Good morning, and welcome to the Compass Minerals’ Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session; instructions will be provided during that time. Please be advised that today’s conference is being recorded. I would now like to turn the call over to Douglas Kris, Senior Director of Investor Relations. Please go ahead.

Good morning, and welcome to the Compass Minerals’ second quarter 2021 earnings conference call. Today, we will discuss our recent results and our outlook for the balance of 2021. We will begin with prepared remarks from our President and CEO, Kevin Crutchfield; and our CFO, Jamie Standen. Joining in for the Q&A session are Brad Griffith, our Chief Commercial Officer; as well as George Schuller, our Chief Operations Officer. Before we get started, I will remind everyone that the remarks we make today represent our view of our financial and operational outlook as of today's date, August 16, 2021. These expectations involve risks and uncertainties that could cause the company's actual results to differ materially. A discussion of these risks can be found in our SEC filings located online at investors.compassminerals.com. Our remarks today also include certain non-GAAP financial measures. You can find reconciliations of these items in our earnings release or in our presentation, both of which are also available online. The results in our earnings release, issued Friday, August 13, and presented during this call reflect only the continuing operations of the business, unless otherwise noted. The results also restate historic amounts for comparative purposes, and reflect adjustments to information presented in the company's previously filed Annual Report on Form 10-K for the year ended December 31, 2020, and quarterly report on Form 10-Q for the quarter ended March 31, 2021. As previously announced, the nine-month 2021 fiscal year reflects the change in fiscal year end from December 31 to September 30. I will now turn the call over to Kevin Crutchfield, our President and CEO.

Good morning, and thanks for taking the time to participate today. While I'll kick off my comments with a brief overview of our financial performance for the second quarter, I also want to take a few minutes to review where we stand as a company in light of our leadership team's previously communicated strategic priorities. As reported, we maintained solid momentum in the second quarter, controlling what we could control in pricing and salt sales volumes. Ultimately, that work resulted in strong consolidated revenue growth of 14% compared to the prior year period, because meaningful contributions from both salt and plant nutrition enabled us to exceed our top-line revenue expectations for the quarter. We continue to work through our previously reported sulfate of potash feedstock inconsistencies, and we are managing around supply chain disruption and inflated shipping costs, which are not unique to our industry. While both our consolidated operating earnings and adjusted EBITDA saw second quarter declines compared to the prior year, largely due to margin compression during the quarter, year-to-date we've seen measured growth in these categories of 20% and 13%, respectively. I'm pleased with the way our team continues to navigate this challenging environment, staying laser-focused on execution in our core businesses. In fact, during the first half of 2021, we generated strong positive free cash flow of $220 million, an increase of approximately 23% versus the prior year. On the cost management side, we've taken prudent steps to control our selling, general and administrative expenses compared to the prior year. We also continued to actively manage our capital plan, with spending in that category coming in at approximately $34 million year-to-date. Focusing on our salt segment for a moment, second quarter revenues were better than expectations at over $142 million, while operating earnings of approximately $19 million, and EBITDA of $37 million were both down, primarily driven by a 28% increase in shipping and handling costs for the segment. Our reported salt segment results for the quarter were also impacted by an accounting methodology change that Jamie will discuss in more detail. When considering our salt results on a year-to-date basis, however, we've achieved meaningful growth of 23% in operating earnings, and 20% in EBITDA for the segment. Regarding the 2021-2022 bid season for our North American highway business, we continue to take a disciplined approach, balancing market share with margin capture, while always looking for opportunities to strategically expand our footprint. With our bid season approximately 80% complete, we expect the average contract pricing for this winter season to be generally consistent with prior season results, while our total committed bid volumes are expected to increase by approximately 7%. Leading into our plant nutrition segment, an increase in average selling price of 6%, and relatively flat volumes in the second quarter compared to prior year, translated to $54 million of revenue for the segment, which was slightly better than expectations. Operating earnings for the segment were $5.6 million lower compared to second quarter 2020, while EBITDA came in at $9.8 million, roughly in line with expectations given our previously discussed feedstock inconsistencies that are anticipated to weigh on segment costs, at least in the third quarter of this year. We continue to believe the impact of the feedstock quality issues on the cost structure of our plant nutrition business is short-term in nature, and the proactive adjustments that we've implemented to address the issue have shown favorable incremental results. We're also actively monitoring the ongoing drought conditions in the Western U.S., and continually assessing how they may potentially impact near-term demand for our Protassium+ SOP product. SOP sales volumes remained stable through the quarter, and we expect volumes to remain steady through September compared to the prior year quarter. However, we'll continue to keep a close eye on demand as the drought season continues, as there could be volume impact later in the 2021 calendar year. As I alluded to at the beginning of my comments today, I'd like to now shift gears from the quarterly recap to provide some color on our strategic execution as a company. When I joined Compass Minerals in mid-2019, one of my first tasks as Chief Executive Officer was to set a course for Compass Minerals that acknowledged the challenges of the past, recognized long-term success must be built on a foundation of consistent execution, and then provided clarity to both our employees and our external stakeholders as to what kind of company we were committed to becoming. With the help of my senior management team, I outlined early 2023 priority focus areas for our company: building a sustainable culture, delivering on our commitments, and conducting a deep strategic assessment of our advantaged assets and related capabilities. It's been approximately 18 months since we've laid out those priorities. And while there still is certainly work to be done, I'm extremely pleased with how far we've come in that short time span. Over the course of the last six months in particular, we have successfully executed against a number of strategic priorities that provided the company with a platform to generate material long-term benefits to our shareholders. Paramount to building a sustainable culture is ensuring the safety and well-being of our workforce. We focus on zero harm and parity for our people and our environment by continuing to strengthen safety and environmental stewardship processes across all sites, with the ultimate goal of zero injuries or incidents in the workplace. We continue to enhance employee safety training, which focuses on elimination of at-risk behaviors. And we maintain a culture of open communication and trust by empowering every employee to stop any work process they deem to be unsafe. I'm proud to say the results of our safety focus were reflected in the first quarter of this year by a multiyear low for our total case incident rate, or TCIR 12-month rolling average. That strong safety performance continued through the second quarter with a rolling 12-month TCIR of 1.4, representing a significant improvement over the previous five-year period. As you've heard me say before, we believe our safety performance is a leading indicator for operational success, and one of our fundamental commitments to creating a sustainable business. The other half of building a sustainable culture requires increasing our levels of employee engagement and our execution muscle, which has been a key focus of our internal optimization efforts that we launched in the fall of 2019. Making improvements in this area doesn't come easily or quickly, and it requires a certain level of humility as an organization to gain self-awareness about what we do well, where we can get better, and what steps are required to get there. While I'm generally pleased with the strides we've made in this category, including but not limited to our commitment as a board and senior management team to ensuring diversity and inclusion throughout all levels of the organization, this will continue to be an ongoing area of focus for our company. Through our increased execution muscle, we've enabled improvements in our second strategic imperative, delivering on our commitments. The foundation of this priority is simple. Be clear with our stakeholders about our goals, capabilities and challenges, and then do what we say we're going to do. We've talked a lot on these quarterly calls about the other half of our internal optimization efforts, creating value for the organization through a bottom-up process of innovation and continuous improvement. For purpose, we're not calling these efforts a program, as they permeate through all levels of the organization and are increasingly becoming simply how we do business here at Compass Minerals. As it has clearly been a strategic focus for our team, I’d offer recent performance at our Goderich mine is probably the most salient example of our efforts today. Over the course of the last few years, we've made meaningful improvements in both production and safety, hitting internal records in both categories. We've implemented a new long-term mine plan to increase production efficiencies and extend the longevity of the strategic core asset. As reflected in the historic five-year collective bargaining agreement secured in late March, we buttress those efforts by committing time, energy and resources towards rebuilding strong and lasting relationships with both our representative workforce at Goderich and the community they call home. But despite this progress, I still believe we have room to grow at Goderich, and that it has not yet fully reached its operating potential. Which brings me to the final area of strategic focus I've often spoken about: positioning our company for success by getting our core asset mix right, finding new ways to leverage those advantaged assets, and strengthening our balance sheet in the process. In this area, our actions have been well documented. With a completed sale of our North American micronutrients business in April, followed July 1 with the completed divestment of our South American plant nutrition business, we achieved the financial flexibility needed to consider strategic growth opportunities, whether organic or otherwise. Specifically, these transactions have enabled us to reduce our long-term debt by approximately $400 million. In addition, we continue to pursue a sale of our South American Chemical business, and look forward to sharing more information around that expected transaction when appropriate. And finally, as we announced several weeks ago, we're excited by the opportunity to broaden our central mineral portfolio through the identification of a sustainable lithium resource at our Ogden, Utah solar evaporation site on the Great Salt Lake. We're currently undertaking a strategic evaluation to assess development options for this lithium brine resource in order to serve growing domestic market demand, while maximizing the long-term value of the asset. As a co-product of our existing SOP, salt, and magnesium chloride production processes, the addition of lithium to our Ogden production portfolio is not expected to have an impact on the essential minerals we already produce on-site. Equally as important, by leveraging existing operational infrastructure, permits and pond processes at our Ogden facility, we believe we're uniquely positioned to capture this newly defined lithium resource with nominal incremental impact to the beds and waters of the Great Salt Lake. We feel this organic opportunity is well aligned with our strategic imperatives, and we're excited to share more details soon on this and other future projects that lie ahead. But opportunities like this are only feasible if the underlying fundamentals of our operating segments are solid. I remain highly confident about the inherent strengths of our advantaged assets, the resiliency and commitment of our people, and the discipline with which we operate. As we continue to advance our strategy and grow our essential minerals business, we do so with a deep commitment towards generating sustainable earnings growth and improving margins, thereby creating value for all stakeholders. Now, at this time I'll turn it over to Jamie, who will discuss in more detail our second quarter financial performance and the rest of the year outlook. Jamie?

Thanks, Kevin, and good morning, everyone. I'll start with a few comments regarding our consolidated results before moving on to our segment specific performance, and then finishing with our rest-of-year outlook. On a consolidated basis for second quarter 2021, the company achieved strong year-over-year sales volume growth in our salt segment, and increased pricing in our plant nutrition segment compared to prior year results. Despite this top-line revenue uplift, our consolidated operating income was below the prior year period by approximately $9 million, while our consolidated adjusted EBITDA fell 21% compared to 2020. Over the same period, we saw both operating margins and EBITDA margins compress. This compression is primarily related to unit costs associated with the feedstock inconsistencies for our SOP production that we've highlighted over the last two quarters, as well as elevated shipping and handling costs in the salt segment. We are pleased to report that during the first six months of the year, we generated about $255 million in cash flow from continuing operations, and approximately $222 million of free cash flow. As announced in June, our Board of Directors approved the change in our fiscal year-end to September 30 from December 31. We're optimistic this change will improve our full-year forecasting accuracy going forward, as we will have the benefit of embedding complete highway deicing bid season results within our full-year forecast at the beginning of each fiscal year. From an accounting perspective, the shorter nine-month year in 2021 impacts our results in a couple of different ways. First, it temporarily increased our expected effective tax rates to 40%, and therefore increased our year-to-date tax expense to $17.7 million. However, this is not expected to impact our effective tax rate for cash taxes over the typical 12-month period. Similarly, changing to a shorter year temporarily increases our unit costs in both the plant nutrition and salt businesses during the second and third quarters by about $20 per ton and $0.50 per ton, respectively. Looking now at our salt segment results, total sales in the second quarter of 2021 were $143 million, up from $122 million in the second quarter of 2020, an increase of approximately 17% and ahead of expectations. This improvement was largely due to additional demand related to customers taking minimum volumes, as well as the timing of certain chemical sales. In addition, our consumer and industrial sales volumes returned to more typical levels, as demand normalized compared to last year, which was negatively impacted by the early months of the pandemic. As expected, highway deicing prices at $59.42 per ton were slightly lower versus the prior year quarter. I think it is important to note that while we have seen lower highway deicing prices over the last four quarters, highway deicing prices have actually shown a 4% average annual growth rate since 2017. On the other hand, consumer and industrial average selling prices increased over $8 or 5% to $158.78 per ton, due to broad-based inflation-related price increases across all of our product groups. Operating earnings for the salt segment totaled $19.2 million for the second quarter versus $22.5 million in the 2020 quarter, while EBITDA for the salt segment totaled $36.8 million compared to $39.7 million in the prior year quarter. On a year-to-date basis, these segment results are at the high end of our second quarter guidance expectations. Our operating and EBITDA margins contracted approximately 5 and 7 percentage points respectively, compared to the 2020 second quarter, which is mostly due to a 28% increase in shipping and handling unit costs, impacting both our highway deicing and consumer and industrial businesses. Again, when comparing on a year-to-date basis, salt operating margins are flat year-over-year, EBITDA margins contracted only 1 percentage point, and shipping and handling unit costs are flat as well. That being said, we did expect these higher shipping and handling costs this quarter, which fall into three primary buckets. First, vessel and barge costs were higher year-over-year, largely due to higher fuel costs as well as modest rate increases. Another bucket is related to our depot costs. In this area, we added some long-term capacity and saw higher overall rents. The last piece was related to distribution costs in our C&I business. While mix played a role in the increases, we saw significantly higher truck rates, as well as some inefficient shipping required to overcome supply chain disruptions during the quarter. Overall, we believe the entire salt industry has been similarly impacted by shipping and handling costs. Therefore, we expect to adjust our future bid prices and product repricing as appropriate to offset these costs, just like we have in the past. Second quarter salt per-unit cash costs were relatively flat from second quarter 2020, as improved UK production costs were offset by higher production costs in the consumer and industrial business. Turning to our plant nutrition segment, second quarter 2021 revenue was 5% higher than the prior year quarter at $53.8 million. This reflects steady sales volumes and an increase of 6% in our average selling price compared to the prior year quarter. It's worth noting that during the second quarter, there has clearly been strong global demand for all fertilizer products. We've generally continued to see strong demand in North America for our Protassium+ SOP product. Though that was partially offset by the severe drought conditions in the west and southwest, we are pleased to deliver 6% sequential improvement in our average sales price compared to the first quarter of 2021. Plant nutrition operating earnings were down $5.6 million and EBITDA was down $6.1 million to $9.8 million for the second quarter compared to the second quarter 2020. With higher prices and lower earnings, we experienced some short-term compression in our operating margins from 12% down to 1%, while our EBITDA margins also compressed by 13 percentage points to 18% versus second quarter 2020. As we have previously discussed, we continue to experience higher per-unit operating costs during the second quarter as we work through the feedstock inconsistencies impacting our SOP production rates. While this continues to impact our financial results, these elevated short-term costs are factored into our guidance, and we have implemented proactive measures to address the situation. We also made a change to our interim period inventory valuation methodology. As we work through our normal quarterly closing process, we identified the need to correct our interpretation of the accounting guidance as it relates to our salt segment interim period inventory valuation reporting. It is important to note that this correction impacts interim periods only, and does not impact our historical full-year results. When compared to our new method, our historical interpretation overstated first quarter product costs and understated subsequent quarter product costs with no impact to the full-year results. For 2021, this resulted in shifting approximately $12 million in costs from first quarter 2021 to subsequent periods. About $11 million of those costs were recorded in the second quarter this year. Our second quarter 2021 Form 10-Q described this change and restated our year-to-date 2021 financial information, as well as our prior year-to-date information. Because we are making corrections to these prior periods, we've also restated our financials for other immaterial items, including shifting a few of these items into the appropriate periods. It's very important to note that the change in methodology, as well as the other corrections, are now reflected in all periods presented in our second quarter 2021 financial statements. Now I'll spend a few minutes on our reporting as well as our third quarter and nine-month 2021 outlook. Given the change in our fiscal year ended September 30, the company will file a transition report on Form 10-K for the shortened 2021 fiscal year sometime in November. After this shortened period, full-year reporting will consist of four full quarters beginning October 1 and ending September 30 each year. At this time, we are providing nine-month 2021 guidance on a pro forma continuing operations basis, which excludes results from our discontinued operations. As we head into our final quarter of fiscal year 2021, we continue to be optimistic about the overall business. We anticipate the salt segment will provide steady revenue and EBITDA generation for the remainder of our new fiscal year. We expect third quarter salt segment revenue of $160 million to $190 million, and EBITDA of $45 million to $55 million, with our consumer and industrial business continuing to deliver steady sales volumes. In our plant nutrition segment, we currently anticipate relatively flat year-over-year sales volumes during the third quarter. However, the continued drought in the Western U.S. could put some pressure on our sales volumes in the back half of the calendar year. So we continue to closely monitor the situation out west. Given this demand backdrop, coupled with our expectation of rising shipping and handling expenses, as well as unit costs slightly higher than those realized in the second quarter, we are expecting plant nutrition revenue of $28 million to $36 million, and EBITDA in the range of $5 million to $8 million for the third quarter of 2021. While we continue to optimize our portfolio through efforts to balance price, demand, and customer relationships, we are focused on operating this business sustainably for the long run and plan to carefully navigate these dynamics. On a consolidated basis, for the nine-month 2021 period, we expect our adjusted EBITDA to be between $175 million and $185 million. Now a few corporate items: our interest expense estimate for the nine-month year is approximately $46 million, as we significantly lowered our debt levels in July. Our nine-month capital spending forecast is approximately $70 million, and our free cash flow is expected to be in the $70 million to $75 million range. With the closing of the plant nutrition South America agro business sale, along with the completed North American micronutrients sale, we have been able to meaningfully reduce our absolute debt levels and continue to expect our leverage ratio to be in the 2.75 to 3 times net debt to EBITDA range upon completion of our Brazil chemical business divestiture. As we consider our short- and long-term paths forward, we are pleased with the continued efficiency we've been able to capture from our internal optimization plan. And we're excited for the future as our strategic assessment of our newly defined lithium resource progresses. As Kevin noted in his comments, our entire senior management team is unified in our focus on executing against the strategic imperatives we have laid out for the company. As we continue to optimize our existing assets and build our essential minerals portfolio, we will continue to aim to optimally allocate capital in a way that maximizes shareholder value. With that, I’ll ask the operator to begin the Q&A session. Operator?

Your first question comes from the line of David Begleiter with Deutsche Bank.

Thank you. Good morning. Kevin, just on the bid season pricing — the lack of any pricing, is that due to you couldn't get pricing or you didn't try to get pricing in order to maximize some of your volume gains?

I'm not sure I caught all of that question, David. Would you mind repeating that? I apologize.

Yeah. On the lack of any pricing in highway deicing, is that a function of you couldn't get pricing because of given competitive dynamics in marketplace, or you chose to push pricing in order to focus on volume and market share?

No, I mean, look, we always take — I mean first thing I'd say is every bid season is different. Our focus is to take a holistic, comprehensive review and match our production plan with what we anticipate the demand side to be. So, when you think about the winter rather than February, I guess I’d probably characterize it as generally unremarkable in terms of inventories to deal with. But I think on balance ending up the year kind of flattish, and having the ability to grow our volumes by roughly 7%, turned out pretty good for us. And as you look back from sort of 2017 to now, we're still in a sort of a 4% compound annual growth rate on the price side. So, I consider the season — at least thus far, we’re 80% through — I consider it a very successful season having picked up some market share and grown our footprint on a modest basis.

Understood. And just on the lithium asset in the Great Salt Lake, can you discuss some of the risks and challenges you see with DLE technology for that resource?

Yeah. Look, as we announced about a month ago, our plan is to conduct a deep, thorough strategic assessment of both the resource and the technologies, as well as the type of structure we think would be appropriate to allow this asset to realize its maximum value. And I think, obviously, the first bridge we have to cross is the direct lithium extraction technology. And as we discussed during that previous period, we're well on our way to making a choice there. We've evaluated a handful of technologies; we're down to a couple that we want to make sure that we make a good selection on, but we're very far into that process. I would expect to be able to make an announcement pretty soon. Everything that we've seen thus far in terms of lithium recovery and rejection of non-lithium materials, contaminants if you will, has been very positive. But we want to take our time and make a good selection. We're getting pretty close and look forward to updating the market more.

Thank you.

Thanks, David.

Your next question comes from the line of Mark Connelly with Stephens.

Thanks. Kevin, can you remind us whether the new continuous miners are fully ramped and what your operating plan is for the second half? And could you give us a rundown of which continuous miners are doing what at this point?

Yeah. So George is here and I’ll let him add some color. The units are running well, specifically the two newer units, they are bigger and stronger. As I mentioned during the first question, we’ve kind of calibrated our volumes based on what we see the demand as being, so we are not producing at the level that we can because we felt like the market — we want to align our supply with anticipated demand. But in terms of how the units are running, very, very well. I’ll let George provide some additional color, but the two bigger units are running, overall, very, very well.

Yeah, and just a couple comments on that. Mark, thanks. Again, looking at those units as Kevin said, they are performing extremely well. I’m overall pleased with those units. As Kevin highlighted, our new mine plan and our new maintenance development would allow us to take some of the older miners offline. And keep in mind, we are continuing to develop in those areas with those miners. So again, as Kevin highlighted, we still have a lot of upside. Our management team still believes there is a lot of upside in both the new equipment and the miners that we already have. So again, as we go through the next couple of years, as we start to finish off that new mine development, it will give us some continual opportunity to improve our productivity and our cost at that location. Thanks.

Okay. One more question, on the SOP quality issues: clearly this sort of thing comes and goes. When will you have visibility into when you are past this?

Maybe I'll start on that, and Jamie will kind of weigh in. Look, as Kevin highlighted, we've continued to make some real good progress both operationally and from a maintenance improvements over the last couple of quarters at our site at Ogden. Again, you've heard from both laboratory testing and cyclical variations in regards to this. And we see it; it's kind of hard to put a finger on it, but I'll call it maybe every five to seven, eight years, we'll actually see this phenomenon. But we've taken a very methodical approach over the last, I'd say, quarter and a half to two quarters at Ogden to take a look at our feedstock harvesting methods, sampling and our operating practice not only to allow us to deliver what we expect to deliver in 2021, but also as we encounter this in the future. So I feel — again, it's one that you don't have year in and year out where you actually have exposure to, so we've got to take everything we possibly can during this period of time. We try to learn from it so we see it again.

And I’d just add that, obviously, we're coming up on the end of this evaporation season, so we'll have the fresh raw material feedstock which, as George alluded to, we're doing a lot more testing and monitoring. And we’ve really learned a lot over the last six months in terms of how to manage through this in terms of our mixing and prepping. And so with more data and information by season, it enables us to mix and blend to optimize the plant given the sub-optimal quality of last year's harvest.

It's really helpful. Thank you.

Hey, Mark, I want to just go back for a sec on your first question. There's an image in our prepared materials on Page 14; it's an illustrative view of the Goderich mine. And as George pointed out, we pulled off some of the older units to develop these new roadways. So, we continue to be implementing a new mine plan, putting a new mine basically in place, while at the same time continuing to produce and break a couple of internal records here, even this year. So, I think it's important to note that that's occurring in a way that you really can't see from the outside looking in. We're incurring a fair amount of cost as we develop this new mine plan and put these new bypass roadways in. But once we get those in, as we've talked about before, I think we'll see a step-function change both in terms of productivity and cost, et cetera. So we still have a couple more years to go on that, but it's progressing nicely. And I thought that would be some nice added context.

Very helpful. Thank you.

Your next question comes from the line of Seth Goldstein with Morningstar.

Hi, good morning, everyone. Thanks for taking my question. With prices flat, how do you think about the profit per ton next year? And how do you view unit production costs? Have you hit the first step change and we should stay flat until the new mine plan is complete?

Go ahead, and I’ll add some color.

So we're not going to talk specifically about profitability in the upcoming year. I can tell you we will see our SOP costs fall in the third quarter relative to both sequentially and year-over-year. And the step change has not yet occurred. That is still down the road as we complete the new mine plan and finish our bypass roads and ultimately shut down old mine workings that are expensive to maintain and require long travel. So you'll have to wait for our full-year guidance that we roll out in November for the full year beginning October 1 through September 30, 2022.

Okay, I appreciate that. And then just a quick follow-up on lithium. Once you select a DLE partner, what are the next couple development steps as you move forward in the process?

Once we make the DLE selection, and we're doing the on-site pilot testing now, the next strategy step will be how to set those modules up in terms of logistics, location, and pumping to start the production of lithium chloride. So that would be the key next step. I don't want to put a firm time limit on the DLE technology provider selection, but I think in the relatively near term we'll make that choice. Also during the strategic assessment, we've indicated that we're open to discussions and it's been very active thus far, and we think that will inform how we think about this project going forward.

I appreciate the details. Thank you.

Thanks, Seth.

Your next question comes from the line of Joel Jackson with BMO Capital Markets.

Good morning, gentlemen. Jamie, Kevin, I think you talked about being able to get maybe $1 or $2 of lower salt costs. I think that was kind of looking into the future year now. If you think of the template of fiscal year and you try to comp it, so right coming September 30 fiscal year, what can you do on cost here in salt, considering the improvements trying to Goderich, but obviously, the multiple buckets of inflation and cost and shipping that you laid out earlier in the call? Thanks.

I think we still have good opportunities there, Joel. One thing to remember about our business is we're extracting minerals; many of our labor costs are set under collective bargaining agreements. Within our C&I business, we've obviously got some direct inputs — bags and other things — that drive that business. But overall, we're going to see lower costs. If you just look at the nine months over nine months, salt costs are going to be down significantly, on the order of magnitude of 10%. And then, as we get into 2022, we're not going to talk much about that yet; we continue to work on our long-term mine plan. That step change is forthcoming. We haven't said exactly when that will be, but as we progress through that, you'll see that next step down when we complete that mine plan. So I think that's all we really have to say. We're not giving any outlook around 2022 just yet, but we do expect to continue to see improvement for the reasons of our limited exposure in many instances to inflation. Obviously, we'll continue to see shipping and handling inflation on that side. But as I said in my prepared remarks, we'll also look to recapture those costs as we go into our next bid season next year. And then we will do it dynamically and constantly within our C&I business.

So, my follow-up on that: your salt netbacks for fiscal ’22 should be lower than what you just said. And then just following up on that, I think it's important because you've talked about your strategy, you've come in and what your bid season strategy is, about your mine production planning strategy. You're very clear about what you want to do, and really try to optimize Goderich. That has led to a lot of production and a lot of competitive response, dealing with flat pricing in an inflationary environment. It would really be helpful if you can explain the entire picture. What does running more volume, flat pricing, and an inflationary environment mean? Does that mean lower netbacks for you next fiscal year? Does that make you want to reassess your strategy within Goderich down the road when you look at what the market size is and what competitors did?

Joel, I would say I would answer that not specifically, but just that we've recaptured some shares that we historically had. Our commitments are up 7%, pricing's flat. I mentioned in my prepared remarks that prices on a CAGR basis are up 4% since 2017. So prices went high when supply was not available; supply is now available and they've come back down. We feel like there's an equilibrium now. I don't think there's any difference in strategy or how we run the business. Now that we've set our market share where it is, we're going to be disciplined and operate that way going forward.

Yeah. It allows us to focus on execution, Joel, because again, like I mentioned before, we've calibrated our volumes to match what we anticipate to be the market demand. We could do more, but we made the election not to so that we can regain some of the market share. As Jamie said, it was ours originally anyway, and we grew our footprint just a tad, but with that on the commitment side it allows us to focus on execution both at Goderich and our other facilities and run them as a portfolio, and then attempt to optimize the resulting margins as a consequence of that holistic approach.

I was going to make one comment just on Kevin's point: a lot of times from an operational perspective, there's always tons in production. But I can assure you there's a real cost and financial acumen across our site leaders that is going to continue to — as we start to look at our cost going into 2022 and 2023 — that I think is extremely important and recognized in the cost of our business. Thanks.

As with your question, obviously, SOP is not potash and it doesn't see the same ranges of highs and lows. We're seeing that in pricing. You've been very good at getting very good price for SOP. But it's interesting that in one of the better years for ag in a decade — maybe not so good for California with drought — you're achieving some of the lowest earnings in recent quarters for SOP in many years. And you're probably going to achieve the lowest SOP premiums to Midwest potash prices in a long time. Can you talk about that? Is Midwest potash pricing not real? There are operational issues you talked about. How do you think about this business? Is this now the area you must really focus on? You've got improvements at Goderich and now it's really about trying to make Ogden be the asset Compass has talked about for well over a decade?

That's a good one, Joel. I think let me make a couple of comments. I think Brad as a couple of comments, you hit on a couple of good points. But it's not good timing, obviously, for our earnings. When you look at our profitability in this quarter, we've got these feedstock inconsistencies, and that's absolutely unfortunate. On the spread side, as you referred to SOP versus MOP, not a lot of MOP has traded at some of those prices you've seen. There's not a lot of MOP even available. So that remains to be seen. Brad, do you want to add some color on the general market?

Yeah. Thanks, Jamie. Hey, Joel, your question on Midwest potash and whether those prices are real: I think you're probably referring to the $570 Corn Belt price for KCl. In our discussions with producers and with our distribution customers, they don't feel like transactions are occurring rapidly at that dollar figure. Farmers are kind of pushing back as crop economics don't make a lot of sense at that price. In some cases, crops that have been tolerant of chloride like potatoes have migrated to KCl. Those same crops now have a renewed interest in SOP, simply because of the price delta between KCl and sulfate of potash. I’d make one more comment, Joel. We took our third price lift on August 1 in the market; our prices vary by region. Given current market dynamics that you're referring to, we do anticipate further ton appreciation of our Protassium+ products. We're in active discussions right now with our customers, and I would expect us to announce specifics to them in the coming days.

Your next question comes from the line of Chris Shaw. Mr. Shaw, please state your company name and proceed with your question.

Yeah, that's Crespi & Hardt. Hey, everyone, how you doing?

Good morning.

Quick ones on the bid season pricing and the higher shipping and freight costs. Did they start coming about too late for you to start planning that into your bid season? I know some bid seasons start in March or maybe February for some. But even in some of the later bids, you weren't able to sort of budget that into some of your bids?

We monitor it very closely. As it relates to the highway business, a lot of what we're doing right now is vessel and barge. We were expecting higher rates, we built that into our bidding process and so now we're kind of booking these bids. Last-mile freight still remains to be seen. We'll deliver these tons through the December quarter and the March quarter as we always do. And we've got an estimate around those things. On the C&I side, truck just got real expensive — more than we thought. So while unit cost for shipping and handling in salt is up kind of $6 or so a ton year-over-year, we were expecting $4 to $4.50. So most of it we were planning on; we really just got hit on truck, and some fuel was a bit higher than we expected.

Got it. That's helpful. And then, I guess the guidance for SOP volumes for third quarter similar to last year or somewhere that sort of 50,000 to 60,000 tons — I always thought that'd be a really sort of weak quarter. Is there increased seasonality that I am not aware of? Or is that some evidence of the drought impacting volumes already?

Thanks, Jamie. I don't think there is any kind of seasonality change, Chris. Right now our distribution customers just want to get product in place so that they can position it adequately for applications. There's still a significant amount of demand by nut growers, by citrus, berries — these chloride-sensitive crops — for sulfate of potash. I don't see any changes in seasonality. At the Southwest Fertilizer Conference, our team heard fairly optimistic reports from our distribution customers and some of our larger end-user producers. So it's a very resilient group of people, and I would expect to see things relatively consistent, Chris.

Okay, great. That's helpful. Thanks a lot, guys.

Thank you.

Your next question comes from the line of David Silver with CL King.

Hi. Good morning. I'd like to start with a question on your salt volumes. In the second quarter, from a historical perspective, both your deicing volumes and your C&I volumes were both at the very upper end or even above the upper end of maybe the last 10 years. The combination is the highest in more than a decade. So I'm just wondering, why you found incremental demand for salt in the seasonally slow second quarter. In particular, I'm kind of scratching my head and wondering if this is an Avery Island effect. In other words, are you capturing some incremental share that may be diverted from a competitor?

I would say generally, hitting C&I first, that business has done a really good job. Those volumes are solid. Last year was obviously depressed from the pandemic. But we did see some modestly higher volumes when you look back over the last five years or so. On the highway deicing side, we were able to book some nice business in the chemical franchise there; that could be a little bit of timing. Sometimes those ebb and flow whether you get some of those contracts in the second quarter or the third quarter in terms of deliveries. Then you had a combination of a little bit of hangover weather — April picked up after a weak March — and then we saw a little bit of sales from that. We also saw a number of our customers that didn't take their minimums during the season; those volumes flowed through the quarter as well. So it's a combination of things and that's kind of the summary.

Okay. Thanks. I was just scratching my head, especially last year where there was a benefit from some contract minimum shipments in the second quarter. I have a couple of follow-ups.

But remember, we did increase our commitments last year as well, so that builds from year to year. Given where seaborne freight rates are, it's going to be more challenging for the more traditional importers. There could be some Avery Island effect flowing through, it's hard to tell, but we think given the freight environment it may benefit domestic suppliers.

Weaker dollar and higher freights give you a little extra advantage. Okay. I'm going to switch over to lithium. I know it's very early days, and there are a number of decisions and options to consider, probably in a sequential manner. One option would be to partner with another company. I'm wondering if you could discuss what you would consider an ideal partner to bring to the table. In other words, you're going to have a separate technology provider. I'm guessing the partner has to bring some capital to the table. But beyond that, what would be especially attractive in choosing the partner or joint venture route as opposed to going it alone?

That's a great question. We haven't decided anything definitively; we're thinking this through. The bookends of the options could be go it alone and develop the expertise internally and fully capitalize it, which we could do. The other extreme would be to sever the asset and sell it or form a joint venture with co-producers on site, and everything in between. As it relates to a partner, unlike a lot of folks trying to get into this space, capital is not a big concern for us. Capital is always a consideration, but not to the degree it is for lithium-focused startups. What we'd be looking for is expertise in the space, whether technical or commercial. That's probably the lens through which we'd evaluate a partnership. We have the resource and all the rights necessary to develop it, and while we're good at extracting products from the Great Salt Lake, there are aspects of this business that are new to us, and we want to be intellectually honest about that. A partner that has expertise in the areas where we don't would be viewed favorably.

Okay. And one last one, on the labor outlook: you'll need a surge of construction workers at a certain point and then a smaller but lasting workforce to operate the facility. Any rough sense of construction crew size, and how do you assess the regional availability for the type of labor needed?

I wouldn't want to speculate on headcount at this point. Generally, labor is tight and it's creating some inflation on the price of labor. We're fully aware of that, but everything we've seen thus far convinces us we can fill the slots we want to fill. As it relates to construction and what the project ultimately looks like, we'll need to decide that first. For now, we'll cross that bridge when we get there and I wouldn't want to speculate too much on the timing.

Your next question comes from the line of Jeff Zekauskas. Mr. Zekauskas, please state your company name and proceed with your question.

Hi. J.P. Morgan. Thanks very much. Given that the Avery Island plant was, I don't know, one to two million tons that got knocked out, are you surprised that salt prices are likely to be flat in the bid season this year? Wouldn't you have expected them to be higher? Can you talk about why the closing of that plant didn't make any difference?

Good question, Jeff. I think there were inventories that acted as a buffer. In this business sometimes effects take another bid season to fully flow through. Something we're watching carefully. I'm sure those who closed Avery Island did what they could to replenish supply. It'll likely take another bid season for the full effect to plug through.

I would add that there's about 20% of the season in front of us. There are a number of tons that would have historically been served from that Avery Island location that we are yet to bid.

Okay. On the lithium, you've spoken about what your resource is. In general, how much lithium carbonate equivalent (LCE) tons can you produce annually? And in producing those lithium tons, will that affect your SOP output or your output of any other mineral? Or do those remain unchanged?

We spoke when we announced the resource of a production target of 20,000 to 25,000 tons a year of LCE. Based on early pilot testing, we don't believe that pulling lithium ions out of the existing stream impacts the SOP stream, the magnesium chloride stream, or salt. We view it as a co-product — we're taking the lithium ions out of existing streams and don't think that process will compromise the production rates or costs of any of our other products.

Great. And then lastly, on the change in your fiscal year, can you state a little more clearly what you know at September 30 that you don't know at June 30? Because you have an idea of your bid season being 80% complete as of now and prices and committed volumes. What incremental information do you get from changing your fiscal year?

Jeff, it's actually relative to January 1. Historically when we provided full-year guidance in February, we were estimating how the winter would unfold through March, the whole bid season through September, and then winter weather activity in the fourth quarter. Now, with a September 30 fiscal year-end, we will have the full bid season results under our belt as of 9/30. That means we will have pricing for the season for our portfolio, and the only variable becomes winter weather activity. So we'll announce our full-year guidance in November with the benefit of the full bid season knowledge, which should improve forecasting accuracy. Weather of course remains unpredictable.

There are no further questions. I will now turn the call over to Kevin Crutchfield for any closing remarks.

We appreciate you tuning in today and appreciate your interest in Compass Minerals, and look forward to keeping you updated as we move forward. Thank you again for attending. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect.