Good morning. My name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Compass Minerals Fiscal Third Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. Brent Collins, VP of Investor Relations. You may begin.

Thank you operator. Good morning and welcome to the Compass Minerals fiscal 2023 third quarter earnings conference call. Today we will discuss our recent results and update our outlook for the remainder of 2023. We'll begin with prepared remarks from our President and CEO, Kevin Crutchfield; and our CFO, Lorin Crenshaw. Joining in for the question-and-answer portion of the call will be George Schuller, our Chief Operations Officer; Jamie Standen, our Chief Commercial Officer; and Chris Yandell, our Head of Lithium. Before we get started, I'll remind everyone that the remarks that we make today reflect financial and operational outlooks as of today's date, August 09, 2023. These outlooks entail assumptions and expectations that 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 yesterday and presented during this call reflect only the continuing operations of the business other than amounts pertaining to the condensed consolidated statements of cash flows or unless noted otherwise. I will turn the call over to Kevin.

Thanks, Brent. Good morning everyone. Thank you for joining on our call today. Before jumping onto the call, for our employees that are listening in today, I want to recognize the outstanding safety performance that you continue to achieve. We make safety a top priority because it's the right thing to do for our people and it's also the right thing to do for our business. George and his team have brought significant and focused leadership to strengthen our safety culture here at Compass Minerals. Keeping ourselves and our colleagues safe is a responsibility we all share, and achieving zero harm is a difficult standard to meet, but you continue to prove it's attainable. So thank you for your efforts on this front and please keep up the excellent work. I'll now make a few comments on our progress on a number of strategic objectives before commenting on the quarter. Lorin will then review our financial performance in more detail. Restoration of the profitability of the Salt business to historic levels was an important goal for the company this year. Year-over-year adjusted EBITDA per ton for salt increased by approximately 50% to slightly over $24.41, and we also meaningfully improved our EBITDA margin percentage. This improvement was driven by better pricing. We saw increases of 16% and 5% in average selling price for highway deicing and commercial and industrial respectively year-over-year. We've talked in previous calls about the importance of reclaiming $20 a ton of EBITDA within our salt franchise. The teams have done a great job of answering that challenge. We remain focused on continuing to enhance our profitability in that segment. Moving to our focused growth initiatives, we continue to advance our lithium project on the Great Salt Lake during the quarter. In May, we announced that we had signed a binding multi-year agreement with Ford Motor Company to provide them with up to 40% of our planned phase-one battery-grade lithium carbonate once production begins. Ford is a trusted leader in the automotive industry, and we appreciate their confidence in our project at Ogden, serving a role within their electric vehicle strategy. With Ford and our agreement with LG Energy Solution in place, we now have 80% of our planned production from phase-one committed. Initial steps to advance construction on the commercial scale DLE demonstration unit proceeded on schedule during the quarter as well. This unit, sometimes also referred to as the DustGard unit or the DG unit, will be the first of four DLE units contemplated for phase-one. We continue to expect to be mechanically complete with that unit by calendar year end, and that it will begin commissioning in the first calendar quarter of next year. We also pushed ahead on broader phase-one activities during the quarter, such as additional earthwork and construction permitting. As we explained last quarter, we won't be sharing any new cost or economic projections with regard to the lithium project until we have clarity on several items that arose from the Utah legislative session earlier this year. You'll recall that on our May earnings call, we discussed how Utah House Bill 513 introduced a number of changes to the regulatory regime governing lithium development on the Great Salt Lake. Since that Bill's passage, we've been actively engaged with political and regulatory leaders in Utah as rulemaking is undertaken by the relevant state agencies. While we won't be making any updated economic cost disclosures today with regard to our lithium project, I did want to provide a bit of color directionally as we understand some time has passed since we disclosed our preliminary FEL-1 estimates about a year ago. We continue to refine the engineering and the associated estimates that will allow us to eventually update our project economics from what we published last September, and I'll share a couple of observations as the plan for phase-one has continued to develop. First, we're still tracking very closely with our original timeline, which we expect will enable us to begin operations in 2025. Second, and this won't be a surprise to anyone who has been following other project developments in the lithium space, cost inflation over the past two years for these types of projects has been meaningful. We continue to work with our engineering partners on developing the plans that will ultimately underpin our next round of disclosures, but investors should expect that construction costs will exceed the upper end of the range that we provided in our FEL-1 estimate. We look forward to sharing more on this topic after we reach resolution on all critical development elements directly with the State of Utah. Changing gears to our other primary growth opportunity, I'm pleased to share some exciting updates regarding Fortress. As we announced last quarter, we acquired the outstanding 55% in Fortress in May of this year, bringing our ownership stake to 100%. This occurred shortly after they signed a supply agreement with the U.S. Forest Service. Using their advanced mobile units, Fortress is supporting up to five air tanker bases with product and associated services for this 2023 fire season. In June, Fortress began dropping product at an Arizona Air Base, marking Fortress' first commercial sales since being added to the Forest Service qualified product list in late 2022. As expected, the feedback we've received regarding both the performance of the products and the execution by the Fortress team has been extremely positive. Subject to quarter end, we were working on three additional assigned bases: one in Montana, one in Washington State, and the U.S. Forest Service base in California. In fact, the U.S. Forest Service recently deployed an aircraft out of a base in San Bernardino, California, to drop Fortress products on the Rabbit fire in Riverside County, marking our first drops in California. Most recently, Fortress has been active in combating fires in the Mojave Desert. The team at Fortress continues to work on its next generation of products. FR-105 will eventually replace FR-100 as the company's primary powder retardant offering. We expect that it will deliver improvements regarding visibility and environmental impact. FR-105 is undergoing the continuation of operational field evaluation that began in 2022 and today has dropped approximately 65% of the required 200,000 gallons. We're well on our way to completing the required OFE volume this summer. Looking ahead, we're currently in discussions with the U.S. Forest Service regarding the contract for 2024 and beyond. We also meet regularly with CAL FIRE and Canadian firefighting entities, and we expect to be bidding for contracts for the 2024 season. One note on Canada, given the recent wildfire activity there in recent months, we've received several questions from investors regarding our ability to compete in that geography. The U.S. Forest Service QPL is used by their entities as well, so our products are qualified for use in Canada and we expect to be able to sell into that market starting in 2024. We're off to a good start with Fortress and we're excited about the counter cyclical growth potential that the business can provide for the company. On the last quarterly earnings call, I spoke a little about the refinancing we completed in May. I won't rehash those details today, but that was technically a third quarter event, so I want to acknowledge that important effort. Enhancing our financial position was the final strategic objective that we set for fiscal 2023, and I'm pleased that we were able to accomplish that despite the challenging environment. Before turning the call over to Lorin, I'll make a couple of comments about the quarter. I discussed salt earlier in my strategic commentary, and those results helped to drive strong performance this quarter. We deliberately chose not to pursue certain business in last year's bid season so that we could improve our profitability, and that value over volume strategy has worked very well. In the C&I business, we've done a great job of leading on price. It was a very solid quarter from the salt business. In contrast, the plant nutrition business has seen several external headwinds this year. From a macro point of view, buyers are simply being very cautious. Buyer sentiment has clearly shifted toward a fear of getting stuck with higher cost of inventory, and we're seeing a lot of just-in-time purchasing behavior. Whereas a year ago, growers were concerned about securing supply, today there is no concern on that front. You can see the impact this has had on MOP prices throughout the year, which in turn has put pressure on SOP prices. While SOP is a premium product and preferable by growers in many applications, its pricing is not immune to the dynamics of the MOP market, given that some substitution can occur. These dynamics have been further exacerbated by the lack of demand caused by the abnormal weather in California that you've heard us talk about in previous quarters. This is frankly a rough part of the cycle, and we simply have to manage our way through it. On a positive note, we've done a good job maintaining price given what is happening with MOP prices, exceeding our internal sales price forecast despite the market pressure we're experiencing. Based on some things we're seeing in the market, it feels like we're close to finding a floor on MOP pricing, which would obviously be a welcome development for holding SOP price as well. While these weather-related factors have challenged our sales efforts this year, it's worth pointing out that operationally, things are going well in Ogden. Year-to-date, we've not had any significant production issues and we're tracking in line with our internal production targets, which has allowed us to replenish our inventory. All in all, we don't see any structural changes regarding SOP use and demand in California or elsewhere for that matter. Based on what we're hearing, our expectation is that demand will revert to more normal levels next year, which would be positive for sales volumes in 2024. All in all, we had solid execution in the third quarter across a number of our businesses while we continue to make progress on positioning the company for accelerated growth in the coming years. Our management team is committed to growing and enhancing the value of the company, and the third quarter was a successful quarter in our pursuit of that objective. I'll now turn the call over to Lorin, who will provide more detail on the quarter.

Thank you, Kevin. As a reminder, the seasonal nature of our business becomes more obvious in the third quarter as winter subsides and we see the impact of the decline in highway deicing sales. On a consolidated basis, revenue was $208 million for the third quarter, down 3% year-over-year. Third quarter consolidated operating loss improved to $0.6 million from a loss of $3.5 million last year. While adjusted EBITDA from continuing operations was $28.6 million, essentially flat year-over-year. We reported net income of $40 million for the quarter, driven by a $43 million tax benefit that reflects our recent acquisition of Fortress and recent changes in Canadian tax law. Specifically, the Fortress acquisition impacts our U.S. tax profile favorably, as we are now able to utilize net operating losses and interest deductions that our prior U.S. income outlook did not call for us to be able to utilize while also enabling us to reverse a portion of the deferred tax allowances we had taken in prior quarters. Starting with the Salt segment, Salt revenue totaled $156 million for the quarter, which was essentially flat year-over-year, despite volumes being 11% lower, reflecting strong Salt segment pricing, which rose 12%. The highway deicing business saw sales volume decline 13% year-over-year. You’ve heard us talk about focusing our efforts on more valuable business over the last year, even if that means giving up some volume. That strategic pursuit, combined with the impact of a below-average winter within the markets that we serve, explains the decline in volumes year-over-year. Pricing for highway deicing rose 16% year-over-year to approximately $74 per ton and was an important contributor to the improvement in profitability that I will speak about in a moment. Within our C&I business, volumes declined 7% year-over-year, driven primarily by the timing of non-deicing demand. This was partially offset by higher C&I pricing, which rose by 5% to approximately $182 per ton. The C&I business has done a great job maintaining positive pricing momentum this year. Distribution costs and all-in product costs on a per ton basis increased 4% and 5% respectively year-over-year. The salt that was sold in the third quarter was produced and moved to depots in 2022, a period of time when we saw strong inflationary pressure on costs, leading to a delayed impact on the financials. Operating earnings for the segment were $21.7 million in the quarter, an increase of almost 75% year-over-year. Adjusted EBITDA came in at $36.4 million, an increase of 31% year-over-year. Adjusted EBITDA per ton was $24.41, which is in line with historical levels of profitability. As Kevin discussed earlier, restoring the profitability of the Salt business was a strategic objective for this year that we are pleased to have successfully accomplished. Turning to our Plant Nutrition segment, the lingering impacts of extraordinary weather that we experienced this year continue to affect our sales. Those sales for the quarter were roughly in line with our expectations. We had hoped that applications of SOP that under normal conditions would have been applied in the first and second fiscal quarters might shift to later in the year. Unfortunately, that didn’t materialize, with sales volumes decreasing by 6% year-over-year. As Kevin mentioned, there has been a change in sentiment over the last several quarters that has impacted pricing. In the third quarter, the average selling price was $750 per ton, down 9% year-over-year and 6% sequentially. The combined impact of lower volumes and lower prices resulted in revenue in the quarter being down 15% year-over-year to around $48 million. While that is obviously not great for the current year, our view is that it sets us up for a positive 2024 from a volume perspective. Generally, we believe that applications have not kept pace with the mining of the soil that occurs through normal growing conditions and that the extraordinary weather conditions that occurred this year seem unlikely to repeat themselves in fiscal 2024. As a point of reference, California just experienced the seventh wettest year in the past 129 years, which clearly qualifies as extraordinary. One benefit of the slowdown in SOP sales is that we’ve been able to build and forward deploy some inventory across our warehouse network. Speaking of distribution during the quarter, we saw those costs decrease on a per ton basis by 8% year-over-year as we had a higher proportion of sales being picked up at our warehouses as opposed to being delivered by the company. I’d note that this dynamic can also influence price, and we will often accept a lower sales price if we don’t have to assume responsibility for delivering the product. Distribution cost per ton also benefited from a shift in the regional sales mix during the quarter. All-in product costs on a per ton basis were up 6% year-over-year, driven by operational steps that we took following the subpar 2022 evaporation season, including the use of KCL to bolster production yields and the impact of the natural gas spike earlier in the year on our inventory costs. The net impact of these drivers is that third quarter adjusted EBITDA declined from $19 million to approximately $12 million year-over-year. As Kevin highlighted, Fortress had its first sales in the third quarter, so we enjoyed a small positive contribution from the business to revenue, operating earnings, and adjusted EBITDA this period. We are excited with the quick traction that the Fortress team has gained in the marketplace. At quarter end, we had liquidity of $418 million comprised of roughly $58 million of cash and revolver capacity of around $360 million. Net debt to adjusted EBITDA stood at 3.1 times at the end of the quarter. As noted previously, we were pleased to successfully execute a refinancing in May of our $250 million of notes due in July 2024. Our focus as we worked through that refinancing centered on four objectives: refinancing on reasonable pricing terms, pushing out our debt maturity profile, bolstering our liquidity, and creating flexibility within the credit agreement to accommodate a wide range of potential non-debt financing sources to fund our lithium efforts in the coming years. I believe we achieved each of these objectives as part of the refinancing. Moving on to our outlook for the remaining of the year. In our press release yesterday, we announced a narrowing of our guidance range to reflect the fact that we are now three quarters of the way through the year. In Salt, we now expect EBITDA in the range of $220 million to $235 million. As you know, we did not adjust our Salt segment guidance throughout the year until now as we approach the final few months of the fiscal year. Our original guidance given at the beginning of the year implied a midpoint for EBITDA of $235 million and assumed average winter weather. The fact is we had a below-average winter deicing season, resulting in the midpoint of volumes, revenue, and EBITDA all moving down to reflect that fact. The midpoint of our original guidance is still within striking distance; despite a winter that was 80% of average, it reflects very favorable sales mix within the highway deicing business and strong C&I pricing. For reasons that we've discussed today and on previous calls, this has been an exceptionally challenging year to forecast our Plant Nutrition business. Despite these challenges, we have managed the business throughout the year in such a way that even though we expect to see fewer volumes for the year compared to our original expectations, the midpoint of our EBITDA guidance for this business remains unchanged at $45 million. The commercial teams in our Salt and Plant Nutrition businesses have done a great job managing price this year and have played a significant role in helping the company successfully navigate a year of profit restoration in the Salt side and the challenging weather conditions and demand dynamics on the Plant Nutrition side. At Fortress, we still expect that business to contribute EBITDA in the low double-digit millions of dollars, with nearly all of that expected to be recognized in the fiscal fourth quarter. That business rolls up into the corporate and other expense net line item, which we are forecasting will come in at $65 million to $70 million for the year, unchanged from our prior guidance at the midpoint. CapEx is moving down slightly to a range of $130 million to $150 million. This is the result of moving lithium development CapEx down to a range of $40 million to $50 million from our prior range of $60 million to $75 million, reflecting a shift in timing that will result in capital being spent early next quarter, pushing into the fiscal 2024 year rather than late during the current quarter. Our sustaining CapEx guidance of $90 million to $100 million remains unchanged from our prior guidance. At this time, I’ll share a few thoughts about the 2023, 2024 bid season. As we noted in yesterday’s press release, we’re about 65% of the way through the current North American deicing bid season. Based on the results that we’ve seen to date, we are expecting an approximate 3% increase in price for highway deicing salt next year. Committed bid volumes are coming in roughly 5% lower than what we saw last year, which is not entirely surprising given the below-average deicing season we just had. Throughout the 2023 bidding season, we have continued discipline adherence to our value-over-volume commercial strategy, with an emphasis on building a book of commitments biased towards markets that are most natural geographically for us to serve, and therefore most profitable. As usual, we will true up our projected salt price and volume on our November earnings call when the bidding season is behind us. However, 65% of the way through the season, we view the results to date as highly constructive, particularly against the backdrop of a relatively sluggish winter this year. Briefly turning to the cost rationalization efforts we have undertaken. On our last earnings call, we discussed how the first phase of our cost savings program was expected to ultimately result in an annual cost reduction of corporate-related expenses of $17 million to $18 million by fiscal 2025 compared to fiscal 2022. These cost savings are split roughly equally between product costs and SG&A. The second phase of this initiative relates primarily to production and packaging operations, and last week we notified the impacted personnel. Costs related to the impacted operations are generally inventoriable, and as a result, the expected benefit of the Phase 2 cost rationalization efforts will be recognized through the income statements when those products are sold out of inventory, which is expected to begin in the middle of fiscal 2024 for the Plant Nutrition business, and late in 2024 for the Salt business subject to the impact of winter weather in the upcoming year. The key takeaway is that the combined impact of phases one and two is expected to result in meaningful savings that all else equal should lower our cost structure and improve our profitability in the coming years. Finally, I wanted to share a couple of thoughts on valuation. Notwithstanding the recent rally in our share price, a classic sum-on-the-parts valuation buildup of our company’s valuation, where you assign reasonable multiples to the long run earnings power of our core Salt and Plant Nutrition businesses, continues to support a stock price higher than where we are trading today. When investors contemplate the earnings potential of the growth opportunities that we have at Fortress and with our planned lithium development, it becomes clear why we're excited about the opportunity to create shareholder value by accelerating our earnings growth and reducing our weather sensitivity by advancing into near adjacencies that align with our core competencies as a company. With that, I'll turn it back to the operator to open the lines for Q&A.

Thank you. The first question is from David Begleiter with Deutsche Bank. Your line is open.

Thank you. Good morning. Kevin, on the highway deicing bid season volumes being down 5%. Are you seeing greater competitive intensity in this season this year? And with volumes down the last two years, do you risk running your operations at below optimal production levels?

Hi, David. Good morning. Good question. There were air pockets, I would say, in this bid season. We had a few areas that experienced an outsized winter where bid volumes were up and prices were up considerably in other areas where the inverse happened. But on balance, we're kind of characterizing the winter as 80%. For the most part, our competitors in the marketplace behaved in a relatively disciplined fashion and everybody is settling into their natural geographies. There's definitely a view to promote value in the marketplace this year. We'd like to see more, obviously, but given the fact it was an 80% winter, the fact they were up 3% on prices is actually a pretty big win at the end of the day. With respect to volumes, as I've said before, we'll do whatever it takes to keep the market balanced. If we need to tweak our production volumes, we'll do it to manage inventories and working capital, but we need to let the next season begin to unfold before we're able to make that call.

Very good. And just on lithium in the State of Utah, it's been about four months since the law was signed into effect. What do you think the timeframe is to get this regulatory clarity you referenced in your remarks?

I wish I could stick a pin in that. I think it'll be done when it gets done. I don't mean to be evasive, David, but the rulemaking process is ongoing. We remain very active in that rulemaking process. And that plane will get landed when it gets landed.

Understand…

Yes, hopefully sooner than later, obviously, because we need that certainty to be able to advance our FEL-3 estimate, make a final investment decision, and that sort of thing. So hopefully the State of Utah will get that settled soon.

Agreed, thank you very much.

The next question is from David Silver with CL King. Your line is open.

Yes. Hi, good morning. Thank you. I would like to start off with a question on lithium, or actually two questions, but firstly regarding the reduction in the fiscal 2023 CapEx to $40 million to $50 million. I did hear your comments about that. I would just kind of come back and say that I think this is the second reduction in that projected spend through fiscal year 2023. I was just hoping you could talk about maybe what the reduction in spending this year might mean for the ultimate timeline to completion. And then secondly, this is very speculative and very early, but with the binding multi-year agreements for phase-one volumes, what happens if you're a little behind schedule, three to six months or whatever, for your planned startup? Alternatively, if you’re ahead? I mean, under the agreement, are you committed to supplying a certain amount of volume by a certain start date? Or might you have to go out in the open market or something? But how does the multi-year binding agreement handle deviations from the planned startup schedule?

Let's start with your second question first. Our agreements with LG and Ford provision for a lot of flexibility in terms of startup timing. So, there is no scenario, David, that we can contemplate where we'd ever have to go to the market to fulfill our obligations under those agreements. They give us plenty of flexibility to get these operations mechanically complete, get them optimized and performing as advertised. So I think we're good there. In terms of the capital, if we're just pushing out the longer lead items into the next couple of quarters, which has taken some pressure off of the capital expense during fiscal year 2023. But Chris, any color you'd like to add to that?

Yes, Kevin, just real quick. So with regards to the longer lead items that Kevin spoke about, that's really related to the broader project on the entirety East side. We've been able to continue optimizing that schedule and look at what that drop date is or the spending on those long lead items. Fortunately for us, those have been able to be pushed out a little bit. Additionally, at the beginning of the year we had a certain estimate associated with what it would cost to build the DustGard commercial demonstration unit. As we've continued to refine that, we've been able to reduce that cost. So that's been a benefit that you heard in the last quarter in the reduction of CapEx. As Lorin also mentioned, we've been able to get really good terms with our vendors, which has allowed us to push out those payments into the next fiscal year. Overall, it's a good story from a CapEx perspective. As we heard in the opening comments, we're still on schedule for mechanical completion by the end of this year. So DustGard is well on its way to being improved.

Thank you for that. I appreciate the detail. I'd like to shift over to salt. And I'd like to pick up on Lorin's comments about, I guess, accounting costs this quarter relative to what we might see going forward. The past year, 18 months has seen significant cost inflation. As you look ahead to the next winter, is it possible for you to kind of give a quick rundown of how you see, let's say, barge rates or plastic prices or pallet prices, whatever key elements that you can lock in prices for ahead of time? But any thoughts about where the pluses and minuses on your overall salt deicing cost elements shake out here now?

Yes, let me just touch on inventory days and how they transition through our P&L before I ask Jamie to talk about supply chain effects. When you look at our inventory days over the past several years, they're in that 125 to 130 day mark, indicating a four month turn. However, you could produce salt in a relatively weaker winter and not sell it for quite some time. You could be selling salt from March production, then in an 80% winter. You could be selling salt from a 2022 inflationary environment for some time. Looking at our inventory days could support the P&L based on the winter that you experienced. Jamie, do you have thoughts on supply chain effects to share?

Yes. David, you mentioned a couple of items: pallets continue to be fairly expensive and inflated; we don't see that coming down. Polypropylene has come down, which is obviously related to oil prices. So if Brent stays in this area, we would look to see some benefit there in the C&I business. On the freight side, we've actually seen lower truck and fuel rates through 2023. Those probably creep up, but we've done a lot of great work on the pricing front to recapture some of the inflation we saw last year and continue to push price through 2023 and into 2024. We are aware that truck freight rates are rising in 2024, but we believe we can stay ahead of it with pricing and see some margin improvement in 2024. On the highway side, most of our material has shipped via vessel and barge. Our vessel rates are locked in through 2028. Our barge rates are locked in through next summer, the summer of 2024. So we'll be renegotiating those rates later this year or early in 2024. On the vessel side, we have inflation and CPI type adjustments on the vessel side, so we feel good about the long-term aspect there. Those are the primary supply chain inputs that I can comment on right now ahead of our full-year discussion later this year for 2024.

Yes, I appreciate it. It's early days, but thank you for that. Very helpful.

The next question is from Chris Kapsch with Loop Capital Markets. Your line is open.

Yes. Following up on the salt business and piggybacking on some of the discussion already. Just curious on the notion that roughly 65% of the negotiations are complete. I'm wondering if in this context of an 80% winter, those discussions align in any way with the geographies that had a stronger winter, whereas the unsettled negotiations might have been with geographies where there was a lighter winter. I'm curious if it aligns with what I mentioned.

Not really, I think. Like Kevin mentioned earlier, there were pockets of success where we had stronger winter weather activity and higher sales in places like the upper Mississippi, while it was weaker along the Ohio River Valley. We would typically be 65% to 75% complete with our bid season, sitting here in early August. Many states and municipal bids are finished, and the latter half of the season is commercial business. It would be rare for the full-year bid season pricing to end up different than where we are at the 65% mark now. I also wanted to note that that 65% applies to about 75% of the overall highway deicing business. Aside from the North American bid season, we have our UK highway deicing business and our mag chloride business, and we are pushing significant price increases on those fronts because the market allows us to. We're pricing to value. So that bid season data is just part of the picture for highway business overall.

Okay. And then the follow-up on again on salt. If you're at this point, the commitments that you have for down 5% volumes, up 3% pricing. By no means are you suggesting that the guidance for 2024 would follow a similar trend and be down 5% in volumes? We just don’t know. I'm only saying that because of the reaction of the stock price this morning. However, in a scenario where you were down 5% in volumes and up 3% pricing, would salt EBITDA be up in 2024? It seems like it would be.

That’s a great point. Remember, the winter was mild, and we’re experiencing that in our current period results. So we sold less material than we would have expected. When we roll out our view on 2024, it will assume average winter weather. So while the commitments are a little bit lower, recovery of normalization or average winter weather offsets the decline in commitments more than we expect. Considering the pricing portfolio improvements that we’re making in the business, remember Gross Sales Price (GSP) is only part of the picture. We’re focused on net back. We might be shipping something with a lower GSP, but we make more money on it because it has a lower transportation cost or is closer to the mine. We’re only giving you part of the picture for competitive purposes. But we certainly feel like we can see improvement in the salt business, highway and commercial and industrial in 2024.

Exactly. Thank you.

The next question is from Greg Lewis with BTIG. Your line is open.

Yes, thank you and good morning. I appreciate the comments around the 65% in the municipalities and the shift now to more industrial. Realizing we can’t comment on pricing, is it fair to think about the stated number as an anchor and a buoy to pricing as we look at the back or remaining season? Also, as we consider previous years, is there upside or downside? It is a price set, and how tight is that range?

It is; there typically is not a lot of movement between the current price and commitments and how we finish the bid season. We're now in really commercial negotiations with independent contractors and landscapers and deicing contractors who resell this material for parking lot clearing, etc. So we’re pushing price across the board. I think you’re right; there’s not a huge amount of upside, but there’s very limited downside as we go through the remainder of this season.

Okay. That’s great to hear. Regarding Fortress, it seems this is a continuing strong driver for the company. Realizing there’s a major existing competitor, what needs to happen for the company to really scale up this business? What can be done to accelerate scaling up and take advantage of demand for that?

Yes, we’re well on our way in doing that. We are engaging with the U.S. Forest Service for a multi-year agreement for 2024 and beyond. Those discussions will really get into details in this month and in September. So I think we’re going to have a lot more visibility on what the next few years look like within the next 60 to 90 days. There’s nothing we can do beyond finalize that arrangement as we go into 2024 and 2025. We’re also discussing entering the California market with CAL FIRE, which is contingent on the completion of our IFOE around our FR-105. Additionally, we see opportunities in Canada, British Columbia, Saskatchewan, and Alberta, as we prepare for 2024.

Okay. Thank you very much.

The next question is from Joel Jackson with BMO Capital Markets. Your line is open.

Hi, good morning. A few questions. Just on 2024, is a 3% gross price increase in highway deicing salt enough to have margins in 2024 higher? What would you need to achieve higher margins in 2024? Secondly, I understand that for some of your competitors and maybe yourselves, barge rates are going to go up on some contracts as of January 1 in Mississippi. Can you talk about how barge rates might affect costs and margins in 2024?

Well, I won’t address it specifically. We’ve not started our discussions on beyond, kind of July 2024 with our barge carriers. Yes, there is talk of those going up for sure. Remember, we are the backhaul; they need us. We’ll go through that process, and the good news about the barge rates and the timing is that we’ll be well into discussions in February or March before we even start our bid season. So we’ll have good visibility during our bid season on what those barge costs will be in 2024 and in a multi-year agreement through 2026 or thereabouts. I don’t have specific comments on what that’ll impact in 2024.

In terms of profitability from an EBITDA per ton perspective, we’re tracking towards an excess of $20 of EBITDA per ton. We see no reason why we shouldn’t be able to hold that. I like to refer to the middle of the bell curve. There’s no reason we can’t see improvement in salt next year at comparable EBITDA per ton with the pricing we’re sharing.

That’s helpful, Lorin. Thanks. Okay. And then finally for me, you mentioned earlier your CapEx reduction of $20 million. Is that just pushing back long lead time items related to the lithium opportunity?

Yes, for the most part. Joel, it’s that coupled with Chris and the team have been able to refine the expectation around the DustGard unit. So it’s a combination, but it’s largely made up of longer lead time items that we’ve been able to push into the next quarter and the quarter after that.

Thank you. I’ll come back to the barge rate question. Do you have any history on how barge rates going up usually have affected following bid seasons? Have prices been passed through to the different tenders? I understand it’s a bidding process, but generally, what has happened when barge rates have changed?

I don’t have that history off the top of my head. Remember, we would be equally impacted as Cargill and the Stone Canyon asset if there were barge rates going up. You would assume that disciplined market competitors would recapture that value through pricing as they go through those bid seasons. The good thing is that the timing is what it is, and it will be a renewal of the July 2024 rates. We’ll have good visibility on that for the 2024-2025 winter, and we’ll embed that into our bidding analysis.

Next summer.

Just maybe one more for me. Typically you have some working capital needs in September and December quarters. Looking at your balance sheet now, are you comfortable, or are there any actions you might want to take to give you more flexibility?

Our leverage just hit 3.1 times. We’re happy with the progress we’ve made to delever, and granted some of that is related to the acquisition, but a lot of it relates to the restoration of the EBITDA of this business. Three times is a very comfortable level for a company with our credit profile. We'll see the usual seasonal dynamics around the final quarter of the year, but we feel very good about our leverage position as we continue to drive it down.

The next question is from Chris Kapsch with Loop Capital Markets. Your line is open.

Yes. This is a detailed question on the lithium business. It’s against the context of Lorin’s mention of valuation. Investors can debate whether there's much of any value being assigned to your lithium resource right now. However, my question addresses visibility and risk in standing up that project right now. Directionally, you suggested that CapEx might be higher than what your original FEL-1 engineering plan had scoped out. As you look forward, I’m curious if, to contain costs, you might consider doing both phases in carbonate, which could potentially reduce risk and CapEx. Would that be a consideration?

Yes, that’s a great point, and we’ll continue to look at that. Right now we’re focused on getting Phase 1 up and running and executing there. As we progress through that, we’ll take a look at Phase 2 and whether that’s carbonate or hydroxide. Great point.

It appears we have no further questions at this time. I’ll turn it back to the presenters for any closing remarks.

Thank you for joining the call today and thank you for your continued interest in Compass Minerals. We will continue to keep you posted in subsequent quarters. Thanks, everybody. Have a great day.

This concludes today’s conference call. You may now disconnect. Thank you.