Compass Minerals International, Inc. (CMP) Q2 2012 Earnings Report, Transcript and Summary

Good day, and welcome to the Compass Minerals Second Quarter Earnings Conference. Today’s call is being recorded. At this time, I’d like to turn the call over to Ms. Peggy Landon. Please go ahead.

Thank you, Brandi. Good morning, everyone. Thank you for joining us this morning. I have with me here Angelo Brisimitzakis, our President and CEO and Rod Underdown, our CFO. And 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 expectations as of today's date, July 30, 2012, and involve risks and uncertainties that could cause the company’s actual results to differ materially. The differences could be caused by a number of factors, including those identified in Compass Minerals’ most recent Forms 10-K and 10-Q. The company undertakes no obligation to update any forward-looking statements made today to reflect future events or developments. You can find reconciliations of any non-GAAP financial information that we discuss today in our earnings release, which is available in the Investor Relations section of our website at compassminerals.com. Now I'll turn the call over to Angelo.

Thanks, Peggy. Good Monday morning everyone. Thank you for joining us this morning. As you know from our earnings release our results this quarter were very consistent with the outlook we provided last quarter. But some of you may have been surprised to read that we expect our highway deicing sales volume to be about averaged this coming winter, if the winter weather is more typical than this season last year. And that the average price we’ve achieved during the bid season so far has been approximately flat. I know there is generally a lot of interest in the highway deicing bid season, so I will begin my remarks by explaining the dynamics that are playing out in our served markets this summer. First, keep in mind that the bid seasons are a lot like winter weather seasons. They develop over the course of many weeks and months. Governments generally don’t consult with one another on deicing purchases because each one is trying to make the best decision for its own constituents. So, trends generally don’t emerge until about this time in the summer when the bid season is at least half over. And we sometimes see trends shift as the season progresses from this point to early fall. This bid season is highly unusual because of the record breaking warm and mild weather we experienced in North America this past winter. A lot of our customers salt storage facilities are already filled full of carryover inventory that they bought over the past six months to meet the minimum purchase requirements specified in the contracts we signed with them last year. It’s important to remind you here that minimum purchase and maximum delivery obligations are primarily a function of contracts in the United States. Most Canadian and British contracts don’t…

Yeah. Thanks, Angelo. This morning I’ll focus my remarks on the financial details related to the Company's performance in the second quarter and what to look for from us for the remainder of 2012 and into 2013. Beginning with the salt segment, Angelo explained that total sales volumes in the quarter were down 10% compared to the second quarter of 2011, this included a drop in highway deicing volume of 15%, partially offset by a 2% increase in consumer and industrial sales volumes. The highway deicing sales volume decline was principally the result of lower, the more average pre-season sales in the U.K. when compared to the robust pre-season sales there last year. In our North American markets, highway deicing volumes were relatively consistent with the prior-year, as some of our customers took the remainder of their unmet minimum commitments in the second quarter. Also during the quarter, we began to experience some softness in the rock salt sales to chemical customers, which we believe to be reflective of a general slowdown in the broader chemical industry. You may remember that our highway deicing sales volumes and prices are a combination of rock salt and other minerals sold into highway deicing applications as well as rock salt sold to chemical customers. We wouldn’t expect this slowdown in sales from the chemical end use to be a material factor in our earnings this year. But it does contribute to our expected weaker third quarter highway deicing sales volumes, especially when compared to the record sales volumes in last year’s third quarter. I will spend more time discussing our third quarter expectations in a moment. Consumer and industrial salt sales volumes improved modestly this quarter by 2% over the prior-year and were in line with our historical second quarter consumer and industrial…

Thank you. (Operator Instructions) And we will go to our first caller, Ivan Marcuse with KeyBanc Capital Markets.

Thanks for taking my question.

Good morning, Ivan.

Good morning. The contracts that you talked about, about 50% have been negotiated. Is the next half – is there any difference between the first half or would you expect sort of – sort of as the business as usual or pretty much the exact same thing that happened with an excess?

Yeah. Ivan, this is Angelo. Obviously we would hope the pattern will continue because this is kind of what we thought was going to develop and it actually has developed that way so far, but it’s really hard to predict if there will be a change or not. The make-up change is over time, I mean; we have activities in two different countries. We have activities with governments and non-government entities. We have activities that are tendered and non-tendered. So each of them has their own subset of dynamics, but at this stage we’re believing that it’s going to end in a similar manner to what it’s been so far.

Got you. And then if you look at in your second quarter in your salt sales, the way I understand is its mostly chemical sales in there since there’s no snow in North America. So in the third quarter I’d assume there’s no deicing sale. So would the price -- sort of your deicing price mix, because I know it includes chemical, would that be flat basically sequentially or would that still be down on a sequential basis, and what sort of moves that, if it’s just sort of chemical salt to chemical salt?

Ivan, this is Rod. Yes, in the second quarter we did have a little bit lower chemical sales but we still had some deicing sales in the second quarter. In the third quarter we expect very little of that, so there would be a mix effect, it would -- we’re projecting that it would not be flat, that it would be down maybe 5% or 10%. So, we’re kind of thinking a price in the mid-40s as opposed to last year’s third quarter price which was around $48 for that part of our salt business.

Got you. And then my last quarter, I’ll get back in the queue. You talked about cost in your specialty fertilizer business sort of falling to -- I think you said $300 in the first quarter, but in your presentation you talked about in the second quarter. So is there -- am I misreading it or did I just misunderstand something when you talked about it? And then going forward, why wouldn’t costs be lower than $300 going into the back half of the year if you have probably, just bad as it was evaporation last year is as good as it’s probably been this year and then you should have some of the benefits of the operating improvements that you put through?

Yeah good question, Ivan and I apologize if there was some ambiguity about the $300 and the timing of it. Certainly it depends on sales and when we work through the 2012 production the expectation is that currently, is that; we’d have some inventory starting January 1 that would be 2012 production, we do FIFO accounting kind of basis, so we need to work through that. We expect to work through that during the first quarter, so the first full quarter of the step down in cost would be the second quarter. It would likely – some of the first quarter sales would likely also be at the lower cost. Also I just want to remind you that it includes SG&A and royalties. It’s a full cost of goods sold plus SG&A and we have been making some investments in our selling area and marketing area to plan for larger volumes there that we’re expecting. So, as I mentioned or as we mentioned, we expect at least $100 improvement. We certainly don’t want to over promise and would expect to do better if the Phase 1 efficiencies are fully realized.

Got you. Is Phase 1 complete now – fully complete?

Yeah, this is Angelo. I mean, with the yield project, I think you’re never fully complete in extracting efficiency from a plant. So, I would say we’re materially complete, but we still have projects that we believe will continue to incrementally give us additional yield. In fact a good organization never stops doing that. So, our recovery is based on the amount of mineral that is in the lake, our goal is to get to 100%, obviously that’s far off, but we’re taking those learnings from Phase 1 and we’re using that to design our Phase 2 plant expansion.

Great, thank you for taking my questions.

And we’ll go next to David Begleiter with Deutsche Bank.

Good morning, guys. Angelo, just on highway deicing volumes, have you been able to gain back any share that you lost last year due to the Goderich constraints?

We haven’t lost any share further from what occurred last year. Obviously, coming of the tornado week, we paused our bidding, usually following an extremely weak period it’s not the most ideal time to regain share. So I would say our share today and again the bidding isn’t over yet. So I’ll have to be careful with my comments, but based on where we are, our share is very similar to what it was in the last season. But we fully expect over time to reestablish our share and then grow share as we have historically during periods of very strong winter where we tend to be more opportunistic on the spot side and also getting a disproportionate amount of the normal 1% to 2% market growth rate which again we haven’t seen this last period, but we fully expect going forward those dynamics to continue.

And just on pricing in highway deicing, when was the last time prices did not rise for a season?

Yeah, Dave, if my recollection is right, I believe it was two years ago. There was a fairly mild winter -- I want to say it was the winter of ’09 and ’10 -- 2009 and 2010 and prices were essentially flat that year as well.

I believe in the late '90s there was another period where there was a mild winter and prices -- volumes declined modestly and prices were near flat. So, this season it seems to be falling into that pattern. Again I caution you there’s still a fair amount of bidding left and as we talked before there are different submarkets to our bidding whether it's Canadian markets, U.S. markets, tendered, non-tendered, government, non-government, but the composite so far has been the pricing essentially flat.

Are you seeing any more or less imports into the U.S. for this coming season or the last season?

Again in our service area which tends to be somewhat protected from imports being in the central part of North America, we very rarely see imports and we haven't seen any -- I don't believe we've seen any this cycle. I can't comment really for the East Coast where we don't participate, I would expect more typical import patterns at that part of North America.

Thank you very much.

And we’ll go next to Jeff Zekauskas with JP Morgan. Jeffrey Zekauskas - JP Morgan Chase & Co, Research Division: Hi, good morning.

Good morning, Jeff. Jeffrey Zekauskas - JP Morgan Chase & Co, Research Division: Hi, good morning. In the second quarter in your salt margin, did you benefit from some of the take or pay features of your contracts and if you did, by how much?

Yeah, we certainly had some amount of sales in the second quarter that were customers who do have storage capabilities and did take their unmet minimum commitments from the prior season, because our sales volumes was 1.1 million tons, it wasn’t a significant percentage, couple of hundred thousand tons. But there were some sales that met that -- where the customers were meeting their unmet requirements from the prior-year. Jeffrey Zekauskas - JP Morgan Chase & Co, Research Division: Okay. So, this is a difficult year for Compass and, so I would expect management incentive compensation to be down this year versus last year; by how much might it be down, if it is down?

Yeah, actually it is …

Unfortunately it is down.

It is down Jeff, and I don't have a percentage for you, but because of the expectation for the year and our first quarter results, the vast majority of that decline in the accrual was recognized in the first quarter. Jeffrey Zekauskas - JP Morgan Chase & Co, Research Division: Okay.

If I had to put a percentage to it, I’d call it 25%. Jeffrey Zekauskas - JP Morgan Chase & Co, Research Division: And then lastly, is there a normal split between your fourth quarter deicing salt volumes and your first quarter of the following year deicing salt volumes; and if there is a normal split what is that and will this year be a normal split or not a normal split or you can’t tell?

Well, yeah, there is a normal, and the normal is around 45%, 55%; so 45% in the fourth quarter of a winter, 55% in the first quarter. In terms of what to expect this year; we would plan on something similar to that. What I would -- of course, I’d never want to predict the winter and we always say; a winter isn't done until mid-April. So, you never know how the winter is going to land. But, I think just overall we’d probably plan on a little lower percentage than that in the fourth quarter and a little higher percent, but not materially different than that. Jeffrey Zekauskas - JP Morgan Chase & Co, Research Division: Okay. Thank you very much.

And we’ll go next to Bob Koort with - Goldman Sachs.

Thank you very much. Good morning.

Good morning.

Good morning, Bob.

I always find the slide deck you guys provide quite helpful. I had a couple of questions actually on couple of those slides. Angelo, if I went to Slide 14, which shows your historic cash flows, it appears that in the last five years there’s been a meaningful step-up in cash flow, nearly double what it was in the preceding five years and I know early in Compass’s public life it was a pretty high yielding stock. It seems like you guys have more cash than you need. Is there any chance you could start inching that dividend back up to a higher payout, I mean, beyond the 10% increase you talked about earlier this year?

Yeah, I mean it's a good question. I mean, every year we've – since we've been a public company we've increased our dividend and even during this period where other companies suspended and cut back their dividends, we increased it by double-digit. So, I think we're pretty proud of our dividend and our dividend yield. I believe about $65 million, I think that’s the number Rod, of our cash, currently gets allocated. What I would remind you is during this period we've also embarked on some very aggressive investment, whether it was at the Goderich mine, where we invested over $75 million or at the Great Salt Lake where we're talking about investments between Phase 1 and Phase 2 in the hundreds of millions of dollars. And then in addition, unfortunately we’re having to reinvest in assets damaged by tornado. We fully expect to get a recovery from insurance but our capital investment plans have been elevated in the last couple of years and plan to be elevated for the next couple of years. So, again we have to find that right balance of honoring the dividend and the dividend yield, but also to make sure we’re investing strategically in our advantage assets for the future. We think we found that balance, but clearly assuming our cash flow stays high and improves and are ultimately our investment intensity declines as we finish our strategic investments and we don't find kind of a needle moving acquisition. We fully expect to utilize other financial mechanisms whether its dividends or share buyback to return to the shareholder their cash.

Angelo, if you were to find something that was attractive, would you consider using equity or do you think because your balance sheet has plenty of room, you’d be more likely to use debt?

Yeah, Bob -- I think it would of course depend on size, but assuming that was a reasonably sized investment, I think our bias would be towards debt.

And my last one if I might; as a chemical analyst we hear talking, there’s some discussion of some expansion of Chlor-Alkali facilities in the US. Not quite sure if any of those are – were your customers, but would you expect there to be some growth in your salt into the Chlor-Alkali markets over the next few years?

I mean – its Angelo again. I mean, we’ve seen good traction and improving business in salt for chemical application, so we’re very happy with that. A lot of the projects rely on brine that's kind of in-situ where we don't participate, but certainly in those projects that source rock salt or a solid product we expect to participate. We currently enjoy good share there. We have a pretty strong business model to support it, so I think marginally increasing our outlook into that segment.

Thanks.

And we’ll go next to Edward Yang with Oppenheimer. Edward Yang - Oppenheimer & Co.: Hi, good morning.

Yeah. Good morning, Ed.

Good morning. Edward Yang - Oppenheimer & Co.: Second quarter consumer volumes, what happened there? Volumes were up about 2%, they were down in the previous quarter and you’re expecting that to decline again in the third quarter?

Yeah. Ed, I don't think there’s anything particularly noteworthy about the volume increase. I mean, it's a segment where our share hasn’t and share typically doesn't change dramatically, but there can be just minor movement in the timing. If you look at our year-to-date volumes they’re down, but that's entirely due to the deicing. So, I really just would attribute that growth somewhat just a timing and not any particular other noteworthy factors. Edward Yang - Oppenheimer & Co.: Okay. And what are your contingency plans if -- again the weather doesn't cooperate and your customers don't need to fulfill or don't plan to commit -- fulfill their volume commitments by the December deadline?

Yeah, this is Angelo. I mean, certainly we've gotten a lot of practice on our contingency planning based on the three highly unusual weather events in 2011. In fact, the last action we’ve taken has been in the second quarter of this year, where both of our North American mines have been a slowdown or shutdown for extended periods, in order to rebalance our inventory. We feel it's essential that we enter the winter with the right amount of inventory and the second and third quarter really provides us the period, which is post the winter season to correct that. We do have quite a flexible cost structure at our mine, particularly in labor. And we have agreements that allow us to flex up and down our headcount, and we do that over the number of hours worked. So, I would imagine if winter weather comes in very, very strong, we’ll flex up. And I imagine unfortunately if winter weather were to come in very, very weak, we’ll flex down. We probably would not make the call on that until the first quarter where we’re sure we’re through the winter, but typically the company has been very active in rebalancing its inventory and making sure we’re positioned with the right amount of inventory going into the subsequent winter. One thing about winter weather unlike, some of the comics have been about the chemical industry. There’s not really an economic cycle to deicing salt. There is really not even a weather cycle to deicing salt. The pattern is random and next winter might be the harshest winter we ever had and it could follow the mildest winter we ever had. So, we always have to prepare for the typical winter and be capable to flex up to the maximum commitments that we've made, and we like that challenge, that contingency. But we also unfortunately on occasion as we head through this last season have to flex down to keep our inventories correctly balanced. Edward Yang - Oppenheimer & Co.: And is it fair to say Angelo that, this has sort of been an unprecedented year, I mean not just with the tornado and the other issues; but in terms of working with your customers and this amount of volume and magnitude in terms of the carryover inventory issues and so on?

Yeah, I would say 2011 and the winter of 2011, 2012 is unique, I mean -- and that's just one of three weather events we've had to deal with. I mean, the winter was somewhere between the mildest for us in 15 to 30 years depending on the region or the product line. We've never experienced a tornado in Goderich, I am not sure the town of Goderich has ever experienced a tornado; but as far back as the weather records are they couldn't record one. And the solar-evaporation season, which we count on at the Great Salt Lake, it’s a late 80s before there was that much rain and moisture early in the evaporation cycle. So, it wasn't kind to us. Again, we’re not complaining. We would have preferred the other side of it, but I think it points to the resiliency of the company and the contingencies we have to react. And I would say almost the courage we have to take those actions when it’s obvious that the environment we assume going into the year was not the environment we were handed. And we will continue to be responsive and then communicate our actions, but also try to give you kind of an underlying sense of what our results are, had they not been for these unusual events.

So Ed, if I could just add to that, I think we feel like we’re turning the corner with typical weather. We would expect to achieve the guidance that we gave you today. But you might – everybody might specifically look at the third quarter, because it's where we feel like the biggest single impact is from the winter period is going to be in the third quarter. So there are some unique things happening in the third quarter that are affecting not just sales volumes, but also salt costs and of course we will have the continuing SOP costs. But we’re definitely turning the corner on those things and we would expect a more normal winter season in salt.

To go a little bit beyond that, I mean, we read everyone’s reports and I think we have some really good analyst that really follow us well and give us – give good insight to the investor as to what to expect. I do have to say that third quarter as Rod pointed out, there appears to be a disconnect. So, we put a page into our presentation that was referenced before, it’s on Page 4. It talks about the third quarter specifically. So I would encourage everyone to kind of take a look at those – that guidance and look at the estimates and the consensus and really make sure you got that one right. Edward Yang - Oppenheimer & Co.: All right. Thank you.

(Operator Instructions). We’ll go next to Mark Gulley with Gulley & Associates. Mark Gulley - Gulley & Associates LLC: Hey, good morning guys.

Hey, Mark. Mark Gulley - Gulley & Associates LLC: Couple of things. It’s been 10 months since your Investor Day in the Great Salt Lake and I’m wondering if you have any updates on some of the new product opportunities that you talked about there. I think one of them had to do with specialty ice control products, and other one had to do with some innovations in crop nutrients that you guys were talking about. So any update there would be helpful?

Yeah, that was long a time ago. But obviously we haven’t had a chance to talk about our marketing efforts having to deal with the numerous weather events. We were very excited at the time about magnesium chloride, particularly into some chloride deficient soils on the Ag side. We still are, where the Ag business unlike the chemical industry, I mean, you could prove something out in plastics or chemicals with one trial over a short period of time. On the Ag side, trials take years. Trials are affected by weather. Obviously, a drought might delay a trial or render it meaningless if the conditions are so abnormal. But we continue to stay to be very excited about magnesium chloride. The other piece we're very excited about is the Big Quill Resources. I think Rod mentioned it a lot of non-Ag applications, which we talked about on Investor Day and subsequently, some of it’s on our website. In terms of higher priced specialty applications that aren’t tied to the Ag cycle that have quite high margins that were new and came to us on a synergy with the acquisition for Big Quill.

And Mark if I can just add to that, on magnesium chloride, we’ve also seen a summer that has been hot and dry and part of our magnesium chloride is soil stabilization, de-dust application that thus far has been our most successful new product with magnesium chloride and we really seem to have a lot of momentum there. So, you might remember that the magnesium chloride, the incremental cost is very low for us on that and so we feel good about that. I mean, 2013 could be a breakout year. It would require a lot of hot dry weather in the west, throughout the west, but we feel good about our moment there. Mark Gulley - Gulley & Associates LLC: All right.

And if you look at magnesium chloride, it’s really the only mineral that’s used by each of our kind of three businesses. It’s used by our salt business, as a specially deicer, and as Rod talked about as a de-dusting material. It’s used by our consumer industrial business, as – again, a specialty deicer, but also a blend stock and it’s used by our Ag business. And our SOP expansion brings along mag chloride essentially free because as we expand our SOP and seal our ponds, we get automatically additional magnesium chloride. So as Rod said, it’s a terrific product and expect us to be talking more about it as we go forward. Mark Gulley - Gulley & Associates LLC: Thanks for the update. And if I could just wrap up, what kind of SOP price trends are you seeing for your specialty crops maybe compared and contrast to what the MOP producers might be seeing?

Yeah – and again, this is where we kind of have both sides. I mean, clearly, we sell potash. So, we’re always interested and will be affected indirectly by whatever happens in the broader MOP market or whatever happens in commodity crops, corn, soy, wheat. Our crops have not suffered the drought conditions typically that the row crops have suffered in the Midwest; partly we don’t sell that much in the Midwest. And then secondly, a lot of our crops because of the higher value are irrigated crops. So, I think dynamics of our crops have held up reasonably well. They have not surged in pricing as some of the commodity crops have surged, but they also have not suffered in terms of yield as many of the commodity crops have. So what we’ve seen on SOP pricing, in spite of kind of the volatility in MOP, we’ve seen quite stable demand and quite stable pricing. And that's not just the phenomena in the second quarter, we saw that in the first quarter and we saw that dating back into the end of next year. So, when we look forward, we have to acknowledge that there is a lot of uncertainty around MOP, MOP crops and that whole global potash, but assuming that stays reasonably together, we expect the SOP markets and our sales to be similar going forward as they’ve been in the last couple of quarters. Also remember, unfortunately we’re capacity constrained in SOP. So therefore, any surge in demand, we probably would not be able to enjoy right now until we get our expansion program, which takes many years recognizing the three year cycle to produce SOP. Mark Gulley - Gulley & Associates LLC: Thank you.

And we’ll next to Joel Jackson with BMO Capital Markets.

Good morning.

Hi. Good morning, Joel.

Hi, Joel.

Could you maybe break down a little bit for your guidance for Q4, Q1 of 7.5 million tons of highway deicing salt assuming a normal winter? Could you maybe give a rough idea of what percentage of that would be unmet minimum purchases versus sales under new awards?

Yeah Joel its – that’s a good question. I’d describe the unmet minimums as not a huge amount. Certainly somewhere less than 500,000 tons, but it is an important element in making sure we – everybody understands kind of where the sales versus our commitment volumes or what’s going on in the bid season, it’s an important element in understanding how the future sales expectation is related to the bid season. So, I don’t – I can’t really get any more lives on that, but its – but I would not describe it is as a huge component of the upcoming winter.

The weather will be the largest component of our sales for this upcoming season as it always is. Rodney Underdown And Joel those commitments would – those unmet commitments would be expected to be taken by contract all during the fourth quarter, not – none of those in the first quarter.

It sounds like from your previous guidance earlier in this call, what you did for Q2 in terms of unmet minimum purchases, if it sounded right, it’s about three quarters million tons of unmet minimum purchases in total?

That’s order of magnitude. That's not a bad total, yeah.

Okay. For your guidance of flat pricing so far 50% of the way through bid season, does that guidance include, is it just new awards or you also including some of the unmet minimum purchases maybe some of the multi years? Rodney Underdown Yeah. We are including everything that has been contracted yet, regardless of the type, whether it's a multi-year or it’s a rollover or exactly whatever. So, it – yeah it includes all types of awards today.

So has pricing for new awards been underperforming the flat? Is it slightly down, is it slightly up, is it flat?

Yeah. I mean, with the flat because of the multi years and remember there aren’t very many multi years, but there are a few. The multi years typically have some kind of an inflation based inflator on the price in those. So, those would be up a little, but the – and that would mean that just down slightly would be the bid, the actual bid volume awards.

So I’m just trying to make sure understand, so we still have the bid season to come, but that would just all new awards, is that right? Of what’s left to come in?

Yeah, the – what would be left would be totally related to new bids.

So, if the trend continued, it would be down slightly?

Yeah. Our comments are meant to be reflective of where we’re at currently and kind of a forward look as to where we would expect to be with those.

Okay. That’s great. Thanks. A little bit on Q4 for C&I, I know you gave some guidance on C&I for Q3. With the inventory build in C&I to reduce a little bit pre-season buying in Q3, would you expect Q4 – assuming a normal winter, of course, would you expect Q4 C&I volumes to be about normal or would you expect a little bit of the – sort of inventory situation to impact Q4 as well?

Yeah. That went a little more difficult. We wouldn’t expect as large of an impact in Q4 if any at all. The buying base there on consumer products usually does their pre-season earlier than the highway business, but that business is probably more subject to in-season winter in the fourth quarter. So it’s tough to say, Joel. Right now we don’t expect a large effect on our fourth quarter consumer deicing volume.

Okay. And finally, maybe it’s a little bit longer term thinking around Big Quill. What are your ideas here for Big Quill? I mean, assuming you would like to increase production, I assume also that your cost advantage long-term MOP supply agreement probably has a set amount of tons every year. So, I mean, what are your thoughts on being able to and desire to expand production at Big Quill and what are your option there in terms of other long-term supply agreements, expand your existing ones, buying MOP on-spot, and how that would potentially affect incremental margins on potentially new production?

Yeah Joel, it’s Angelo. I mean, that’s a great question. The first point is we’re very pleased with the acquisition. They’re hot acquisitions a year or so later that companies make that they can’t say they are pleased with, so I’m very pleased to be able to say that. Second thing is to agree with you. We would love to find ways of increasing – cost effectively increasing the capacity there. But there are constraints both in the assets that we have, just the kit that’s in place to produce SOP. And as you correctly pointed out, constraints in terms of how much of MOP we can source with those favorable economics in order to make SOP. But then as I commented previously about the Great Salt Lake minerals, yield is a big deal for us in terms of these types of processes. I mean, you literally lose a very large portion of your production to recycle to dust, to lack of conversion, to waste disposal. So there are significant yield opportunities to reduce the amount of waste and to increase the percent conversion of the process at Big Quill Resources, as it is at the Great Salt Lake. So, our focus will be primarily on sizing the plants to the maximum capacity that we had sourcing capability against and then increasing the yield in order to extract more tons from the same amount of input, i.e., productivity. But it’s not going to double or triple the production, but it could give us opportunity to grow. The other thing we’re doing is perhaps shifting some of the low end production that Big Quill had been producing for standard agricultural applications, shifting that to the Great Salt Lake and then allocating more and more of Big Quill’s production to those higher value applications.

Thank you.

And this concludes today’s question-and-answer session. I’d like to turn the call back over to the Compass Minerals’ CEO, Mr. Angelo Brisimitzakis, for any additional or closing remarks.

Great. Thank you. You said that well. In conclusion, I want to reiterate that Compass Minerals is quite a resilient Company and we're turning the corner on multiple weather challenges we faced in 2011. The underlying improvements in both of our segments will begin to be apparent, assuming more typical winter weather returns in the fourth quarter, and as our per-unit salt and SOP cost improve in 2013. Thank you so much for joining us today. I look forward to talking to everyone again in October. Have a nice day.

And this concludes today’s conference. We do thank you for your participation.