Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Compass Minerals Inc. Second Quarter Fiscal 2024 Earnings Conference Call.

Thank you, operator. Good morning and welcome to the Compass Minerals fiscal 2024 second quarter earnings conference call. Today, we'll discuss our recent results and update our outlook for fiscal 2024. We'll begin with prepared remarks from our President and CEO, Edward Dowling; and our CFO, Lorin Crenshaw. Joining in for the question-and-answer portion of the call will be Gordon Dunn, our Chief Operations Officer; Ben Nichols, our Chief Sales Officer; and Jenny Hood, Chief Supply Chain Officer. 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, May 8, 2024. 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. I will now turn the call over to Ed.

Thank you, Brent. Good morning, everyone, and thank you for joining our call today. I'll begin with a few remarks about the quarter. Then discuss some actions we took to enhance the company's ability to free up and generate more cash and pay down debt. These actions include tough choices, but ones which I believe are necessary to unlock the intrinsic value of our company. As we all know, the winter has been especially mild across much of North America. In the representative cities that we track for snow event purposes, this is the second worst winter in 27 years of snow events. Our operating results for the quarter clearly reflect that reality, with Salt segment volumes down 21% year-over-year. Notwithstanding these recent challenges, the basic fundamentals of the Salt business remain solid. Gross revenue per ton was up 9% year-over-year. Net revenue was up 11% per ton. Adjusted EBITDA was up 19% per ton to just under $24. The problem is that we just didn't have enough weather to generate sales volume, which resulted in Salt revenue declining 14% and adjusted EBITDA declining 7% year-over-year. In the Plant Nutrition business, the results for the quarter are a bit of a mixed bag. On the positive side, we've seen demand in our core markets normalize to around historic levels after last year's weather-driven suppressed demand. We also saw the sales price per ton for SOP increase 3% on a sequential basis after 5 quarters of price decreases. There are some positive developments in that business. We changed the leadership of the Ogden facility during the second quarter, and I'm pleased with the operational improvements we're seeing there. The team's focus at Ogden is on improving our cost structure. It's early days, but I'm confident we'll continue to see positive impacts as that team drives increased value from that asset. The obvious negative for the quarter was the impairment of goodwill in the Plant Nutrition segment. Lorin will provide detail on that in a moment. Moving on to Fortress, our fire-retardant business. We've previously announced that the path forward for magnesium chloride-based aerial fire-retardant is uncertain, resulting in a $56 million non-cash loss on impairment of goodwill and tangible assets. We're evaluating various alternatives regarding the future of the fire-retardant business given recent developments. Now, I'll transition to the actions we announced yesterday to improve our ability to maximize cash flow and to pay down debt. After several consecutive mild winters and substantial past investments aimed at growing the business, the balance sheet is clearly not in a place where we, or most of our investors, want it to be. We believe that the best way to unlock the intrinsic value of our company is to deleverage. To do that, we need to maximize cash available for paying down debt. Recently, the Board of Directors decided not to declare quarterly dividends for the foreseeable future, freeing up approximately $25 million annually. We also decided to temporarily curb production at our Goderich mine to build operating flexibility and address excess inventory we are currently carrying after 2 mild winters. We've laid off approximately 20% of the mine's represented workforce. If and when market conditions improve, we'll be ready to recall impacted employees as needed. Assuming a normal winter ahead, our plan is to aggressively reduce production to substantially decrease inventory levels and release cash as the next winter's deicing season begins. Third, we've advanced a multifaceted G&A cost-saving initiative to improve our company's cost competitiveness over the next 18 months. We expect some of the improvement will be recognized in 2024 and increasingly in 2025, with the full run rate improvement coming in fiscal 2026. Lastly, we've rolled out a more rigorous standardized methodology for evaluating and prioritizing MRO expenditures. While improvements from this action are not readily visible to investors, it's an important cultural change that I believe will positively impact sustainable operations. My vision for the company is that we generate free cash flow under various winter conditions over time. As the balance sheet is restored over time, we would consider returning capital to shareholders through buybacks or dividends.

Thanks, Ed. There were a lot of moving parts this quarter that impacted our financials. Consolidated revenue was $364 million for the second quarter, down 11% year-over-year. Our profitability was impacted by a $107 million aggregate loss on impairments related to goodwill and intangible assets in the Fortress fire-retardant business and a goodwill impairment in the Plant Nutrition segment. As background on the write-downs, given the sustained decrease in our share price and market capitalization continuing into fiscal '24, we determined that there were indicators of impairment and performed long-lived assets and goodwill impairment testing across our portfolio of assets. The analysis for Plant Nutrition resulted in a goodwill impairment, while the Fortress analysis resulted in an impairment of our magnesium chloride related assets and goodwill. For the quarter, we recognized $107 million in impairments, partially offset by a recognition of $21 million of other operating income, related to the decline in valuation of the contingent consideration liability associated with the Fortress acquisition. The consolidated operating loss for the quarter was $46 million compared to operating income of $48 million last year. We reported a net loss of $48 million for the quarter, which compares to a net loss of $22 million last year. Adjusted EBITDA was approximately $87 million, up 13% year-over-year. In the Salt segment, revenue totaled $310 million for the quarter, down 14% year-over-year. The mild weather we experienced continued through the second quarter, resulting in one of the mildest winters over the last 25 years. Highway deicing volumes were down 22% year-over-year, with total segment volumes down 21%. As Ed mentioned, the Salt business is operating well from a production standpoint, but we didn't have much weather this winter to pull sales through the income statement. As expected with these volume declines, we saw segment operating earnings and adjusted EBITDA decline by 9% and 7% respectively. However, the profitability of the business improved year-over-year with adjusted EBITDA margin increasing by approximately 200 basis points. Moving on to our Plant Nutrition segment, demand has continued to be in a more normalized range, with volumes up 23% from the prior year. The pricing dynamic for SOP continues to track with global trade, leading to a 15% decrease in price per ton year-over-year. However, as Ed pointed out, the sales price per ton actually increased this past quarter after 5 consecutive quarters of price declines. Additionally, we recognized a goodwill impairment in the Plant Nutrition segment of $51 million. Our total corporate cost guidance is now set at $10 million more favorable than prior guidance, including approximately $21 million in year-to-date non-cash gains. Overall, our actions will improve our ability to generate more cash for paying down debt. Given the timing of when most of our initiatives will manifest in our statements, we expect benefits to start appearing in fiscal '25.

Our first question will come from David Begleiter with Deutsche Bank.

Given the mild winter weather and the elevated inventories, do you have any early thoughts on pricing for the upcoming highway deicing season?

Yes. This is Ben. I would first say we're just starting to get into our bid process for the '24-'25 season, so it is a bit early to provide anything substantial. The one thing I can say is that the team is working hard against it. I think we'll find a way to continue pushing momentum in that business, and we'll remain focused on driving the type of values we've driven in the past.

And Ed, in terms of Fortress, what's a timeframe to determine which path to pursue? What are the various options you are looking at right now?

We're limited in what we can say due to the ongoing investigation. However, we're looking at several strategic alternatives and will share more once we have that information.

I think that's perfect, Ed. It's too premature at this point. There have been several developments over the last weeks, so we're just evaluating our options at this point.

Your next question will come from the line of Jeff Zekauskas with JPMorgan.

From a longer-term standpoint, you've mentioned that your 10-year Salt sales seem to be down by 13%. Given the changing weather patterns in the U.S., do you think it might be wise to rethink your forecast methodology and cost structure in light of these trends?

That's a fair question, and we agree. We are working operationally to build flexibility in our mines to manage inventory and cash flow. We've taken some actions now and will continue as things progress.

Your point is valid. We're planning based on fulfilling our contractual obligations, which are tied to our customers' requirements.

We don't have precise targets for inventories or payables, but our efforts, especially regarding Goderich, focus on reducing inventory days through next winter.

Your next question comes from David Silver with CL King.

I'm following up on your action plan and the MRO reassessments. Given that some portions of the Goderich underground mine are yet to be completed, could you share your current thinking about those improvements?

We've implemented a risk assessment approach to capital allocation. We don't have the balance sheet to do everything, so we need to prioritize our investment wisely. We are running numbers related to the mill relocation and other plans we talked about in the past.

I'm excited about this new prioritization framework for MRO capital and believe it's necessary to enhance our operational rigor.

This cultural shift in prioritization is essential. It will drive improvements for the future.

Regarding the amended credit agreement, can you relate its implications to your expected cash flow for the next year?

We're pleased with the package we negotiated with our banks, setting covenants conservatively to provide us with flexibility for potential future challenges.

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

You mentioned the bid season and the impact of mild winter conditions on minimum commitments. Can you discuss how these negotiations operate going forward?

We're moving minimums in aggregate and pursuing negotiations. I'll provide more insights in the next quarter on tracking during the bid season.

Do you foresee the normal winter sales range for fiscal '25 being lower than what you presented for '24 due to the current circumstances?

It's premature to speak specifically about volumes, but the fundamentals of our earnings power remain unchanged.

The objective is to fulfill contractual obligations; we will know more as we work through the bidding process.

The way we're managing to minimize fixed costs while ensuring flexibility with temporary layoffs at Goderich reflects our approach. We plan to adjust production based on inventory assessment.

Will you consider converting temporary layoffs to permanent based on market conditions?

Right now, we’re operating Cote Blanche to meet customer demand, and all options remain on the table. However, at Goderich, we're likely to lower production through next winter while monitoring the situation.

And your next question is a follow-up from David Silver with CL King.

This question is directed to Gordon Dunn. Having assumed greater responsibilities after running U.K. operations, what opportunities do you see in the North American assets? Are there immediate efficiency gains you expect?

Yes, I'm familiar with the U.S. operation. We will introduce models that increase flexibility based on true demand while focusing on continuous improvement. This will be a cultural shift.

With that, I'll turn the call back to Ed for any closing remarks.

Thank you again for your interest in Compass Minerals. Please don't hesitate to reach out to Brent. If you have any follow-up questions, we look forward to speaking to you in the next quarter.

Everyone, that will conclude our call for today. Thank you all for joining, and you may now disconnect.