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Compass Minerals International Inc. Reports Operating Results (10-Q)

July 30, 2010 | About:
10qk

10qk

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Compass Minerals International Inc. (CMP) filed Quarterly Report for the period ended 2010-06-30.

Compass Minerals International Inc. has a market cap of $2.32 billion; its shares were traded at around $70.78 with a P/E ratio of 14.3 and P/S ratio of 2.4. The dividend yield of Compass Minerals International Inc. stocks is 2.2%. Compass Minerals International Inc. had an annual average earning growth of 16.9% over the past 5 years.CMP is in the portfolios of RS Investment Management, Michael Price of MFP Investors LLC, Wallace Weitz of Weitz Wallace R & Co, John Keeley of Keeley Fund Management, Pioneer Investments, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

Sales for the second quarter of 2010 of $179.0 million increased $19.5 million, or 12% compared to $159.5 million for the same quarter of 2009. Sales primarily include revenues from the sale of our products, or “product sales,” revenues from our records management business, and shipping and handling costs incurred to deliver salt and specialty fertilizer products to our customers. Shipping and handling costs increased $2.7 million from $37.5 million in second quarter of 2009 to $40.2 million in the second quarter of 2010 due primarily to higher SOP sales volumes during the second quarter of 2010 when compared to the same period of 2009. In addition, product mix changes in 2010 partially offset by slightly higher fuel costs have decreased our average per unit cost of shipping and handling products by approximately 9% to our salt customers.

Gross profit for the second quarter of 2010 of $39.9 million decreased $15.1 million or 27% compared to $55.0 million in the second quarter of 2009. As a percent of total sales, 2010 gross margin decreased by 12 percentage points, from 34% in the second quarter of 2009 to 22% in the second quarter of 2010. The gross margin for the SOP segment contributed approximately $10 million to the decline in gross profit due to lower sales prices partially offset by higher sales volumes. The gross margin for the salt segment contributed approximately $5 million to the decline in gross profit. Salt per unit production costs were higher in the second quarter of 2010, primarily due to lower rock salt production at our underground mines, particularly at our Cote Blanche mine resulting from the strike in the second quarter of 2010, and continuing efforts at our consumer and industrial salt plants to reduce our inventory levels following a mild winter season in our primary service region. The combined impact of the lower salt production volumes negatively impacted gross profit by $6 million in the second quarter of 2010. We also incurred an increase in input costs of approximately $3 million for KCl used for certain packaged water conditioning products. These declines in salt gross profit were partially offset by price improvements and higher salt sales volumes during the second quarter of 2010. The weakening of the U.S. dollar in the second quarter of 2010 when compared to the prior year exchange rate for the Canadian dollar had a negligible impact on gross profit in the second quarter of 2010.

Other income of $1.9 million for the second quarter of 2010 changed $7.8 million when compared to expense of $5.9 million in the second quarter of 2009. Net foreign exchange gains were $2.2 million in the second quarter of 2010 when compared to foreign exchange losses of $1.5 million in the same quarter of 2009. In addition, the second quarter of 2009 includes a $5.0 million charge related to the refinancing of the 12% Senior Subordinated Discount Notes, including tender and other fees of $4.1 million and the write-off of deferred financing fees of $0.9 million.

Gross profit for the six months ended June 30, 2010 of $154.5 million decreased $15.8 million, or 9% compared to $170.3 million for the same period in 2009. As a percent of total sales, 2010 gross margin decreased by seven percentage points, from 36% to 29%. The gross margin for the SOP segment contributed approximately $20 million to the decline in gross profit due primarily to lower sales prices partially offset by higher sales volumes. The gross margin for the salt segment partially offset the decline in SOP gross margin by contributing an increase of approximately $4 million. Salt price realizations were partially offset by unfavorable product mix and higher per unit productions costs, particularly at our consumer and industrial salt plants due to higher costs for KCl used for water conditioning and continuing efforts to reduce our inventory levels and to a lesser degree our Cote Blanche mine due to the strike in the second quarter of 2010. In addition, the weakening of the U.S. dollar in the second quarter of 2010 when compared to the prior year exchange rate for the Canadian dollar and the British pound sterling unfavorably impacted unit costs by approximately $8 million.

Other expense of $1.8 million for the six months ended June 30, 2010 decreased $3.0 million from $4.8 million in the same period of 2009. Net foreign exchange losses were $1.7 million in the six months ended June 30, 2010 when compared to losses of $0.4 million in the same period in 2009. The six months ended June 30, 2009 also includes a $5.0 million charge related to the refinancing of the 12% senior subordinated discount notes, including tender and other fees of $4.1 million and the write-off of deferred financing fees of $0.9 million.

As of June 30, 2010, we had $488.8 million of principal indebtedness consisting of $97.7 million 8% Senior Notes ($100 million at maturity) due 2019 and $391.1 million of borrowings outstanding under our Credit Agreement which matures in December 2012. Our Credit Agreement also includes a Revolving Credit Facility which provides borrowing capacity up to an aggregate amount of $125.0 million. No amounts were borrowed under our Revolving Credit Facility as of June 30, 2010. We had $9.5 million of outstanding letters of credit as of June 30, 2010 which reduced our borrowing availability to $115.5 million.

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