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Compass Minerals Reports Fourth-Quarter 2012 Earnings

Excluding special items from net earnings is meaningful to investors because it provides insight with respect to the ongoing operating results of the company. Special items reflect CEO transition costs, charges associated with the refinancing of the company’s term loans, the release of tax reserves and the estimated effects of the tornado that struck the company’s salt mine and evaporation plant in Goderich, Ontario, in August 2011. Those effects include lost sales volumes, higher net per-unit production costs and higher net costs to serve customers, including purchased products and logistical inefficiencies, in 2011 and 2012. Management’s calculations of these measures are set forth in the following tables.

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 ended

December 31,

  Twelve months ended

December 31,

2012   2011 2012   2011
Net earnings $ 30.1 $ 43.9 $ 88.9 $ 149.0
Income tax expense 8.3 12.5 22.4 48.3
Interest expense 4.5 5.1 18.2 21.0
Depreciation, depletion and amortization   17.3     15.9     64.5     64.7  
EBITDA $ 60.2 $ 77.4 $ 194.0 $ 283.0
Adjustments to EBITDA:

Other (income)/expense (1)

  (0.7 )   (1.5 )   3.7     (3.0 )
Adjusted EBITDA $ 59.5   $ 75.9   $ 197.7   $ 280.0  
 

(1) Primarily includes interest income and foreign exchange gains and losses. The twelve months ended December 31, 2012 include a charge of $2.8 million related to the refinancing of term loans.

 
 
Reconciliation for Net Earnings, Excluding Special Items (unaudited)

(in millions)

Three months ended

December 31,

Twelve months ended

December 31,

2012 2011 2012 2011
Net earnings $ 30.1 $ 43.9 $ 88.9 $ 149.0

Estimated losses incurred from tornado, net of taxesand recoveries (1)

2.2 11.4 14.8 11.4
Costs to refinance debt, net of taxes (2) 1.7
Tax benefit from income tax audit (3) (3.0 )
CEO transition costs (4)   2.0         2.0      
Net earnings, excluding special items $ 34.3   $ 55.3   $ 104.4   $ 160.4  
 

(1)

  In August 2011, the company’s rock salt mine and evaporated-salt plant in Goderich, ON, sustained damage from a tornado. The amount reported is management’s estimate of the impact on the period’s net earnings from losses caused by the tornado that have not yet been recovered through insurance. Estimated pre-tax losses of $3.1 million and $21.4 million ($2.2 million and $14.8 million after applicable income taxes) for the three and twelve months ended December 31, 2012, respectively, and $16.4 million ($11.4 million after applicable taxes) in the three and twelve months ended December 31, 2011, primarily includes lost sales volumes, higher per-unit production costs and higher costs to serve customers – including purchased products and logistical inefficiencies – realized in the period. These losses may be recovered in future periods through the company’s business interruption insurance, but actual recoveries could be different than the estimate noted above. Under U.S. generally accepted accounting principles (US GAAP), expected business interruption insurance recoveries that relate to lost sales and other types of losses not covered by property and casualty insurance are not recognized until the insurance claim has been settled, at which time they would be recognized as reductions in costs. This estimate does not include property and casualty losses – consisting of direct cleanup costs and impairments of property, plant and equipment – that were offset by insurance recoveries recognized in the period pursuant to US GAAP.

(2)

In May 2012, we amended and restated our senior secured credit facility and refinanced our term loans into a single term loan for pre-tax costs of $2.8 million ($1.7 million after applicable income taxes).

(3)

In the second quarter of 2012, the company settled a tax audit which resulted in a $3.0 million income tax benefit.

(4)

In the fourth quarter of 2012, the company recorded costs associated with the retirement of its CEO of $3.3 million ($2.0 million after applicable income taxes).
 
Reconciliation for Pro Forma Salt Segment Operating Earnings (unaudited)

(in millions)

  Three months ended

December 31,

  Twelve months ended

December 31,

2012   2011 2012   2011
Salt segment operating earnings $ 47.9 $ 53.4 $ 126.0 $ 184.7
Estimated losses incurred from tornado (1) 3.1 16.4 21.4 16.4
Pro forma salt segment earnings $ 51.0 $ 69.8 $ 147.4 $ 201.1
 

(1)

  In August 2011, the company’s rock salt mine and evaporated-salt plant in Goderich, ON, sustained damage from a tornado. The amount reported is management’s estimate of the impact on the period’s net earnings from losses caused by the tornado that have not yet been recovered through insurance. Estimated pre-tax losses of $3.1 million and $21.4 million for the three and twelve months ended December 31, 2012, respectively, and $16.4 million for the three and twelve months ended December 31, 2011, primarily includes lost sales volumes, higher per-unit production costs and higher costs to serve customers – including purchased products and logistical inefficiencies – realized in the period. These losses may be recovered in future periods through the company’s business interruption insurance, but actual recoveries could be different than the estimate noted above. Under U.S. generally accepted accounting principles (US GAAP), expected business interruption insurance recoveries that relate to lost sales and other types of losses not covered by property and casualty insurance are not recognized until the insurance claim has been settled, at which time they would be recognized as reductions in costs. This estimate does not include property and casualty losses – consisting of direct cleanup costs and impairments of property, plant and equipment – that were offset by insurance recoveries recognized in the period pursuant to US GAAP.
 
COMPASS MINERALS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in millions, except share data)

     
Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
 
Sales $ 267.1 $ 306.1 $ 941.9 $ 1,105.7
Shipping and handling cost 60.8 78.9 238.1 293.8
Product cost   136.7     140.3     476.7   502.1  
Gross profit 69.6 86.9 227.1 309.8
 
Selling, general and administrative expenses   27.4     26.9     93.9   94.5  
Operating earnings 42.2 60.0 133.2 215.3
 
Other (income) expense:
Interest expense 4.5 5.1 18.2 21.0
Other, net   (0.7 )   (1.5 )   3.7   (3.0 )
Earnings before income taxes 38.4 56.4 111.3 197.3
Income tax expense   8.3     12.5     22.4   48.3  
Net earnings $ 30.1   $ 43.9   $ 88.9 $ 149.0  
 
Basic net earnings per common share $ 0.90 $ 1.31 $ 2.65 $ 4.46
Diluted net earnings per common share $ 0.90 $ 1.31 $ 2.65 $ 4.45
Cash dividends per share $ 0.495 $ 0.45 $ 1.98 $ 1.80
 
Weighted-average common shares outstanding (in thousands): (1)
Basic 33,195 32,991 33,109 32,906
Diluted 33,225 33,013 33,135 32,934
 

(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 352,000 and 402,000 participating securities in the three-month and twelve-month periods ending December 31, 2012, respectively, and 454,000 and 522,000 participating securities in the three-month and twelve-month periods ending December 31, 2011, respectively.
 
COMPASS MINERALS INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in millions)
 
December 31, December 31,
2012 2011
 
ASSETS
 
Cash and cash equivalents $ 100.1 $ 130.3
Receivables, net 143.7 152.5
Inventories 229.7 207.2
Other current assets 33.4 25.8
Property, plant and equipment, net 645.2 573.4
Intangible and other noncurrent assets   148.5   116.3
 
Total assets $ 1,300.6 $ 1,205.5
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current portion of long-term debt $ 3.9 $ 156.0
Other current liabilities 195.4 170.8
Long-term debt, net of current portion 478.4 326.7
Deferred income taxes and other noncurrent liabilities 119.4 105.4
Total stockholders' equity   503.5   446.6
 
Total liabilities and stockholders' equity $ 1,300.6 $ 1,205.5
 
COMPASS MINERALS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in millions)
   
Twelve Months Ended
December 31,
2012 2011
Net cash provided by operating activities $ 151.7   $ 252.3  
 
Cash flows from investing activities:
Capital expenditures (130.9 ) (107.4 )
Insurance advances for investment purposes, Goderich tornado 8.7 12.6
Acquisition of a business - (58.1 )
Other, net   (1.4 )   0.5  
 
Net cash used in investing activities   (123.6 )   (152.4 )
 
Cash flows from financing activities:
Proceeds from the issuance of long-term debt 387.0
Principal payments on long-term debt (387.7 ) (4.2 )
Fees and premiums paid to redeem and refinance debt (1.8 )
Deferred financing costs (2.2 )
Dividends paid (66.3 ) (60.1 )
Proceeds received from stock option exercises 7.4 5.1
Excess tax benefits from equity compensation awards   1.7     3.5  
 
Net cash used in financing activities   (61.9 )   (55.7 )
 
Effect of exchange rate changes on cash and cash equivalents   3.6     (5.0 )
 
Net change in cash and cash equivalents (30.2 ) 39.2
Cash and cash equivalents, beginning of the year   130.3     91.1  
 
Cash and cash equivalents, end of period $ 100.1   $ 130.3  
 
COMPASS MINERALS INTERNATIONAL, INC.
SEGMENT INFORMATION (unaudited)
(in millions)
       
Specialty Corporate
Three Months Ended December 31, 2012   Salt   Fertilizer   and Other (a, b)   Total
Sales to external customers $ 206.7 $ 56.6 $ 3.8 $ 267.1
Intersegment sales 0.2 2.6 (2.8) -
Shipping and handling cost 54.2 6.6 - 60.8
Operating earnings (loss) 47.9 10.7 (16.4) 42.2
Depreciation, depletion and amortization 10.2 5.8 1.3 17.3
Total assets 809.3 412.3 79.0 1,300.6
 
Specialty Corporate
Three Months Ended December 31, 2011   Salt   Fertilizer   and Other (a)   Total
Sales to external customers $ 250.1 $ 53.6 $ 2.4 $ 306.1
Intersegment sales 0.1 2.6 (2.7)
Shipping and handling cost 73.0 5.9 78.9
Operating earnings (loss) 53.4 19.6 (13.0) 60.0
Depreciation, depletion and amortization 9.8 5.2 0.9 15.9
Total assets 758.8 378.2 68.5 1,205.5
 
 
Specialty Corporate
Twelve Months Ended December 31, 2012   Salt   Fertilizer   and Other (a, b)   Total
Sales to external customers $ 703.4 $ 226.2 $ 12.3 $ 941.9
Intersegment sales 0.8 6.8 (7.6) -
Shipping and handling cost 211.9 26.2 - 238.1
Operating earnings (loss) 126.0 58.4 (51.2) 133.2
Depreciation, depletion and amortization 38.9 21.4 4.2 64.5
 
Specialty Corporate
Twelve Months Ended December 31, 2011   Salt   Fertilizer   and Other (a)   Total
Sales to external customers $ 885.3 $ 209.6 $ 10.8 $ 1,105.7
Intersegment sales 0.8 6.4 (7.2)
Shipping and handling cost 268.5 25.3 293.8
Operating earnings (loss) 184.7 77.0 (46.4) 215.3
Depreciation, depletion and amortization 40.2 20.2 4.3 64.7

(a)

  “Corporate and Other” 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)

In the fourth quarter of 2012, the company recorded costs associated with the retirement of its CEO of $3.3 million.
 




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