,”
“will,” “likely,” “expect,” “anticipate,” “believe,” “intend,”
“plan,” “forecast,” “outlook,” “project,” “estimate” and similar
expressions suggesting future outcomes or events to identify
forward-looking statements or forward-looking information. 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. These risks, uncertainties and
factors include, but are not limited to: (i) weather conditions,
(ii) pressure on prices and impact from competitive products, (iii)
any inability by the company to fund necessary capital
expenditures, (iv) foreign exchange rates, and (v) the cost and
availability of transportation for the distribution of the
company’s products. For further information on these and other
risks and uncertainties that may affect the company’s business, see
the “Risk Factors” sections of the company’s Annual Report on Form
10-K for the year ended December 31, 2015. The company undertakes
no obligation to update any forward-looking statements made in this
press release to reflect future events or developments. Because it
is not possible to predict or identify all such factors, this list
cannot be considered a complete set of all potential risks or
uncertainties.
Non-GAAP Measures
Management uses a variety of measures to evaluate the company’s
and its operating segments’ 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 non-GAAP financial measures, to evaluate
the operating performance of the company’s core business
operations. The company’s resource allocation, financing methods,
cost of capital and income tax positions are managed at a corporate
level, apart from the activities of the operating segments. In
addition, the operating facilities are located in different taxing
jurisdictions, which can cause considerable variation in net
income. The company also uses EBITDA and Adjusted EBITDA to assess
its overall and operating segment operating performance and return
on capital against other companies, 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 income, 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 are 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 calculation of EBITDA and Adjusted EBITDA as used
by management is set forth in the tables below.
Reconciliation for EBITDA and Adjusted EBITDA
(unaudited)
(in millions)
Three months endedMarch 31, Three
months endedMarch 31, 2016 2015 Net
earnings $ 49.7 $ 60.6 Interest expense 5.8 5.4 Income tax
expense 20.0 22.2 Depreciation, depletion and amortization 19.9
19.1 EBITDA $ 95.4 $ 107.3 Adjustments to
EBITDA: Other income, net (1) (0.8 ) (3.5 ) Adjusted EBITDA
$ 94.6 $ 103.8 (1) Primarily includes
interest income and foreign exchange gains and losses.
Reconciliation for Salt Segment EBITDA
(unaudited)
(in millions)
Three months endedMarch 31, Three
months endedMarch 31, 2016 2015
Segment operating earnings $ 82.7 $ 77.0 Depreciation,
depletion and amortization 10.7 10.9 Segment EBITDA $ 93.4
$ 87.9
Reconciliation for
Plant Nutrition Segment EBITDA (unaudited)
(in millions)
Three months endedMarch 31, Three months
endedMarch 31, 2016 2015 Segment
operating earnings $ 5.3 $ 20.8 Depreciation, depletion and
amortization 7.9 7.0 Segment EBITDA $ 13.2 $ 27.8
Reconciliation for Salt Segment
Adjusted Quarterly Operating Earnings (unaudited)
(in millions)
Three months endedMarch 31, Three
months endedDec. 31, Three months
endedSept. 30, Three months endedJune
30, 2016 2015 2015
2015 Segment Sales $ 292.1 $ 236.1 $ 179.9
$ 116.3 Segment operating earnings 82.7 72.1 45.0 21.1 Gain
from insurance settlement(a) — —
— — Adjusted segment operating earnings $ 82.7
$ 72.1 $ 45.0 $ 21.1 Adjusted segment operating earnings margin
28.3 % 30.5 % 25.0 % 18.1 % Depreciation, depletion and
amortization 10.7 11.0 11.1
10.9 Adjusted segment EBITDA $ 93.4 $ 83.1 $
56.1 $ 32.0 Adjusted segment EBITDA margin 32.0 % 35.2 % 31.2 %
27.5 %
Three months endedMarch 31, Three months
endedDec. 31, Three months endedSept.
30, Three months endedJune 30, 2015
2014 2014 2014 Segment
Sales $ 316.7 $ 355.3 $ 175.4 $ 118.7 Reported GAAP segment
operating earnings 77.0 104.4 116.7 6.8 Gain from insurance
settlement(a) — — (82.3 )
— Adjusted segment operating earnings $ 77.0 $ 104.4 $ 34.4
$ 6.8 Adjusted segment operating earnings margin 24.3 % 29.4 % 19.6
% 5.7 % Depreciation, depletion and amortization 10.9
11.3 11.4 10.7 Adjusted
segment EBITDA $ 87.9 $ 115.7 $ 45.8 $ 17.5 Adjusted segment EBITDA
margin 27.8 % 32.6 % 26.1 % 14.7 %
Three months endedMarch 31,
Three months endedDec. 31, Three months
endedSept. 30, 2014 2013
2013 Segment Sales
$
353.2
$ 323.1 $ 142.6 Reported GAAP segment operating earnings 63.5 74.8
25.4 Gain from insurance settlement(a) — — — Estimated costs of
legal ruling(b) — 4.7 —
Adjusted segment operating earnings
$
63.5
$ 79.5 $ 25.4 Adjusted segment operating earnings margin 18.0 %
24.6 % 17.8 % Depreciation, depletion and amortization 11.4
12.4 11.2 Adjusted segment
EBITDA
$
74.9
$ 91.9 $ 36.6 Adjusted segment EBITDA margin 21.2 % 28.4 % 25.7 %
(a) In the third quarter of 2014, the company recorded an $83.3
million gain ($60.6 million, net of 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. (b) In the
fourth quarter of 2013, the company recorded a reserve of $4.7
million ($2.8 million, net of taxes) related to a ruling against
the company from a 2010 labor matter.
COMPASS MINERALS INTERNATIONAL,
INC.CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)(in millions, except share and per-share
data)
Three Months Ended March 31,
2016 2015 Sales $ 345.7 $ 393.0
Shipping and handling cost 89.4 101.9 Product cost 153.7
177.9 Gross profit 102.6 113.2 Selling,
general and administrative expenses 28.3 28.5
Operating earnings 74.3 84.7 Other (income)/expense:
Interest expense 5.8 5.4 Earnings in equity investee (0.4 ) —
Other, net (0.8 ) (3.5 ) Earnings before income taxes
69.7 82.8 Income tax expense 20.0 22.2
Net earnings $ 49.7 $ 60.6 Basic net earnings per
common share $ 1.47 $ 1.79 Diluted net earnings per common share $
1.46 $ 1.79 Cash dividends per share $ 0.695 $ 0.66
Weighted-average common shares outstanding (in thousands):(1) Basic
33,746 33,626 Diluted 33,748 33,649 (1) The company
calculates earnings per share using the two-class method to account
for its stock awards that receive non-forfeitable dividends. As a
result, the above basic and diluted weighted shares outstanding do
not include 143,000 and 216,000 of participating securities for the
three months ended March 31, 2016 and 2015, respectively.
COMPASS MINERALS INTERNATIONAL,
INC.CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)(in millions)
March 31, December 31, 2016
2015 ASSETS Cash and cash equivalents $ 85.2 $ 58.4
Receivables, net 134.8 147.8 Inventories 211.1 275.3 Other current
assets 28.7 30.8 Property, plant and equipment, net 865.1 800.7
Intangible and other noncurrent assets 327.0 311.8 Total assets $
1,651.9 $ 1,624.8
LIABILITIES AND STOCKHOLDERS'
EQUITY Current portion of long-term debt $ 4.9 $ 4.9 Other
current liabilities 131.2 165.9 Long-term debt, net of current
portion 712.5 718.0 Deferred income taxes and other noncurrent
liabilities 101.1 96.3 Total stockholders' equity 702.2 639.7 Total
liabilities and stockholders' equity $ 1,651.9 $ 1,624.8
COMPASS MINERALS INTERNATIONAL, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in
millions) Three Months Ended March 31,
2016 2015 Net cash provided by
operating activities $ 92.6 $ 122.4 Cash flows
from investing activities: Capital expenditures (43.8 ) (41.7 )
Other, net (0.7 ) — Net cash used in investing
activities (44.5 ) (41.7 ) Cash flows from financing
activities: Proceeds from revolving credit facility borrowings 31.0
— Principal payments on revolving credit facility borrowings (35.5
) — Principal payments on long-term debt (1.2 ) (0.9 ) Dividends
paid (23.5 ) (22.4 ) Proceeds received from stock option exercises
0.6 2.1 Excess tax benefit (deficiency) from equity compensation
awards (0.1 ) 0.1 Net cash used in financing
activities (28.7 ) (21.1 ) Effect of exchange rate changes
on cash and cash equivalents 7.4 (12.6 ) Net change in cash
and cash equivalents 26.8 47.0 Cash and cash equivalents, beginning
of the year 58.4 266.8 Cash and cash
equivalents, end of period $ 85.2 $ 313.8
COMPASS MINERALS INTERNATIONAL,
INC.SEGMENT INFORMATION (unaudited)(in
millions)
Three months ended March 31,
2016
Salt
PlantNutrition(1)
Corporateand Other
(2)
Total
Sales to external customers $ 292.1 $ 51.1 $ 2.5 $ 345.7
Intersegment sales — 0.2 (0.2 ) — Shipping and handling cost 83.0
6.4 − 89.4 Operating earnings (loss) 82.7 5.3 (13.7 ) 74.3
Depreciation, depletion and amortization 10.7 7.9 1.3 19.9 Total
assets 893.1 704.8 54.0 1,651.9
Three months ended March 31,
2015
Salt
PlantNutrition
Corporateand Other
(2)
Total
Sales to external customers $ 316.7 $ 73.6 $ 2.7 $ 393.0
Intersegment sales — 0.7 (0.7 ) — Shipping and handling cost 94.5
7.4 − 101.9 Operating earnings (loss) 77.0 20.8 (13.1 ) 84.7
Depreciation, depletion and amortization 10.9 7.0 1.2 19.1 Total
assets 949.6 543.3 53.8 1,546.7 (1) Plant nutrition segment
assets include the investment in Produquímica Indústria e Comércio
S.A. (2) 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 and finance functions.
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version on businesswire.com: http://www.businesswire.com/news/home/20160425006384/en/
Compass MineralsInvestor ContactTheresa L. Womble,
+1-913-344-9362Director of Investor
Relationswomblet@compassminerals.comorMedia ContactTara
Hart, +1-913-344-9319External Communications
ManagerPressRelations@compassminerals.com
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