COMPASS MINERALS INTERNATIONAL INC

Previous wording

Forward-looking statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following: our mining and industrial operations; our continued ability to access ambient lake brine in the Great Salt Lake; the termination of our lithium development project; geological conditions; dependency on a limited number of key production and distribution facilities and critical equipment; weather conditions; the inability to fund necessary capital expenditures or successfully complete capital projects; uncertainties in estimating our economically recoverable reserves and resources; the useful life of our mine properties; our expectation of extending the Goderich mine mineral lease; conversion of mineral resources into mineral reserves; strikes, other forms of work stoppage or slowdown or other union activities; supply constraints or price increases for energy and raw materials used in our production processes; our indebtedness and inability to pay our indebtedness; restrictions in our debt agreements that may limit our ability to operate our business or require accelerated debt payments; tax liabilities; the inability of our customers to access credit or a default by our customers of trade credit extended by us; our payment of any dividends; financial assurance requirements; the seasonal demand for our products; the impact of anticipated changes in potash product prices and customer application rates; the impact of competition on the sales of our products; inflation risks; increasing costs or a lack of availability of transportation services; risks associated with our international operations and sales, including changes in currency exchange rates; conditions in the sectors where we sell products and supply and demand imbalances for competing products; our rights and governmental authorizations to mine and operate our properties; risks related to unanticipated litigation or investigations or pending litigation or investigations or other contingencies; compliance with environmental, health and safety laws and regulations; environmental liabilities; compliance with foreign and United States (“U.S.”) laws and regulations related to import and export requirements and anti-corruption laws; changes in laws, industry standards and regulatory requirements; product liability claims and product recalls; misappropriation or infringement claims relating to intellectual property; inability to obtain required product registrations or increased regulatory requirements; our ability to successfully implem…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Forward-looking statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following: our mining and industrial operations; our continued ability to access ambient lake brine in the Great Salt Lake; the termination of our lithium development project; geological conditions; dependency on a limited number of key production and distribution facilities and critical equipment; weather conditions; the inability to fund necessary capital expenditures or successfully complete capital projects; uncertainties in estimating our economically recoverable reserves and resources; the useful life of our mine properties; conversion of mineral resources into mineral reserves; strikes, other forms of work stoppage or slowdown or other union activities; supply constraints or price increases for energy and raw materials used in our production processes; our indebtedness and inability to pay our indebtedness; restrictions in our debt agreements that may limit our ability to operate our business or require accelerated debt payments; tax liabilities; the inability of our customers to access credit or a default by our customers of trade credit extended by us; our payment of any dividends; financial assurance requirements; the seasonal demand for our products; the impact of anticipated changes in potash product prices and customer application rates; the impact of competition on the sales of our products; inflation risks; increasing costs or a lack of availability of transportation services; risks associated with our international operations and sales, including changes in currency exchange rates; conditions in the sectors where we sell products and supply and demand imbalances for competing products; our rights and governmental authorizations to mine and operate our properties; risks related to unanticipated litigation or investigations or pending litigation or investigations or other contingencies; compliance with environmental, health and safety laws and regulations; environmental liabilities; compliance with foreign and United States (“U.S.”) laws and regulations related to import and export requirements and anti-corruption laws; changes in laws, industry standards and regulatory requirements; product liability claims and product recalls; misappropriation or infringement claims relating to intellectual property; inability to obtain required product registrations or increased regulatory requirements; our ability to successfully implement our strategies; risks related to labor shortages and the l…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

As previously disclosed in the 2023 Form 10-K and as discussed in Item 1, Note 5 of our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, the Company indefinitely paused new investment in its lithium salt project pending greater clarity on the evolving regulatory environment in Utah. In December of 2023, a revised draft of rules was proposed, project engineering estimates were refined and, taken together with the decline in market price of lithium products, the Company determined to terminate the lithium development. Consequently, the Company evaluated the capitalized assets and recorded an impairment charge of $74.8 million, including $7.6 million associated with future commitments, for the three months ended December 31, 2023 to value the assets at estimated fair value, considering equipment expected to be used by the on-going business and amounts estimated to be recoverable through returns or salvage value. The determination of fair value of these assets requires us to make estimates and assumptions that include, but are not limited to, estimated proceeds to be received upon sale or return of the equipment, assumptions about the ability to redeploy equipment and materials to other parts of the business and estimates regarding the utility value and replacement cost of the equipment redeployed. Actual proceeds received from asset sales or returns and our ability to utilize the assets may vary from the Company’s estimates resulting in further impairment.

Current wording

As previously disclosed in the 2023 Form 10-K and as discussed in Item 1, Note 5 of our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, we indefinitely paused new investment in the lithium salt project pending greater clarity on the evolving regulatory environment in Utah. In December of 2023, a revised draft of rules was proposed, project engineering estimates were refined and, taken together with the decline in market price of lithium products, we determined to terminate the lithium development. Consequently, we evaluated the capitalized assets and recorded an impairment charge of $74.8 million for the six months ended March 31, 2024, including $5.9 million associated with future commitments as of March 31, 2024. Additional restructuring charges of $1.7 million were recorded in other operating (income) expense during the three months ended March 31, 2024. The impairment charges were recognized to value the assets at estimated fair value, considering equipment expected to be used by the on-going business and amounts estimated to be recoverable through returns or salvage value. The determination of fair value of these assets requires us to make estimates and assumptions that include, but are not limited to, estimated proceeds to be received upon sale or return of the equipment, assumptions about the ability to redeploy equipment and materials to other parts of the business and estimates regarding the utility value and replacement cost of the equipment redeployed. Actual proceeds received from asset sales or returns and our ability to utilize the assets may vary from the our estimates resulting in further impairment.

Previous wording

In May 2023, we completed the purchase of Fortress North America, LLC (“Fortress”), a next-generation fire retardant company dedicated to developing and producing a portfolio of magnesium chloride-based aerial and ground fire retardant products to help combat wildfires (see Item 1, Note 2 of our Consolidated Financial Statements). Magnesium chloride is an existing product stream out of our Ogden, Utah, solar evaporation facility. December 31, 2023 marked the end of Fortress's first commercially operating fire season with the U.S. Forest Service (“USFS”).

Current wording

In May 2023, we completed the purchase of Fortress, a next-generation fire retardant company dedicated to developing and producing a portfolio of environmentally-friendly aerial and ground fire retardant products to help combat wildfires (see Item 1, Note 2 of our Consolidated Financial Statements). December 31, 2023 marked the end of Fortress's first commercially operating fire season with the U.S. Forest Service (“USFS”). As described in Item 1, Note 1 of our Consolidated Financial Statements, the USFS recently notified us that Fortress would not be awarded a contract to supply its magnesium chloride-based aerial fire retardant for the calendar 2024 fire season. We are evaluating various alternatives regarding the path forward for the Fortress business given recent developments.

Previous wording

Additionally, we had been pursuing development of a sustainable lithium salt resource near Ogden, UT to support the North American battery market. However, as discussed above in Critical Accounting Policies and in Item 1, Note 5 of our Consolidated Financial Statements, we have terminated our pursuit of the lithium development and recognized a $74.8 million

Current wording

Additionally, we had been pursuing development of a sustainable lithium salt resource near Ogden, UT to support the North American battery market. However, as discussed above in Critical Accounting Policies and in Item 1, Note 5 of our Consolidated Financial Statements, we have terminated our pursuit of the lithium development. As a result, we recognized a $74.8 million loss on impairment of long-lived assets for the six months ended March 31, 2024, including $5.9 million associated with future commitments as of March 31, 2024. Additional restructuring charges of $1.7 million were also recorded during the three months ended March 31, 2024.

Previous wording

The following is a summary of our consolidated results of continuing operations for the three months ended December 31, 2023 and 2022, respectively. The following discussion should be read in conjunction with the information contained in our consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q.

Current wording

The following is a summary of our consolidated results of continuing operations for the three and six months ended March 31, 2024 and 2023, respectively. The following discussion should be read in conjunction with the information contained in our consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q.

Previous wording

•Total sales decreased 3%, or $10.7 million, due to lower Salt segment sales, partially offset by sales by the Fortress fire retardant business and higher Plant Nutrition segment sales. The decrease in sales for Salt reflected lower sales volumes. Plant Nutrition sales increased from the prior year due to an increase in sale volumes, partially offset by lower average sales prices. In addition, we recognized $14.5 million in sales related to the completion of our 2023 contract with the USFS.

Current wording

•Total sales decreased 11%, or $47.1 million, due to lower Salt segment sales, partially offset by higher Plant Nutrition segment sales. The decrease in sales for Salt reflected lower sales volumes, partially offset by higher average sales prices. Plant Nutrition sales increased from the prior year due to an increase in sales volumes, partially offset by lower average sales prices.

Previous wording

•Earnings before interest, taxes, depreciation and amortization (“EBITDA”)* adjusted for items management believes are not indicative of our ongoing operating performance (“Adjusted EBITDA”)* decreased 3.9%, or $2.4 million.

Current wording

•Earnings before interest, taxes, depreciation and amortization (“EBITDA”)* adjusted for items management believes are not indicative of our ongoing operating performance (“Adjusted EBITDA”)* increased 12.8%, or $9.9 million, benefiting from a $24.3 million gain recorded in the current period related to the decline in the valuation of the Fortress contingent consideration.

Previous wording

Gross Profit: Increased 1%, or $0.6 million; Gross Margin increased 1 percentage point to 21%

Current wording

Gross Profit: Decreased 14%, or $12.3 million; Gross Margin decreased 1 percentage point to 20%

Previous wording

•Salt segment gross profit increased $2.0 million primarily due to higher average sales prices, which were partially offset by lower sales volumes and higher per-unit product costs (see Salt operating results).

Current wording

•Salt segment gross profit decreased $7.6 million primarily due to lower sales volumes and higher per-unit product costs, which were partially offset by higher average sales prices (see Salt operating results).

Previous wording

•The gross profit of the Plant Nutrition segment decreased $13.5 million due to higher per-unit product costs and lower average sales prices, which were partially offset by lower per-unit distribution costs (see Plant Nutrition operating results).

Current wording

•The gross profit of the Plant Nutrition segment decreased $1.9 million due to lower average sales prices, which were partially offset by lower per-unit product and distribution costs (see Plant Nutrition operating results).

Previous wording

•The decrease in interest income during the current period is primarily due to the higher cash balance in the prior year resulting from proceeds received from a private placement of our common stock.

Current wording

•The decrease in interest income during the current period is primarily due to the higher average cash balance in the prior year resulting from proceeds received from a private placement of our common stock.

Previous wording

•Interest expense increased $1.9 million due to higher interest rates and debt levels in the current period.

Current wording

•Interest expense increased $2.9 million due to higher interest rates and debt levels in the current period.

Previous wording

•We realized loss on foreign exchange of $1.9 million in the first quarter of fiscal 2024 compared to $2.5 million in the same quarter of the prior-year period, primarily reflecting changes in translating our intercompany loans from British Pounds to U.S. Dollars.

Current wording

•We realized a gain on foreign exchange of $2.5 million in the second quarter of fiscal 2024 compared to $0.2 million in the same quarter of the prior-year period, primarily reflecting the translation of our intercompany loans from Canadian dollars to U.S. dollars.

Previous wording

Net Loss in Equity Investees: $0.9 million in the prior-year period

Current wording

Net Loss in Equity Investees: $1.4 million in the prior-year period

Previous wording

•We realized a net loss of $0.9 million in the prior-year period reflecting our share of losses related to our equity investments as these development stage businesses positioned themselves for commercialization.

Current wording

•We realized a net loss of $1.4 million in the prior-year period reflecting our share of losses related to our equity investments as these development stage businesses positioned themselves for commercialization.

Previous wording

•The decrease in income tax expense was due primarily to lower pretax book income, excluding the impairment of lithium assets, in the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. The net tax benefit recorded on the impairment of the lithium assets impairment was offset entirely by tax expense for a valuation allowance on the related deferred tax asset.

Current wording

•The decrease in income tax expense was due primarily to a significant decrease in annual effective tax rate driven by a significant decrease in forecasted pretax book income for the remainder of the year. Additionally, the majority of the impairments recorded in the three months ended March 31, 2024 were either not tax deductible or the tax benefit was offset by tax expense for a valuation allowance on the related deferred tax asset.

Previous wording

•Our effective tax rate was (2.5)% for the three months ended December 31, 2023, which is primarily driven by the income mix by country with income recognized in foreign jurisdictions offset by losses recognized in the U.S. for which a valuation allowance has been recorded against the U.S. tax benefit carryforward.

Current wording

•Our effective tax rate was 21.4% for the three months ended March 31, 2024, which is primarily driven by the income mix by country with income recognized in foreign jurisdictions offset by losses recognized in the U.S. for which a valuation allowance has been recorded against the U.S. tax benefit carryforward. Additionally, no tax benefit was recorded on the Plant Nutrition impairment as the impairment is not tax deductible.

Previous wording

SG&A: Increased $3.9 million; increased 1.5 percentage points as a percentage of sales from 11.9% to 13.4%

Current wording

SG&A: Increased $2.8 million; increased 1.2 percentage points as a percentage of sales from 10.0% to 11.2%

Previous wording

•The increase in SG&A expense was primarily due to expenses related to our Fortress fire retardant business that was acquired in May 2023 and higher corporate incentive compensation expense.

Current wording

•The increase in SG&A expense was primarily due to expenses related to our Fortress fire retardant business that was acquired in May 2023.

Previous wording

•We recognized an impairment loss of $74.8 million for the three months ended December 31, 2023 related to the termination of the lithium development (see Item 1, Note 5).

Current wording

•We recognized an impairment loss of $74.8 million for the six months ended March 31, 2024 related to the termination of the lithium development (see Item 1, Note 5).

Previous wording

•The increase in other operating expense was due to an increase in the contingent consideration related to the Fortress acquisition and severance costs resulting from the decision to discontinue the pursuit of the lithium development in the current period.

Current wording

•The decrease in other operating expense was due to a decrease in the contingent consideration related to the Fortress acquisition, partially offset by severance costs resulting from the decision to discontinue the pursuit of the lithium development and corporate restructuring charges in the current period.

Previous wording

Other Expense, net: Increased to $0.7 million

Current wording

Other Expense, net: Increased $0.6 million to $1.6 million

Previous wording

The results of operations of the Fortress business include sales of $14.5 million for the three months ended December 31, 2023. The results of operations of the consolidated records management business and other incidental revenues include sales of $3.2 million and $2.7 million for the three months ended December 31, 2023 and 2022, respectively. These sales are not material to our consolidated financial results and are not included in the following operating segment financial data.

Current wording

The results of operations of the Fortress business include sales of $0.1 million and $14.6 million for the three and six months ended March 31, 2024. The results of operations of the consolidated records management business and other incidental revenues include sales of $3.4 million and $2.9 million for the three months ended March 31, 2024 and 2023, respectively, and $6.6 million and $5.6 million for the six months ended March 31, 2024 and 2023, respectively. These sales are not material to our consolidated financial results and are not included in the following operating segment financial data.

Previous wording

•Salt sales volumes decreased 19% in total, or 666,000 tons, reducing sales by approximately $47.5 million. Highway deicing sales volumes decreased 22%, reflecting a combination of exceptionally mild weather and the impact of 5%

Current wording

•Salt sales volumes decreased 21% in total, or 937,000 tons, reducing sales by approximately $72.8 million. Highway deicing sales volumes decreased 22%, reflecting a combination of exceptionally mild weather and the impact of 5% lower total committed bid volumes compared to the prior-year bid season. Consumer and industrial sales volumes decreased 14% primarily due to lower deicing volumes.

Previous wording

•Highway deicing average sales price increased 7% across all product categories as we have sought to restore profitability and offset the impact of prior year inflation on costs by executing a commercial bidding strategy emphasizing pricing over volume. Consumer and industrial average sales price increased 3% due to price increases taken to offset inflation realized in prior years. The higher average sales prices are also reflective of sales mix.

Current wording

•Highway deicing average sales price increased 7% across all product categories as we have sought to restore profitability and offset the impact of prior year inflation on costs by executing a commercial bidding strategy emphasizing pricing over volume. Consumer and industrial average sales price increased 11% due to price increases taken to offset inflation realized in prior years. The higher average sales prices are also reflective of sales mix.

Previous wording

lower total committed bid volumes year over year compared to the prior-year bid season. Consumer and industrial sales volumes decreased 5% primarily due to lower consumer deicing volumes.

Current wording

•Salt sales volumes decreased 20% reducing sales by approximately $120.6 million. Highway deicing sales volumes decreased 22% reflecting a combination of exceptionally mild weather and the impact of 5% lower total committed bid volumes year over year compared to the prior-year bid season. Consumer and industrial sales volumes decreased 9% primarily due to lower consumer deicing volumes.

Previous wording

•Average sales prices increased 10% partially offsetting the volume decline by approximately $13.7 million with increases in both highway and consumer and industrial average sales prices.

Current wording

•Average sales prices increased 10% partially offsetting the volume decline by approximately $36.7 million with increases in both highway and consumer and industrial average sales prices.

Previous wording

•Plant Nutrition sales volumes increased 67% year over year driven by normalization of demand levels in fiscal 2024 following lower demand in fiscal 2023 reflective of impacts from weather events in key markets and uncertainty about future fertilizer prices causing customers to cancel or delay purchases. The higher sales volumes increased sales by approximately $27.9 million.

Current wording

•Plant Nutrition sales volumes increased 23% year over year driven by normalization of demand levels in fiscal 2024 following lower demand in fiscal 2023 reflective of impacts from weather events in key markets and uncertainty regarding future fertilizer prices causing customers to cancel or delay purchases. The higher sales volumes increased sales by approximately $11.0 million.

Previous wording

•Plant Nutrition average sales prices decreased 29%, offsetting the increase in sales by approximately $19.8 million. Average sales prices decreased throughout fiscal 2023 due to global supply and demand dynamics for fertilizer products resulting in weakening pricing year over year following a strong, steadily increasing price trend throughout fiscal 2022.

Current wording

•Plant Nutrition average sales prices decreased 15%, partially offsetting the increase in sales by approximately $8.6 million. Average sales prices decreased throughout fiscal 2024 due to global supply and demand dynamics for fertilizer products resulting in weakening pricing year over year.

Previous wording

•Plant Nutrition operating earnings decreased $13.3 million to a $2.3 million operating loss primarily due to lower averages sales prices and higher per-unit product costs driven by higher cost carryover inventory reflective of lower production volume and higher energy and other input costs in fiscal 2023, which were partially offset by higher sales volumes.

Current wording

•Plant Nutrition operating earnings decreased $52.7 million to a $53.4 million operating loss primarily due to the write-off of goodwill (see Item 1, Note 1) and lower averages sales prices, which was partially offset by lower per-unit product and distribution costs and higher sales volumes.

Previous wording

•There are several factors adversely impacting the outlook for our Plant Nutrition segment. First, muriate of potash prices continue to be under pressure in the market, which as a potential substitute impacts our SOP pricing. Second, continuing weakness in fertilizer pricing is resulting in buyers deferring purchases in anticipation of lower prices, which adds risk to our sales outlook. Lastly, first-quarter pond-based production tracked toward the lower end of our initial projections. As a result, we now expect Plant Nutrition segment sales volumes and adjusted EBITDA to be within a range of 280,000 to 310,000 tons and $15 million to $35 million, respectively, in fiscal year 2024.

Current wording

•Plant Nutrition segment sales volumes and adjusted EBITDA to be within a range of 280,000 to 310,000 tons and $15 million to $30 million, respectively, in fiscal year 2024.

Previous wording

•Fiscal year 2024 capital expenditures were expected to be in the $120 million to $130 million range. This includes approximately $80 million to $90 million in sustaining capital for the core Salt and Plant Nutrition businesses. In the fire retardant business, approximately $10 million of growth capital is anticipated to be spent in fiscal year 2024. Finally, we expect capital expenditures of roughly $30 million related to the now-terminated lithium project for items that had been committed to prior to the project’s suspension in November 2023. As a result of the termination of the

Current wording

•Fiscal year 2024 capital expenditures are now expected to be in the $115 million to $130 million range. This includes approximately $80 million to $90 million in sustaining capital for the core Salt and Plant Nutrition businesses. In the fire retardant business, approximately $5 million to $10 million has been budgeted for fiscal year 2024, with approximately $3 million invested through the first six months of fiscal 2024. Finally, we expect capital expenditures of roughly $30 million related to the now-terminated lithium project for items that had been committed to prior to the project’s suspension in November 2023. As a result of the termination of the lithium project and the related impairments in the first half of fiscal 2024, a portion of the expenditures related to committed items that had not been received by December 31, 2023, will not be classified as capital expenditures within the Consolidated Statements of Cash Flows when paid.

Previous wording

Historically, our cash flows from operating activities have generally been adequate to fund our basic operating requirements, ongoing debt service and sustaining investment in our property, plant and equipment. We have also used cash generated from operations to fund capital expenditures, pay dividends, fund smaller acquisitions and repay our debt. To a certain extent, our ability to meet our short- and long-term liquidity and capital needs is subject to general economic, financial, competitive and weather conditions, effects of climate change, geological variations in our mine deposits and other factors that are beyond our control. Historically, our working capital requirements have been the highest in the first fiscal quarter (ending December 31) and lowest in the third fiscal quarter (ending June 30). When needed, we may fund short-term working capital requirements by accessing our $375 million revolving credit facility and our $100 million revolving AR Securitization Facility. As of December 31, 2023, we had liquidity of approximately$245.8 million, comprised of $38.3 million of cash and cash equivalents and $207.5 million of availability under our$375 million revolving credit facility.

Current wording

Historically, our cash flows from operating activities have generally been adequate to fund our basic operating requirements, ongoing debt service and sustaining investment in our property, plant and equipment. We have also used cash generated from operations to fund capital expenditures, pay dividends, fund smaller acquisitions and repay our debt. To a certain extent, our ability to meet our short- and long-term liquidity and capital needs is subject to general economic, financial, competitive and weather conditions, effects of climate change, geological variations in our mine deposits and other factors that are beyond our control. Historically, our working capital requirements have been the highest in the first fiscal quarter (ending December 31) and lowest in the third fiscal quarter (ending June 30). When needed, we may fund short-term working capital requirements by accessing our $375 million revolving credit facility and our $100.0 million revolving AR Securitization Facility. As of March 31, 2024, we had liquidity of approximately $277.7 million, comprised of $40.0 million of cash and cash equivalents and $237.7 million of availability under our $375 million revolving credit facility.

Previous wording

We have been able to manage our cash flows generated and used across Compass Minerals to indefinitely reinvest earnings in our foreign jurisdictions or efficiently repatriate those funds to the U.S. As of December 31, 2023, we had $5.5 million of cash and cash equivalents that was either held directly or indirectly by foreign subsidiaries. As a result of U.S. tax reform, we revised our permanently reinvested assertion, expecting to repatriate approximately $150 million of unremitted foreign earnings from Canada. Throughout fiscal years 2022 and 2023, we increased our repatriation expectation to include an additional $16 million from our U.K. operations. During the first quarter of fiscal 2023, $89.2 million was repatriated from Canada and in the third quarter of fiscal 2023, $15.6 million was repatriated from the U.K. Net income tax expense of $3.8 million has been recorded for foreign withholding tax, state income tax and foreign exchange losses on these changes in assertion as of December 31, 2023, consisting of a tax benefit of $0.7 million recorded in fiscal 2023 and tax expense of $4.5 million, most of which was recorded in years prior to fiscal 2021. Due to our ability to generate adequate levels of U.S. cash flow on an annual basis, it is our current intention to continue to reinvest the remaining undistributed earnings of our foreign subsidiaries indefinitely. We review our tax circumstances on a regular basis with the intent of optimizing cash accessibility and minimizing tax expense.

Current wording

We have been able to manage our cash flows generated and used across Compass Minerals to indefinitely reinvest earnings in our foreign jurisdictions or efficiently repatriate those funds to the U.S. As of March 31, 2024, we had $13.6 million of cash and cash equivalents that was either held directly or indirectly by foreign subsidiaries. As a result of U.S. tax reform, we revised our permanently reinvested assertion, expecting to repatriate approximately $150 million of unremitted foreign earnings from Canada. Throughout fiscal years 2022 and 2023, we increased our repatriation expectation to include an additional $16 million from our U.K. operations. During the first quarter of fiscal 2023, $89.2 million was repatriated from Canada and in the third quarter of fiscal 2023, $15.6 million was repatriated from the U.K. Net income tax expense of $3.8 million has been recorded for foreign withholding tax, state income tax and foreign exchange losses on these changes in assertion as of March 31, 2024, consisting of a tax benefit of $0.7 million recorded in fiscal 2023 and tax expense of $4.5 million, most of which was recorded in years prior to fiscal 2021. It is our current intention to continue to reinvest the remaining undistributed earnings of our foreign subsidiaries indefinitely. We review our tax circumstances on a regular basis with the intent of optimizing cash accessibility and minimizing tax expense.

Previous wording

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred in the U.S. over the three-year period ended December 31, 2023. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future income. On the basis of this evaluation, during the three months ended December 31, 2023, an additional valuation allowance of $19.6 million has been recorded to recognize only the portion of the U.S. deferred tax assets that are more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased or reduced or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for income.

Current wording

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred in the U.S. over the three-year period ended December 31, 2023. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future income. On the basis of this evaluation, during the six months ended March 31, 2024, an additional valuation allowance of $28.3 million has been recorded to recognize only the portion of the U.S. deferred tax assets that are more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased or reduced or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for income.

Previous wording

As of December 31, 2023, we had $919.2 million of outstanding indebtedness, consisting of $500.0 million outstanding under our 6.75% Senior Notes due 2027, $349.9 million of borrowings outstanding under our senior secured credit facilities under the Credit Agreement, consisting of $197.5 million of term loans and $152.4 million borrowed against our revolving credit facility, and $69.3 million of outstanding loans under the accounts receivable financing facility(see Item 1, Note 8 of our Consolidated

Current wording

As of March 31, 2024, we had $883.3 million of outstanding indebtedness, consisting of $500.0 million outstanding under our 6.75% Senior Notes due 2027, $318.5 million of borrowings outstanding under our senior secured credit facilities under the Credit Agreement, consisting of $196.3 million of term loans and $122.2 million borrowed against our revolving credit facility, and $64.8 million of outstanding loans under the accounts receivable financing facility (see Item 1, Note 8 of our Consolidated Financial Statements for more detail regarding our debt). Outstanding letters of credit totaling $15.1 million as of March 31, 2024 further reduced available borrowing capacity under our revolving credit facility to $237.7 million.

Previous wording

Pursuant to the terms of the 2023 Credit Agreement, the maximum allowed consolidated total net leverage ratio (as defined and calculated under the terms of the 2023 Credit Agreement and discussed further below) was 5.0x for the quarter ended December 31, 2023, which steps down to 4.75x in the quarter ending March 31, 2024, and to 4.5x for the fiscal quarter ended June 30, 2024 and thereafter. The consolidated total net leverage ratio represents the ratio of (a) consolidated total net debt to (b) consolidated adjusted EBITDA. Consolidated total net debt includes the aggregate principal amount of total debt, net of unrestricted cash not to exceed $75.0 million. As of December 31, 2023, our consolidated total net leverage ratio was approximately 4.33x.

Current wording

On March 27, 2024, we entered into an amendment to our 2023 Credit Agreement, which eased the restrictions of certain covenants contained in the agreement. The amendment included increasing the maximum allowed consolidated total net leverage ratio (as defined and calculated under the terms of the amended 2023 Credit Agreement) to 6.0x as of the fiscal quarter ended March 31, 2024, increasing further to 6.5x as of the last day of any quarter through the fiscal quarter ended December 31, 2024, gradually stepping down to 4.75x for the fiscal quarter ended March 31, 2026 and thereafter. The amendment also removed the flexibility related to the lithium development joint ventures, projects or similar arrangements and any related funding transactions in connection therewith. Consolidated total net debt includes the aggregate principal amount of total debt, net of unrestricted cash not to exceed $75.0 million. As of March 31, 2024, our consolidated total net leverage ratio was approximately 4.26x.

Previous wording

We manage our capital allocation considering our long-term strategic objectives, required spending to sustain our business and focus on generating adequate returns on capital. While our equipment and facilities are generally not impacted by rapid technology changes, our operations require refurbishments and replacements to maintain structural integrity and reliable production and shipping capabilities. When possible, we incorporate efficiency, environmental and safety improvement capabilities into our routine capital projects and we plan the timing of larger projects to balance with our liquidity and capital resources. Changes in our operating cash flows may affect our future capital allocation and spending.

Current wording

We manage our capital allocation considering our long-term strategic objectives, required spending to sustain our business and focus on generating adequate returns on capital. On April 22, 2024, our Board of Directors determined not to declare dividends for the foreseeable future in order to align our capital allocation policy with our corporate focus on accelerating cash flow generation and debt reduction. While our equipment and facilities are generally not impacted by rapid technology changes, our operations require refurbishments and replacements to maintain structural integrity and reliable production and shipping capabilities. When possible, we incorporate efficiency, environmental and safety improvement capabilities into our routine capital projects and we plan the timing of larger projects to balance with our liquidity and capital resources. Changes in our operating cash flows may affect our future capital allocation and spending.

Previous wording

During fiscal 2024, we expect to spend between $80 million and $90 million of sustaining capital in our Salt and Plant Nutrition businesses, including approximately $7 million to $12 million towards replacing the existing underground mill at Goderich mine over multiple years, which will be located in a built-for-purpose area of the mine and is expected to improve operating efficiencies. We also expect to spend approximately $10 million of growth capital on our fire retardant business. Additionally, we incurred approximately $20.0 million, including amounts accrued and unpaid, of previously committed capital in the first quarter of fiscal 2024 (approximately $71.3 million cumulatively) towards the development phase of our sustainable lithium development project. However, during the first quarter of fiscal 2024, we ceased further development of the lithium project. For

Current wording

During fiscal 2024, we expect to spend between $80 million and $90 million of sustaining capital in our Salt and Plant Nutrition businesses. We incurred approximately $23.9 million, including amounts accrued and unpaid, of previously committed capital in the first two quarters of fiscal 2024 (approximately $75.2 million cumulatively) towards the development phase of our

Previous wording

more information, refer to Item 1, Note 5 of our Consolidated Financial Statements and Part I, Item 1A, “Risk Factors” in our 2023 Form 10-K.

Current wording

former lithium development project. However, during the first quarter of fiscal 2024, we ceased further development of the lithium project. For more information, refer to Item 1, Note 5 of our Consolidated Financial Statements and Part I, Item 1A, “Risk Factors” in our 2023 Form 10-K.