COMPASS MINERALS INTERNATIONAL INC (CMP) FY 2024 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 global 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, chemical 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 and helps improve the quality and yield of crops, while supporting sustainable agriculture. We are working to develop long-term fire-retardant solutions to help combat wildfires. As of September 30, 2024, we operate 12 production and packaging facilities with nearly 1,900 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 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+.

In May 2023, we completed the purchase of Fortress, a fire retardant company working to develop long-term aerial and ground fire retardant products to help combat wildfires (see Part II, Item 8, Note 3 of our Consolidated Financial Statements). December 31, 2023 marked the end of Fortress's first commercially operating fire season with the U.S. Forest Service (“USFS”). As described in Item 8, Note 2 of our Consolidated Financial Statements, the USFS did not award us a contract for the calendar 2024 fire season. We are evaluating various alternatives regarding the path forward for the Fortress business given recent developments.

As discussed in Item 8, Note 2 of our Consolidated Financial Statements, we recognized a long-lived asset impairment, net, of $15.6 million, an inventory impairment of $2.4 million and goodwill impairment of $32.0 million related to Fortress and goodwill impairment of $51.0 million related to Plant Nutrition during the second quarter of fiscal 2024. Failure to obtain full qualification by the USFS or a decision by the USFS not to enter into commercial agreements with respect to Fortress’s non-magnesium chloride-based fire retardant products could result in additional impairments related to the Fortress business.

Additionally, we had been pursuing development of a sustainable lithium salt resource near Ogden, UT to support the North American battery market. However, as described in Part II, Item 8, Note 8 of our Consolidated Financial Statements, we have terminated our pursuit of the lithium development. Consequently, we evaluated the capitalized assets, including site preparation, project engineering, equipment and materials and capitalized labor and interest, and recorded an impairment charge of $74.8 million.

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

Discontinued Operations

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 with the goal of reducing our leverage and enabling increased focus on optimizing our core businesses and as described further in Item 8, Note 1 and Note 4 to our Consolidated Financial Statements, we subsequently sold 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. 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 discontinued operations in accordance with U.S. Generally Accepted Accounting Principles. The dispositions were completed during fiscal 2022; accordingly, the results of operations of the Specialty Businesses are presented as discontinued operations in the Consolidated Statements of Operations for the fiscal year ended September 30, 2022.

Consolidated Results of Operations

The following discussion and analysis are for the fiscal year ended September 30, 2024, compared to the same period in 2023, unless otherwise stated. For a discussion and analysis of the fiscal year ended September 30, 2023, compared to the same period in 2022, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Form 10-K/A for the fiscal year ended September 30, 2023, filed with the SEC on October 29, 2024.

* Refer to “—Reconciliation of Net (Loss) Earnings from Continuing Operations 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: Fiscal Year Ended September 30, 2024 – Fiscal Year Ended September 30, 2023

•Total sales decreased 7%, or $87.3 million, due to lower Salt segment sales, partially offset by sales by the Fortress fire retardant business and higher Plant Nutrition segment sales. The decrease in Salt sales was primarily driven by lower sales volumes, partially offset by higher average sales price. The increase in Plant Nutrition sales from the prior year primarily reflects higher sales volumes, partially offset by lower average sales price.

•Operating loss of $116.8 million decreased $194.2 million from operating earnings of $77.4 million in the prior fiscal year, reflecting the impairments related to our previous lithium development project (see Item 8, Note 8), our Fortress business and the Plant Nutrition segment (see Item 8, Note 2) and lower Plant Nutrition operating earnings. Corporate and Other operating loss increased from the prior year primarily due to a $74.8 million lithium asset impairment and $50.0 million of goodwill, long-lived asset and inventory impairments related to the Fortress business. The

impairments were partially offset by the net non-cash reduction in our Fortress-related contingent consideration of $22.1 million. Plant Nutrition operating earnings decreased due primarily to a $51.0 million goodwill impairment, a $17.6 million water rights impairment and lower sales prices, which were partially offset by higher sales volumes and lower per-unit distribution costs. In addition, Salt operating earnings decreased slightly due to lower Salt sales volumes, partially offset by higher average sales prices.

•Diluted net loss per share of $4.99 decreased by $5.24 from net earnings of $0.25 per common share in the prior fiscal year period.

•EBITDA* adjusted for items management believes are not indicative of our ongoing operating performance (“Adjusted EBITDA”)* increased 4%, or $7.2 million, benefiting from a $22.1 million net gain recorded in the current fiscal year period related to the decline in the valuation of the Fortress contingent consideration.

GROSS PROFIT & GROSS MARGIN COMMENTARY: Fiscal Year Ended September 30, 2024 – Fiscal Year Ended September 30, 2023

Gross Profit: Decreased 16%, or $37.0 million; Gross Margin decreased 2% from 19% to 17%

•Salt segment gross profit decreased $9.1 million primarily due to lower sales volumes and higher per-unit product costs, which were partially offset by higher average sales prices (see “—Operating Segment Performance—Salt” for additional information).

•Gross profit for the Plant Nutrition segment decreased $28.4 million due to lower average sales prices, which were partially offset by lower per-unit distribution costs and higher sales volumes (see “—Operating Segment Performance—Plant Nutrition” for additional information).

•Fortress gross profit decreased $1.0 million from 2023 as Fortress was not awarded a contract for the 2024 fire season.

OTHER EXPENSES AND INCOME COMMENTARY: Fiscal Year Ended September 30, 2024 – Fiscal Year Ended September 30, 2023

SG&A: Decreased $12.4 million; Decreased 0.2 percentage points as a percentage of sales to 12.3% from 12.5%

•The decrease in SG&A expense was primarily due to lower corporate expenses, including lower compensation expenses due to restructuring and lower professional services, as well as lower lithium expenses. These decreases were partially offset by higher expenses related to our Fortress fire retardant business that was acquired in May 2023.

Loss on Impairments: $191.0 million in the current-year period

•During the fiscal year ended September 30, 2024, we recognized goodwill impairments of $51.0 million related to our Plant Nutrition segment and $32.0 million related to our Fortress operations (within the Corporate and Other segment). The Plant Nutrition impairment was primarily the result of reduced cash flow assumptions impacting expected profitability of the Plant Nutrition segment. The Fortress impairment was primarily related to uncertainty surrounding our magnesium chloride-based fire retardants which impacted projected future revenues and cash flows. Also, during the fiscal year ended September 30, 2024, we recognized a $15.6 million long-lived asset impairment, net, related to Fortress magnesium chloride-based products. See Item 8, Note 2 for additional information.

•We recognized an impairment loss of $74.8 million for the fiscal year ended September 30, 2024 related to the termination of the lithium development (see Item 8, Note 8).

•We recognized an impairment loss of $17.6 million for the fiscal year ended September 30, 2024 in our Plant Nutrition segment related to water rights (see Item 8, Note 9).

Other Operating (Income) Expense: Changed $21.4 million from expense of $4.4 million to income of $17.0 million

•The change in other operating (income) expense was primarily the result of a $22.1 million non-cash gain in the contingent consideration recorded in the current fiscal year related to the Fortress acquisition due to changes in projected revenues and cash flows from our magnesium chloride-based fire retardants.

•The other operating income was partially offset by a provision for product recall costs of $0.8 million.

Interest Income: Decreased $4.3 million to $1.0 million

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

Interest Expense: Increased $14.0 million to $69.5 million

•The increase was primarily due to higher debt levels in the current fiscal year period.

Loss on Foreign Exchange: Decreased by $1.6 million from $2.3 million to $0.7 million

•We realized a foreign exchange loss of $0.7 million for the fiscal year ended September 30, 2024 compared to a loss of $2.3 million in the prior year due primarily to changes in translating our intercompany loans from Canadian dollars to U.S. dollars.

Net Loss in Equity Investees

•We realized a net loss in equity investees of $3.1 million in the fiscal year ended September 30, 2023 reflecting our share of losses related to our equity investments.

Gain from Remeasurement of Equity Method Investment

•We recognized a gain of $10.1 million for the fiscal year ended September 30, 2023 related to our previously held equity investment in Fortress, which was remeasured to fair value upon our full acquisition of the business in May 2023.

Other Expense, Net: Decreased $2.1 million to $2.2 million

•The change is due primarily to a decrease in losses on cash flow hedges.

Income Tax Expense from Continuing Operations: Increased $0.8 million to $17.9 million

•Income tax expense increased $0.8 million despite a reduction in pretax book income of $215.8 million due primarily to the income mix by country with income recognized in foreign jurisdictions more than offset by losses, including significant impairments, recognized in the U.S., for which a valuation allowance has been recorded against the U.S. tax benefit carryforward. See Note 2 for further discussion of impairments.

•Our effective tax rate was a negative 10% for the fiscal year ended September 30, 2024, which is primarily driven by the income mix by country with income recognized in foreign jurisdictions more than offset by losses recognized in the U.S., for which a valuation allowance has been recorded against the U.S. tax benefit carryforward.

•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 valuation allowance expense. Additionally, the income tax provision for the fiscal year ended September 30, 2023 included base erosion and anti-abuse tax.

OPERATING SEGMENT PERFORMANCE

The following financial results represent consolidated financial information with respect to sales from our Salt and Plant Nutrition segments for the fiscal years ended September 30, 2024 and 2023. 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 Fortress business include sales of $14.7 million and $10.4 million for the fiscal years ended September 30, 2024 and 2023, respectively. The results of operations of the consolidated records management business and other incidental revenues include sales of $13.9 million, $11.4 million and $11.5 million for the fiscal years ended September 30, 2024, 2023, and 2022, respectively. These sales are not material to our consolidated financial results and are not included in the following operating segment financial data.

SALT SEGMENT RESULTS

SALT SEGMENT RESULTS COMMENTARY: Fiscal Year Ended September 30, 2024 – Fiscal Year Ended September 30, 2023

•Salt sales of $907.8 million decreased $103.0 million, or 10%, in the current year reflecting lower Salt volumes, which were partially offset by higher Salt average sales prices.

•Salt sales volumes decreased 18%, or 2.0 million tons, and reduced sales by approximately $155.1 million. Highway deicing sales volumes decreased 20% reflecting a combination of exceptionally mild weather and the impact of 9% lower total committed bid volumes year over year compared to the prior-year bid season. Consumer and industrial sales volumes decreased 7% primarily reflecting a decrease in deicing sales volumes.

•Salt average sales price increased 9% and contributed approximately $52.1 million to the increase in sales, partially offsetting the decrease in sales volumes, due to higher highway and consumer and industrial average sales prices.

•Highway deicing average sales prices increased 6% across all product categories when compared to the prior year as we have sought to restore profitability and offset the impact of prior year inflation on our costs by executing a commercial bidding strategy emphasizing pricing over volume. Consumer and industrial average sales prices increased 6% due to price increases taken to offset inflation realized in prior years. The higher combined sales prices are also reflective of sales mix.

•Salt operating earnings decreased 4%, or $6.9 million, due primarily to lower sales volumes for both highway and consumer and industrial products and higher per-unit product costs, which were partially offset by higher average sales prices.

PLANT NUTRITION RESULTS

PLANT NUTRITION RESULTS COMMENTARY: Fiscal Year Ended September 30, 2024 – Fiscal Year Ended September 30, 2023

•Plant Nutrition sales increased 5%, or $8.9 million, due to higher sales volumes, which was partially offset by lower average sales prices.

•Plant Nutrition sales volumes increased 25%, or 54,000 tons, which contributed approximately $42.4 million to the increase in sales driven by normalization of demand levels in fiscal 2024 following lower demand in fiscal 2023 reflective of impacts from weather events in key markets and uncertainty regarding future fertilizer prices causing customers to cancel or delay purchases.

•Plant Nutrition sales prices decreased 16%, partially offsetting the increase in sales by approximately $33.5 million. Average sales prices decreased through fiscal 2024 due to global supply and demand dynamics for fertilizer products resulting in weakening pricing year over year.

•Plant Nutrition operating earnings decreased $95.9 million to an operating loss of $86.4 million in fiscal 2024 primarily due to a $51.0 million goodwill impairment, a $17.6 million water rights impairment and lower sales prices, which were partially offset by higher sales volumes and lower per-unit distribution costs.

OUTLOOK

•Following one of weakest winters in our served markets in nearly a quarter century, committed volumes for fiscal year 2025 in the North American highway deicing business are down approximately 9%. Despite these lower volume commitments, we expect Salt segment sales volumes to increase by approximately 9% year over year at the mid-point of our guidance range based on a reversion to more normalized weather. Pricing for the Salt segment is expected to decline slightly year over year, driven by lower North American highway deicing bid season results that saw average pricing contract due to excess supply across the system. Accordingly, we expect Salt segment sales volumes and adjusted EBITDA to range from 9.7 million to 10.7 million tons and $225 million to $250 million, respectively, in fiscal year 2025.

•Plant Nutrition segment sales volumes are expected to improve to a range of 285,000 to 305,000 tons in fiscal year 2025, improving from levels in fiscal year 2024 that reflected a return to normal demand in core Western markets. We expect lower average selling prices throughout fiscal 2025 due to anticipated weakness in global potash value. For fiscal year 2025, we expect adjusted EBITDA in a range of $14 million to $20 million.

•Fiscal year 2025 capital expenditures are expected to be in the $100 million to $110 million range. This includes non-recurring amounts of approximately $10 million to $15 million related to larger capital projects, including preparation work for the mill relocation at Goderich mine and refurbishment of silos at Ogden.

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. We must also comply with the terms of our indentures governing our 6.75% Senior Notes due December 2027 (the “6.75% Notes”), which limits the amount of dividends we can pay to our stockholders. We are in compliance with our debt covenants as of September 30, 2024. 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, pay dividends, fund smaller acquisitions and repay our debt. We have been able to manage our cash flows generated and used across Compass Minerals to indefinitely reinvest earnings in our foreign jurisdictions or efficiently repatriate those funds to the U.S. As of September 30, 2024, we had $17.3 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 salt deicing 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 $375 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 4 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 in fiscal 2018 expecting to repatriate approximately $150 million of unremitted foreign earnings from Canada. In fiscal 2022, we revised our permanently reinvested assertion, expecting to repatriate an additional $10 million of unremitted foreign earnings from our U.K. operations and in fiscal 2023 we revised it again expecting to repatriate an additional approximately $6 million of unremitted foreign earnings from our U.K. operations. During the first quarter of fiscal 2023, $89.2 million was repatriated from Canada and in the third quarter of fiscal 2023, $15.6 million was repatriated from the U.K. Net income tax expense of $3.8 million has been recorded for foreign withholding tax, state income tax and foreign exchange losses on these changes in assertion as of September 30, 2024, consisting of a tax benefit of $0.7 million recorded in fiscal 2023, a tax benefit of $0.2 recorded in fiscal 2022 and tax expense of $4.7 million, recorded in years prior to fiscal 2022. 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, 2024, we have $213.5 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, 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.

Capital Allocation

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, Plant Nutrition and Fortress 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.

We manage our capital allocation considering our long-term strategic objectives, required spending to sustain our business and focus on generating adequate returns on capital. In April 2024, the Board of Directors determined not to declare dividends for the foreseeable future in order to align the Company’s capital allocation priorities with its corporate focus on accelerating cash flow generation and debt reduction. While our equipment and facilities are generally not impacted by rapid technology changes, our operations require refurbishments and replacements to maintain structural integrity and reliable production and shipping capabilities. When possible, we incorporate efficiency, environmental and safety improvements 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.

On October 18, 2022, we received aggregate net proceeds of approximately $240.7 million, net of transaction costs, from Koch Minerals & Trading, LLC (“KM&T”) as part of a strategic equity partnership. We have used, or committed to use, approximately $78 million of the proceeds from the private placement for capital expenditures to advance the first development phase of the lithium project with the remainder of the proceeds used to reduce debt or for general corporate purposes.

In fiscal 2022, we made an additional $45 million equity investment in Fortress, resulting in a total investment of $50 million representing a 45% ownership interest. Fortress is a fire retardant company working to develop long-term fire retardant solutions to help combat wildfires. On May 5, 2023, we acquired the remaining 55% interest in Fortress not previously owned in exchange for an initial cash payment of approximately $18.9 million (net of cash held by Fortress of $6.5 million), and additional contingent consideration of up to $28 million to be paid in cash and/or Compass Minerals common stock upon the achievement of certain performance measures, and a cash earn-out based on financial performance and volumes of Fortress fire retardant products sold over a 10-year period. Building upon the previous 45% minority ownership stake in Fortress, the transaction provided us full ownership of all Fortress assets, contracts, and intellectual property.

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. During the fiscal year ended September 30, 2024, we also paid liabilities accrued as of September 30, 2023, including the remaining $10 million settlement payment to the SEC, accrued incentive compensation, and other liabilities. Additionally, at the end of Fortress’ contract term with the USFS, we recognized revenue previously deferred in accrued liabilities and decreased our contingent consideration liability due to recent revisions of potential payouts. The lower accounts receivable balance and higher inventory balance as of September 30, 2024, as compared to September 30, 2023,

primarily reflects lower sales volumes in the fourth quarter in our Salt segment year over year. The lower accounts receivable balance and higher inventory balance as of September 30, 2023, as compared to September 30, 2022, primarily reflects lower sales volumes in the fourth quarter 2023 in our Salt and Plant Nutrition segments. The acquisition of Fortress resulted in an increase in current liabilities due to accrued contingent consideration and deferred revenue recorded on its contract with the USFS as of September 30, 2023 as compared to September 30, 2022.

Capital Resources

With regard to our Salt, Plant Nutrition and Fortress businesses, 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 sustaining capital expenditures will primarily be funded from these sources.

Our debt service obligations could, under certain circumstances, materially affect our financial condition and prevent us from executing our business strategies. 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, 2024, we had $922.8 million of outstanding indebtedness consisting of $500.0 million under our 6.75% Notes, $383.9 million of borrowings outstanding under our senior secured credit facilities (consisting of a term loan and a revolving credit facility), including $190.1 million borrowed against our revolving credit facility. Letters of credit totaling $15.2 million as of September 30, 2024, reduced available borrowing capacity under the revolving credit facility to $169.7 million.

On March 27, 2024, we entered into an amendment to our 2023 Credit Agreement, which eased the restrictions of certain covenants contained in the agreement. The amendment included increasing the maximum allowed consolidated total net leverage ratio (as defined and calculated under the terms of the amended 2023 Credit Agreement) to 6.5x as of the last day of any quarter through the fiscal quarter ended December 31, 2024, then gradually stepping down to 4.75x by the fiscal quarter ended March 31, 2026 and thereafter.

On August 12, 2024, we entered into amendments to our 2023 Credit Agreement and our AR Securitization Facility, which extended the deadline for delivery of our financial statements for the quarter ended June 30, 2024, together with the respective compliance certificates, from 45 days to 75 days after the last day of the quarter ended June 30, 2024.

On September 13, 2024, we entered into amendments to our 2023 Credit Agreement and our AR Securitization Facility, which extended the deadline for delivery of our financial statements for the quarter ended June 30, 2024, together with the respective compliance certificates, to November 29, 2024, 152 days after the last day of the quarter ended June 30, 2024.

On September 18, 2024, we received a notice of default relating to our 6.750% Senior Notes due 2027 because we failed to timely furnish a Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024. We had 90 days from receipt of the notice to remedy prior to it becoming an Event of Default under the terms of the Indenture, dated November 26, 2019. Our Q3 Form 10-Q was filed with the SEC on October 30, 2024.

On December 12, 2024, we entered into an amendment to our 2023 Credit Agreement, which, among other things, eased the restrictions of certain covenants contained in the agreement. The amendment included increasing the maximum allowed consolidated total net leverage ratio (as defined and calculated under the terms of the amended 2023 Credit Agreement) to 6.5x as of the last day of any quarter through the fiscal quarter ended September 30, 2025, then gradually stepping down to 4.5x by the fiscal quarter ended December 31, 2026 and thereafter. The amendment also decreased the Revolving Commitments (as defined in the Existing Credit Agreement) from $375 million to $325 million with additional reductions stepping down to $250 million on July 1, 2026.

On May 5, 2023, we entered into an agreement to amend and restate our credit agreement entered into on November 26, 2019 (as in effect prior to such restatement, the “Existing Credit Agreement”) with a new $575 million senior secured credit agreement due May 5, 2028 (as amended, the “2023 Credit Agreement”), comprised of a $375 million revolving credit facility and $200 million term loan. The term loan is payable in quarterly installments of interest and principal, which began September 30, 2023. The 2023 Credit Agreement increases the Applicable Margins by 25 basis points over those defined in the Existing Credit Agreement and adds an additional level at a consolidated total leverage ratio (defined below) of greater than 4.00 to 1.00. Consolidated total net debt includes the aggregate principal amount of total debt, net of unrestricted cash of up to $75 million as per the 2023 Credit Agreement. Proceeds from the 2023 Credit Agreement were used to redeem our $250 million 4.875% Senior Notes on May 10, 2023 and pay off the Existing Credit Agreement term loan balance of $16.9 million. Refer to Item 8, Note 12 of our Consolidated Financial Statements for additional details.

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.

Pursuant to the terms of the amended 2023 Credit Agreement, the maximum allowed consolidated total net leverage ratio (as defined and calculated under the terms of the amended 2023 Credit Agreement and discussed further above) is 6.5x as of the last day of any quarter through the fiscal quarter ended December 31, 2024, which steps down to 4.75x in the quarter ending March 31, 2026 and thereafter. The consolidated total net leverage ratio represents the ratio of (a) consolidated total net debt to (b) consolidated adjusted EBITDA. As of September 30, 2024, our consolidated total net leverage ratio was approximately 4.89x.

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 to repay approximately $60.6 million of our term loan balance.

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. In January 2023, certain of the Company’s U.S. subsidiaries entered into the second amendment to the AR Securitization Facility with PNC Bank, which temporarily eased the restrictions of certain covenants contained in the agreement through March 2023. The amendment made certain adjustments to the financial tests including: (i) the default ratio and (ii) the delinquency ratio to make compliance with such tests more likely. On March 27, 2024, certain of our U.S. subsidiaries entered into an amendment to its revolving accounts receivable financing facility with PNC Bank, National Association, extending the facility to March 2027.

At September 30, 2024, we had $38.9 million of outstanding loans under this accounts receivable financing facility. See Item 8, Note 12 to our Consolidated Financial Statements for more information.

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. Although we are in compliance with our debt covenants as of September 30, 2024, we can make no assurance that we will remain in compliance with these ratios. Furthermore, we may need to refinance all or a portion of our indebtedness on or before maturity; however, we cannot provide assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

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, 2024, we had $76.4 million of gross federal NOL carryforwards and $6.1 million of net operating tax-effected state NOL carryforwards that expire beginning in 2031. Also at September 30, 2024 and 2023, we had $2.0 million tax-effected state capital losses that expire beginning in 2027 and $1.6 million of tax-effected federal capital losses that expire beginning in 2025. The NOL carryforwards in Brazil and related valuation allowances were eliminated as of September 30, 2022 given the ending of the Company’s operations in Brazil.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred in the U.S. over the three-year period ended September 30, 2024. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future income. On the basis of this evaluation, for the fiscal year 2024, an additional valuation allowance of $46 million has been recorded to recognize only the portion of the U.S. deferred tax assets that are more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for income.

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, 2024, 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.

Dispositions

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.

Off-Balance Sheet Arrangements

At September 30, 2024, 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, 2024, we had total future contractual obligations of approximately $1.4 billion, with approximately $141.6 million due during fiscal 2025.

We have a contractual commitment to repay our long-term debt of $922.8 million based on the terms of our debt agreements, of which $7.5 million is payable within the next twelve months. Our interest commitment based on the debt balances at September 30, 2024 is $215.8 million, with $64.9 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 and benefit plan obligations.

See Item 8, Note 6 and Item 8, Note 12 to our Consolidated Financial Statements for amounts outstanding as of September 30, 2024 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, 2024. See Item 8, Note 11 for information related to these plans.

In addition, we have other future contingent commitments of approximately $250.1 million, consisting of letters of credit and performance bonds, due during fiscal 2025. At September 30, 2024, we had $242.4 million of outstanding performance bonds, which includes bonds related to Ontario mining tax reassessments. Refer to Item 8, Note 13 for additional details. We also have contingent consideration liabilities related to the Fortress acquisition currently valued at $7.9 million as of September 30, 2024. The milestone portion of the contingency is to be paid upon the achievement of certain performance measures over the next five years (currently estimated to be $4.7 million in total), and a cash earn-out based on financial performance and volumes of certain Fortress fire retardant products sold over a 10-year period (currently estimated to be $3.2 million in total). Refer to Item 8, Note 3 and Item 8, Note 17 for additional information.

Product Recall

On October 25, 2024, we issued a recall for nine production lots of food-grade salt produced at our Goderich Plant following a customer report of a non-organic, foreign material in our product. The products recalled included both products sold prior and subsequent to September 30, 2024. We followed recall protocol and notified our BRCGS Global Standard for Food Safety certifying body, the Canadian Food Inspection Agency (“CFIA”) and the U.S. Food and Drug Administration (“FDA”). We have 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, we have recorded $0.8 million for estimated costs expected to be borne by us, which we have included in other (income) expense on the Consolidated Statements of Operations for the year ended September 30, 2024. Additionally, as of September 30, 2024, we have recorded additional reserves of $6.7 million and estimated insurance recoveries of $6.7 million in our Consolidated Balance Sheets.

We continue 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 our applicable insurance coverage, we do not believe any incremental losses will have a material adverse effect on our results of operations or cash flows in future periods.

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 4 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, interest income, (gain) loss on foreign exchange, other (income) expense, net and other significant items that management does not consider indicative of normal operations. Other significant items, such as executive transition costs, restructuring charges and impairment charges and gain from remeasurement of equity method investment, involve distinct initiatives that are not reflective of core operating activities and affect the comparability of our operational results across reporting periods. 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 related charges related to reductions in workforce, changes to executive leadership and additional restructuring costs related to the termination of our lithium development project.

(b)We recognized impairments of long-lived assets related to the termination of the lithium development project; Fortress goodwill, intangible assets and inventory; and Plant Nutrition goodwill and water rights. Refer to Item 8, Note 2, Item 8, Note 8 and Item 8, Note 9 for additional details.

(c)We recorded a provision for potential costs related to a recall for food-grade salt produced at our Goderich Plant. Refer to Item 8, Note 13 for additional details.

(d)We recognized costs, net of reimbursements, related to the settled SEC investigation during the fiscal year ended September 30, 2023, and recorded a settlement loss accrual during the fiscal year ended September 30, 2022.

Adjusted EBITDA also excludes 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 2024, 2023 and 2022 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.

Intangible Assets - Finite-lived intangible assets are amortized over their respective estimated useful lives. Intangible assets with indefinite lives are not amortized, but rather are tested for impairment at least annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of the intangible asset below its carrying amount. Our finite-lived intangible assets include customer relationships, developed technology, trade name, supply agreements, SOP production rights and lease rights. Our indefinite-lived intangible assets include trade names and in-process research and development. We may first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. A qualitative assessment (“Step 0 test”) may include, but is not limited to, reviewing factors such as macroeconomic conditions, industry and market considerations, cost factors, financial performance and other entity or reporting unit specific events. When performing a Step 0 test, if we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we then perform a quantitative goodwill impairment analysis (“Step 1 test”) by comparing the carrying amount to an estimate of the fair value of the reporting unit. If the fair value of the indefinite-lived intangible asset is less than the carrying amount, an impairment loss is recognized in an amount equal to the difference.

The unit of accounting used to test our indefinite-lived intangible assets for impairment is at the reporting unit level. The fair values of our indefinite-lived trade names and in-process research and development are determined for impairment testing purposes based on an income 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 its 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.

For finite-lived intangible assets, we amortize over periods that range from five to fifty years; refer to Item 8, Note 9 for additional details. We perform an impairment review of finite-lived intangible assets when facts and circumstances indicate that the carrying value of an asset may not be recoverable from its undiscounted future cash flows. The impairment test for finite-lived intangible assets is consistent with the test applied to property, plant and equipment as described in our policy.

Assessment of the potential impairment of intangible assets is an integral part of our normal ongoing review of operations. Testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects management's best estimates at a particular point in time. Estimates based on these assumptions may differ significantly from actual results. Changes in factors and assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments, as well as the time in which such impairments are recognized.

In addition, we continually review our diverse portfolio of assets to ensure they are achieving their greatest potential and are aligned with our strategy. Strategic decisions involving a particular group of assets may trigger an assessment of the recoverability of the related assets. Such an assessment could result in impairment losses. For further information, see Item 8, Note 9 to the Consolidated Financial Statements.

Mineral Interests – As of September 30, 2024, we maintained $117.7 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 an actual 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.

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, legal reserves, derivative instruments, post-employment benefit obligations and environmental accruals require judgments.

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 25% of our fiscal 2024 sales in foreign currencies, and we incurred 22% of our fiscal 2024 total operating expenses in foreign currencies. Additionally, we have approximately $350 million of net assets denominated in foreign currencies. In fiscal 2024, the average rate for the U.S dollar strengthened slightly against the Canadian dollar and weakened against the British pound sterling. In fiscal 2023, 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.

Although inflation has not had a significant impact on our operations in the current period, our efforts to recover cost increases due to inflation may be hampered as a result of the competitive industries 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 products are 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). Lastly, the results of our fire retardant business are also seasonal with peak demand for fire retardant products and services occurring from June through September.

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 excessive precipitation 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 affect our operations and necessitate capital expenditures in the future, although capital expenditures for climate-related projects were not material in fiscal 2024 and are not expected to be material in fiscal 2025. For more information, see Part I, Item 1A, “Risk Factors” and Part I, Item1 “Business—Environmental, Health and Safety and Other Regulatory Matters.”

Significant Accounting Policies and Recent Accounting Pronouncements

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