Compass Minerals Intl Inc

been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, simply press star one again. I would now like to turn the conference over to Brent Collins, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Good morning and welcome to the Compass Minerals Fiscal 2024 second quarter earnings conference call. Today we'll discuss our recent results and update our outlook for fiscal 2024. We'll begin with prepared remarks from our President and CEO, Edward Dowling, and our CFO, Lauren Crenshaw. Joining in for the question and answer portion of the call will be Gordon Dunn, our Chief Operations Officer, Ben Nichols, our Chief Sales Officer, and Jenny Hood, Chief Supply Chain Officer. Before we get started, I will remind everyone that the remarks that we make today reflect financial and operational outlooks as of today's date, May 8, 2024. These outlooks entail assumptions and expectations that 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. I will now turn the call over to Ed.

Thank you, Brent. Good morning, everyone, and thank you for joining our call today. I'll begin with a few remarks today about the quarter, then discuss some of the actions we're taking to enhance the company's ability to free up and generate more cash and pay down debt. These actions include some tough choices, but ones which I believe are necessary to unlock the intrinsic value of our company. As we all know, the winter has been especially mild across much of North America. In the representative cities that we track for snow event purposes, this is the second worst winter in 27 years of snow events. Our operating results for the quarter clearly reflect that reality. Will salt segment volumes down 21% year over year? Notwithstanding these recent challenges, the basic fundamentals of the salt business remain sound. Gross revenue per ton was up 9% year over year. Net revenues was up 11% per ton. Adjusted EBITDA was 19% per ton to just under $24. The problem is that we just didn't have enough weather to generate sales volume, which resulted in the SALT revenue declining 14% and adjusted EBITDA declining 7% year over year. In the plant nutrition business, the results for the quarter are a bit of a mixed bag. On the positive side, we've seen demand in our core markets normalized to around historic levels after the last year's weather-driven suppressed demand. We also saw sales price per ton for SOP increase 3% on a sequential basis after five quarters of price decreases. So there are some positive things happening in that business. We changed the leadership of the Ogden facility during the second quarter, and I'm pleased with the operational improvements we're seeing there. We're making a fresh set of eyes, renewed energy in every facet of that operation. One of the primary things the team's focus on is improving our cost structure. It's early days, but I'm confident we'll continue to see positive impacts as that team continues to drive increased value out of that asset. The obvious negative for the quarter was the impairment of goodwill in the plant nutrition segment. Lauren will provide detail on that in a moment. Moving on to Fortress, our fire retardant business. As we've previously announced, the path forward for magnesium chloride-based aerial fire returns is uncertain. Accordingly, we recognize the $56 million non-cash loss on impairment of goodwill and tangible assets in the quarter. We're evaluating various alternatives regarding the path forward for the fire retardant business given the development over the last few weeks. Now I'll transition to the actions that we announced yesterday to improve our ability to maximize cash flow and to pay down debt. After several consecutive mild winters and several substantial investments in the past years aimed at trying to grow the business, the fact is the balance sheet is clearly not a place where we, or most of our investors, want it to be. We believe that the best thing we can do at this time to help unlock the intrinsic value of our company is to deleverage. To do that, we need to maximize cash available for paying down debt. To that end, and most immediately, yesterday, we announced the company's board of directors decided not to declare quarterly dividends for the foreseeable future. This step frees up approximately $25 million on an annual basis. A second action, which we announced earlier, was our decision to temporarily curb production at our Godrich mine. This is being done to build and enhance operating flexibility as well as address excess inventory we're currently carrying following two mild winters. As part of this curtailment, we've laid off approximately 20% of the mines represented workforce. If and when market conditions improve, we'll be ready to recall impacted employees as needed. Assuming normal winter ahead, our plan is to aggressively reduce production to position us to substantially reduce inventory levels and release the cash as the next winter's de-icing season begins and we start selling highway de-icing salt. Third, We've advanced the multifaceted G&A cost-saving initiative that is intended to improve cost competitiveness of the company over the next 18 months. Our goal is to position ourselves as a leader in SG&A among our proxy peer group. As part of this effort, we've recently implemented another headcount reduction at the company headquarters. We've begun the process of rationalizing functional support across the organization, restructuring contracts, eliminating or paring back on professional services, to name a few. We expect some of the improvement SG&A will be recognized in 2024 and increasingly in 2025. The full run rate improvement will come in fiscal 2026. We enjoy a full year contribution from the various actions that we're advancing. Lastly, we've rolled out a more rigorous standardized methodology for evaluating and prioritizing MRO expenditures and assessing the relative criticality of individual projects. will be a tool that enables us to challenge historical assumptions around what is the right amount of maintenance capex for the business. While improvements from this action are not as readily visible to investors, it's important cultural change that I believe will positively impact sustainable cost-effective operations. Ultimately, that will allow us to maximize cash generation and returns on capital. This is just an initial step toward our operational excellence objectives. As I mentioned on our last quarterly call, my mandate is to improve cash flow generation and returns on capital we provide to our shareholders. These actions are discussed today, help us make progress toward these goals. As a leadership team, we are acutely aware that most of these actions I outlined have had direct impact on shareholders and employees. Do not take these steps lightly, and most are not easy decisions to make. However, for us to realize the inherent value of the company, We need to take divisive and decisive actions now and accelerate our ability to generate free cash and then pay down debt, particularly when we begin relieving inventory in the coming de-icing season. My vision for the company over the coming years is that we will lower our cost structure and capital intensity such that the company generates free cash flow even in mild winters, strong free cash flow during normal winters, and outstanding cash flow in strong winters. As the health of the balance sheet is restored, Over time, back towards two or two and a half times net leverage, we would expect to consider turning our focusing to returning capital to shareholders through share buybacks and or dividends. Over the medium term, we'll continue to work on plans to improve the production effectiveness, asset efficiency of our salt and plant nutrition businesses, maximize the potential performance of our unique proven assets. We'll share more details of these plans over time. For those of you attending our Godrich Mine tour in mid-June, we'll show you some of the things that we're planning, and we'll expect the mine to be more efficient and profitable. Compass Minerals is composed of high-quality assets and benefits from contribution of talented and committed employees. We're excited to lead the company through this period of balance sheet restoration and believe that we'll have a great opportunity to create value for shareholders over time. With that, I'll turn the call over to Lauren to review the quarter in more detail.