Ladies and gentlemen, please standby. Good day and welcome to the Compass Minerals’ First Quarter Earnings Conference Call. Today's conference is being recorded. And now, at this time, I would like to turn the call over to Theresa Womble. Please go ahead ma'am.

Thank you and good morning. Today our Interim CEO, Dick Grant; and our CFO Jamie Standen will review Compass Minerals' first quarter 2019 results and our outlook for the rest of the year. 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 May 1, 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 and 10-Q 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 measures, 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. Now I turn the call over to Dick.

Good morning, everyone. I have two positive topics to cover today. Firstly, some color on our strong first quarter results. And secondly some comments on our new permanent CEO Kevin Crutchfield, who will be joining the company on May 7. First our results this quarter: Our operating earnings and EBITDA both posted strong year-over-year growth of 25% and 12% respectively and led to net earnings of $0.22 per share. These results were driven by our salt business, which delivered well above expected results in the first quarter, due to a combination of factors including the way winter unfolded this year and the improved execution by our salt business in terms of production and commercial operations, which allowed us to capitalize on the winter weather. Back in February, I talked about how this winter season started with a lot of snow in November then very little snow in December and most of January in our served markets. We were just seeing a pickup in snow from late January into the first week in February. As we now know, February and early March turned into a strong snow period, a storm after storm swept through the U.S. and Canada, before stopping in the second week in March. Both our North American mines, Goderich in Ontario and Cote Blanche in Louisiana, exceeded their production targets in January and February, which gave us additional salt to restock our depots. Further, our cost advantage shipping routes stayed open throughout February, which gave us a longer window to cost effectively ship salt. Remember we shipped from our Louisiana mine up to Mississippi and Ohio River systems via barges and from our Goderich mine by vessel around the Great Lakes. This allowed us to capitalize on the extra salt produced, and was of particular benefit to Goderich…

Thanks Dick. Today I'll start by reviewing our segment results before discussing our outlook and some corporate items. Beginning with our Salt segment results which are discussed on slide 7 of the earnings presentation. Well, first quarter 2019 revenue in sales volumes declined compared to first quarter 2018, we reported strong gains in both operating earnings and EBITDA due to the factors outlined by Dick. Looking a little closer, highway de-icing sales volumes were 17% lower year-over-year with slightly more than half of the decline driven by lower U.K. sales due to mild winter weather compared to the strong winter they experienced last year. The remainder of the decline resulted from lower highway de-icing commitments in North America. Fortunately, above average winter weather in North America helped offset some of the year-over-year impact of lower commitment levels as did the improved pricing we achieved during the 2018/2019 highway de-icing bid season. Turning to price, we reported a 13% increase in Salt average selling prices this quarter compared to the first quarter of 2018 with highway de-icing prices up 12% and consumer and industrial prices down slightly due to the product sales mix changes versus the prior year. Together these high prices and lower volumes generated a 3% year-over-year reduction in Salt segment revenue. This decline was smaller than we anticipated due to the above average winter weather in North America which contributed between $20 million and $25 million of revenue this quarter. Salt segment operating earnings grew 53% from prior year and our operating margin increased six percentage points to 17%, while EBITDA increased 39% and EBITDA margin expanded to 22% from 15% in the first quarter of 2018. In addition to price, the other key driver of these improvements was higher production rates at our North American salt mines…

Hi, Good morning, everyone. This is Graeme Welds on for Chris. So a couple of questions for me. Firstly, on the Salt segment the performance is obviously very impressive and you guys highlighted the fact that price played a major role in driving margins higher. I was wondering, if you could help us to parse out the relative impacts of higher pricing and lower costs on the performance in 1Q? And how you expect those two factors to drive the margin improvement that we're likely to see throughout the balance of this year?

Sure. Sure. Graeme I'll take that. I would say we highlighted price because it is fundamentally the main driver there. On the cost side, however what happened is because how the weather unfolded in our ending inventories at the end of 2018 we basically went through those higher cost inventories by about the middle of the quarter. So what happened was we started selling the tons we were producing in 2019, the tons we started producing in January and February which are lower cost tons. So that factor is a little bit short-term because you shouldn't think of that cost just translating throughout the entire year. What we would expect now is to continue to import some tons full year, so we're going to have some import costs over the longer term. But as we think about the full year salt cost, it should be similar to 2018 on a total salt basis and that's really driven by the mix impact of the lower deicing tons versus C&I. So as it relates to margin, I would say that the improvement we saw was 75% related to price and about 25% related to lower cost.

Got it. Understood. That's very helpful, Jamie. Thanks. And then just on the Plant Nutrition segment in North America specifically weather was obviously very disruptive, but pricing was still quite good. And if I heard correctly you guys mentioned the fact that imports were less of a factor and I'm just curious on what you're seeing that's driving that reduction in imports, so whether it was just overseas competitors recognizing that North American demand was going to be weakened holding back or if there's anything more structural going on there in the SOP market?

So there were -- there are really a couple of factors I think. First and foremost, obviously, the weather is impacting it certainly. Also last year some competitor’s, global competitors had lower production rates. There were some issues with some Chinese production. So what we believe may be happened is some of the tons that would have traditionally been coming into the U.S. may have gravitated over toward Europe and limited the imports coming into the U.S. But the other factor though is that, I think the market participants globally understand that we have our distribution channel full and ready to serve. So there just quite frankly isn't much bin space in North America.

Got it. Thanks very much.

Now we'll hear from Mark Connelly with Stephens Inc.

Hi, this is Joan Tong for Mark Connelly. On the salt side, just want to get an idea like what's your expectation for the coming season in terms of commitment and also potential to have another meaningful pricing increase given the inventory level that you have after very strong winter season?

Yeah. This is Dick. Essentially what we're seeing is that we believe that the overall inventory levels throughout and the markets we serve are at a relatively low level, and of course, there was quite a bit of snow late in the season. So I think that sets us up for what I describe as more typical thing we found is that after an above average winter, we tend to get better pricing in that -- in the following bid season. So -- and I think it's not just us but I think it's the whole market is relatively tight at the moment. And so as we go through the restocking process, I think we'll start to see as this evolves that we should see some positive pricing impact this year.

Okay. And then questions on the South America Plant Nutrition. What -- were there a material difference in direct sales versus dealer co-op sales in Brazil this quarter in terms of the slowdown? Or is it pretty much everybody just carrying last inventory given the market condition?

I think the overall picture is that all of -- we see all of the farmers in Brazil being more cautious this year about committing to extra fertilizers and other inputs to their business. It, of course, is the very quiet season down there. I mean we -- this is a very low volume time anyway, but what we are seeing is that caution across the board. So we're still seeing growth coming from our direct-to-grower part of the business, but we are seeing caution there as well. So I think we'll probably have a better view of this as we get through into the summer period and see whether the farmers stop to commit to putting the extra resources into the farms.

Yeah, I would just add on. I mean, it's early in the season. It's hard to make a call on the full year. We still feel confident. We left our full year volumes as originally guided. And as Dick mentioned, we continue to see the expected growth in the B2C channel. We mentioned the B2B in the second quarter, and how we're seeing some strength there just in terms of -- that's where we're selling product to other fertilizer manufacturers and getting it out on the field that way. But I would say that if you look at barter rates, NPK barter rates versus soy, they are up, up around $22 per ton -- so 22 bags per ton. So it's just making those growers hesitant. And as I mentioned in my remarks, they have forward sold less because they are just holding out and waiting to see how this unfolds. But again it's early and we're still very optimistic and confident about the full year.

Very good. Thank you.

And now we will hear from Vincent Anderson with Stifel.

Yeah, good morning. And nice job on the salt costs in the quarter. I want to go back to that topic briefly though. So if we look at costs and we strip out DNA, we strip out shipping and handling and then you think about the $20 million of overhang from last year's high-cost inventory. If you take that out as well, we actually -- it looks like we saw unit costs come down about 15% year-over-year. So I'm trying to understand exactly how you get to full year salt costs being similar to 2018, especially when you think about the back half of 2018 really being a tough period in terms of working through that mine strike?

Sure. So full year total salt costs being similar is fully loaded with depreciation. So on a cash basis, we would expect full year salt costs to be lower year-over-year. But the main driver there is mix. Remember, we had the lower commitments last year, lower bid commitments and we'll -- as Dick mentioned in one of his answers, I mean, I think, we'll look to recover a good portion of that, certainly, this year. And that's going to help us. But the -- we don't expect to end the year at a traditional mix between C&I and highway deicing tons. So that is the driver of what's keeping our costs a bit elevated.

Okay. So it sounds like you're just kind of baking in potentially lower-than-expected volumes relative to how strong the winter was if you have to rebuild that order book from last year?

Yes. We just can't -- it just takes time when you lower your bid commitments, you've kind of already got the first quarter done, right? So now what we have is the fourth quarter in terms of building up -- building back up that book of business. So you don't have a full year's work. The remainder of that comes in the first quarter of 2020. So it just doesn't move as quickly as you would like, because of the timing of the seasons. So we wouldn't -- for full year in 2019, we don't expect to be doing the more traditional mix. We would expect to get there in 2020.

And this is Theresa. I'll just add on to that, that we also expect some growth in C&I volumes versus prior year, which further shifts that mix more towards C&I volumes.

And therefore cost higher.

Okay. That is helpful. And then just on the ag side, briefly. I was wondering if you had any early feedback with regards to your new go-to-market partnership in Canada. And how that's playing out?

I think it started well. We're excited about that new product abundance. We are -- we also launch Rocket Seeds in the first quarter which we're extremely excited about. The seed nutritionals is a new area for us and we think there's a lot of growth there. So we continue to look for collaborations and marketing alliances and agreements on products. And that's not something that's moving the needle yet but we are certainly excited about the relationship and the start.

Great. Thank you.

And next we'll hear from Joel Jackson with BMO Capital Markets.

Good morning, everyone. So what do you think, like, when you look at the amount of bid volumes you'll be able to do this summer -- let's just -- let's pretend that demand was normal year-over-year, will Compass have more volume available to place in this year's bid season, less or the same?

More.

Yes, Joel. This is Dick. The sort of production rates we're getting now from both of these North American mines allow us really to think about going back to more traditional volumes that we've had in the past. I mean, we have to take a conservative view last year, but this -- given the way we're seeing production levels, this allows us to think about reversing that shortfall that we had last year. So I think on balance, we would see more volume being able to share than previously.

So a share gain, as well, this year should resolve for Compass?

No. I'd probably call it share recovery. But, yes, I think, we will take some share back this year.

Okay. That's very helpful. Now switching gears in Brazil. So some of the data points are little bit interesting. So on the chemical side of Plant Nutrition South America, you've seen the average selling price for chems decline six quarters in a row sequentially and the year-over-year decline in that price is accelerating now every quarter for about a year. So what is going on in that business? When can we see chemical prices widen and maybe even start to recover?

So what we're seeing there is, there's a particular large chunk of business that we have gotten into -- gotten back into that we had had historically with the best which is the São Paulo waterworks and they are a heavy user of poly aluminum chloride. So that is not a high technology product, obviously, for water treatment. And we've gone in and taken some of those -- taken a larger share of that business in São Paulo state and that's really been the primary driver on the price side, because PAC is much less expensive than some of our coagulants and flocculants. So it's a product mix shift there. We still make money. We still make nice money on that business, but it's just not as -- the prices are lower. Costs are lower as well.

Okay. Now sticking in Brazil, to hit your volume guidance you want -- you'll need to see on the ag side, I think, about a 20% growth in ag products following from the last three quarters of 2019. What are the major drivers there? How do you get there?

So it's fundamentally the continued -- the increased average sales per customer. So we add new customers in -- a lot of which are in the Cerrados region, where we can have access to the 4,000-plus growers there and the customers that we currently have continue to use more of our products on more of their fields. So it's just a fundamental increase that we see year-after-year adding new growers.

But we haven't seen those increases like that, like, we haven't seen anything like that. So why is this year the year you're going to see that trend finally happen?

Well I would say that, if you look back at 2017 there was some uniqueness there. But we grew Ag volumes 2018 from 2017 and we expect to have a more meaningful growth trajectory in 2019.

[Operator Instructions] We're now moving to a question from Chris Shaw with Monness Crespi.

Good morning everyone. Heading into the bid season do you any indication of what sort of industry supply will look like? And I guess you'll have a bit more obviously but do you know about some of the other players what their buy levels will look like heading into that season?

Chris, I think our overall view is that the whole market it has relatively low inventories in the field. And we think the market is probably going to be stronger following the winter. And so we did not see certainly any oversupply situation. So we think that supply in general will still be tight. So you'd have to ask others about production issues that they may have, but I don't -- we don't see anything that suggests that there's going to be an abundance of products available this year.

And we also believe that there was certain commercial business that just quite frankly went unserved last year. So those are good opportunities in the marketplace. As we continue to ramp up our production, improve our production rates that will give us an opportunity to capture some of that -- recapture some of that business.

And then just curiously the -- I mean the parts of the upper Midwest got some snows here in April. Do you see that is being meaningful? I'm not sure how much typically happens in April, but does that - do you think it's going to be a meaningful impact? If not 2Q I mean just -- how depleted their levels might be as well to customer side?

I don't think the recent activity is. It was more impactful last year. Remember winter started a little bit late in the quarter and dragged. It was nice in March and even went into heavy cold and moisture in April and that was impactful to the second quarter last year. This year the recent snow activity seen in Chicago last week is just not that impactful because of the lateness and overall temperature rising. You don't get a lot of sales activity because of the melting factor, the natural melting factor.

What we have seen Chris is some activity of the municipalities in spite of have cash left, buying some product in the last month or so and trying to possibly get ahead of price increases for the year. So I mean we have seen some fresh orders from the places that have cash left in the bank.

And that's baked into our expectation.

We'll now move to our next question and that will come from David Begleiter with Deutsche Bank.

Hi. This is Christine Besselman on for David. Just first I guess on the longer-term Salt outlook. When do you think you'll be able to achieve the targeted mid-30s-type EBITDA margin that you guys have talked about in the past? And kind of what's the trajectory to get to that point?

Yes so, I think we get there through the continued improvements that we're seeing at the Goderich mine through this year increased production rates. And -- what's going to happen there? A good part of that improvement is going to come from no longer needing imported salt. So if those imported salt tons fall away over time as this production ramps up to targeted rates, we're going to get improvement there. So from a timing perspective, I think of '20 late '20 depending on weather and pricing and all of those things, we should be well positioned in the latter half of '20 to be able to start making some meaningful progress toward the mid-30s operating margins.

Okay. Great. That's super helpful. And then...

I'm sorry EBITDA margin is that -- I meant mid-30s EBITDA margins. Sorry.

Right, right. Yes. And then just switching over to Plant Nutrition, do you think a trade resolution needs to be made in order to see some of that demand in the segment in South America be recovered?

I don't think so. I think that -- like I said they are just being patient and waiting and watching. At some point they just go. So trade resolution would certainly break it free if it happened tomorrow, but it's just difficult to predict. They're going to wait as long as they can. And hopefully they don't wait too long to where we get a really tight window of delivery. But we're prepared where we've evolved a bit since last year. Remember we endured a trucker strike. We've -- we keep continue to adjust our distribution and make it so that we're capable to deliver into smaller windows in South America.

Okay. Thank you.

And with no additional questions in the queue I will turn the call back over to your host for any additional or closing remarks.

Thank you, Jake. I appreciate everybody joining us today. If you have any additional follow-up questions please feel free to call Investor Relations. You can find the contact information on our website. Have a great day.

And with that ladies and gentlemen this does conclude your conference for today. We do thank you for your participation and you may now disconnect.