Good day and welcome to the Compass Minerals’ Second Quarter Earnings Conference Call. Today's conference is being recorded.At this time, I would like to turn the call over to Theresa Womble. Please go ahead.

Thank you. This morning our CEO, Kevin Crutchfield; and our CFO Jamie Standen will review Compass Minerals' second quarter 2019 results and our outlook for the rest of the 2019.Before I turn the call over to them, let me remind you that today's discussion may contain Forward-Looking Statements within the meaning of the Private Securities Litigation reform Act of 1995. These statements are based on the Company's expectation as of today's date August 7, 2019, and involve risks and uncertainties that could cause the Company's actual results to differ materially. Please refer to the Company's most recent Forms 10-K for a full disclosure of these risks.The Company undertakes no obligation to update any forward-looking statements made today to reflect future events or developments. Our remarks also may include non-GAAP financial disclosures, which we feel are important to provide a full understanding of our businesses and operating conditions. You can find reconciliations of any of these measures in our earnings release or in our earnings presentation, both of which are available on the Investor Relations section of our website at compasminerals.com.Now, I will turn the call over to Kevin.

Good morning, everyone. First, let me say how glad I am to be here at Compass Minerals and participating on my first earnings call. After a brief review of some of our financial and operational results, I will share some of the early thoughts I have about our path forward.First, a quick review of our second quarter results. While total Company revenue declined slightly, we generated operating earnings growth of 46% and adjusted EBITDA growth of 6% compared to the prior year quarter.The EBITDA results exclude the impact from unusual logistics costs we incurred in our salt business due to severe flooding along the Mississippi River. Despite the impact of those additional costs. Most of the earnings growth came from improvements in our salt business driven by increased sales prices on highway deicing salt as well as an uptick in sales within the consumer and industrial business.We also increased earnings in the Plant Nutrition South America segment, due to the increased prices and sales volumes of our agricultural products. Looking more specifically at the salt business, I'm happy to report that we have continued to make progress towards improving production at our Goderich Mine, year-to-date, the mine has produced approximately 36% more salt than last year at a 20% lower per unit costs.The outcome is a direct result of ongoing improvements in the performance of our continuous mining system. From my multiple visits to the mine, I'm seeing strong improvements in the skill levels of our employees with operating and maintaining the new equipment, which is leading to increased equipment availability and higher utilization rate.The increase in internally produced tons are important for improving our market position and allowing us to take greater advantage of a strong highway deicing bid season in North America. Our highway deicing bidding for the…

Thank you Kevin. First looking at our salt results found on Slide 7. We delivered a 17% increase in operating earnings in the second quarter, as 14% higher average selling prices and lower highway deicing salt costs more than offset a 19% decline in sales volumes compared to the prior year.As mentioned by Kevin and in our earnings release, these results included $2.8 million in unusual logistics costs related to the extreme flooding experienced this spring along the Mississippi River. This flooding resulted in increased transit times and unexpected demerged fees. The shipment delays also had a negative impact on our sales volumes, although we are already starting to make up those sales in the third quarter.Salt sales volumes were also negatively impacted by lower deicing commitment volumes from last year's bid season, as well as the mild winter in the UK, which has reduced restocking demand. However, some of this decline was offset by stronger consumer and industrial sales.Average selling price was very positive this quarter as a result of a 7% improvement in highway deicing prices and a 7% benefit from a relatively higher mix of consumer and industrial sales in the 2019 quarter compared to prior year. Remember, these products have a much higher average selling price compared to highway deicing products, although the cost to produce them is also higher.In addition to the unusual logistics costs we discussed, base rates and fuel prices also increased shipping and handling costs from second quarter 2018 results. Per unit cash costs for salt products were about 2% above per year. Excluding the product mix impact, per unit cash costs would have been 10% lower, which is a reflection of the improved production at Goderich mine versus last year's results and higher year-over-year operating rates at our Cote Blanche mine.Second…

Thank you. [Operator Instructions] We will take our first question from Vincent Anderson with Stifel.

Good morning and welcome aboard Kevin. I wanted to go back to Goderich for a little bit more detail. Has the timeline changed at all since you last updated us with regards to so when you think you will be at least in a place where you can stop importing salt, if not at targeted capacity utilization rates?

Good morning Vince and thank you. Maybe the best way to hit Goderich is just to talk about it in the context of a continuum. And maybe this might even answer other questions folks had on their mind that. You know we have got the four CMCH units in place there and as you can see, year-over-year we are seeing better results. And I would expect that trend to continue.As we get more comfortable with the equipment and we are doing some things on the maintenance side, lots of cooperation - collaboration between production and maintenance on the preventative side to keep these things running in the salt phase at more appropriate levels of availability and system utilization. So that is kind of number one.We have got a new unit showing up, I think we have talked about that in the past, would show up late this year. We don't have anything built into the plan this year for that. But we will see the full benefit of that unit next year and it will allow us to pull one of the older units off towards development on this new mine plan that we have referenced a time or two in the past.So with that, I would expect as we continue to improve things at Goderich, it will lessen the burden of purchasing import salt and for every ton you do that, you are going to experience margin expansion. Because the margin we experienced across imported tons is less obviously than we can achieve through internally produced tons.In addition, as we grow our volumes at Goderich, which I have every intent and believe that we will, fixed costs absorption levels will also improve driving down Goderich costs, which will further increase margin expansion.So without any reference to specific targets, that is at least the near-term game plan. And then the longer term game plan is I think we discussed you know creating mining districts and migrating ourselves from the old mine setup that is been in place 50, 60 years towards a new mine setup, so that we can reduce the care and maintenance costs associated with maintaining the old mine works and get ourselves set up for the next 30, 40, 50 years.But that is going to take two, three years to get underway. But that is what we are working towards. So that is a really long answer to your question, and I hope that was responsive to it.

No, certainly helpful, I appreciate it. Sticking with salt, you know, 85% completed at this point, I think that is about 10% to 20% above the usual pace through the balance of the year. Would you characterize that 85% is in line with the broader bid season or is it higher than normal, because you chose to fill your book faster than that maybe some of your competitors?

Well I think it's a function of people being depleted in terms of inventories, the RFPs came out pretty aggressively, we had a couple of really big wins, I think was probably what makes up most of that delta, because you know we normally come in this time of the year, as I'm learning anyway, somewhere in the 70% zip code and in that we are in at 85%. I think it's really a function of a couple of big wins that we took up in the upper Midwest. And I think that is essentially the difference. Jamie, did you have reference?

Exactly right.

Thanks. I'm going to try to sneak one more in here. Have there been any early indications that your fourth quarter micronutrients demand can have a pretty healthy comeback, given higher crop prices and where we started the year and pressures on yields?

I think we mentioned some headwinds here in the second half expected to continue, certainly higher crop prices and depletion of those customer inventories will help. But we are just not quite sure yet. We are going to have to wait and see how that unfolds. It's hard to say at this point. Exactly.

Fair enough. Thank you.

Our next question comes from Mark Connolly with Stephens.

Thanks, just two questions. Kevin, when we spoke last, you hadn't spent a lot of time yet with the people on the Ag side of the business. And I assume that you are spending most of your time on salt. But since that time, you have made some important management and organizational changes. We hear a lot from investors that the Ag business doesn't fit. So can you share your still early thoughts on how the Ag business does it?

Yes, good question. Yes, we did make some important changes and we will continue to make changes as we evolve towards more of a functional organization structure with a bifurcation between operations and the commercial aspects and treating that from an enterprise wide standpoint.And then, as Jamie mentioned in his prepared remarks, centralizing strategic sourcing and how we allocate capital internally, we think there is some value there. But not to get into strategy here this morning. I think our first order of businesses, as we are conducting our kind of business MRI or diagnostics, whatever you want to call it top to bottom, we see a lot of internal potential here.And I think staying focused on that in the near-term and improving the results in our performance is jobs, one, two, and three, for the next handful of quarters. So that is what we are really going to be focused on. And as we start to put runs on the board through some of these improvements that we are in the very early stages of.And as business gets healthier and healthier, I think that is when we will evolve into more of a strategic discussion with the Management Team, as well as the Board on where we go from here. So I don't want to touch on somebody's view that Ag doesn't fit or does fit. I think job one for us is improving the performance of the business, because you know it goes without saying that we have had some misses in the past and I think getting focused on that is really job one.

Helpful. And second question is just on working capital. You had a bigger bill this quarter with higher inventories, which I'm pretty sure is a good thing. So how should we think about the second half, should we assume that working capital is going to be a bigger build year-over-year again as Goderich continues to show progress?

Yes, I will take that one. You will see a bit more cash consumed from the working capital build. Last year in our salt business, we ended the year with significantly lower inventories than we would have typically wanted to end with. And then as you can recall, we had consumed all of our 2018 salt kind of midway through first quarter this year.So we would prefer to finish the year with higher levels. And so you can expect to see a bit bigger, not a huge difference. But you know, it could be $10 million to $15 million bigger year-over-year in terms of working capital in the second half.

Super helpful. Thank you, Jamie.

We will take our question from Christopher Parkinson was Credit Suisse.

Great, thank you. You hit on this a little bit when you take a step back and just look at the current segment level outlooks over the intermediary to long-term, how should investors be thinking about the annualized cash conversion in a normalized environments, maintenance and growth CapEx and just key variables. So just any additional insights on Slide 12 and just how you are thinking about that would be very helpful. Thank you.

Sure. So in the prepared remarks, we mentioned the focus on internal capital allocation. We have been running high CapEx for several years, last year above 100. Trying to get that down below 100 this year. So I think we are going to look to drive our maintenance of business capital a bit lower, with more rigor and attention to that specifically. So, you know of that $90 million range of CapEx is what we are focused on right now.Cash taxes are going to be similar to what they have been using that that 28% tax rate is as good numbers any. And then we do expect to get to that $150 million to $200 million of free cash flow based on our expected increased production levels, reduction of imported salt, like we talked about before. And, we are not in a position to say we are going to hit that level in 2020, but as you look out a little bit further and think about 2021 that is a very real possibility.

Great. And when you think about the competitive landscape in the U.S. salt market, can you just update us on your intermediate to long-term strategy just to maximizing FX in your key markets and just how that looks it is like shaping up in the current QSR season. Is there stuff you can do even better in next year and the year after that, are you kind of where you think you need to be roughly and that comments excluding the third-party salt?

Yes, good question. I mean, I think job one for us is and like everybody knows Goderich hasn't performed all that well over the last few years and getting it performing well and basically growing it into the level of import salt that we have now is kind of job one.And then when you look at our depots, and our logistics and our network, we are taking a very close look at how we move salt around to make sure that we are doing it in the most efficient way possible. That last miles, the toughest part and we want to try to optimize around that so there is not that there wasn't a focus here before, but it would be renewed focus on that to try to minimize the cost from the salt phase to the ultimate depot or even the ultimate customer.So we think there are some additional improvements that can be made there on the logistic side, and we are honed in on that as well. But again, just kind of going back to Goderich for a moment, there is a ton of pent up potential there, that I'm super excited about having been up there now a handful of times already, and feel really good about our prospects there is, it is going to take a while to kind of get things in place.But I think over the next few quarters, you will continue to see improvement there. And then over the next few years, I'm super excited about what the prospects look like in terms of getting into this new mine plan and correct geometries, bigger equipment, these new units that we are getting later this year and next year are much more substantial units than we have up there now and I think their productive capacities will exceed what is in place now.So I'm really excited about how we are getting things teed up and how I think we will be able to execute over the next few quarters. Thank you.

Thank you.

Our next question comes from Joel Jackson with BMO Capital Markets.

Hi, good morning everyone. I want to go back to this season, talk about a word of volume is trending up above 15% year-over-year. Can you maybe break that down a little more between how much of that came from Goderich being able to produce more to maybe some competitors having issues on production to maybe just sort of market growth or inventory adjustments year-over-year in channel. Thanks.

Yes, I will start that and then you can chime in Kevin. So we wouldn't really - we will never talk about competitor behavior, like Kevin mentioned, we picked up some tons quite a nice slug of tons back June, July time period, which was a bit surprising to us, but I'm not sure if some competitors are shifting tons to different geographies or some may have some supply constraints themselves.But you know, we are we are running very well down in Cote Blanche. So that has given us the opportunity to adjust our we call it a North South line where we can serve tons out of either mine. So with that facility running like it is, we are able to take advantage of that.A significant part of it is certainly that the higher levels of production out of Goderich, so that is a big piece of our ability to increase. And then gosh what would be the other piece? I think a lot of business last year went kind of unserved.So that enabled us to take significant amount of tons back, take market share back so to speak at really nice prices in the grand scheme of things. So there is a lot of pieces there. But I think unserved the market that we are taking back, so to speak, or picking up and Cote Blanche and it hard to say what is happening with our competitors.

Yes. I was just going to say, I mean I think Jamie hit on the right points there. I mean, we did run into some surprising I guess no bid situations and we don't have a lot of entails as to what is going on with that, it worked out really well for us and we are happy about it.And, as Jamie mentioned, that I would like to give kudos to Cote Blanche team, I mean they have been a very steady producer through the year and they handled that storm very well. Took a loss on tons. But they will make that up between now and the end of the year.And, of course with the Mississippi kind of being backed up, we are a little behind on moving our salt, but we think we think we will be fine throughout the course of the year. So I think we are teed up for a really strong back half of 2019 and have some nice tailwinds going into 2020 as well.

Thank you for that. Maybe back on Brazil, so you have given some commentary about some of that puts and takes in your forecast second half of the year grower caution and some of the sensitivities in corn and beans, I appreciate that. Could you maybe give some commentary on a lot of the products that you sell in Brazil, are not the same commodity, fertilizers and cropping for products that we see you sell a lot of niche products, specialty products. Can you maybe comment on the sensitivity of the broader Brazilian Ag macro to your set of products as appose to more of the commodity products. Thanks.

Sure. Thanks, Joel. That is a good question. But remember, we do have high technology products, leading edge products, but a lot of our products go into soy in South America and corn as well. So the biggest shift is like we mentioned in the prepared remarks is that risks around soy corn.The real issue down there right now is as farmers wait to sell their grains with the commodity traders is I think they are about 20% behind typically they would have committed 20% more their grains than they have year-to-date.So the big trading companies aren't taking positions as quickly as they were last year so they are waiting for that. So what that can do is shift sales from third quarter to fourth quarter. So that is why we are being a little cautious there. If we see corn tons planted and some premium related products, that can give us a little bit of margin squeeze, because we just don't make as much money on the corn side as we do to soy.The other piece is, if they wait too long they can miss the soil applied nutrient season, which is coming up quickly. In which case, if that is a little bit lighter in order to deliver the nutrients to the plants, we would expect a little bit of boost on the full-year side which would transition tons and profitability for that matter to the fourth quarter. So yes, we do have some citrus and coffee and other products down in South America. But the lion's share of what we sell into is soy that is the main driver down there. So that is what we try to try to focus on.As it relates to the second quarter itself, we did see some good activity on the B2B front. In our ingredients business, we had significant volume sold into distribution. But I think even the distributors are down there, even though they are taking product on their customers, particularly in the South are also waiting to see how things flush out with global trade, swine flu, China demand and soy prices.

Thanks.

[Operator Instructions] We will take our next question from Jeffrey Zekauskas with JP Morgan.

Thanks very much. Taking the course of the call. Kim, you made a remark about how $150 million to $200 million in free cash flow look less possible for 2020. But maybe in 2021. Why did you say that, why is 2021 their opportunity to capture that level of free cash flow. And why do you rule it out for 2020?

Thanks, Jeff, I'd say we will be on a path to that. So I would expect 100 to 150 out in 2020. So, bottom end of that 150 to 200 is kind of how we see it. As we ramp-up production, we can’t take ton back in the marketplace as quickly as we would like, because of the timing of the bid season.So you have to bid those incremental tons, keep increasing our production capacity so we can did these incremental tons, replace purchase tons, which generates more cash flow and it just pushes it out a bit. So just to be clear, I would say this year, we are talking about 100 million next year, we should be able to move that up toward kind of halfway up to that 150 to 200. And then in the 2021 timeframe, we would be fully normalized.

How many purchased tons of salt roughly do you sell?

So we think of it, we don't we don't talk about that specifically, but we are spending approximately $15 million on purchased salt.

Okay. Are there any capacity constraints that you still have that are left over from the strike or any other factors in trying to serve I guess, the 2020 calendar year?

No, I mean, I think just like in the 2018, 2019 bid season how we took our commitments down. You know that was because of our own internal supply constraints. Now that we have continued to see production recover. We have taken those tons back, we are very confident that we can serve the 2019 and 2020 bid season given our current production rates at all of our facilities. So I don't see any issue around being able to serve what we did. Was that your question Jeff?

Yes. Just two very quick things. You treated the extra logistics costs because of flooding in a nonrecurring item. Why do you do that? I would think that there are all sorts of small natural things that occur when you run a salt or an agricultural business and shouldn't these be part of normal operations?

Well, it was particularly unique Jeff. That was something that we haven't ever - since I have been at the Company seen before in terms of the upper Mississippi block was closed until June 27th. I don't think that that has ever happened. So that is an item that we truly view as non-recurring and extremely unusual. You are talking about more rain in the Midwest than they have seen in 125 years. So that that is to us by definition unusual.

Okay. And then lastly, in the press release Kevin you said that you made important strides this quarter to drive operational performance, which is beginning to be reflected in your results. Can you be specific about what it is you accomplished this quarter?

Well I mean I think you can see it in particular in Goderich on a year-over-year basis being up 36%. And I would expect that 36% number to be larger, by the time we get to the back half of the year. So as I'm, as I mentioned, think of it as a as a continuum.But I think at the mine level, what we are seeing is like I mentioned earlier, very close collaboration between the production and maintenance folks to understand that these - this is complicated machinery, and it needs to be taken care of, and the over occurring less sort of unplanned failures and doing things more on the preventative side. And overtime, we will move more towards the predictive side to anticipate what we think might be coming.So bottom-line, is the units are just running better and I think that is a function of people getting more and more comfortable with the equipment and how to take care of it and that sort of thing. So I think that in and of itself is a big one.And I think we will continue to see that through the balance of the year and then additionally, I would point to SOP costs being down, in that $225 ton zip code. That is pretty important milestone compared to what we have been in the past. So I would point those two things as examples.

Okay, great. Thank you so much.

Our next question comes from Seth Goldstein with Morningstar.

Hi thank you for taking my question. Assuming the salt production continues to ramp up as expected. When do we expect to see the large improvement in unit production costs show up in the finance results? Is that late 2020 or out in 2021?

So, you will start to see some of it in 2020 on a blended cost basis for all salt tons. We will get down below $40 in 2020. And then the continued improvements we make throughout 2020 itself will really start to show up in 2021 for the most part. So we view a couple of dollar lower salt costs in 2020 and then and then another step change out in 2021.

Okay, thank you. And looking at the North American Ag business. I remember right SOP sales are only to 10% of corn, soy, and row crops. But how was the entire North American crop exposure changed once you started selling the micronutrients North America and then how will that evolve overtime from a crop exposure basis.

Well, I would say that we haven't seen - so the 10% number is I'm not specifically sure about that piece. A lot of SOP most of our SOP goes into specialty crops. Don't think of it as a growing into row crops, it does go into potatoes in the Pacific Northwest. But in terms of crop shift, I think our SOP will continue to be the best source of potassium for specialty crops in North America.As we continue to grow our micronutrient business, you will start to see that diversification and that is like you mentioned earlier in our prepared remarks, we have built out our sales force and our R&D team to continue driving new products to continue to really grow that business. So those products, many of those micronutrients are going on to row crops throughout the Midwest. So it's just going to take some time to build that up before you see a significant a significant shift there.

Okay, great. Thank you.

We have a follow-up question from Vincent Anderson with Stifel.

Yes, I just had two quick follow-ups, roughly what portion of the 8% increase in your salt bid price would you attribute to passing through logistics inflation?

I would say. So there is a mix impact. The tons we won versus last year. There is a lot of factors in there. But probably a small portion, I would say less than a quarter of it.

That is helpful, thank you. And then just with the brass come outage down in Brazil and the rise in Latin American caustic soda prices, have you seen a pick-up an interest for potential buyers for your Brazilian chlor-alkali facility?

So we wont to really comment on that. Specifically, we continue to really enjoy the margins and the profit of that business, but you know, I don't think that we have any comment in terms of M&A.

Alright. Thank you.

And it appears we have no further questions at this time. I'd like to turn the conference back to Theresa Womble for any additional or closing remarks.

Thank you, Lauren. And thank you all for joining our call today. If you have any follow-up questions, feel free to reach the investor relations department. You can find the information on our website. Have a great day.

And that does conclude today's conference. We thank you for your participation. You may not disconnect.