Compass Minerals Intl Inc

and welcome to the Compass Minerals third quarter and fiscal 2021 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star one. We ask that you please limit yourself to one question and one follow-up. Thank you. I'd now like to turn the conference over to Douglas Criss, Senior Director of Investor Relations.

Mr. Criss, please go ahead. Thank you, Jack, and good morning, and welcome to the Conference Minerals Third Quarter and Fiscal 2021 Earnings Conference Call. Today, we will discuss our recent results and our outlook for fiscal 2022. We will begin with prepared remarks from our President and CEO, Kevin Crutchfield, and our CFO, Jamie Standen. Joining in for the Q&A discussion will be George Shuler, our Chief Operations Officer. Before we get started, I will remind everyone that the remarks we make today represent our view of our financial and operational outlook as of today's date, November 16th, 2021. These expectations involve risks and uncertainties that could cause the company's actual results to differ materially. A discussion of these risks can be found in our SEC filings located online at investors.compassminerals.com. Our remarks today also include certain non-GAAP financial measures. You can find reconciliations of these items in our earnings release or in our presentation, both of which are also available online. The results in our earnings release issued last night and presented during this call reflect only the continuing operations of the business unless otherwise noted. The company's fiscal 2021 results and fiscal 2022 outlook in this earnings release reflect the change in fiscal year end from December 31st to September 30th. The fiscal 2021 results are reported for the nine month period from January 1st, 2021 to September 30th, 2021. And the company has presented comparable results for the January 1st, 2020 to the September 30th, 2020 period. I will now turn the call over to Kevin. Thanks, Doug.

Good morning, everyone, and thanks for taking time to join our call today. I want to start by extending my appreciation to our workforce at Compass Minerals for another strong quarter in their safety performance. Our people continue to execute safely and responsibly with a relentless focus on continuous improvement. I sincerely appreciate everyone's commitment and drive toward operational excellence in every facet of their job, including safety. I'll now provide a brief review of our third quarter in fiscal 2021 performance, then spend a few minutes discussing the unique and lasting value proposition I believe we're building here at Compass Minerals. As a reminder to those of you on the call, we've recently instituted a change in our fiscal year end from December to September, which shortened our 2021 fiscal year to a nine-month period. While we understand this change created a bit of noise around the financials the past two quarters, which Jamie will address in more detail, We believe going forward that this new approach will enable us to improve our forecasting accuracy by including the complete highway de-icing bid season results within our full year guidance at the beginning of each fiscal year. As reported in our earnings release yesterday, we've achieved meaningful consolidated revenue growth in fiscal 21, up 20% versus the comparable period a year ago. This improvement was delivered through strong sales volumes across both our core business segments despite a number of headwinds we faced throughout the shortened fiscal year, from a strained supply chain, inflationary pressures, and the impact of Hurricane Ida. For fiscal 21, increased sales volumes in our salt segment also drove operating earnings 5% higher than the prior year period, and adjusted EBITDA was nearly 4% above the prior year period. These incremental gains were offset, however, by lower SALT pricing that compressed margins compared to the prior year period. Capping off our consolidated results, we ended the fiscal year in a strong liquidity position of nearly $220 million, which includes just under $3 million in cash from discontinued operations. Drilling down into our SALT segment results, SALT revenue was up in both the third quarter and fiscal year compared to the prior year periods. Conversely, while operating earnings in EBITDA also increased in fiscal 21 compared to the prior year period, they were down in the third quarter as we proactively tapered production to manage inventory levels after a weaker than average winter. In addition, during the latter part of the third quarter, Hurricane Ida disrupted the U.S. Gulf Coast. As always, our workforce down in Cote Blanche did a stellar job of preparing the mine for the storm, and thankfully the mine remained out of out of harm's way. However, the barge provider experienced significant disruption and the shipping channels along the inland waterways remained constrained for a number of weeks. This ultimately pushed some highway salt sales volumes into the next quarter and also spurred lost sales volumes for a handful of chemical customers. The resulting impact to the bottom line we experienced was approximately $2.6 million, which had a relatively equal negative effect on both revenues and costs during the third quarter. Touching briefly upon the completion of the bid season for our North American highway business, we were able to take advantage of opportunities to strategically regain footing in historically served markets. We do believe these gains will balance out a bit over time, but we're pleased with our ability to serve customers and compete across a broad geographic footprint due to the increased output in recent quarters from an optimized Goderich mining operation. Overall, committed salt volumes for the 21-22 North America Highway de-icing bid season increased approximately 17% compared to prior year bid season results, while pricing has remained relatively flat year over year. As a reminder, while this past February provided a number of strong snow events across the U.S., overall for the full winter season, snow events were 8% below the 10-year average, leading to more modest pricing during the early part of the bid season. Moving to our plant nutrition segment, we experienced significant revenue growth in the third quarter, up 60% compared to the prior year period. Despite the strong demand pool for our products, profitability in this segment declined year over year due primarily to the higher costs we incurred out in August. As a result, we reported lower operating earnings in EBITDA for fiscal 21 compared to the prior year. SOP production costs at our Ogden facility remained elevated in the third quarter due to the temporary feedstock inconsistencies we continue to manage through on the most recent harvest. While we aren't out of the woods yet, I'm optimistic we'll begin to see lower year-over-year unit costs during the second half of fiscal 22. Taking into consideration these production and market factors, as well as the continued headwinds we're experiencing, we're targeting a fiscal 2022 adjusted EBITDA range of $220 million to $250 million. Jamie will provide more detail shortly with regard to our quarterly and fiscal 21 results and our 22 outlook. Prior to his doing so, I'd like to now spend a few minutes addressing the strategic building blocks we put into place this past fiscal year and how we view those actions as enablers for the future success of our company. As I outlined on our second quarter call several months ago, We've made significant strides throughout the year that have enabled the company to deliver on our strategic commitments. Financially, the sale of our South American plant nutrition business and North American micronutrient assets earlier in the year allowed for a meaningful reduction in the amount of outstanding debt, enhancing the financial flexibility of the company. Operationally, the new long-term Goddard Mine Plan continues to come into form with progress made on the new main roadways which are expected to ultimately increase efficiency and decrease mine maintenance needs in the older operating sections of the mine. We're still a few years out from completion of the new mine plan, but believe the change in salt segment costs as a result of this new mine plan will be measured in dollars per ton rather than nickels per ton. And culturally, we continue to focus during the year on building execution muscle, filling skill gaps where needed, adding process rigor through our internal optimization program, and prioritizing employee safety, wellness, and engagement. The enduring economic moat that fundamentally exists by way of our unique and advantaged assets is further buttressed by a skilled and engaged workforce. Along with market leadership, efficient scale, balance sheet strength, and cost advantage, I believe we've laid a foundation upon which the company can not only thrive but grow. While headwinds might be introduced from time to time, such as the current inflationary environment or isolated short-term operational issues, we believe our privileged assets and long-term strategy allows for a compelling return on capital. To begin seizing upon that opportunity for growth, we've progressed forward on two recently announced organic opportunities within high-growth or underserved markets. namely the development of a sustainable lithium brine resource to support the battery industry and securing a 45 minority ownership state in a next generation fire retardant business both of these exciting ventures leverage our existing production stream and significant infrastructure already in place at our solar evaporation operations on the great salt lake both also provide a counter seasonal balance to our core de-icing business It's only been four short months since we first announced our plans to assess development options for our approximately 2.4 metric ton, 2.4 million metric ton lithium brine resource. And I'm extremely pleased with the project milestones we've already accomplished during that brief timeframe. As we detailed in a more recent announcement, successful conversion testing of our lithium brine resource has been completed by Veolia, a respected third-party technology provider. Utilizing a proven commercially viable conversion process, the resulting sample of lithium hydroxide monohydrate met established battery grade specification thresholds, providing increased confidence that we'll be ready for market entry with a battery grade lithium hydroxide product in 2025. To ensure we're leveraging the appropriate level of expertise as we further navigate the development process for this high demand essential mineral, we've also recently announced new key leadership appointments with extensive experience in the lithium and advanced battery industries. These include our new head of lithium, Chris Yandel, and incoming chief financial officer, Lauren Crenshaw, both of whom recently served in leadership roles at an established player in the global lithium industry, and our newest board member, Gareth Joyce, who brings deep expertise in both sustainability and electric vehicle battery technologies. I'm pleased to have Chris and Lauren joining our senior management team and look forward to Gareth's continued insights and guidance on our board of directors. Turning to the recently announced investment in Fortress North America, we're equally excited about the potential of this emerging business. This next generation fire retardant company has developed a patent portfolio of highly specialized aerial and ground retardant formulations with unique properties for fighting wildfires and evading fire risk. Their products, which leverage confidence minerals, magnesium chloride production on the Great Salt Lake, are designed to be more environmentally friendly than the traditional products on the market today. In recent burn tests by the U.S. Forest Service, they were also shown to be 20 to 30 percent more effective in retarding fires. Taking into consideration the sole source nature and high barriers for entry of the current market, we view Fortress as a disruptor with meaningful potential upsides. Our involvement brings to the table not just the capital associated with our minority stake investment, but also our capabilities and expertise in supply chain, logistics, and providing essential products through a government procurement process, something we've been doing successfully for decades. As such, we're confident we can help them scale more quickly and effectively. In just a few minutes, I'll let Jamie provide some additional details on the investment and the long-term growth opportunities. As we continue to evolve our essential minerals portfolio through organic growth opportunities like these, it became clear that we needed to reassess our company's historical capital allocation strategy, as we alluded to in our lithium announcement back in July. As also announced yesterday, our board of directors has approved a reduction in the dividend for the third quarter, enabling us to leverage our operating cash flow for what we believe is a higher and better use of capital. supporting strategic growth and ultimately creating long term and lasting shareholder value. Importantly, yesterday's announced dividend level is also better aligned with the dividend yields of peers and the general market. Going forward, our board will continue to evaluate the company's capital allocation needs on an ongoing basis in an attempt to strike a balance between supporting the investment needs of the business with returning cash to shareholders. I believe that this past fiscal year was truly an inflection point for our business. We've taken strategic measures to recalibrate our business model in an effort to better position our company towards sustainable earnings and margin growth. Our path forward through this business transformation is also clear. We'll work to continue strengthening our core assets and production capabilities to become more efficient and sustainable. We remain committed to protecting a healthy balance sheet and lower leverage while concurrently increasing focus on the high growth opportunities I've outlined here this morning. Our senior management team and board are aligned with this strategy. Our people are ready to execute on it, and I'm encouraged by our recent momentum that we can be successful in creating value for the benefit of all Compass Minerals stakeholders. So with that, I'll now turn it over to Jamie, who will discuss in more detail our financial performance, strategic investments, and our outlook for fiscal year 2022. Jamie?