C NTERNATIONAL OMPASS MINERALS Worth our · PDF fileOverland Park, Kansas 66210 ... Diluted...

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Transcript of C NTERNATIONAL OMPASS MINERALS Worth our · PDF fileOverland Park, Kansas 66210 ... Diluted...

  • Worth our Salt2005 Annual Report

    CO M PA S S MI N E R A L SIN T E R N AT I O N A L, IN C.

    9900 West 109th Street

    Suite 600

    Overland Park, Kansas 66210

    913-344-9200

  • Worth our Salt

    Compass MineralsInternational

    Compass is the second-largest salt producer in North America and the largest

    in the United Kingdom, and the leading producer of sulfate of potash in North

    America. In 2005, Compass showed we were worth our salt by achieving

    strong performance in a challenging cost environment. Throughout the company,

    Compasss seasoned managers delivered results by executing proven strategies

    in each of the core elements of our business: production, distribution, customer

    service, and management resources.

    2005 Gross Sales by Product Line(in dollars)

    2005 Shipments by Product Line(in tons)

    2005 Gross Sales by Country(in dollars)

    51% Highway Deicing Salt35% General Trade Salt14% Sulfate of Potash (SOP)

    80% Highway Deicing Salt17% General Trade Salt3% Sulfate of Potash (SOP)

    70% United States23% Canada7% United Kingdom

    Highway Deicing SaltSupplied to more than 3,000 provincial,

    state, county and municipal customers

    and road maintenance contractors.

    General Trade SaltEvaporated salt supplied to a variety of

    industrial and agricultural customers, as

    well as for consumer applications includ-

    ing water conditioning and table salt.

    Sulfate of Potash (SOP)Supplied to dealers and distributors

    for use in the production of specialty

    fertilizers that increase yields of high-

    value crops and turf.

    Directors

    Vernon G. Baker, II (3,4)

    Senior Vice President and General Counsel ArvinMeritor, Inc.

    Bradley J. Bell (1)*Executive Vice President and Chief Financial Officer Nalco Company

    David J. DAntoni (2,3)

    Retired Senior Vice President and Group Operating Officer Ashland, Inc.

    Michael E. Ducey (3)

    President and Chief Executive Officer Compass Minerals International, Inc.

    Richard S. Grant (1,4)**Retired Chief Executive Officer BOC Process Gas Solutions

    Perry W. Premdas (1,2)*Retired Chief Financial Officer Celanese AG

    (1) Audit Committee member(2) Compensation Committee

    member(3) Environment, Health &

    Safety Committee member(4) Nominating/Corporate

    Governance Committee member

    * Audit Committee financialexpert

    **Lead Director

    Officers

    Michael E. Ducey President and Chief Executive Officer

    Ronald BryanVice President and GeneralManager, Sulfate of PotashVice President, Strategy and Development

    Keith E. ClarkVice President and GeneralManager, General Trade

    John FallisVice President and GeneralManager, Highway Deicing

    David J. GoadbyVice President and ManagingDirector, Salt Union Limited

    Victoria HeiderVice President, Human Resources

    Timothy R. MertzVice President, Tax and Assistant Secretary

    Gregory W. SheltonVice President, Supply Chain

    Jerry A. SmithVice President, Chief Information Officer

    Rodney L. UnderdownVice President, Chief FinancialOfficer and Secretary

    Carol WoodTreasurer

    Michael ZinkeVice President, Controller

    ShareholderInformation

    Address: Compass Minerals International, Inc.9900 West 109th StreetSuite 600Overland Park, Kansas 66210

    Securities Listed: New York Stock ExchangeCommon Stock Symbol CMP

    Transfer Agent: UMB Bank, n. a.Securities Transfer DivisionP.O. Box 410064Kansas City, MO 64141-0064816-860-7000

    Web site: www.CompassMinerals.com

  • 1

    Financial Highlights2004-2005

    From continuing operations; dollars in millions, except share amounts 2005 2004 2003 % change

    Operating ResultsSales $ 742.3 $ 639.9 $ 553.5 16%

    Gross profit 199.3 179.8 139.3 11%

    Net earnings from continuing operations 26.8 47.8 30.9 -44%

    Net earnings from continuing operations

    excluding non-recurring items (1,2) 52.0 40.9 28.2 27%

    Diluted earnings per share from continuing operations 0.84 1.50 1.12 -44%

    Diluted earnings per share from continuing operations

    excluding non-recurring items (1,2) 1.62 1.28 0.83 27%

    EBITDA (1,2) 144.2 148.5 126.1 -3%

    Adjusted EBITDA (1,2) 182.9 162.2 132.2 13%

    Other Selected ItemsCash flow from operations $ 87.9 $ 99.7 $ 69.1 -12%

    Capital expenditures 31.8 26.9 20.6 18%

    Depreciation, depletion and amortization (3) 43.6 41.3 42.1 6%

    Diluted weighted-average shares outstanding 32,049,632 31,816,202 33,983,983 1%

    (1) These measurements are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as analternative to GAAP measures of performance. Furthermore, such measures may not be comparable to the calculation of these measures byother companies.

    (2) For a reconciliation to GAAP measurements of performance, please see page 62. (3) Excludes amortization of financing costs

    Sales (dollars in millions)

    Cash Flow from Operations(dollars in millions)

    Diluted Earnings per Share from Continuing Operations (1,2)(excluding non-recurring items)

    03 04 05

    $553

    .5 $639

    .9 $742

    .3

    03 04 05

    $69

    $100

    $88

    $1.6

    2

    03 04 05

    $0.8

    3$1

    .28

    On the cover

    Compasss evaporation

    ponds use solar energy

    to produce salt, SOP

    and magnesium chloride

    from brine pumped from

    the Great Salt Lake.

  • 2

    At Compass Minerals, our strengths are as basic as salt. We sell products that are

    essential to life, we work to maintain strong competitive positions, and we have

    decades of experience that keep us focused on the things that really matter: generating

    cash, strengthening the company and its balance sheet, and rewarding our owners.

    Every day, we challenge ourselves to prove that Compass is worth its salt.

    Compass Minerals had an outstanding year in 2005. We delivered strong financial results, made

    continuing progress on our strategic and financial priorities, and returned value directly to share-

    holders through an increase in our dividend.

    2005 ResultsFor the year, revenues increased 16 percent to a record $742 million. Net earnings from continuing

    operations, excluding special items*, increased 27 percent to $52 million. Earnings before interest,

    taxes, depreciation, depletion and amortization (EBITDA)*, adjusted to remove the impact of non-

    recurring costs, improved 13 percent to $183 million.

    These very strong results include a significant boost from favorable winter weather, which we esti-

    mate added $60 million to $70 million to our revenues. Of course, we cannot control the weather. But

    we can control how we run our business, and I am pleased to say that, excluding the estimated impact

    of more-severe-than-normal weather from our results in 2005 and 2004, we performed exceptionally

    well, with double-digit growth in both revenues and operating earnings from continuing operations.

    Focus on ExecutionOur strong normal weather performance is particularly gratifying because it was accomplished

    despite significant increases in natural gas and fuel prices, and transportation shortages that intensified

    in the wake of the Gulf Coast hurricanes.

    Our ability to deliver these excellent results flows directly from our persistent focus on our

    operating principles. You can see that focus in the productivity and cost improvements driven by

    our Operational Excellence program. Over the past several years, many Operational Excellence

    projects have targeted energy efficiency, which helped to moderate the impact of higher energy

    costs. We also benefited from our natural gas hedging program, which protected us against sharp

    increases in market rates for natural gas in 2005.

    Our BusinessesOur highway deicing product line had an outstanding year, with weather-driven volume gains and

    price increases that helped offset higher transportation costs. Our highway deicing customers rely

    on us to get salt to them when they need it, and in 2005 our logistics team did a great job in the face

    of sometimes severe logistical challenges. Our general trade product lines delivered solid top-line

    growth with a continuing focus on higher-value products, such as water conditioning and premium

    deicing products for the consumer market.

    Dear Fellow Shareholders:

    * These measurements are not recognized in accordance with generally accepted accounting principles (GAAP). Please see page 62 for reconciliations to GAAP measures of performance.

  • 3

    Sulfate of potash (SOP) had a record year, with revenue up 17 percent and increases in operating

    earnings and margins, driven by significant price improvements and modest volume growth, which

    was limited by our solar pond harvest. Pond expansions completed in early 2005 should improve

    our SOP production for the 2007 selling season.

    Employing Our CashAs in the past, we used the cash generated by our operations for three primary purposes: reducing

    our debt, investing in capital projects that build the value of the company, and returning value to

    shareholders through dividends.

    Over the course of 2005, we made nearly $30 million of early payments on our pre-payable

    debt. Then, in December, we executed a tender offer and a refinancing that replaced virtually all of

    our 10-percent senior subordinated notes with a new bank credit facility, creating significant net

    benefit to the company in lower interest costs and increased flexibility.

    Also duri