COMPASS MINERALS INTERNATIONAL INC (CMP) FY 2022 MD&A

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The statements in this discussion regarding the industry outlook, our expectations for the future performance of our business, and the other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in Item 1A, “Risk Factors.” You should read the following discussion together with Item 1A, “Risk Factors” and the Consolidated Financial Statements and Notes thereto included elsewhere in this report.

COMPANY OVERVIEW

Compass Minerals 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. Our Salt segment products help keep roadways safe during winter weather and are used in numerous other consumer, industrial and agricultural applications. Our Plant Nutrition segment is the leading North American producer of sulfate of potash, which is used in the production of specialty fertilizers for high-value crops and turf. As of September 30, 2022, we operate 12 production and packaging facilities with nearly 2,000 personnel throughout the U.S., Canada and the U.K , including:

•The largest rock salt mine in the world in Goderich, Ontario, Canada;

•The largest dedicated rock salt mine in the U.K. in Winsford, Cheshire;

•A solar evaporation facility located near Ogden, Utah, which is both the largest sulfate of potash specialty fertilizer production site and the largest solar salt production site in the Western Hemisphere; and

•Several mechanical evaporation facilities producing consumer and industrial salt.

We concluded that certain of our assets met the criteria for classification as held for sale and discontinued operations in the first quarter of 2021, as discussed further in the “Discontinued Operations” section below. As a result, we are presenting two reportable segments, Salt and Plant Nutrition (which was previously known as the Plant Nutrition North America segment) in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” See Item 8, Note 14 to our Consolidated Financial Statements for more information. Unless otherwise indicated, the information and amounts provided in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” pertain to continuing operations.

Our Salt segment provides highway deicing salt to customers in North America and the U.K. as well as consumer deicing and water conditioning products, ingredients used in consumer and commercial food preparation, and other salt-based products for consumer, industrial, chemical and agricultural applications in North America. In the U.K., we operate a records management business utilizing excavated areas of our Winsford salt mine with one other location in London, England.

Our Plant Nutrition segment produces and markets SOP products in various grades worldwide to distributors and retailers of crop inputs, as well as growers and for industrial uses. We market our SOP under the trade name Protassium+.

We focus on building intrinsic value by growing our earnings before interest, taxes, depreciation and amortization (“EBITDA”) and by improving our asset quality. We can employ our operating cash flow and other sources of liquidity to pay dividends, re-invest in our business, pay down debt and make acquisitions.

Discontinued Operations

During fiscal 2020, we initiated an evaluation of the strategic fit of certain of our businesses. On February 16, 2021, we announced our plan to restructure our former Plant Nutrition South America segment to enable targeted and separate sales processes for each portion of the former segment, including our chemicals and specialty plant nutrition businesses along with our equity method investment in Fermavi. Concurrently, to optimize our asset base in North America, we evaluated the strategic fit of our North America micronutrient product business. On March 16, 2021, our Board of Directors approved a plan to sell our South America chemicals and specialty plant nutrition businesses, our investment in Fermavi and our North America micronutrient product business (collectively, the “Specialty Businesses”) with the goal of reducing our leverage and enabling increased focus on optimizing our core businesses.

As described further in Item 8, Note 1 and Note 3 to our Consolidated Financial Statements, on March 23, 2021, April 7, 2021, June 28, 2021 and April 20, 2022, we entered into definitive agreements to sell our South America specialty plant nutrition business, a component of our North America micronutrient business, our Fermavi investment and our South America chemicals business, respectively. The South America specialty plant nutrition business sale closed on July 1, 2021, the North America micronutrient sale closed on May 4, 2021, the sale of our Fermavi investment closed on August 20, 2021 and the sale of the South America chemicals business closed on April 20, 2022.

We believe these dispositions were conducted through a single disposal plan representing a strategic shift that has had a material effect on our operations and financial results. Consequently, the Specialty Businesses qualify for presentation as assets and liabilities held for sale and discontinued operations in accordance with U.S. GAAP. Accordingly, current and noncurrent assets and liabilities of the Specialty Businesses are presented in the Consolidated Balance Sheets as assets and liabilities held

for sale as of September 30, 2021 and their results of operations are presented as discontinued operations in the Consolidated Statements of Operations for each period presented.

Change in Fiscal Year

On June 23, 2021, our Board of Directors approved a change in our fiscal year end from December 31 to September 30. As a result, our results of operations, cash flows and all transactions impacting shareholders equity presented in this Annual Report on Form 10-K are for the twelve months ended September 30, 2022 (“fiscal 2022”), the nine month transition period ended September 30, 2021 (“fiscal 2021”) and the twelve months ended December 31, 2020 (“fiscal 2020”), unless otherwise noted. As such, our fiscal year 2022, or fiscal 2022, refers to the period from October 1, 2021 to September 30, 2022.

This Annual Report on Form 10-K also includes an unaudited Consolidated Statement of Operations for the comparable twelve month period of October 1, 2020 to September 30, 2021 and nine month period of January 1, 2020 to September 30, 2020; see Item 8, Note 19 to our Consolidated Financial Statements for additional information.

The discussion below provides a comparison of (1) the twelve months ended September 30, 2022 to the twelve months ended September 30, 2021 and (2) the nine months ended September 30, 2021 to the nine-month period ended September 30, 2020. All information for the twelve months ended September 30, 2021 and the nine-month period ended September 30, 2020 is unaudited.

Consolidated Results of Operations

* Refer to “—Reconciliation of Net Earnings to EBITDA and Adjusted EBITDA” for a reconciliation to the most directly comparable U.S. GAAP financial measure and the reasons we use this non-U.S. GAAP measure.

CONSOLIDATED RESULTS COMMENTARY: Twelve Months Ended September 30, 2021 – Twelve Months Ended September 30, 2022

•Total sales increased $98.3 million, due to an increase in the Salt segment, which was partially offset by a decrease in the Plant Nutrition segment.

•Operating earnings decreased 60%, or $64.2 million, due to lower operating earnings in our Salt segment and higher corporate expenses, which was partially offset by higher Plant Nutrition segment earnings.

•Diluted earnings per share decreased $2.10 to a loss of $1.10.

•EBITDA* adjusted for items management believes are not indicative of our ongoing operating performance (“Adjusted EBITDA”)* decreased 22%, or $52.3 million.

CONSOLIDATED RESULTS COMMENTARY: Nine Months Ended September 30, 2020 – Nine Months Ended September 30, 2021

•Total sales increased $140.9 million, due to increases in both the Salt and Plant Nutrition segments.

•Operating earnings increased 5%, or $4.1 million, due to higher operating earnings in our Salt segment, which was partially offset by lower Plant Nutrition segment earnings and higher corporate expenses.

•Diluted earnings per share decreased 27%, or $0.21.

•EBITDA* adjusted for items management believes are not indicative of our ongoing operating performance (“Adjusted EBITDA”)* increased 6%, or $9.4 million.

GROSS PROFIT & GROSS MARGIN COMMENTARY: Twelve Months Ended September 30, 2021 – Twelve Months Ended September 30, 2022

Gross Profit: Decreased 15%, or $33.4 million; Gross Margin decreased 4% percentage points from 20% to 16%

•Salt segment gross profit decreased $59.7 million primarily due to higher per-unit logistics and product costs, which were partially offset by higher sales volumes (see “—Operating Segment Performance—Salt” for additional information).

•Gross profit for the Plant Nutrition segment increased $26.3 million due to higher average sales prices, which were partially offset by lower sales volumes and higher per-unit product costs (see “—Operating Segment Performance—Plant Nutrition” for additional information).

GROSS PROFIT & GROSS MARGIN COMMENTARY: Nine Months Ended September 30, 2020 – Nine Months Ended September 30, 2021

Gross Profit: Increased 6%, or $10.4 million; Gross Margin decreased 2 percentage points from 23% to 21%

•Salt segment gross profit increased $17.5 million primarily due to higher sales volumes, which were partially offset by lower average sales prices (see “—Operating Segment Performance—Salt” for additional information).

•Gross profit for the Plant Nutrition segment decreased $7.6 million due to higher per-unit product costs, which was partially offset by higher sales volumes and average sales prices (see “—Operating Segment Performance—Plant Nutrition” for additional information).

OTHER EXPENSES AND INCOME COMMENTARY: Twelve Months Ended September 30, 2021 – Twelve Months Ended September 30, 2022

SG&A: Increased $30.8 million; Increased 1.7 percentage points as a percentage of sales to 12.4% from 10.7%

•The increase in SG&A expense was primarily due to the fiscal 2022 accrued settlement and increased legal expenses related to the recently completed SEC investigation, costs related to our lithium development and increased employee compensation costs which include executive transition costs.

Interest Expense: Decreased $4.6 million to $55.2 million

•The decrease was primarily due to a decrease in outstanding borrowings.

Gain (Loss) on Foreign Exchange: Improved $20.5 million from a loss of $5.6 million to a gain of $14.9 million in 2022

•We realized a foreign exchange gain of $14.9 million for the twelve months ended September 30, 2022 compared to a loss of $5.6 million in the comparable period for the prior year due primarily to changes in translating our intercompany loans from Canadian dollars to U.S. dollars.

Net Loss in Equity Investees: Increased $4.7 million to $5.2 million

•We realized a net loss in equity investees of $5.2 million for the twelve months ended September 30, 2022 compared to $0.5 million in the comparable period for the prior year due to our share of losses related to our equity investments in the current period.

Other Income, Net: Increased $0.1 million from income of $0.2 million to income of $0.3 million

•Other income, net primarily reflects an increase in investment income, which was offset by losses in our deferred compensation plan in fiscal 2022.

Income Tax Expense from Continuing Operations: Increased $29.2 million to $35.0 million

•The increase in income tax expense was due to a $37.5 million of valuation allowance recorded in the twelve months ended September 30, 2022 against the portion of our deferred tax assets that are no longer considered more likely than not to be realized, partially offset by a decrease due to lower pretax book income for the twelve months ended September 30, 2022 compared to the twelve months ended September 30, 2021.

•Our effective tax rate decreased from 14% for the twelve months ended September 30, 2021, reflecting $37.5 million of valuation allowance recorded in fiscal 2022 on pretax book losses. See Item 1, Note 10 to the Consolidated Financial Statements.

•Our income tax provision in both periods differs from the U.S. statutory rate primarily due to U.S. statutory depletion, state income taxes, nondeductible executive compensation, foreign income, mining and withholding taxes and interest expense recognition differences for tax and financial reporting purposes. Our provision for the twelve months ended September 30, 2022 also included valuation allowances and nondeductible contingent loss accrual. Our provision for the twelve months ended September 30, 2021 also included global intangible low-taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”).

Net (Loss) Earnings from Discontinued Operations: Increased from a loss of $220.8 million to income of $12.2 million

•The net earnings from our discontinued operations for the twelve months ended September 30, 2022 includes only the results from our chemicals business in South America through the April 20, 2022 sale date, but includes the results of all the South America businesses and the North America specialty plant nutrition business for the twelve months ended September 30, 2022.

•The current period results of the South America chemicals business includes a foreign currency exchange rate gain of $17.5 million offset by an impairment loss of $23.1 million compared to the prior period foreign currency exchange rate gain of $11.3 million and net impairment loss of $269.4 million to record the net assets of the South America businesses at their fair value less cost to sell net of a gain on the sale of the Plant Nutrition micronutrient business. Refer to Item 1, Note 3 to the Consolidated Financial Statements for additional details.

OTHER EXPENSES AND INCOME COMMENTARY: Nine Months Ended September 30, 2020 – Nine Months Ended September 30, 2021

SG&A: Increased $6.3 million; Decreased 1.3 percentage points as a percentage of sales to 11.1% from 12.4%

•The increase in SG&A expense was primarily due to higher corporate professional services expense and costs incurred related to our lithium resource assessment.

Interest Expense: Decreased $2.9 million to $44.3 million

•The decrease was primarily due to lower debt levels.

Gain on Foreign Exchange: Decreased $10.2 million from a gain of $10.8 million to a gain of $0.6 million in fiscal 2021

•The decrease of $10.2 million was due primarily to changes in foreign currency exchange rates on our non U.S. dollar denominated intercompany loans between our U.S. and foreign subsidiaries.

Net Loss in Equity Investees: Increased to $0.5 million

•We realized a net loss in equity investees of $0.5 million for the twelve months ended September 30, 2021.

Other Expense, Net: Increased $0.6 million from expense of $0.3 million to income of $0.3 million

•The decrease in other expense, net is primarily due to fees related to our U.S. securitization facility in 2020 and higher interest income in fiscal 2021.

Income Tax Expense from Continuing Operations: Increased $3.9 million to $14.2 million

•Income tax expense increased by $3.9 million and our effective tax rate increased from 27% in fiscal 2020 to 40% in fiscal 2021 due primarily to valuation allowances on state income tax credits and state excess interest expense deferred tax assets and remeasurement of deferred taxes due to the tax rate increase in the UK.

•Our income tax provision in both periods differs from the U.S. statutory rate primarily due to U.S. statutory depletion, state income taxes, foreign income, mining and withholding taxes, “GILTI” and interest expense recognition differences for tax and financial reporting purposes. Our fiscal 2021 income tax provision also included “BEAT”.

Net (Loss) Earnings from Discontinued Operations: Decreased $241.3 million to $(234.2) million

•The net loss from discontinued operations includes losses of $189.0 million and $20.8 million recognized from the sale of the South America specialty nutrition business and our investment in Fermavi, respectively, including the realization of the currency translation adjustment (“CTA”) which had accumulated due to the significant weakening of the Brazilian real. An impairment loss, as required by U.S. GAAP, of approximately $90.2 million also negatively impacted earnings from discontinued operations due to a change in fair value less estimated costs to sell our South America chemicals business, which also considers the CTA related to this business. These losses were partially offset by a gain recognized for the sale of a component of the North America product micronutrient business in May 2021 of

$30.6 million.

•Our operating earnings for our South America chemicals and specialty plant nutrition businesses decreased by $3.1 million and the North America micronutrient product business improved by $0.7 million. The improvements in our South America businesses were due to lower sales volumes, which were partially offset by higher average sales prices. The North America micronutrient product business increased primarily due to higher sales volumes, which were partially offset by lower average sales prices and the write off of the remaining inventory that was not included in the sale of the business.

OPERATING SEGMENT PERFORMANCE

The following financial results represent consolidated financial information with respect to sales from our Salt and Plant Nutrition segments for the twelve months ended September 30, 2022 and 2021 and the nine months ended September 30, 2021 and 2020. Sales primarily include revenue from the sales of our products, or “product sales,” and the impact of shipping and handling costs incurred to deliver our salt and plant nutrition products to our customers.

The results of operations of the consolidated records management business and other incidental revenues include sales of $11.5 million, $8.7 million and $10.1 million for fiscal year ended September 30, 2022, the nine months ended September 30, 2021 and the fiscal year ended December 31, 2020, respectively. These sales are not material to our consolidated financial results and are not included in the following operating segment financial data.

SALT SEGMENT RESULTS

SALT SEGMENT RESULTS COMMENTARY: Twelve Months Ended September 30, 2021 – Twelve Months Ended September 30, 2022

•Salt sales increased 12%, or $110.7 million, due to higher Salt sales volumes and average sales prices.

•Salt sales volumes increased 11%, or 1,265,000 tons, and contributed approximately $90.6 million to the increase in sales. Highway deicing sales volumes increased 12% primarily as a result of an increase in sales commitments. Consumer and industrial sales volumes increased 6% due to an increase in both deicing and non-deicing sales volumes.

•Salt average sales price increased 1% and contributed approximately $20.1 million to the increase in sales due to higher consumer and industrial average sales prices.

•Highway deicing average sales prices were relatively flat when compared to the prior year as lower North American highway deicing contract prices for the 2022 winter season and the weaker pound sterling were mostly offset by favorable product sales mix. Consumer and industrial average sales prices increased 6% due to higher sales prices primarily in response to the high inflationary environment.

•Salt operating earnings decreased 35%, or $61.5 million, due primarily to higher per-unit product and logistics costs. We are experiencing higher freight costs and inflationary pressures for certain materials and supplies that were not recovered through increased sales prices during the period. The Company estimates increased Salt product cost of approximately $15.5 million to $17.5 million during fiscal 2022 due to inflation impacts. Additionally, as a result of a maintenance outage at our Cote Blanche mine during the three months ended March 31, 2022, we incurred approximately $9.2 million of additional product and logistics costs to fulfill seasonal demand with salt from other sources. Higher sales volumes compared to the prior period partially offset the higher costs.

SALT SEGMENT RESULTS COMMENTARY: Nine Months Ended September 30, 2020 – Nine Months Ended September 30, 2021

•Salt sales increased 22%, or $120.2 million, due to higher Salt sales volumes, which was partially offset by lower average sales prices.

•Salt sales volumes increased 28%, or 1,853,000 tons, and contributed approximately $128 million to the increase in sales. Highway deicing sales volumes increased 33% primarily as a result of an increase in winter weather activity in February 2021 in the U.S. and the first quarter of 2021 in the U.K. Consumer and industrial sales volumes increased 7% due to an increase in both deicing sales volumes and non-deicing volumes primarily due to an increase in winter weather events and the impact of the COVID-19 pandemic in the prior period.

•Salt average sales price decreased 5% and partially offset the increase in sales by approximately $8 million due to lower highway average sales prices.

•Highway deicing average sales prices decreased 4%, due to lower North American highway deicing contract prices for the 2020-2021 winter season. Consumer and industrial average sales prices increased 4% due to product sales mix and price increases.

•Salt operating earnings increased 14%, or $16.7 million, due to higher highway deicing sales volumes. The increase in operating earnings was partially offset by lower average sales prices and higher per-unit product costs at our consumer and industrial facilities primarily due to lower production volumes and inflationary pressure on certain raw materials and packaging.

PLANT NUTRITION RESULTS

PLANT NUTRITION RESULTS COMMENTARY: Twelve Months Ended September 30, 2021 – Twelve Months Ended September 30, 2022

•Plant Nutrition sales decreased 5%, or $12.7 million, due to lower sales volumes, which was partially offset by higher average sales prices.

•Plant Nutrition sales volumes decreased 29%, or 117,000 tons, as feedstock inconsistencies over the past year have reduced production volumes and available inventory levels. The lower sales volumes resulted in a sales decline of approximately $68.2 million.

•Plant Nutrition average sales prices increased 33% and increased sales by approximately $55.5 million.

•Plant Nutrition operating earnings increased 308%, or $28.0 million primarily due to significantly higher average sales prices, which were partially offset by reduced sales volumes due to inventory constraints and higher per-unit product and logistics costs primarily due to lower production volumes at our Ogden facility as well as approximately $5 million to $7 million of higher energy and other input costs.

PLANT NUTRITION RESULTS COMMENTARY: Nine Months Ended September 30, 2021 – Nine Months Ended September 30, 2022

•Plant Nutrition sales increased 14%, or $19.6 million, due to higher sales volumes and average sales prices.

•Plant Nutrition sales volumes increased 10%, or 23,000 tons, and increased sales by approximately $13 million. The volume increase primarily reflects the prior year delayed and weaker fall application of SOP and solid demand in the current year in anticipation of increasing sales prices.

•Plant Nutrition average sales prices increased 4% and increased sales by approximately $7 million.

•Plant Nutrition operating earnings decreased 52%, or $6.2 million primarily due to higher per-unit product costs due to lower production yields and volumes, which primarily resulted from a lower quality pond harvest at our Ogden facility. The higher per-unit product costs were partially offset by higher average sales prices, higher sales volumes, lower per-unit shipping and handling costs due to a higher mix of direct shipments to customers compared to the prior year and lower SG&A expenses.

OUTLOOK

•We expect Salt segment sales volumes and EBITDA to range from 11.35 million to 12.2 million tons and $215 million to $255 million, respectively, in fiscal year 2023.

•Plant Nutrition segment sales volumes and EBITDA are expected to range from 265,000 to 295,000 tons and $55 million to $70 million, respectively, in fiscal year 2023.

•Fiscal year 2023 capital expenditures are expected to be in the $175 million to $230 million range which includes $75 million to $120 million for our Lithium project.

Investments, Liquidity and Capital Resources

Overview

As a holding company, CMI’s investments in its operating subsidiaries constitute substantially all of its assets. Consequently, our subsidiaries conduct all of our consolidated operations and own substantially all of our operating assets. The principal source of cash needed to pay our obligations is the cash generated from our subsidiaries’ operations and their borrowings. Furthermore, we must remain in compliance with the terms of the credit agreement governing our credit facilities, including the consolidated total net leverage ratio and interest coverage ratio, in order to pay dividends to our stockholders. We must also comply with the terms of our indentures governing our 4.875% Senior Notes due July 2024 (the “4.875% Notes”) and our 6.75% Senior Notes due December 2027 (the “6.75% Notes), which limit the amount of dividends we can pay to our stockholders. We are in compliance with our debt covenants as of September 30, 2022. See Item 8, Note 12 to our Consolidated Financial Statements for a discussion of our outstanding debt.

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 which strengthen our operational position, to pay dividends, to fund smaller acquisitions and to repay our debt. We have been able to manage our cash flows generated and used across Compass Minerals to permanently reinvest earnings in our foreign jurisdictions or efficiently repatriate those funds to the U.S. As of September 30, 2022, we had $21.0 million of cash and cash equivalents (in our Consolidated Balance Sheets) that was either held directly or indirectly by foreign subsidiaries. Due in large part to the seasonality of our deicing salt business, we have experienced large changes in our working capital requirements from quarter to quarter. 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 $300 million revolving credit facility and our $100 million revolving accounts receivable financing facility (our “AR Facility”).

Notwithstanding our strategic decision to exit our South America chemicals and specialty plant nutrition businesses, as discussed in Item 8, Note 1 and Note 3 to our Consolidated Financial statements, we have historically considered the undistributed earnings of our foreign subsidiaries to be permanently reinvested. As a result of U.S. tax reform, we revised our permanently reinvested assertion and we now expect to repatriate approximately $150 million of unremitted foreign earnings on which $4.6 million of income tax expense has been recorded for foreign withholding tax and state income taxes as of September 30, 2022. Additionally, we changed our permanently reinvested assertion and repatriated $42.5 million of unremitted foreign earnings from our U.K. operations in September 2021 on which $0.1 million of income tax expense was recorded during fiscal 2021. In fiscal 2022, the Company changed its permanently reinvested assertion and now expects to repatriate an additional approximately $10 million of unremitted foreign earnings on which $0.1 million of income tax benefit was recorded during fiscal 2022. 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. As of September 30, 2022, we have $147.5 million of outside basis differences for which no deferred taxes have been recorded. See Item 8, Note 10 to our Consolidated Financial Statements for additional information.

In addition, the amount of permanently reinvested foreign earnings is influenced by, among other things, the profits generated by our foreign subsidiaries and the amount of investment in those same subsidiaries. The profits generated by our U.S. and foreign subsidiaries are impacted by the transfer price charged on the transfer of our products between them. As discussed in Item 8, Note 10 to our Consolidated Financial Statements, our calculated transfer price on certain products between one of our foreign subsidiaries and a domestic subsidiary has been challenged by Canadian federal and provincial governments. Canadian provincial taxing authorities continue to challenge our transfer prices of certain items. The final resolution of these challenges may not occur for several years. We currently expect the outcome of these matters will not have a material impact on our results of operations. However, it is possible the resolution could materially impact the amount of earnings attributable to our foreign subsidiaries, which could impact the amount of permanently reinvested foreign earnings. See Item 8, Note 10 to our Consolidated Financial Statements for a discussion regarding our Canadian tax reassessments.

Principally due to the nature of our deicing business, our cash flows from operations have historically been seasonal, with the majority of our cash flows from operations generated during the first half of the calendar year (see “—Seasonality” for more

information). When we have not been able to meet our short-term liquidity or capital needs with cash from operations, whether as a result of the seasonality of our business or other causes, we have met those needs with borrowings under our revolving credit facility. We expect to meet the ongoing requirements for debt service, any declared dividends and capital expenditures related to our Salt and Plant Nutrition businesses from these sources. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

As discussed in Item 8, Note 3 to our Consolidated Financial Statements and Item 7, we have disposed of our South America specialty plant nutrition business, equity method investment in Fermavi, our North America micronutrient business and our South America chemicals business for cash proceeds totaling approximately $409.8 million ($348.6 million in fiscal 2021 and $61.2 million in fiscal 2022), net of debt assumed by ICL Brasil Ltda., a post-closing adjustment and cash on hand transferred to the buyer (both related to the sale of our South America chemicals business) and associated selling costs. On April 7, 2022, we received the maximum earnout possible under the terms of the South America specialty plant nutrition sale, or $18.5 million based on exchange rates at the time of receipt. An additional R$30 million of deferred purchase price for Fermavi was also receivable over the four years following the sale (R$7.5 million was received in fiscal 2022).

We manage our capital allocation considering our long-term strategic objectives and required spending to sustain the business. We announced on November 15, 2021, that we are reducing our dividend by approximately 80% to provide additional liquidity to support the business and invest in strategic expansion opportunities. 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.

In fiscal 2022, we spent approximately $96.7 million on capital expenditures including approximately $15 million to upgrade the barge dock at our Cote Blanche mine, which incorporated efficiency and safety features into the design. During fiscal 2023, we expect to spend between $100 million and $110 million of sustaining capital in our Salt and Plant Nutrition businesses, including approximately $10 million to $15 million towards the Goderich long-term mine plan.

Additionally, we continued to develop our recently identified lithium resource at our Ogden facility and spent approximately $2.6 million of capital in fiscal 2022 towards the development phase of this sustainable lithium development project. For fiscal 2023, we have allocated between $75 million and $120 million for further development. We expect to achieve market entry with a lithium product by 2025 and expect significant capital and other expenditures would be required to achieve this market entry; however, the full amount of this expenditure is currently unknown and will depend on a number of factors, including the outcome of further engineering and design plans. For more information, see Item 1A, “Risk Factors.”

On October 18, 2022, the Company received aggregate gross proceeds of approximately $252 million from Koch Minerals & Trading, LLC (“KM&T”) as part of a strategic equity partnership. The Company expects to use approximately $200 million of the proceeds from the private placement to advance the first development phase of the lithium project. The Company expects to use the remaining $52 million of proceeds, less transaction expenses, to reduce debt. For additional information, see Item 8, Note 21.

In connection with our strategy to strengthen and grow its essential minerals businesses, on November 2, 2021, we announced a $45 million equity investment in Fortress North America, LLC (“Fortress”), building upon a previous $5 million investment. As of September 30, 2022, we had invested $50 million in Fortress in exchange for an ownership interest of approximately 45%. Fortress is a development stage company that intends to achieve commercialization of its magnesium chloride-based fire-retardant products to help combat wildfires. We may make further investments or make other acquisitions to grow our business.

The table below provides a summary our cash flows by category and period ended.

As mentioned above, our Salt segment’s business is seasonal and our Salt segment results and working capital needs are heavily impacted by the severity and timing of the winter weather, which generally occurs from December through March each year. Customers tend to replenish their inventory prior to the start of the winter season and following snow events, consequently the number and timing of snow events during the winter season will impact the amount of our accounts receivable and inventory at the end of each quarter. The higher accounts receivable balance as of September 30, 2022, as compared to September 30, 2021, reflects higher sales in the fourth fiscal quarter due to higher preseason deicing demand and higher SOP pricing in the current period. The higher sales activity and increased costs resulted in a higher level of current liabilities as of September 30, 2022 as compared to September 30, 2021. The working capital reduction for the nine months ended September 30, 2021 reflects the collection of the prior winter season accounts receivable and subsequent rebuilding of inventory in advance of the next winter season. The working capital increase as of December 31, 2020 over the prior year reflected a later start of winter weather events which resulted in lower replenishment demand and accounts receivable balances with higher inventory levels than the prior year.

Dispositions

On March 23, 2021, we entered into a definitive agreement to sell our South America specialty plant nutrition business to ICL Brasil Ltda., a subsidiary of ICL Group Ltd. The transaction closed on July 1, 2021. Upon closing we recorded gross proceeds of approximately $421.1 million, including a reduction in proceeds of $6.2 million in working capital adjustments

which were finalized during the third quarter of fiscal 2021 and associated selling costs of $8.4 million, comprised of a cash payment of approximately $318.4 million and an additional $102.7 million in net debt assumed by ICL Brasil Ltd. The Brazilian debt was deducted from gross proceeds from the transaction. The terms of the definitive agreement provided for an additional earnout payment of up to R$88 million Brazilian reais. On April 7, 2022, we received the maximum earnout possible under the terms of the sale, of $18.5 million based on exchange rates at the time.

On April 7, 2021, we entered into a definitive agreement to sell a component of our North America micronutrient business to Koch Agronomic Services, LLC, a subsidiary of Koch Industries. On May 4, 2021, we completed the sale for approximately $56.7 million and we paid fees totaling $0.5 million.

On June 28, 2021, we entered into a definitive agreement to sell our investment in Fermavi for R$45 million Brazilian reais (including R$30 million Brazilian reais of deferred purchase price due in annual installments through August 2025). The transaction closed on August 20, 2021, and we received gross proceeds of approximately $2.9 million (based on exchange rates at the time of closing).

On April 20, 2022, we completed the sale of our South America chemicals business to a subsidiary of Cape Acquisitions LLC. Upon closing of the all-cash sale, we received gross proceeds of approximately $51.5 million based on exchange rates at the time of receipt, including a post-closing adjustment and compensation for $6.4 million cash on hand that transferred to the buyer. The sale included all of our remaining operations in Brazil, concluding the previously announced plan to exit the South American market.

We recorded losses on the sales of the South American specialty plant nutrition business, the investment in Fermavi and the South America chemicals business totaling approximately $323.1 million. These losses were partially offset by approximately $30.6 million of gain from the sale of a component of the North America micronutrient business.

Capital Resources

We believe our ongoing primary sources of liquidity will continue to be cash flow from operations and borrowings under our revolving credit facility. We believe that our current banking syndicate is secure and believe we will have access to our entire revolving credit facility. We expect that ongoing requirements for debt service and committed or sustaining capital expenditures will primarily be funded from these sources while approximately $200 million of the approximately $252 million of proceeds received from the October 18, 2022 private placement of common stock with KM&T will fund the capital expenditure needs of our planned lithium development over the next two years with the remaining approximately $52 million, less transaction expenses, used to repay outstanding debt. For additional information, see Item 8, Note 21.

Our debt service obligations could, under certain circumstances, materially affect our financial condition and prevent us from fulfilling our debt obligations. See Item 1A, “Risk Factors—Our indebtedness and any inability to pay our indebtedness could adversely affect our business and financial condition.” Furthermore, CMI is a holding company with no operations of its own and is dependent on its subsidiaries for cash flow. As discussed in Item 8, Note 12 to our Consolidated Financial Statements, at September 30, 2022, we had $955.9 million of outstanding indebtedness consisting of $250.0 million under our 4.875% Notes, $500.0 million under our 6.75% Notes, $168.4 million of borrowings outstanding under our senior secured credit facilities (consisting of term loans and a revolving credit facility), including $151.5 million borrowed against our revolving credit facility. Letters of credit totaling $13.6 million as of September 30, 2022, reduced available borrowing capacity under the revolving credit facility to $134.9 million. Subsequent to September 30, 2022, we paid down approximately $142.0 million of the outstanding revolving credit facility balance.

In November 2022, we entered into the third amendment to the Credit Agreement, principally to affect a transition from the London Inter-Bank Offered Rate to the Secured Overnight Financing Rate pricing benchmark provisions.

In June 2022, we entered into an amendment to its 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 (defined and calculated under the terms of the Credit Agreement as the ratio of consolidated net debt to consolidated adjusted EBITDA) to 5.5x as of the last day of any quarter through fiscal 2022, stepping down to 5.0x for the subsequent quarter ending December 31, 2022, stepping further down to 4.75x for subsequent quarters through March 31, 2024, and to 4.5x for the fiscal quarter ending June 30, 2024 and thereafter. As of September 30, 2022, our consolidated total net leverage ratio was approximately 4.59x. Consolidated total net debt is defined as the aggregate principal amount of debt outstanding, net of unrestricted cash not to exceed $50 million.

In April 2022, we utilized earnout proceeds from the fiscal 2021 sale of our South America specialty plant nutrition business and proceeds from the sale of our South America chemicals business, both discussed in Dispositions above, to repay approximately $60.6 million of our term loan balance.

In July 2021, we utilized cash proceeds from the sales of our South America specialty plant nutrition business and North America micronutrient business noted above in Dispositions to repay amounts borrowed against our revolving credit facility of $35.0 million. An additional $265.0 million of proceeds was utilized to pay down our term loan balance.

In the first quarter of 2021, we made a $41.7 million required prepayment of our term loan for 2020 Excess Cash Flow (as such term is defined in the Credit Agreement). This prepayment, along with the prepayment made in the third quarter of 2021

described above, will reduce the future required term loan payments. As such, we will not have a scheduled term loan payment until January 2025.

On June 30, 2020, certain of our U.S. subsidiaries entered into a three-year committed revolving accounts receivable financing facility for up to $100.0 million of borrowing with PNC Bank, National Association, as administrative agent and lender, and PNC Capital Markets, LLC, as structuring agent. On June 27, 2022, certain of our U.S. subsidiaries entered into an amendment to our AR Facility, extending the facility to June 2025. At September 30, 2022, we had $37.5 million of outstanding loans under this accounts receivable financing facility. See Item 8, Note 12 to our Consolidated Financial Statements for more information.

In the future, including in fiscal 2023, we may borrow amounts under the revolving credit facility or enter into additional financing to fund our working capital requirements, potential acquisitions and capital expenditures and for other general corporate purposes.

Our ability to make scheduled interest and principal payments on our indebtedness, to refinance our indebtedness, to fund planned capital expenditures and to fund acquisitions will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations, we believe that cash flow from operations and available cash, together with available borrowings under our revolving credit facility, will be adequate to meet our liquidity needs over the next 12 months.

We have various foreign and state net operating loss (“NOL”) carryforwards that may be used to offset a portion of future taxable income to reduce our cash income taxes that would otherwise be payable. However, we may not be able to use any or all of our NOL carryforwards to offset future taxable income and our NOL carryforwards may become subject to additional limitations due to future ownership changes or otherwise. At September 30, 2022, we had $94.1 million of gross foreign federal NOL carryforwards and $3.2 million of net operating tax-effected state NOL carryforwards that expire beginning in 2035. Also at September 30, 2022, we had $2.1 million of tax-effected state capital losses that expire beginning in 2027. The NOL carryforwards in Brazil and related valuation allowances were removed given the ending of the Company’s operations in Brazil.

We have a defined benefit pension plan for certain of our current and former U.K. employees. Beginning December 1, 2008, future benefits ceased to accrue for the remaining active employee participants in the plan concurrent with the establishment of a defined contribution plan for these employees. Generally, our cash funding policy is to make the minimum annual contributions required by applicable regulations. As of September 30, 2022, the fair value of the plan’s assets are in excess of the accumulated benefit obligations and we expect to be required to use cash from operations above our historical levels to fund the plan in the future.

Off-Balance Sheet Arrangements

At September 30, 2022, we had no off-balance sheet arrangements that have or are likely to have a material current or future effect on our consolidated financial statements.

Contractual Obligations

We believe we have sufficient liquidity to fund our operations and meet both short-term and long-term obligations. Our material future obligations include the contractual obligations and other commitments as described below.

We are party to contractual obligations involving commitments to make payments to third parties. These obligations impact our liquidity and capital resource needs. As of September 30, 2022, we had total future contractual obligations of approximately $1.4 billion, with approximately $95.2 million due during fiscal 2023.

We have a contractual commitment to repay our long-term debt of $955.9 million based on the terms of our debt agreements, of which none is payable within the next twelve months. Our interest commitment based on the current debt balances at September 30, 2022 is $221.1 million, with $55.5 million expected within the next twelve months. The remainder of our contractual commitments consist of lease payments, purchase obligations and commitments, income taxes and employer pension plan obligations.

See Item 8, Note 5 and Item 8, Note 12 to our Consolidated Financial Statements for amounts outstanding as of September 30, 2022 related to leases and debt, respectively. Our contractual obligations related to income taxes represent the one-time transition tax obligation. Refer to Item 8, Note 13 for amounts related to purchase obligations and performance bonds. See Item 8, Note 10 for information related to income taxes. Our contractual obligations related to employer pension plan obligations represent the funded status recognized as of September 30, 2022. See Item 8, Note 11 for information related to these plans.

In addition, we have other future contingent commitments of approximately $208.6 million, consisting of letters of credit and performance bonds, due during fiscal 2023. At September 30, 2022, we had $195.0 million of outstanding performance bonds, which includes bonds related to Ontario mining tax reassessments. Refer to Item 8, Note 13 for additional details.

Reconciliation of Net (Loss) Earnings from Continuing Operations to EBITDA and Adjusted EBITDA

Management uses a variety of measures to evaluate our performance. While our consolidated financial statements, taken as a whole, provide an understanding of our overall results of operations, financial condition and cash flows, we analyze

components of the consolidated financial statements to identify certain trends and evaluate specific performance areas. In addition to using U.S. GAAP financial measures, such as gross profit, net earnings and cash flows generated by operating activities, management uses EBITDA and Adjusted EBITDA. We have presented Adjusted EBITDA for both continuing operations and consolidated including discontinued operations for comparative purposes (see Item 8, Note 3 to our Consolidated Financial Statements for a discussion of discontinued operations). Both EBITDA and Adjusted EBITDA are non-U.S. GAAP financial measures used to evaluate the operating performance of our core business operations because our 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. We also use EBITDA and Adjusted EBITDA to assess our 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 U.S. GAAP and should not be considered in isolation or as a substitute for net earnings, cash flows or other financial data prepared in accordance with U.S. GAAP or as a measure of our overall profitability or liquidity.

EBITDA and Adjusted EBITDA exclude interest expense, income taxes and depreciation, depletion and amortization, each of which are an essential element of our cost structure and cannot be eliminated. Furthermore, Adjusted EBITDA excludes other cash and non-cash items, including stock-based compensation, (gain) loss on foreign exchange, other (income) expense, net and other infrequent items that management does not consider indicative of normal operations. Our borrowings are a significant component of our capital structure and interest expense is a continuing cost of debt. We are also required to pay income taxes, a required and ongoing consequence of our operations. We have a significant investment in capital assets and depreciation and amortization reflect the utilization of those assets in order to generate revenues. Our employees are vital to our operations and we utilize various stock-based awards to compensate and incentivize our employees. 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 and Adjusted EBITDA as used by management is set forth in the table below (in millions).

(a)We incurred severance and other costs related to executive transition.

(b)We recorded a settlement loss accrual during the twelve months ended September 30, 2022, and recognized costs, net of reimbursements, related to the recently completed SEC investigation during each of the twelve and nine months ended September 30, 2022 and 2021.

Adjusted EBITDA also includes other non-operating income, primarily non-cash stock-based compensation expense, foreign exchange gains (losses) resulting from the translation of intercompany obligations, interest income and investment income (loss) relating to our nonqualified retirement plan.

Our net earnings, EBITDA and Adjusted EBITDA are impacted by other events or transactions that we believe to be important in understanding our earnings trends such as the variability of weather. The impact of weather has not been adjusted in the amounts presented above. Our fiscal 2022 and 2021 results were unfavorably impacted by winter weather activity as compared to an average winter in the markets we serve.

Management’s Discussion of Critical Accounting Policies and Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the reporting date and the reported amounts of revenue and expenses during the reporting period. Actual results could vary from these estimates. We have identified the critical accounting policies and estimates that we believe are most important to the portrayal of our financial condition and results of operations. The policies set forth below require significant subjective or complex judgments by management, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Goodwill – During the three months ended September 30, 2021, we voluntarily changed the date of our annual goodwill impairment test from the first day of the fourth quarter of our prior fiscal year ending December 31 to the first day of the fourth quarter of our new fiscal year ending on September 30. We test goodwill more frequently if an impairment indicator is present. The quantitative impairment test requires judgment, including the identification of reporting units and the determination of fair value of each reporting unit. We determine the estimated fair value for each reporting unit based on discounted cash flow projections (income approach) and market values for comparable businesses (market approach). Under the income approach, we are required to make judgments about appropriate discount rates, long-term revenue growth rates and the amount and timing of expected future cash flows. The cash flows used in our estimates are based on the reporting unit's forecast, long-term business plan, and recent operating performance. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective reporting unit and market conditions. Our estimates may differ from actual future cash flows. The risk adjusted discount rate used is consistent with the weighted average cost of capital of our peer companies and is intended to represent a rate of return that would be expected by a market participant. Under the market approach, market multiples are derived from market prices of stocks of companies in our peer group. The appropriate multiple is applied to the forecasted revenue and earnings before interest, taxes, depreciation and amortization of the reporting unit to obtain an estimated fair value.

As of September 30, 2022, we have recorded goodwill of $56.4 million, primarily consisting of $50.9 million in our Plant Nutrition segment. As of our July 1, 2022 annual measurement date, the estimated fair value exceeded carrying value. The most critical assumptions used in the calculation of the fair value are the projected revenue growth rates, long-term operating margin, working capital requirements, terminal growth rates, discount rate, and the selection of market multiples. The projected long term operating margin utilized in our fair value estimates is consistent with our operating plan and is dependent on the successful execution of our long-term business plan, overall industry growth rates and the competitive environment. The discount rate could be adversely impacted by changes in the macroeconomic environment and volatility in the equity and debt markets. Although management believes its estimate of fair value is reasonable, if the future financial performance falls below our expectations or there are unfavorable revisions to significant assumptions, or if our market capitalization declines, we may need to record a non-cash goodwill impairment charge in a future period.

Mineral Interests – As of September 30, 2022, we maintained $118.5 million of net mineral properties as a part of property, plant and equipment. Mineral interests include probable mineral reserves. We lease mineral reserves at several of our extraction facilities. These leases have varying terms, and many provide for a royalty payment to the lessor based on a specific amount per ton of mineral extracted or as a percentage of sales.

Mineral interests are primarily depleted on a units-of-production method based on a combination of third-party and internal qualified geologists’ estimates of recoverable reserves. Our rights to extract minerals are generally contractually limited by time or lease boundaries. If we are not able to continue to extend lease agreements, as we have in the past, at commercially reasonable terms, without incurring substantial costs or incurring material modifications to the existing lease terms and conditions, if the assigned lives realized are less than those projected by management, or if the actual size, quality or recoverability of the minerals is less than the estimated probable reserves, then the rate of amortization could be increased or the value of the reserves could be reduced by a material amount.

Income Taxes – Developing our provision for income taxes and analyzing our potential tax exposure items requires significant judgment and assumptions as well as a thorough knowledge of the tax laws in various jurisdictions. These estimates and judgments occur in the calculation of certain tax liabilities and in the assessment of the likelihood that we will be able to realize our deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenue and expense, carryforwards and other items. Based on all available evidence, both positive and negative, the reliability of that evidence and the extent such evidence can be objectively verified, we determine whether it is more likely than not that all, or a portion of, the deferred tax assets will be realized.

In evaluating our ability to realize our deferred tax assets, we consider the sources and timing of taxable income, our ability to carry back tax attributes to prior periods, qualifying tax planning and estimates of future taxable income exclusive of reversing temporary differences. In determining future taxable income, our assumptions include the amount of pre-tax operating income according to multiple federal, international and state taxing jurisdictions, the origination of future temporary differences and the implementation of feasible and prudent tax planning. These assumptions require significant judgment about material

estimates, assumptions and uncertainties in connection with the forecasts of future taxable income, the merits in tax law and assessments regarding previous taxing authorities’ proceedings or written rulings. While these assumptions are consistent with the plans and estimates we use to manage the underlying businesses, differences in our actual operating results or changes in our tax planning, tax credits, tax laws or our assessment of the tax merits of our positions could affect our future assessments.

In addition, the calculation of our tax liabilities involves uncertainties in the application of complex tax regulations in multiple jurisdictions. We recognize potential liabilities in accordance with applicable U.S. GAAP for anticipated tax issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when we determine the liabilities are no longer necessary. If our estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result. See Item 8, Note 10 to our Consolidated Financial Statements for further discussion of our income taxes.

We have elected to account for GILTI in the year the tax is incurred, rather than recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years.

Taxes on Foreign Earnings – Under U.S tax reform, we revised our permanently reinvested assertion and expect to repatriate approximately $150 million of unremitted foreign earnings on which $4.6 million of income tax expense has been recorded for foreign withholding tax and state income taxes. Additionally, we changed our permanently reinvested assertion and repatriated $42.5 million of unremitted foreign earnings from our U.K. operations in September 2021 on which $0.1 million of income tax expense was recorded during fiscal 2021. Additionally in fiscal 2022, we changed our permanently reinvested assertion and expect to repatriate an additional approximately $10 million of unremitted foreign earnings on which $0.1 million of income tax benefit was recorded during fiscal 2022. We consider all remaining non-U.S. earnings to be permanently reinvested outside the U.S. to the extent these earnings are not subject to U.S. income tax under an anti-deferral tax regime. As of September 30, 2022, we have approximately $147.5 million of outside basis differences on which no deferred taxes have been recorded.

U.K. Pension Plan – We have a defined benefit pension plan covering some of our current and former employees in the U.K. The U.K. pension plan was closed to new participants in 1992. As we elected to freeze our pension plan, our remaining active employees ceased to accrue future benefits under the plan beginning December 1, 2008. We select the actuarial assumptions for our pension plan after consultation with our actuaries and consideration of market conditions. These assumptions include the discount rate and the expected long-term rates of return on plan assets, which are used in the calculation of the actuarial valuation of our defined benefit pension plans. If actual conditions or results vary from those projected by management, adjustments may be required in future periods to meet minimum pension funding or to increase pension expense or our pension liability. A decrease of 25 basis points in our discount rate would have increased our projected benefit obligation as of September 30, 2022, by approximately $1.0 million and would increase our net periodic pension expense for 2022 by approximately $0.1 million. A decrease of 25 basis points in our expected return on assets assumption as of September 30, 2022, would increase our net periodic expense for 2022 by approximately $0.3 million.

We set our discount rate for our U.K. pension plan based on a forward yield curve for a portfolio of high credit quality bonds with expected cash flows and an average duration closely matching the expected benefit payments under the plan. The assumption for the return on plan assets is determined based on expected returns applicable to each type of investment within the portfolio expected to be maintained over the next 15 to 20 years. Our funding policy has been to make the minimum annual contributions required by applicable regulations. However, we have made special payments during some years when changes in the business could reasonably impact the pension plan’s available assets and when special early retirement payments or other inducements are made to pensioners. Contributions totaled $0, $0 and $0.4 million during the fiscal year ended September 30, 2022, the nine months ended September 30, 2021 and the fiscal year ended December 31, 2020, respectively. If supplemental benefits were approved and granted under the provisions of the plan, or if periodic statutory valuations cause a change in funding requirements, our contributions could increase to fund all or a portion of those benefits. See Item 8, Note 11 to our Consolidated Financial Statements for additional discussion of our U.K. pension plan.

Other Significant Accounting Policies – Other significant accounting policies not involving the same level of measurement uncertainties as those discussed above are nevertheless important to an understanding of our consolidated financial statements. Policies related to revenue recognition, allowance for doubtful accounts, valuation of inventory reserves, equity compensation instruments, intangible assets, legal reserves, derivative instruments, post-employment benefit obligations and environmental accruals require judgments on complex matters.

Effects of Currency Fluctuations and Inflation

Our operations outside of the U.S. are conducted primarily in Canada and the U.K. Therefore, our results of operations are subject to both currency transaction risk and currency translation risk. We incur currency transaction risk whenever we or one of our subsidiaries enter into either a purchase or sales transaction using a currency other than the local currency of the

transacting entity. With respect to currency translation risk, our financial condition and results of operations are measured and recorded in the relevant local currency and then translated into U.S. dollars for inclusion in our historical consolidated financial statements. Exchange rates between these currencies and the U.S. dollar have fluctuated significantly from time to time and may do so in the future. The majority of revenues and costs are denominated in U.S. dollars, with Canadian dollars and British pounds sterling also being significant. We generated 26% of our fiscal 2022 sales in foreign currencies, and we incurred 25% of our fiscal 2022 total operating expenses in foreign currencies. Additionally, we have approximately $400 million of net assets denominated in foreign currencies. In fiscal 2020 and 2021, the average rate for the U.S. dollar weakened against the Canadian dollar and the British pound sterling. In fiscal 2022, the average rate for the U.S. dollar strengthened against the Canadian dollar and the British pound sterling. Significant changes in the value of the Canadian dollar or the British pound sterling relative to the U.S. dollar could have a material adverse effect on our financial condition and our ability to meet interest and principal payments on U.S. dollar-denominated debt, including borrowings under our senior secured credit facilities.

We are experiencing increases in logistics costs, prices for energy and other costs that have only been partially recovered through price increases for our products. During the fiscal year ended September 30, 2022, the Company estimates that the impact of inflation increased logistics costs by approximately $30 million to $35 million and product costs by approximately $20 million to $25 million. Our efforts to recover inflation-based cost increases from our customers may be hampered as a result of the structure of our contracts and the contract bidding process as well as the competitive industries, economic conditions and countries in which we operate. For more information, see Part I, Item 1A, “Risk Factors”.

Seasonality

We experience a substantial amount of seasonality in our sales, including our salt deicing product sales. Consequently, our Salt segment sales and operating income are generally higher in the first and second fiscal quarters (ending December 31 and March 31) and lower during the third and fourth fiscal quarters of each year (ending June 30 and September 30). In particular, sales of highway and consumer deicing salt and magnesium chloride products vary based on the severity of the winter conditions in areas where the product is used. Following industry practice in North America and the U.K., we seek to stockpile sufficient quantities of deicing salt throughout the first, third and fourth fiscal quarters (ending December 31, June 30 and September 30) to meet the estimated requirements for the winter season. Our plant nutrition business is also seasonal. As a result, we and our customers generally build inventories during the plant nutrition business’ low demand periods of the year (which are typically winter and summer, but can vary due to weather and other factors) to ensure timely product availability during the peak sales seasons (which are typically spring and autumn, but can also vary due to weather and other factors).

Climate Change

The potential impact of climate change on our operations, product demand and the needs of our customers remains uncertain. Significant changes to weather patterns, a reduction in average snowfall or regional drought within our served markets could negatively impact customer demand for our products and our costs, as well as our ability to produce our products. For example, prolonged periods of mild winter weather could reduce the demand for deicing products. Drought or flood conditions could similarly impact demand for our SOP products, as well as continue to impact the amount and quality of feedstock used to produce SOP at our Ogden facility due to changes in brine levels, mineral concentrations or other factors, which could have a material impact on our Plant Nutrition results of operations. Climate change could also lead to disruptions in the production or distribution of our products due to major storm events or prolonged adverse conditions, changing temperature levels, lake level fluctuations or flooding from sea level changes. Climate change or governmental initiatives to address climate change may necessitate capital expenditures in the future, although capital expenditures for climate-related projects were not material in fiscal 2022 and are not expected to be material in fiscal 2023. For more information, see Part I, Item 1A, “Risk Factors” and Part I, Item1 “Business—Environmental, Health and Safety and Other Regulatory Matters.”

Global Economy

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. We have continued producing and delivering essential products that support critical industries such as transportation, agriculture, chemical, food, pharmaceutical and animal nutrition. We have instituted several measures in response to the COVID-19 pandemic and have experienced negative impacts to our business to our business from COVID-19, but our results of operations for the fiscal year ended September 30, 2022, the nine months ended September 30, 2021 and the fiscal year ended December 31, 2020 were not materially affected by COVID-19, although recent supply chain shortages and cost increases may be linked to COVID-19. Also, while we have no operations in Russia or Ukraine, we are continuing to monitor any broader impact from the current war in Ukraine, particularly with respect to energy costs and implications on global fertilizer market supply and demand conditions. The ultimate impact that any infectious outbreak or the war in Ukraine will have on our future results is unknown at this time. For more information, see “Part I, Item 1A, Risk Factors.”

Critical Accounting Estimates and Recent Accounting Pronouncements

See Item 8, Note 2 to our Consolidated Financial Statements for a discussion of critical accounting estimates and recent accounting pronouncements.