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

October 27, 2010 | About:
10qk

10qk

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Compass Minerals International Inc. (CMP) filed Quarterly Report for the period ended 2010-09-30.

Compass Minerals International Inc. has a market cap of $2.55 billion; its shares were traded at around $79.31 with a P/E ratio of 16.4 and P/S ratio of 2.7. The dividend yield of Compass Minerals International Inc. stocks is 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, Bruce Kovner of Caxton Associates, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

SOP product sales for the third quarter of 2010 of $31.9 million increased $10.0 million, or 46% compared to $21.9 million for the same period in 2009. This increase was due to higher sales volumes and contributed approximately $25 million to the increase in SOP product sales as demand rebounded significantly in 2010 following a prolonged period of uncertainty about broader potash pricing throughout 2009. This increase was offset, in large part, by lower prices in the third quarter of 2010 as our average sales price was $506 per ton compared to $706 per ton for the same period in 2009.

Sales for the nine months ended September 30, 2010 of $712.6 million increased $61.7 million, or 9% compared to $650.9 million for the nine months ended September 30, 2009. Shipping and handling costs were $177.7 million during the first nine months of 2010, an increase of $8.2 million compared to $169.5 million for the same period in 2009. The increase in shipping and handling costs primarily reflects the higher sales volumes for the nine months ended September 30, 2010 when compared to same period of 2009.

Gross profit for the nine months ended September 30, 2010 of $207.9 million decreased $29.0 million, or 12% compared to $236.9 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 $19 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 contributed approximately $10 million to the decline in gross profit. Salt price realizations were offset by unfavorable product mix and higher per unit productions costs. We had lower salt production for the nine months ended September 30, 2010 when compared to the same period in 2009 at our Cote Blanche and Goderich mines and certain consumer and industrial salt plants. Much of the reduced production related to deicing product inventory management following a mild winter in our primary service area. In addition, the strike at our Cote Blanche mine in the second quarter of 2010 and a two-month delay in equipment installation in the third quarter of 2010 at our Goderich mine as part of its capacity expansion project significantly reduced production volumes. In addition, the weakening of the U.S. dollar when compared to the prior year exchange rate for the Canadian dollar and the British pound sterling unfavorably impacted unit costs by approximately $9 million.

Other expense of $3.1 million for the nine months ended September 30, 2010 decreased $3.2 million from $6.3 million in the same period of 2009. Net foreign exchange losses were $3.4 million in the nine months ended September 30, 2010 when compared to losses of $2.6 million in the same period in 2009. The nine months ended September 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 September 30, 2010, we had $487.8 million of principal indebtedness consisting of $97.7 million 8% Senior Notes ($100 million at maturity) due 2019 and $390.1 million of borrowings outstanding under our Credit Agreement. Our Credit Agreement also includes a Revolving Credit Facility which provides borrowing capacity up to an aggregate amount of $125.0 million. In October 2010, the Company amended the terms of its Credit Agreement and entered into a new revolving credit facility. As part of the amendment, the Company extended the maturity of approximately $234 million of its term loans under that credit agreement to 2016. The remaining approximately $156 million outstanding on the term loan will mature in December 2012. No amounts were borrowed under our Revolving Credit Facility as of September 30, 2010. We had $9.4 million of outstanding letters of credit as of September 30, 2010 which reduced our borrowing availability to $115.6 million.

Financing activities during the 2010 nine-month period used $36.3 million of cash flows, primarily to make $39.0 million of dividend payments which was partially offset by proceeds received from stock option exercises. During 2009, we used $42.3 million in financing activities primarily to make $8.6 million of payments to reduce our outstanding debt drawn on our Revolving Credit Facility, $35.3 million of dividend payments and $6.5 million of tender costs and other fees related to issuance of our 8% Senior Notes and related redemption of our 12% Senior Subordinated Discount Notes.

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