EXHIBIT 99.1
Compass Minerals International, Inc. Announces Third-Quarter Results;
Company Releases Valuation Allowance for Deferred Tax Assets
OVERLAND PARK, Kan.--(BUSINESS WIRE)--Nov. 10, 2004--Compass
Minerals International, Inc. (NYSE:CMP), a leading producer and
marketer of salt and specialty potash, reported the following
third-quarter results:
-- Sales increased 15 percent year-over-year as a result of
volume growth and price improvements across all product
groups.
-- Sulfate of potash (SOP) sales increased 43 percent over the
third quarter of 2003.
-- Bidding for the 2004-2005 highway-deicing season has nearly
concluded with Compass Minerals modestly increasing its volume
over the 2003-2004 bid season and increasing its bid prices an
average of nearly five percent. The company expects
approximately half of the price improvement to be offset by
higher transportation costs.
-- Net income was $5.5 million or $0.17 per diluted share
including a non-cash $11.1 million benefit from the partial
release of the valuation allowance for deferred tax assets.
Excluding special items, the company reported a net loss of
$5.1 million, or $0.17 per share.
-- The company's routine review of its valuation allowance for
deferred tax assets resulted in adjustments in the non-cash
allowance in all prior periods.
-- Compass made a voluntary $10 million principal repayment of
its term loan.
-- The company's board of directors declared a regular quarterly
dividend of $0.25 per share payable on December 15, 2004, to
shareholders of record on December 1.
"We're seeing solid, steady growth in our salt product lines and
significant increases in our sulfate of potash business," commented
Michael E. Ducey, Compass Minerals president and CEO. "We're in a
strong position moving into the fourth quarter, and we're ready to
handle the first winter storms."
======================================================================
Financial Results
(in millions except for EPS)
======================================================================
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
2003 2003
2004 Restated 2004 Restated
-------- --------- -------- ---------
Gross sales $111.7 $97.1 $459.1 $398.5
Gross sales less shipping and
handling
(product sales) 83.9 73.0 334.2 289.2
Income tax expense (benefit) (12.2) (4.1) (3.1) (2.8)
Net income (loss) available for
common stock 5.5 (6.3) 29.9 22.1
Net income (loss) available for
common stock, excluding
special items (5.1) (7.6) 19.6 10.1
Diluted EPS(a) 0.17 (0.21) 0.93 0.64
Diluted EPS, excluding special
items(a) (0.17) (0.25) 0.61 0.29
EBITDA 18.8 16.9 103.1 84.0
Adjusted EBITDA 22.7 18.5 108.1 86.6
(a)Negative EPS is not diluted
Salt sales were $94.4 million for the quarter, an increase of 11
percent over the prior year. Highway-deicing shipments increased 14
percent due to growth in rock salt sales to chemical producers.
General Trade shipments were slightly higher than the prior year, and
early-summer price increases helped improve pricing by an average of
five percent. The year-over-year weakening of the U.S. dollar versus
the Canadian dollar and the British pound also created a $1.8 million
benefit to reported sales.
Sulfate of potash sales increased to $17.3 million compared to
$12.1 million for the third quarter of 2003. Shipments grew 29 percent
as a result of the company's efforts to expand the SOP market as well
as Compass's December 2003 acquisition of IMC Global's SOP marketing
business. Pricing improved 10 percent year-over-year reflecting
previously announced price increases. The company recently announced a
$20 per ton SOP price increase that will begin taking effect in
January 2005.
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Selected Sales Data
======================================================================
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
2004 2003 2004 2003
-------- --------- --------- -------
Sales Volumes (in thousands of
tons):
Highway deicing.................. 1,219 1,068 6,744 6,355
General trade.................... 692 677 2,107 2,042
Specialty potash................. 76 59 276 183
Average Sales Price (per ton):
Highway deicing.................. $26.39 $25.31 $30.07 $28.77
General trade.................... 89.97 85.42 92.40 86.64
Specialty potash................. 227.09 206.34 223.53 211.84
- ----------------------------------------------------------------------
Compass's natural gas hedging program helped the company
successfully contain production costs again in the third quarter. The
company's gas needs are 90 percent hedged through the end of the year,
so fourth-quarter costs are expected to be approximately $0.4 million
more than in the fourth quarter of 2003.
Selling, general and administrative expenses increased by $2.1
million to $13.3 million reflecting new public-company expenses,
higher general liability insurance costs and the impact of foreign
exchange rates on Canadian and U.K. expenses.
Compass incurred other charges of $0.6 million for the secondary
offering that closed on July 14 and the shelf registration that was
filed on September 27.
The company recorded a non-cash foreign exchange loss of $3.3
million, or $0.08 per share after tax, in the quarter compared to a
non-cash foreign exchange loss of $1.6 million, or $0.04 per share
after tax, in the third quarter of 2003.
Interest expense for the third quarter was $15.4 million, of which
$5.9 million is a non-cash accrual for payment-in-kind interest on the
company's senior subordinated discount notes and its senior discount
notes.
Also during the quarter, the company recorded a non-cash benefit
to earnings of $11.1 million as a result of the release of part of the
company's valuation allowance against deferred tax assets. The
reversal followed a routine assessment of the valuation allowance by
the company, which established that the non-cash valuation allowance
should be released because Compass's improving performance indicates
that the company will be able to use the majority of its net operating
loss carryforwards. The release of this valuation allowance will have
no impact on cash flows from operations, income before income taxes,
cash taxes or the company's ability to use its carryforwards to reduce
its tax obligations in the future.
As part of the assessment, Compass reevaluated its deferred income
tax accounts and the related valuation allowance in prior periods
against applicable accounting guidance. This process resulted in
changes in the non-cash valuation allowance in all prior periods. The
accounting adjustments have no impact on cash taxes, cash flows from
operations, or income before income taxes in any affected period, but
increased or decreased net income available for common stock in the
prior periods as follows (unaudited): $5.1 million in 2003, ($1.9)
million in 2002, $9.5 million in 2001, and $3.3 million cumulative
prior to 2001. Net income available for common stock for the third
quarter and first nine months of 2003 increased by $1.3 million and
$3.8 million respectively.
Net income for the first and second quarters of 2004 was not
affected. The company will promptly file restated financial statements
for 2001 through 2003, including applicable quarterly financial
information.
Compass's book tax rate, excluding the non-cash $11.1 million
benefit, is anticipated to be approximately 30 percent for 2004 and to
increase modestly in 2005 as a result of these changes, but the
company's cash tax rate and payments will not change.
Through September 30, 2004, cash flow from operations was $86.8
million, an increase of $35.4 million over the same period in 2003.
Capital expenditures are $16.4 million year to date, and the company
continues to anticipate capital expenditures of $25 to $27 million for
the full year. Compass's debt at September 30, 2004, stood at $573.5
million and debt net of cash was $565.2, a decline of $26.9 million
and $32.6 million from December 31, 2003.
Earnings Call
Compass Minerals International will discuss its third-quarter
financial results on a conference call tomorrow, November 11, at 9:00
a.m. ET. To access the conference call, interested parties should
visit the company's Web site at www.CompassMinerals.com or dial
877-228-7138. Outside of the U.S. and Canada, callers may dial
706-643-0377. Replays of the call will be available on the company's
Web site for two weeks. The replay can also be accessed by phone for
seven days at 800-642-1687, Conference ID 1660105. Outside of the U.S.
and Canada, callers may dial 706-645-9291.
About Compass Minerals International
Based in the Kansas City metropolitan area, Compass is the
second-leading salt producer in North America and the largest in the
United Kingdom. The company operates nine production facilities,
including the largest rock salt mine in the world in Goderich,
Ontario. The company's product lines include salt for highway deicing,
consumer deicing, water conditioning, consumer and industrial food
preparation, agriculture and industrial applications. In addition,
Compass is North America's leading producer of sulfate of potash,
which is used in the production of specialty fertilizers for
high-value crops and turf.
Non-GAAP Measures
EBITDA (earnings before interest, taxes, depreciation and
amortization) and adjusted EBITDA (EBITDA adjusted for special items
and other income/expense) are non-GAAP measures. They are not
recognized in accordance with generally accepted accounting principles
(GAAP) and should not be viewed as an alternative to GAAP measures of
performance. Furthermore, such measures may not be comparable to the
calculation of these measures by other companies.
Management believes that these non-GAAP measures can assist
investors in understanding our cost structure, cash flows and
financial position. Management further believes that it is helpful to
provide an analysis of our ability to satisfy our debt service,
capital expenditures and working capital requirements in terms of
EBITDA and adjusted EBITDA. The company's financial covenants and
ratios in our senior credit facilities and indentures are also tied to
measures that are calculated by adjusting EBITDA as described below.
======================================================================
Adjusted EBITDA Reconciliation
(in millions)
======================================================================
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
2003 2003
2004 Restated 2004 Restated
-------- --------- -------- ---------
Net income (loss)............... $5.5 $(6.3) $29.9 $15.1
Income tax expense (benefit)... (12.2) (4.1) (3.1) (2.8)
Interest expense.............. 15.4 15.5 45.9 40.5
Depreciation, depletion and
amortization.................. 10.1 11.8 30.4 31.2
-------- --------- -------- ---------
EBITDA.......................... $18.8 $16.9 $103.1 $84.0
Adjustments to income from
operations:
Other charges(1)............... 0.6 --- 1.0 ---
Other (income) expense(2)...... 3.3 1.6 4.0 2.6
-------- --------- -------- ---------
Adjusted EBITDA................. $22.7 $18.5 $108.1 $86.6
======== ========= ======== =========
(1) "Other charges" includes costs for a secondary offering of our
common stock that closed in July 2004 and for the Form S-1 filed
with the Securities and Exchange Commission (SEC) in September
2004. The shares sold in the July offering were previously held by
stockholders and we did not receive any proceeds from the sale.
(2) "Other (income) expense" primarily includes $1.1 million of costs
related to amending the senior credit facility (second quarter of
2003), a $1.9 million gain on the early extinguishment of debt
(second quarter of 2003), interest income, and non-cash foreign
exchange gains and losses in all periods.
======================================================================
Reconciliation for Net Income Available for Common Stock, Excluding
Special Items
(in millions)
======================================================================
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
2003 2003
2004 Restated 2004 Restated
------- ---------- ------- ---------
Net income (loss) available for
common stock.................... $5.5 $(6.3) $29.9 $22.1
Plus (less) special items:
Release of deferred tax asset
valuation allowance(a)...... (11.1) (1.3) (11.1) (3.8)
Public offering costs, net of
tax(b)...................... 0.5 --- 0.8 ---
Gain on redemption of
preferred stock(c).......... --- --- --- (8.2)
------- ---------- ------- ---------
Net income (loss) available for
common stock, excluding special
items........................... $(5.1) $(7.6) $19.6 $10.1
(a) We recorded a non-cash benefit to earnings of $11.1 million in the
third quarter of 2004 due to the release of part of the company's
valuation allowance for deferred tax assets. Amounts in 2003
represent non-cash changes to the valuation allowance for deferred
tax assets.
(b) We incurred pretax costs of $0.4 million in each of the second and
third quarters of 2004 for a secondary offering of our common
stock that closed in July 2004, and $0.2 million in the third
quarter of 2004 for a Form S-1 filed with the SEC in September
2004. The shares sold in the July 2004 offering were previously
held by stockholders and we did not receive any proceeds from the
sale. These items are presented net of tax.
(c) We recorded an $8.2 million gain on redemption of preferred stock
resulting from the repurchase of 14,704 shares of mandatorily
redeemable preferred stock in June 2003. The gain was treated as
an increase to net income available for common stock.
COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in millions, except share data)
Three months ended Nine months ended
September 30, September 30,
-------------------- --------------------
2003 2003
2004 Restated 2004 Restated
-------- --------- -------- --------
Sales..................... $111.7 $97.1 $459.1 $398.5
Cost of sales - shipping
and handling............. 27.8 24.1 124.9 109.3
Cost of sales - products.. 58.0 55.1 216.2 199.5
------ ------- ------ ------
Gross profit............ 25.9 17.9 118.0 89.7
Selling, general and
administrative expenses.. 13.3 11.2 40.3 34.3
Other charges............. 0.6 --- 1.0 ---
------ ------- ------ ------
Operating earnings...... 12.0 6.7 76.7 55.4
Other (income) expense:
Interest expense........ 15.4 15.5 45.9 40.5
Other, net............. 3.3 1.6 4.0 2.6
------ ------- ------ ------
Income (loss) before
income taxes............. (6.7) (10.4) 26.8 12.3
Income tax expense
(benefit)................ (12.2) (4.1) (3.1) (2.8)
------ ------- ------ ------
Net income (loss)......... 5.5 (6.3) 29.9 15.1
Dividends on preferred
stock.................... --- --- --- 1.2
Gain on redemption of
preferred stock.......... --- --- --- (8.2)
------ ------- ------ ------
Net income (loss)
available for common
stock.................... $5.5 $(6.3) $29.9 $22.1
====== ====== ====== ======
Net income (loss)
per share, basic......... $0.18 $(0.21) $0.98 $0.66
Net income (loss)
per share, diluted....... 0.17 (0.21) 0.93 0.64
Cash dividends per
share, common............ 0.25 --- 0.69 2.85
Basic weighted-
average shares
outstanding.............. 30,785,285 30,029,932 30,514,439 33,265,989
Diluted weighted-
average shares
outstanding.............. 32,273,436 30,029,932 32,224,950 34,620,505
COMPASS MINERALS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in millions)
December 31,
September 30, 2003
2004 Restated
------------- ------------
ASSETS
--------
Cash and cash equivalents................ $8.3 $2.6
Receivables, net......................... 64.5 117.4
Inventories.............................. 113.4 96.7
Other current assets..................... 3.4 3.7
Property, plant and equipment, net....... 398.2 410.0
Intangible assets - mineral interests and
other, net.............................. 23.9 24.7
Other non-current assets................. 30.0 31.4
------------- ------------
Total assets......................... $641.7 $686.5
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
---------
Current liabilities...................... $90.3 $114.0
Long-term debt, net of current portion... 575.7 602.5
Deferred income taxes.................... 49.3 61.7
Other noncurrent liabilities............. 35.5 36.4
Total stockholders' deficit.............. (109.1) (128.1)
------------- ------------
Total liabilities and stockholders'
deficit............................. $641.7 $686.5
============= ============
COMPASS MINERALS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in millions)
Nine months ended
September 30,
-----------------------
2003
2004 Restated
---------- -----------
Net cash provided by operating activities.... $ 86.8 $ 51.4
---------- -----------
Cash flows from investing activities:
Capital expenditures....................... (16.4) (9.7)
Acquisition of intangible assets........... --- (21.1)
Other...................................... 0.3 (0.2)
---------- -----------
Net cash used in investing activities (16.1) (31.0)
Cash flows from financing activities:
Issuance of long-term debt................. --- 100.0
Principal payments on long-term debt....... (30.6) (30.9)
Revolver activity.......................... (14.0) 17.5
Payments of notes due to related parties... --- (1.5)
Dividends paid............................. (21.0) (103.7)
Repurchase of Preferred Stock.............. --- (6.6)
Payments to acquire treasury stock......... --- (9.8)
Proceeds from the exercise of stock options 1.2 0.3
Capital contribution....................... --- 8.8
Deferred financing costs................... (0.1) (4.2)
---------- -----------
Net cash used in financing activities........ (64.5) (30.1)
Effect of exchange rate changes on cash and
cash equivalents............................ (0.5) 1.4
---------- -----------
Net increase (decrease) in cash and cash
equivalents............................... 5.7 (8.3)
Cash and cash equivalents, beginning of
period...................................... 2.6 11.9
---------- -----------
Cash and cash equivalents, end of period..... $ 8.3 $ 3.6
========== ===========
COMPASS MINERALS INTERNATIONAL, INC.
SEGMENT INFORMATION (unaudited)
(in millions)
Three months ended September 30, 2004 Salt Potash Other(a) Total
- ---------------------------------------- ------ ------ -------- ------
Sales to external customers.............$ 94.4 $ 17.3 $ --- $111.7
Intersegment sales...................... --- 2.6 (2.6) ---
Cost of sales - shipping and handling
costs.................................. 25.2 2.6 --- 27.8
Operating earnings (loss)............... 12.8 5.0 (5.8) 12.0
Depreciation, depletion and amortization 8.1 2.0 --- 10.1
Total assets............................ 485.9 134.6 21.2 641.7
Three months ended September 30, 2003 Salt Potash Other(a) Total
- ---------------------------------------- ------ ------ -------- ------
Sales to external customers.............$ 85.0 $ 12.1 $ --- $ 97.1
Intersegment sales...................... --- 2.5 (2.5) ---
Cost of sales - shipping and handling
costs.................................. 22.0 2.1 --- 24.1
Operating earnings (loss).............. 9.4 1.4 (4.1) 6.7
Depreciation, depletion and amortization 9.7 2.1 --- 11.8
Total assets............................ 462.5 136.1 21.7 620.3
Nine months ended September 30, 2004 Salt Potash Other(a) Total
- --------------------------------------- ------ ------- -------- ------
Sales to external customers............$397.4 $ 61.7 $ --- $459.1
Intersegment sales..................... --- 7.4 (7.4) ---
Cost of sales - shipping and handling
costs................................. 115.1 9.8 --- 124.9
Operating earnings (loss).............. 79.3 14.2 (16.8) 76.7
Depreciation, depletion and
amortization.......................... 24.4 6.0 --- 30.4
Nine months ended September 30, 2003 Salt Potash Other(a) Total
- ---------------------------------------- ------ ------ -------- ------
Sales to external customers.............$359.8 $ 38.7 $ --- $398.5
Intersegment sales...................... --- 6.4 (6.4) ---
Cost of sales - shipping and handling
costs.................................. 102.9 6.4 --- 109.3
Operating earnings (loss).............. 63.6 4.2 (12.4) 55.4
Depreciation, depletion and amortization 25.2 6.0 --- 31.2
(a) "Other" includes corporate entities and eliminations.
COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the years ended December 31, 2003, 2002 and 2001
(in millions, except share data)
2003 2003 2002
As Filed Restated As Filed
----------- ----------- ------------
Sales............................ $600.6 $600.6 $502.6
Cost of sales - shipping and
handling........................ 165.3 165.3 137.5
Cost of sales - products......... 288.3 288.3 239.2
----------- ----------- ------------
Gross profit................... 147.0 147.0 125.9
Selling, general and
administrative expenses......... 49.0 49.0 40.6
Restructuring and other charges.. 2.4 2.4 7.7
----------- ----------- ------------
Operating earnings............... 95.6 95.6 77.6
Other (income) expense:
Interest expense................. 56.3 56.3 42.4
Other, net....................... 3.7 3.7 4.9
----------- ----------- ------------
Income before income taxes..... 35.6 35.6 30.3
Income tax expense............... 8.4 3.3 11.4
----------- ----------- ------------
Net income....................... 27.2 32.3 18.9
Dividends on redeemable preferred
stock........................... 1.2 1.2 10.6
Gain on redemption of preferred
stock........................... (8.2) (8.2) ---
----------- ----------- ------------
Net income available for common
stock........................... $34.2 $39.3 $8.3
=========== =========== ============
Net income per share, basic...... $1.05 $1.21 $0.24
Net income per share, diluted.... 1.01 1.15 0.23
Basic weighted-average shares
outstanding..................... 32,492,792 32,492,792 35,039,110
Diluted weighted-average shares
outstanding..................... 33,983,983 33,983,983 35,474,539
2002 2001 2001
Restated As Filed Restated
----------- ---------- ----------
Sales................................ $502.6 $523.2 $523.2
Cost of sales - shipping and handling 137.5 143.2 143.2
Cost of sales - products............. 239.2 257.0 257.0
----------- ---------- ----------
Gross profit....................... 125.9 123.0 123.0
Selling, general and administrative
expenses............................ 40.6 38.9 38.9
Restructuring and other charges...... 7.7 27.0 27.0
----------- ---------- ----------
Operating earnings................... 77.6 57.1 57.1
Other (income) expense:
Interest expense..................... 42.4 14.4 14.4
Other, net........................... 4.9 (3.1) (3.1)
----------- ---------- ----------
Income before income taxes......... 30.3 45.8 45.8
Income tax expense................... 13.3 26.8 17.3
----------- ---------- ----------
Net income........................... 17.0 19.0 28.5
Dividends on redeemable preferred
stock............................... 10.6 0.8 0.8
Gain on redemption of preferred stock --- --- ---
----------- ---------- ----------
Net income available for common stock $6.4 $18.2 $27.7
=========== ========== ==========
Net income per share, basic.......... $0.18 $5.65 $8.60
Net income per share, diluted........ 0.18 5.65 8.60
Basic weighted-average shares
outstanding.........................35,039,110 3,220,724 3,220,724
Diluted weighted-average shares
outstanding.........................35,474,539 3,220,724 3,220,724
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 Compass
Minerals International's registration statement on form S-1 filed with
the Securities and Exchange Commission on September 27, 2004. The
Company will not update any forward-looking statements made in this
press release to reflect future events or developments.
CONTACT: Compass Minerals International, Inc.
Rodney L. Underdown, 913-344-9395
or
Peggy Landon, 913-344-9315