COMPASS MINERALS INTERNATIONAL INC

13. COMMITMENTS AND CONTINGENCIES

Contingent Obligations:

As previously disclosed, the Company was the subject of an investigation by the Division of Enforcement of the SEC regarding the Company’s disclosures primarily concerning the operation of the Goderich mine, the former South American businesses, and related accounting and internal control matters including Salt interim inventory valuation methodology issues that were disclosed in the Company’s Form 10-K/A for the year ended December 31, 2020, and Form 10-Q/A for the quarter ended March 31, 2021, each filed with the SEC on September 3, 2021.

On September 23, 2022, the Company reached a settlement with the SEC, concluding and resolving the SEC investigation in its entirety. Under the terms of the settlement, the Company, without admitting or denying the findings in the administrative order issued by the SEC, agreed to pay a civil penalty of $12 million and to cease and desist from violations of specified provisions of the federal securities laws and rules promulgated thereunder, and to retain an independent compliance consultant for a period of approximately one year to review certain accounting practices and procedures. The Company accrued for the full amount of the penalty in fiscal 2022, of which $10 million was reflected in accrued expenses and other current liabilities on the Company’s Consolidated Balance Sheets as of September 30, 2023 and subsequently paid during the first quarter of fiscal 2024.

On October 21, 2022, a putative securities class was filed in the United States District Court for the District of Kansas. The lawsuit alleges that the Company and certain former executives of the Company made misleading statements and that shareholders were damaged by these statements. Plaintiffs filed an Amended Complaint on March 13, 2023; the Company filed

a Motion to Dismiss on May 12, 2023. On December 12, 2023, the court granted and denied in part the Company’s Motion to Dismiss. On December 29, 2023, the Company filed a request for an interlocutory appeal and a request for a stay of discovery. On March 15, 2024, the Court denied the Company’s request for an interlocutory appeal. The parties participated in a mediation on November 19, 2024; the parties did not resolve the matter at mediation. Discovery in the matter is ongoing.

On February 1, 2023, a shareholder derivative lawsuit was filed in the District of Kansas by an individual shareholder, purportedly on behalf of the Company. The lawsuit alleges that certain directors and executives breached their fiduciary duties to shareholders by failing to prevent the dissemination of misstatements and omissions from October 30, 2017, to November 18, 2018. The parties have stipulated to stay this matter through the discovery stage of the putative securities class action. On October 30, 2024, an additional shareholder derivative lawsuit was filed in the District of Kansas by an individual shareholder, purportedly on behalf of the Company. The lawsuit alleges that certain directors and executives breached their fiduciary duties to shareholders by willfully or recklessly causing the Company to make false and/or misleading statements and/or omissions of material fact from October 31, 2017, to October 21, 2022.

The Company is also involved in legal and administrative proceedings and claims of various types from the ordinary course of the Company’s business.

Management cannot predict the outcome of legal claims and proceedings with certainty. Nevertheless, management believes that the outcome of legal proceeding and claims, which are pending or known to be threatened, even if determined adversely, will not, individually or in the aggregate, have a material adverse effect on the Company’s results of operations, cash flows or financial position, except as otherwise described in Note 10 and this Note 13.

Nearly 50% of the Company’s workforce is represented by collective bargaining agreements. Of the Company’s 12 collective bargaining agreements in effect on September 30, 2024, six will expire in fiscal 2025 (including the Company’s Cote Blanche mine), four will expire in fiscal 2026 (including the Company’s Goderich mine), andtwo will expire in fiscal 2027.

The Company also has contingent consideration liabilities related to the Fortress acquisition. Refer to Note 17 for additional information.

On October 25, 2024, the Company issued a recall fornine production lots of food-grade salt produced at its Goderich Plant following a customer report of a non-organic, foreign material in its product. The products recalled included both products sold prior and subsequent to September 30, 2024. The Company followed recall protocol and notified its BRCGS Global Standard for Food Safety certifying body, the Canadian Food Inspection Agency (“CFIA”) and the U.S. Food and Drug Administration (“FDA”). The Company has been working to obtain and assess the reported foreign material, complete the necessary investigation, and determine the next steps. Based on initial feedback received from customers impacted by the recall and other currently available information, the Company has recorded $0.8 million for estimated costs expected to be borne by the Company, which have been included in other (income) expense on the Consolidated Statements of Operations for the year ended September 30, 2024. Additionally, as of September 30, 2024, the Company has recorded reserves of $6.7 million and estimated insurance recoveries of $6.7 million in its Consolidated Balance Sheets.

The Company continues to assess the scope and magnitude of additional customer claims for product produced and shipped after September 30, 2024. At this time, based on currently available information and its applicable insurance coverage, the Company does not believe any incremental losses will have a material adverse effect on its results of operations or cash flows in future periods.

Commitments:

Royalties: The Company has various private, state and Canadian provincial leases associated with the salt and SOP businesses, most of which are renewable by the Company. Many of these leases provide for a royalty payment to the lessor based on a specific amount per ton of mineral extracted or as a percentage of revenue. Royalty expense related to these leases was $16.2 million, $18.7 million and $20.0 million for the fiscal years ended September 30, 2024, 2023 and 2022, respectively.

Performance Bonds: The Company has various salt and other deicing product sales contracts that include performance provisions governing delivery and product quality. These sales contracts either require the Company to maintain performance bonds for stipulated amounts or contain contractual penalty provisions in the event of non-performance. For the fiscal years ended September 30, 2024, 2023 and 2022, the Company has had no material penalties related to these sales contracts. At September 30, 2024, the Company had $242.4 million of outstanding performance bonds, which includes bonds related to Ontario mining tax reassessments.

Purchase Commitments: In connection with the operations of the Company’s facilities, the Company purchases utilities, other raw materials and services from third parties under contracts extending, in some cases, for multiple years. Purchases under these contracts are generally based on prevailing market prices. The Company has minimum throughput contracts with some of its depots and warehouses. The purchase commitments for these contracts are estimated to be $32.0 million for 2025, $28.1 million in 2026, $28.0 million in 2027, $9.9 million in 2028, $3.6 million in 2029 and $2.7 million thereafter.

14. OPERATING SEGMENTS

The Company’s reportable segments are strategic business units that offer different products and services, and each business requires different technology and marketing strategies. For all periods presented in this report, the Company hastwo reportable segments in its Consolidated Financial Statements: Salt and Plant Nutrition. The Salt segment produces and markets salt, consisting primarily of sodium chloride and magnesium chloride, for use in road deicing for winter roadway safety and for dust control, food processing, water softeners and other consumer, agricultural and industrial applications. The Plant Nutrition segment produces and markets various grades of SOP. The results of operations for the Company’s fire retardant and records management businesses are included in Corporate and Other in the tables below.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. All inter-segment sales prices are market-based. The Company evaluates performance based on the operating earnings of the respective segments.

Segment information is as follows (in millions):

Disaggregated revenue by product type is as follows (in millions):

(a)Corporate and Other includes corporate entities, records management operations, the Fortress fire retardant business, equity method investments, lithium costs and other incidental operations and eliminations. Operating earnings (loss) for corporate and other includes indirect corporate overhead, including costs for general corporate governance and oversight, lithium-related expenses, as well as costs for the human resources, information technology, legal and finance functions.

(b)The Company recognized impairments of $193.4 million for the fiscal year ended September 30, 2024, which impacted operating results. Refer to Note 2 for additional information regarding the Plant Nutrition and Fortress impairments and Note 8 for additional information about the impairment of lithium development assets.

(c)Corporate operating results were impacted by net gains of $22.1 million and $0.8 million related to the decline in the valuation of the Fortress contingent consideration for the fiscal years ended September 30, 2024 and 2023, respectively. Corporate operating results also include a reserve for estimated costs related to a product recall of $0.8 million for the fiscal year ended September 30, 2024, and net reimbursements related to the settled SEC investigation of $0.3 million for the fiscal year ended September 30 2023. Corporate operating results for the fiscal year ended September 30, 2022 include a contingent loss accrual and costs related to the SEC investigation of $17.1 million. Refer to Note 17 for information regarding the Fortress contingent consideration and to Note 13 for more information regarding the product recall and the SEC investigation and settlement.

(d)The Company continued to take steps to align its cost structure to its current business needs. These initiatives impacted Corporate operating results and resulted in net severance and related charges for reductions in workforce, changes to executive leadership and additional restructuring costs related to the termination of the Company’s lithium development project of $15.8 million, $5.5 million and $3.8 million for the fiscal years ended September 30, 2024, 2023 and 2022, respectively.

Financial information relating to the Company’s operations by geographic area is as follows (in millions):

(a)United States sales exclude product sold to foreign customers at U.S. ports.

Financial information relating to the Company’s long-lived assets, excluding the investments related to the nonqualified retirement plan and pension plan assets, by geographic area (in millions):