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

Thank you, Matt and good morning everyone. Today, our CEO, Fran Malecha and our CFO, Matthew Foulston, will review our second quarter results and current outlook. 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 26, 2016, and involve risks and uncertainties that could cause the Company’s actual results to differ materially. These 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, or in our earnings release presentation, both of which are available on the Investor Relations section of our Web site at compassminerals.com. With that, I’ll turn the call over to Fran.

Thank you, Theresa. Good morning everyone and thanks for joining our call today. I’ll start with a broad overview of our results before turning to some comments on our individual businesses. Our earnings this quarter continued to be pressured by the weak agricultural sector, while some of that weakness was offset by strength in our salt business. While total revenue was down 8% our operating earnings declined 35% driven principally by weaker plant nutrition income. These results are disappointing but not unexpected given the current down cycle in the agricultural market. More important for us is the confidence we have in our long-term strategy, based on ensuring the integrity of our assets and improving our cost position, completing our investments to expand capacity in salt and sulfate of potash, which positions us for organic growth as the markets for deicing salt and specialty potash recover, and positioning the Company for international growth, specifically in Brazil with our initial investment in Produquímica. This investment will provide geographic diversity in our earnings and lessen the impact of winter weather on our overall results. While the current results and to some degree the outlook for the remainder of 2016 are not ideal, we remain focused on execution and being prepared to maximize our profitability once our key markets begin to recover. So turning first to salt, year-over-year salt revenue was up 2% this quarter, as a result of an increase in highway deicing sales of volumes. Some of this increase was driven by late fees and snow events in April. In fact, we recorded 15 events in the 11 cities we track which compares to a 10-year average of 3.5 events. We also benefited from higher commitment volumes from the 2015 to '16 bid season which when more customers were purchasing the remainder…

Thanks, Fran and good morning everyone. I'd like to begin by discussing our second quarter salt results on Slide 8. Even though this wasn't a winter quarter, several of the winter season dynamics that lifted our earnings in the first quarter, continues to benefit us in the second. First as Fran mentioned, we actually had some snow events. In addition, we had customers placing orders to reach their minimum commitment levels. These sales boosted the mix of higher priced highway deicing tones and our mix of total salt sales and lifted our average price for highway deicing salt by 3% compared to the second quarter of 2015. While these late season orders were a positive for second quarter results, they have had a negative impact on bid volumes as well as early season order expectations for the upcoming winter. Both are lower due to the fact that customers exited the winter with above average inventories. I will discuss the repercussions of that on our outlook shortly. Results for our Consumer & Industrial business have also been good. We instituted a price increase on most of our non-deicing products at the end of 2015 and the positive impact of that can be seen in our results this quarter. On average the price for our Consumer & Industrial products increased 3% from our 2015 second quarter results. We're also benefitting from lower shipping costs as a combination of lower fuel and a softer trucking market has significantly lowered freight rates. This in combination with our efforts to focus on the most profitable customers has boosted the business’ earnings contribution for the salt segment. Second quarter earnings in the salt segment was a highest Q2 earnings since our IPO and represent the eighth consecutive quarter of year-over-year operating margin expansion. Turning to Slide…

Thank you. [Operator Instructions] We request that you limit your questions to one primary and one follow-up question. [Operator Instructions] We will take our first question from Chris Parkinson with Credit Suisse.

Perfect thank you, when you think about the longer-term outlook for SOP pricing, can you give any color on how you are working with your current customers and how are you thinking about the pricing of the potassium component, the sulfur component, as well as the lack of a chloride, so some of the things you are looking for in the back half of the year? Just anything on how to think about this slightly differently, given your customer mix versus MOP, would be very helpful. Thank you.

Hi Chris it is Fran. We definitely know there is value in the non-chloride aspects of SOP or Potassium+ and we are focused on tying to grow that demand and increase our volumes on those crops and as I mentioned in my script some of those crops have been under pressure on pricing over the past six to nine months and that’s flowing though the market and those growers’ have less profitability than they had a year ago so it's also impacting I think some of the demand in the short-term. But we feel like with the pricing that we have in place today, we can compete and maintain our share, and maintain the current tons if you will against MOP on those substitutable volume. And we will continue to build demand on the crops that are sensitive to chloride. So it's really a bit of a dual strategy there and we think we have the right people in place and the right pricing structure in place to compete given today's dynamics.

Perfect, and just very quickly on some of your longer-term targets, you hit on this a little bit in your prepared remarks, but can you just give some of the longer-term -- some longer-term color in terms of the costs at Goderich on one side and then, obviously, Ogden on the other? You hit on some of that, but just how do you think about the cost structure on a per-unit basis, assuming, let's say, a normalized outlook for both salt and plant nutrition over the next two to three years, so ignoring the next year, but the true longer-term aspect there? Thank you.

Hi Chris this is Mathew. Let me talk about Goderich first that’s where we are really making this transformative move to continuous mining. We are already significantly into that project but we don’t realize the benefits until we are able to stop the drilling blast. Right now we are running a combination of technologies underground as we are stepping into continuous mining, this assembling machines reassembling up and running. So they are already a big part of our operation up there the technology transfer is going well and we are on track to have that completed by the end of '17 at which point our costs will go down by a projected $30 million a year. So full year '18 compared to today's run rate, we should be $30 million lower given the performance of continuous mining. And again I think as you guys know, we had this technology in operation in the UK for years now, and part of making this transition successful was having UK guys here and our guys over there, so this is really a seamless adoption of a new technology. So we feel real comfortable about how that’s coming along. On the other side of the business, as we talked about with a lot of you that we were up in Ogden a lot of money put into the business, new thickener technology, new harvest feed system all things that are feeding through into cost today and will continue to improve in the coming period here. The key to unlocking further cost up there, I think is really related to volume. We are looking at very-very low levels driven by the overall ag market and I think as we get back to more normalized levels which since I have been in the business here have been 400,000 tons a year instead of closer to three. There will be a significant improvement in the fixed cost absorption and we will be running that facility sort of closer to its intended rate.

That’s very helpful. Thank you very much.

Next we will hear from Vincent Anderson with Stifel.

Good morning, thanks for taking my question. I was hoping you could talk about the weakness in the salt guidance, when you compare it to the 2011/2012 winter, which was comparatively even worse than last year's, and also given your previous comments that there have been some incremental market-share gains.

I think if I look at the way the salt business has progressed over the past few years and you're going back in the timeframe you mentioned about five years now, we've been working hard to increase our margins and you've been seeing that over the last eight quarters of consistent margin improvement and as the margins have increased I would just offer that I think a mild -- when we do experience mild winters like we've gone through this past year we're probably going to have a little more volatility in the pricing, and we've seen that with our 7% lower pricing expectation given the competitive nature of the bid season. The real story though for us is volume, in addition to that pricing. Not only do we have a weaker North American market impacting us but also a very mild winter that we just experienced in the UK impacting this year and we'll look into next year and see how that, how the weather impacts that. So, we're getting the combination of both of our key markets, as that have gone through a mild winter and the volume impacts as I would suspect to have even greater than looking back negative to the timeframe you mentioned.

Thanks, that's helpful. And on the SOP price reduction, if you are holding market share right now and it is really just the total market has declined, I think you said 20%, is this new price level -- is it necessary to defend your core market share? Is it pushback from your core market share because of lower crop prices or is it actually at a level where you think you can grow your market share going forward as you have increased capacity? I am just trying to -- I'm trying to wrap my head around the driver for that if, again, the premium over MOP is large enough where it doesn't look like a $30 per ton reduction is necessarily going to claw back some of the marginal buyers of that product.

Yes I think so the other thing that is happening out there, as at least for the last bit of time, maybe the last couple of months we have seen the MOP prices stabilize granted they are at probably 10 year low pricing but they have stabilized. So, that's from our perspective a positive signal and as I mentioned earlier I think we have the pricing on SOP at a point where we'll continue to defend against imports but can grow the demand from here on the chloride sensitive crops and as the profitability of those growers returns in some of those key crops for us, key specialty crops improve we think we'll get some benefit over the midterm. But I think right now we're just in the middle of kind of the perfect storm and wanting to make sure that we're doing the blocking and tackling what the customer base, so that as things do improve our volumes will go up and hopefully the pricing will go up as well.

We will now hear from Ivan Marcuse with KeyBanc Capital Markets.

Thanks for taking my questions. The first one is on your 2018 $500 million outlook. If volumes and the business fundamentals, underlying fundamentals, just bounce around here, remain relatively stable to flat through 2018, does with your cost initiatives and the projects that you are doing, where does EBITDA guidance get to, assuming that volume stays where it's at?

Ivan this is Fran, and I think in my comments I mentioned that, we are in a bit of a timing gap here because of the winter impact more than anything else, when we put that plan together, we assumed normal weather and that’s normal weather in both, the winter season for salt and the evaporation season for our SOP harvest and it hasn’t been that way for the past couple of seasons. With that said, so we will continue to assume in our planning, kind of average weather going forward, so not the benefit of a harsh winter or things like that but average weather going forward. We’re going through our plans, working through the impact at the cost reductions and to the extent what demand growth we can get especially on the SOP side, to fill that gap that we have, if organic growth is going to come from our Wolf Trax business and we will just have to see about Produquímica we are going to assume that, that full transaction will be complete at the end of the plan in 2018, which we did last year that the put -- to be exercised. So with all those things in play here, we think that we have a good plan in front of us to bring us close to those better divisional target, and as we work through the coming months and kind revisit on an ongoing basis our strategy to probably to give a little more clarity on the timing and the dollar impact to the earnings, that you’re looking for. Right now I would say that, we’re doing the right things, we haven’t given up on the 500, and I would say that we’ll provide more clarity as time goes on.

There is another way to ask it. The $230 million in free cash flow that you laid out -- that you continue to target for 2018, what's the underlying EBITDA that you need to achieve to get that free cash flow?

Yes that number reflects a shortfall of about 50 million to that target that drives that free cash flow, so if we get to 500 we are a little bit better, if we come up a little short for the 450 we would be offset a little. But as Fran said, we’re going through the deep dive refresh and strategic planning process right now, so we’re deep into that and over the coming couple of months we will have that completed in a much more what is the right word, accurate kind of view where we think ’18 is going to land with the assumptions we make.

Okay, and then last question and I will jump back in the queue, the PDQ, the equity line here, how should we look at it? So the third quarter, you said, is their biggest quarter. Is that your third quarter or would their third quarter show up in your fourth-quarter results? I guess you made $0.5 million in the first quarter. You lost $1.5 million in the second quarter. Should you lose money again in the third quarter and then make a bunch in the fourth quarter or how should I think about that?

Yes their third quarter will show up in our fourth quarter and consistent with how we have talked that business we said along that we thought it would be a modest single-digit positive contribution to our profits this year because we only pick up about 35% of their net income while we own this minority ownership so we continue to have a profitable outlook for that in the full year that the big number will be there their Q3, our Q4.

And one more quick question. As a result of your cash flow being a lot lower this year than you probably were expecting, are you going to have to tap more into your revolver? Do we expect total debt to start to rise and how much do you expect that to rise for the full year?

We will tap into it a little more than we are now. I don’t think you are going to see it materially rise significantly that will cause anyone any alarm but it will be a higher level by the time we get to the end of the year than where we are right now. We will still have a lot of revolver capacity left.

What level would you expect?

I am not sure I want to be specific about that right now but we are going to be nowhere near taping our revolver to the limit.

Our next question comes from Garrett Nelson with BB&T Capital Market.

I think that in last quarter's 10-Q you estimated that if the PDQ put option were to be exercised this October, it would cost $250 million to $270 million, plus the assumption of about $100 million in existing PDQ debt. Is that still a reasonable estimate or has it changed at all in light of the improved year-to-date revenue numbers from PDQ?

We talked about the year-to-date in terms of where they are this year versus last year but also we said that tracking on to slightly ahead of plan so we don’t see a really material change and what it's going to cost us driven by their earnings but probably the biggest thing that has changed is the currency, the reais has appreciated significantly since then so the -- with that the cost of the foot goes yup and the quality in terms U.S. dollars of the income stream moves. I think we will see some upward pressure on that number but primarily due to FX not due to any big change in the business.

Okay and do you have the first half EBITDA numbers for PDQ and may be how that compares to the first half of 2015?

We are not disclosing their EBITDA numbers precisely but we are up year-over-year and we are ahead our plan so we are extremely happy with the way that thing is progressing.

And could you remind us when the Ogden plan expansion is expected to be finished and maybe your plans regarding the ramp-up there?

Sure we will finish the expansion there in the first quarter of '17, so we are reporting a new crystallizer our new compactor the new compactor will be complete in this year by the end of 2016 and crystallizer in the first quarter of '17. And that will create additional capacity that we can access. And I think as I talked earlier that we plan to ramp-up that volume by building demand on the chloride sensitive crops and really focusing on the key markets for us which are primarily in the West and in California. And that will compete against MOP for the crops that aren’t sensitive to the chlorides but that’s where the bulk of the growth will come that’s sustainable in our mind. And as we have talked about earlier looking to 2018 in the ramp-up to our EBITDA target more assuming kind of measured growth, I would say on the SOP side, so not full capacity in 2018 so being more realistic there given the current situation as we see it. And we in terms of pricing we will just have to see where it goes, but we aren’t plugging in a huge price increase in our numbers to get to a target so it is looking at the market as it is today and doing the things that we can do it under our control to build demand and manage margin.

Okay great, thanks very much.

Our next participant is David Begleiter with Deutsche Bank.

Just on deicing, I may have missed this, are you going to hold share this year based on your current bid season volumes?

The bid season is not over yet, but we are about two-thirds through and we generally expect to hold our share. And might be as the season starts and progresses through the geography it may not be in exactly the same price that we thought it would be when we started the bid season given the competitive nature and just the way those the bidding happens. But we do expect to largely maintain our share.

And just to the competitiveness of this bid season Fran, is it different than last year when you had a similar price decline? Is it -- how can you qualify this bid season?

I mean it is different because if you recall from last year we were coming off a significant increase in price in the prior year. And at the tail end of that pricing season we had a fair amount of our volumes, were at a significantly higher price and was probably sustainable so that just fell off if you will as you looked into what we priced last year. So this year I think we are starting at maybe a narrower pricing scenario from start to finish looking into the year prior. And so I would say from that aspect, it's more disappointing than the prior year, but we also had a milder winter. And the volumes are down significantly in our served area and we think given the fact that the eastern part of the U.S. was even milder that and they were coming off probably a stronger winter the year before that that has a certainly significant influence on the bid season this year that it wasn’t there last year.

And Fran, lastly, as Goderich mine costs come down due to the continuous mining equipment, would you hope to use that cost advantage to gain some share in the U.S.?

We are pretty comfortable with our share as it stands today as I mentioned the share will kind of bounce around a bit from year-to-year in the geography. But in terms of our overall share of the market, we think we are in pretty good shape so I would expect that the cost benefit that Matthew has described will fall straight to the bottom-line.

We'll now hear from Bob Koort with Goldman Sachs.

Good morning. This is Ryan Berney on for Bob. I was hoping you could give us a little bit of color. Versus maybe a 10-year average, call it, normal municipal contract that you'd sign for highway deicing salt, what do you think is maybe typical for their ability to inventory as a percentage of that? Or maybe asked another way, what is the ability of a municipality versus a normal purchase to inventory salt?

In general I would say that they don't have a significant inventory capacity and in most cases those depots will hold about three salt events and they are carrying inventory more than they would like to do, they'd like to be outer or closed out so they can then do their road construction work and utilize their facilities and their assets accordingly. So, I think certainly their inventories are higher than they were a year ago, inventories throughout the market are higher but I think that I would say for us as we look at our inventory levels they are lower than when we look back to the previous mild winter that we had in the 2012 season. So, I think that's a result of we reacted quickly to the weather this year and did reduce production primarily at Goderich to help improve our inventory situation which we knew would be higher than normal as well as the rest of the industry.

Great, that's helpful. And then, maybe just a quick one on the plant nutrition side, it seems like you're guiding to the back half a little bit better volume based on some of the seasonality of the chloride-sensitive crops the SOP is especially useful for. If I'm looking back to the previous year, in the third and fourth quarter clearly there was a little bit of a pause on the demand side and I know there was a little bit of import angle and there were still some of the pricing issues. Is your implied guidance, with the pricing you have given as well, basically indicating that you think your current pricing level is largely where it needs to be to get that volume level back to where it has been the last few years?

We do, I think as I mentioned earlier we think we have the pricing where it needs to be to drive the volumes that we're guiding to and to hold our share and then we will go from there.

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

So first on salt, it seems like Compass did lose a bunch of share in a lot of the large state tenders so far in the bid season. As you say, there is still one-third to go. Maybe you can give a little more color on what's going on. Is it that salt is being shoved more west? Do you have a lot more importers bringing salt into the coast, because of the large salt price increases two years ago, and that's putting a lot of your East Coast competitors to now move more salt into the Midwest? Can you maybe talk a little bit about what you're seeing and why some of your volumes were down in the large state tenders in the Midwest? Thanks.

Sure Joel this is Fran I don't think it's particularly pressure from imports although I would say that given vessel freight rates and currency rates move in those over the past couple of seasons, there has been a slight dynamic there in terms of the cost to land imports into the U.S. and that’s putting pressure on the overall market I would say and probably shine through on some of the pricing. But I think, more of the pressure is just coming, due to the fact that the Eastern U.S. had an extremely mild winter and so the tendency for the producers in that part of the country will be to move west and I think we saw the opposite happen of that last year where we moved into the east, and picked up some volume and some early fill volume and in some cases that, the others just couldn’t secure. So you’re seeing some of that dynamic in the state tenders, but as we look at our overall business the overall region that we serve, which is quite a large geography there is some markets that are down nearly as much as may be what you have seen in the public bids and the pricing is kind of, we were talking about the averages when we talked about how we expect the season to end up so, there is a lot of those types of dynamics going on in the bid season, but as I mentioned, we think that we’re largely holding our share and a bit of a shift in some of the geographies and in the volume but not I would say a material shift away from where we normally compete.

That was helpful. For my second question, I will move to SOP. You mentioned a little bit earlier that you wouldn't expect to bring on all of your new -- sell all of your new capacity at Ogden next year. Maybe we could dive into that a little bit more. Is it reasonable to assume you will only sell a fraction of that new capacity next year, because just listening to your commentary on SOP, if you were to bring anything more than a little bit on next year, wouldn't you really cause potential pressure to SOP prices?

As I mentioned, as the thing we’re looking and building the demand overtime and as I said, as we look to our 2018 objective that we have laid out there, we don’t expect to be at full capacity at Ogden by then. So it’s going to take more time to build the demand effectively from our perspective, but it will happen and the benefit that we’ll get at Ogden is the improvement in our yield, so we won’t be able to get more SOP tones produced from our own harvest, than we ever have before, assuming the normal weather. Then we get a benefit there on our cost for sure so, that is where the early benefit comes from the improvements that we have made out there and then the longer term benefit will come from the expansion of capacity, and as we fully utilize our own harvest, our own feedstock, we will augment that with the MOP taking advantage of our excess sulphur to make our margin and deliver into the market.

If I could sneak one more in on Produquímica, so I understand the commentary that Matthew talked about and I understand the seasonality, but I'm a little confused a bit modeling Produquimica just because it looks like sales are pretty close to half or just below half in the first half of the calendar year for Produquímica of the full year, so the first half mix looks pretty strong. But you are talking about near zero earnings and the earnings are mostly weighted almost all in the second half of the year. What am I missing here? It seems like you have a lot of sales in the first half year in Produquímica, yet almost no earnings. Does that make sense?

We are on this lag Joel so what we described this first half sales.

The calendar you're giving Produquímica's calendar year, so ignoring the lag.

So calendar year we remain confident that they will be profitable, bearing in mind we pick up 35% of their net income only so that’s a lot different to the sort of EBITDA discussion we generally have because that’s an after tax number that we are picking up, through the six months and next quarter we will get to report what happened in the quarter just gone that’s where some of the 26% up will come into our income and then in the fourth quarter we will report their third which is typically every year their big planning season. So it’s the cyclicality plus the lag and we remain commitment to that being a positive contribution to our income in 2016.

How do they do BRL0.5 billion of sales in the first half of the year and do near zero earnings? And you disclosed on the transaction there is about BRL1 billion of sales in the entire year of ’15. I am just trying to understand how they could have near zero earnings with almost half of their sales happening in the first half of the calendar year?

Well I don’t think Joel that half the sales are going to occur in the first half of the year so there is growth happening in their sales and the ag sales are more heavily weighted to the back half than the first half the water conditioning and treatment businesses is more consistent throughout the year.

Our next participant is Chris Shaw with Monness Crespi.

In the highway salt business, the bidding season so far, is there any discernible trends as we move through in terms of I know in the past in a year you got the 25% price increases that accelerated throughout the season, the bidding season. Are we seeing any sort of trends this season or is it all pretty constant in terms of the same sort of pricing across the market?

Yes Chris you cut out there a bit in your question could you just repeat that I wasn’t quite sure what you are asking?

I'm trying to get at -- because you still have 35% of the bidding to go if there is any discernible trend throughout the season. Does it start with smaller or higher price decline? I know back when you had the 25% price increase that year, it accelerated throughout the bid season. So, is there any discernible trend this year in bidding?

I'd say that kind of the state bid so the large bids are virtually behind us and so the balance of our pricing will be some of the smaller municipalities in the commercial business that we do and that tends to -- it would be pretty close to the pricing that’s in the market and the geographies that we have already priced so we wouldn’t expect a significant shift away from what's already happened to the pricing season and keep in mind that we have some contracts that are longer term in nature. We have a Canadian marketplace that’s a bit more consistent probably in terms of weather then the Southern U.S. and so we have some of those geographic dynamics that happened in the bid that all add up to the average pricing that we guide to. But I would say I wouldn’t expect a significant differentiation in the last third of the pricing season from than what we have experienced in the first two thirds.

Okay, thanks. And then for SOP, do you guys have any insight to your customers or your customers' customers, maybe, about what -- the reason that the demand is down? Is it strictly that when we are looking at substitution, is it just that the farmers can afford less because of crop prices or is it more strictly a mathematical problem between MOP and, say, adding AMS is just cheaper than SOP at this point?

I think it's a combination of those things, I do think we have because of profitability the growers are looking to reduce cost and would be using more MOP relative to SOP than they normally would and that could mean the blend is different and more favored to MOP than normal, even if they were using MOP at all in the past and might be using some. So like that’s happening when we think that there are some growers that are using less, I don’t know if they mean to -- for taking the season off. But applying less fertilizer per acre than they normally would. And I think that’s happening probably in all the micro fertilizers and we are seeing some of that in SOP as well.

Okay, thank you.

That concludes today's question-and-answer session. Ms. Womble at this time I’ll turn the conference back to you for any additional or closing remarks.

Thank you, Matt. We appreciate your interest in Compass Minerals. Please feel free to contact the Investor Relations department with any additional follow-up questions you may have. You can find the contact information on the Investor Relations section of our Web site. Have a great day.

That concludes today's conference. Thank you for your participation. You may now disconnect.