Compass Minerals Reports Strong First-Quarter 2021 Results

Salt segment operating earnings improve while continued asset optimization is expected to reduce leverage

Compass Minerals (NYSE: CMP), a leading global provider of essential minerals, today reported significant year-over-year increase in operating earnings and adjusted EBITDA* from continuing operations during first-quarter 2021, primarily driven by improved per-unit operating cost performance and strong sales volumes of highway deicing products within the company's Salt segment.

PRESENTATION OF RESULTS

In March 2021, the company’s board of directors approved the divestiture of the company’s South America businesses and its North America micronutrient business as part of the company’s broader asset optimization strategy. Collectively, the results of these businesses have been reported as discontinued operations for all periods presented.

The continuing operations of the company are reported on the consolidated level and in two segments: Salt and Plant Nutrition (which was previously known as Plant Nutrition North America). The results in this release reflect the continuing operations of the company unless otherwise noted.

*Non-GAAP financial measure. Reconciliations to the most directly comparable GAAP financial measure are provided in tables at the end of this press release.

HIGHLIGHTS

• Realized Salt segment operating earnings of $80.1 million for the first quarter of 2021, up 41% versus the prior-year period
• Salt segment achieved lowest first-quarter operating cost per ton since 2016
• Strengthened pricing for the company's Protassium+^® sulfate of potash (SOP) product to approximately $573 per ton, an improvement of 5% versus fourth-quarter 2020 pricing
• Announced approximately $478 million year-to-date in sale agreements for our South America specialty plant nutrition business and for a component of our North America micronutrient business, the latter of which closed on May 4, 2021, together expected to reduce leverage and allow the company to focus on its core operations
• Rolling Total Case Incident Rate (TCIR) reached a milestone of approximately 1.39*, reflecting the company's ongoing commitment to employee health and safety

*Number of injuries per 200,000 exposure hours.

“On the heels of a challenging year, we are pleased to have come out of the gate in 2021 with a very productive first quarter, while concurrently making meaningful progress executing on our strategic priorities,” said Kevin S. Crutchfield, president and CEO. "Our relentless focus on optimization has translated into improved per-unit operating costs within our Salt segment. In addition, continued solid demand for our Protassium+ product underpins our position as the North American SOP market leader. We also continue to focus on strengthening our balance sheet, which is expected to be aided by the proceeds from the sale agreement for our South America specialty plant nutrition business and the completed sale of certain North America micronutrient assets. Our intent moving forward is to concentrate on our advantaged core assets and selectively pursue strategic opportunities for growth.”

First-quarter 2021 revenue and operating earnings were both higher, by 23% and 40% respectively, compared to the prior-year period, driven primarily by an increase in highway deicing sales volumes of 47% and continued improvement in Salt segment operating costs per ton. In addition, consolidated adjusted EBITDA increased 30% versus first-quarter 2020. The Plant Nutrition segment continued to experience solid customer demand. While Protassium+ pricing has improved compared to the fourth quarter of 2020, Plant Nutrition segment revenue was down 4% compared to the prior-year period.

SALT SEGMENT SUMMARY

First-quarter 2021 Salt segment revenue totaled $369.0 million, a 28% increase from prior-year results, as a 41% increase in sales volumes was partially offset by a 9% decline in average selling prices. Higher seasonal demand for both U.S. and U.K. highway deicing products drove increased sales volumes compared to the first quarter of 2020, in addition to a 2% improvement in consumer and industrial (C&I) sales volumes. Salt segment average selling prices benefited from a 5% increase in C&I average sales prices compared to the same period in the prior year, primarily due to ongoing internal optimization efforts and product sales mix. This was more than offset by an expected 8% decline in year-over-year highway deicing average sales prices as the prior-year bid season weighed on results.

Salt segment operating earnings in first-quarter 2021 increased 41% to $80.1 million, compared to $56.9 million a year ago, while EBITDA grew 37% to $98.1 million. Salt segment operating margin expanded to 22% in first-quarter 2021 from 20% in the prior year, and EBITDA margin expanded to 27% from 25%. These results were primarily driven by sales mix as well as lower per-unit salt costs resulting from strong production at both the Goderich mine and Winsford mine in the U.K.

WINTER WEATHER EFFECT

Snow events during the first quarter of 2021 in Compass Minerals’ North American market were approximately 8% below the 10-year average. For the full winter season, snow events were also 8% below the 10-year average. Despite these circumstances, the company estimates that severe winter weather during February 2021 in the U.S. and strong winter weather in the U.K. during the quarter positively affected operating earnings by $11 million to $14 million in first-quarter 2021 and partially offset the negative operating earnings impact from winter weather in fourth-quarter 2020. The company estimates an adverse impact on operating earnings of $11 million to $13 million for the full winter season.

PLANT NUTRITION SEGMENT SUMMARY

Plant Nutrition segment (previously known as the Plant Nutrition North America segment) revenue in the first quarter of 2021 totaled $54.2 million, down 4% from prior-year results. Sales volumes and average selling prices each decreased approximately 2% compared to first-quarter 2020 results. This was partially offset by a 9% improvement in per-unit logistics costs primarily driven by a significantly higher mix of direct customer shipments compared to the same period a year ago. First-quarter operating earnings declined $2.2 million from the first quarter of 2020 to $4.4 million, which reflects higher operating costs per ton, while EBITDA totaled $13.2 million compared to $16.4 million in the prior-year period. First-quarter 2021 operating margin was 8% compared to 12% in the prior year and the EBITDA margin was 24% compared to 29% in the prior year, both reflecting higher per-unit cost and lower pricing, partially offset by lower logistics unit cost.

On May 4, 2021, the company successfully closed its previously announced North America micronutrient sale to Koch Agronomic Services for approximately $60 million, subject to a closing working capital adjustment.

OTHER FINANCIAL HIGHLIGHTS

The company reported a first-quarter 2021 loss on foreign exchange of $2.1 million compared to a gain on foreign exchange of $18.0 million in the prior-year quarter, primarily driven by the significant appreciation of the Canadian dollar during first-quarter 2021.

Interest expense decreased $0.9 million from first-quarter 2020 levels to $15.7 million due to lower weighted average interest rates and lower debt levels.

Cash flow from continuing operations for the first quarter of 2021 totaled $196.8 million compared to $230.3 for the same period in 2020. Excluding the one-time, $55 million tax refund in first-quarter 2020, cash flow from continuing operations for the current quarter was up $21.5 million or 12% versus the prior period.

Capital spending from continuing operations for the first quarter of 2021 totaled $16.6 million.

The company ended the quarter with $329.8 million of liquidity, which includes $42.8 million in cash and cash equivalents from continuing operations and approximately $287.0 million of availability on its $300 million revolving credit facility.

OUTLOOK

Beginning with this earnings release, Compass Minerals will provide full-year adjusted EBITDA guidance and corporate level expenditure guidance on a pro forma continuing operations basis, which excludes 2021 operating results from the former Plant Nutrition South America segment and North America micronutrient business.

The continuing operations of the company will be reported on a consolidated level and in two segments: Salt and Plant Nutrition.

Given higher-than-expected Salt segment sales volumes and the improved cost structure at our Goderich mine, we are adjusting our full-year 2021 EBITDA outlook for continuing operations to $270 million to $295 million from our prior pro forma outlook of $250 million to $280 million. Pro forma prior outlook excludes approximately $80 million of full-year 2021 EBITDA from discontinued operations.

For the second quarter of 2021, we expect Salt segment revenue to benefit from mix driven average selling price improvement, partially offsetting anticipated higher year-over-year logistics costs and sales mix related per-unit operating costs.

In the Plant Nutrition segment, given the amount of sales generated in the first quarter, we expect a modest year-over-year decrease in second-quarter 2021 sales volumes with slightly higher average SOP selling prices compared to the prior-year period.

Conference Call

Compass Minerals will discuss its results on a conference call tomorrow morning, Wednesday, May 5, 2021, at 10 a.m. ET. To access the conference call, interested parties should visit the company’s website at compassminerals.com or dial 1-833-900-1533. Callers must provide the conference ID number 1587105. Outside of the U.S. and Canada, callers may dial 1-236-712-2274. Replays of the call will be available on the company’s website.

A corporate presentation with first-quarter 2021 performance results will also be available at investors.compassminerals.com.

About Compass Minerals

Compass Minerals (NYSE: CMP) is a leading provider of essential minerals focused on safely delivering where and when it matters to help solve nature’s challenges for customers and communities. Its salt products help keep roadways safe during winter weather and are used in numerous other consumer, industrial and agricultural applications. Its plant nutrition business manufactures an innovative and diverse portfolio of products that improve the quality and yield of crops, while supporting sustainable agriculture. Additionally, its specialty chemical business serves the water treatment industry and other industrial processes. The company operates 21 production and packaging facilities with more than 3,000 personnel throughout the U.S., Canada, Brazil and the U.K. Visit compassminerals.com for more information about the company and its products.

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements about the company’s ability to strengthen its balance sheet, concentrate on core assets and pursue growth opportunities; Goderich mine, logistics and operating costs; prices; and the company’s outlook for the second quarter of 2021 and the full year of 2021, including its expectations regarding adjusted EBITDA, volume, revenue, EBITDA, corporate and other expense, interest expense, depreciation, depletion and amortization, capital expenditures and tax rates. 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. The differences could be caused by a number of factors, including without limitation (i) impacts of the COVID-19 pandemic, (ii) weather conditions, (iii) pressure on prices and impact from competitive products, (iv) foreign exchange rates and the cost and availability of transportation for the distribution of the company’s products, (v) any inability by the company to successfully implement its strategic priorities or its cost-saving or enterprise optimization initiatives, (vi) the timing and completion of the proposed transaction to sell the company’s South America agriculture business, and (vii) the timing and the outcome of the sale process for the company’s other South America businesses. For further information on these and other risks and uncertainties that may affect the company’s business, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the company’s Annual Report on Form 10-K for the year ended December 31, 2020 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 filed or to be filed with the SEC and the company’s Current Report on Form 8-K filed with the SEC on March 24, 2021. 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

In addition to using U.S. generally accepted accounting principles (“GAAP”) financial measures, management uses a variety of non-GAAP financial measures described below 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.

Management uses EBITDA, EBITDA adjusted for items which management believes are not indicative of the company’s ongoing operating performance (“Adjusted EBITDA”) and EBITDA margin to evaluate the operating performance of the company’s core business operations because its 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 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 earnings, operating 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 are an essential element of the company’s cost structure and cannot be eliminated. In addition, Adjusted EBITDA excludes stock-based compensation. 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, Adjusted EBITDA and EBITDA margin as used by management is set forth in the following tables. All margin numbers are defined as the relevant measure divided by sales.

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