Operator: Good day, and welcome to the Compass Minerals Third Quarter Earnings Conference. Today's conference is being recorded. At this time, I'd like to turn the conference over to Theresa Womble. Please go ahead.

Theresa Womble: Thank you, Ashley.

Today, our CEO, Fran Malecha; and our CFO, Jamie Standen will review our third quarter results and outlook for the remainder 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 expectations as of today's date, October 31, 2017, 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 Form 10-K and 10-Q. The company undertakes no obligation to update any forward-looking statements made today to reflect future events.

Our remarks may also include non-GAAP financial disclosures, which 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 site at compassminerals.com. Now I'll turn the call over to Fran.

Fran Malecha: Thank you, Theresa. Good morning and thank you for joining our call today.

Our results this quarter were slightly below our expectations given the pressure on our salt business from a second consecutive mild winter and delays in some sales on our plant nutrition business. On a consolidated basis, our total revenue and operating earnings increased significantly, largely driven by the addition of Produquimica to our results, which offset expected weakness in our salt business. We also continue to focus on the things we can control to drive better performance. In fact our cost savings initiatives have already generated 7.9 million in savings year-to-date, with savings impacting our salt and plant nutrition business as well as our corporate expenses. While lower deicing demand pressured salt segment results, we have made progress with our capital projects at the Goderich mine.

I'm also glad to report that our team there has addressed all the issues related to the collapsed roof and the mine is fully operational and running in line with our current production plans. The other important solid result that we reported in the third quarter is the conclusion of the North American highway deicing bid season. This process shapes our pricing and sales volumes expectations which assume average winter weather for the highway deicing portion of our salt business. As we expected, this year our average awarded bid price declined approximately 3% as did our awarded bid volumes. Given how mild winter it was last season in much of the US, I'm pleased with how our salt team has responded to market-wide challenges and limited downward pressure on these results.

Our plant nutrition business in North America posted solid results this quarter, with volumes dropping modestly due to a slowdown in sales late in the quarter related to hurricane activity in the southeast US, while operating earnings for the segment increased. In Brazil, we faced near-term headwinds from the delayed planting season. Although we believe underlying demand for our innovative plant nutrition products remain strong, the compressed selling season can be a challenge from a logistics perspective. As a result, some of these expected sales may not materialize. As important as these quarterly results, the fact that we continue to make significant progress on our strategic objectives.

As we discussed at our recent Investor Day, we are executing a consistent strategy designed to achieve sustainable growth based on strengthening the foundation of our company, increasing the balance between our salt and plant nutrition businesses and improving the margin performance of our company through efficiency improvements innovation and organic growth opportunities. Today I'd like to touch on how we progress in these areas throughout the quarter and what executing in these areas will mean for us in terms of improving our company and delivering shareholder value. First, in strengthening the foundation of our company, we are nearing the end of our major capital investment program, which is focused on ensuring the longevity, efficiency and capabilities of our key assets at Goderich and Ogden. Our Goderich shaft realigning project continues on track and it's expected to be completed in 2018. The installation of continuous mining systems at the Goderich mine is also on track even with the partial roof collapse we experienced in September.

We are currently commissioning the final continuous mining system and expect to complete this in 2017 fourth quarter. At Ogden, we've completed commissioning the compaction facility and are working through final commissioning of other equipment which should be completed by year round. While I know we've been discussing these projects for some time, keep in mind that these projects represent an investment of approximately 525 million and underpin many of our strategies for improvement and growth. Once we complete these projects, these assets will be very well positioned to deliver safe efficient production for years to come and to better serve additional markets and demand in both our salt and plant nutrition businesses. The next strategic priority for us has been creating more balance between our salt and plant nutrition business in order to diversify our earnings stream and improve our ability to address winter weather variability.

This quarter helps demonstrate the positive benefits of our investment in Produquimica. The addition of this innovative specialty plant nutrition company drove an increase in total revenues and earnings in what is typically a lower earnings quarter for us due to the seasonality of the salt segment. On a year-to-date basis, combined plant nutrition revenue as a percent of total sales was about 43%, where it was only 20% in 2016 by this point in the year. We believe that over time this diversification will improve our earnings stability and increase our growth potential. The third area focus for us is driving margin improvement and organic growth.

There are a couple of things I'd like to discuss in this area. Our cost savings plan initiated in July is part of this overarching effort to improve our operational performance and increase efficiency. This plan to eliminate 20 million in ongoing costs in 2018 is on track. While we recorded a charge of 4.3 million this quarter related to this plan as I mentioned earlier, we've already generated almost 8 million in savings. These savings are in addition to the 30 million in cost reductions we expect to achieve in 2018 from our investment and continuous mining at Goderich.

Another key driver here is improving our innovation and commercialization capabilities to capture growth from the acquisitions of Produquimica and Wolf Trax. We have a couple of successes to mention here. First, sales of Wolf Trax's micronutrients in North America were double what they were in the 2016 third quarter. This is a good sign that our sales and marketing teams are starting to get more traction particularly in the US. Second, so far in 2017, we have introduced 22 new products in total between Brazil and the US.

This includes an entirely new line of liquid specialty fertilizer products in North America based on technology we brought up from Brazil. While it's too early to make any statements about the contribution of these products to sales or earnings, we can say we are delivering our goal of increasing innovation and building out a full portfolio especially plant nutrients that we believe will increase relevancy of Compass Minerals in the agricultural market throughout the western hemisphere. With the progress we're making in these three areas, I'm confident that Compass Minerals is well positioned to deliver growth as our key markets begin to recover from current trough levels. Even in the near term as our capital expenditures taper off, we expect to improve our free cash flow and achieve significant increases in 2018 and we anticipate returning to our targeted leverage ratio in 2019. With these factors in mind, we will end the year having made significant progress on our strategic goals which we believe will position us to benefit from normalization in our key markets and drive near-term earnings growth.

With that I'll turn the call over to Jamie for more financial details.

Jamie Standen: Thanks Fran, and good morning everyone. Before getting into the details of our financial results, I'd like to briefly explain the restructuring charge this quarter. As we announced in July, we instituted a cost savings plan which is expected to generate about 20 million in annual life savings beginning in 2018. We recorded a 4.3 million charge this quarter related to the plan and we've already achieved $7.9 million in savings.

We have noted in our press release and our presentation where the charges have been recorded. They include $2 million charge in our salt segment, a $1.2 million charge in our plant nutrition North America segment and a $1.1 million charge in our corporate SG&A expense. As I talk through our results, I will be excluding these charges were applicable. We also reported a special item this quarter for the release of tax valuation allowances related to our plant nutrition South America segment. This was a $13 million benefit in the quarter.

Excluding this benefit, our third quarter tax rate was lower than normal and we also expect our full-year tax rate to be depressed due to overall lower income and other refinements to our assumptions. Now let's turn to our salt segment results which can be found on Slide 9 for those of you looking at our presentation. Our total sales this quarter declined versus the 2016 quarter primarily as a result of lower sales of packaged deicing products. This would typically be the time when retailers begin purchasing to stock up on deicing supplies prior to winter. But many of our customers are still holding inventories left over from last winter.

This decline in consumer and industrial sales this quarter also created a negative product mix for this overall segment average selling price. Excluding mix, average selling prices for highway deicing and consumer and industrial were each up about 2% from prior year. It's important to note however that for highway deicing sales, this improvement was primarily driven by geographic sales mix. We sold more products to customers in the US West which increased average sales price, but also increased logistics costs. On a net price basis, highway deicing average sales price dropped 6%.

Our decline in operating earnings was primarily a result of lower revenues as well as increased logistics and depreciation expense. Production costs were slightly higher for our highway deicing business, but the shift in sales away from consumer and industrial products and toward highway deicing tons offset the impact of the higher costs in our reported results. Our plant nutrition North America results on Slide 10 were a bit mixed and that our revenues were slightly below prior year, but our operating earnings improved excluding the restructuring costs. Sales volumes dropped 7% reflecting the impact of hurricane activity in the southeastern US, which disrupted sales late in the quarter. However, even with the hurricane activity, we sold about 50% more micronutrient products this quarter when compared to the 2016 quarter.

This helped push the average sales price for the segment up 6%. We believe that most of the lost sales in the quarter will occur in the fourth quarter and we are seeing strong SOP demand in other regions. As a result, we are leaving our full-year sales volume guidance unchanged. This segment also posted 40% earnings growth as well as margin improvement when excluding the $1.1 million restructuring charge that was incurred this quarter. This improvement was driven by better sales prices and a more profitable sales mix.

In the plant nutrition South America segment, sales volumes declined 8% mainly due to a 16% decline in chemical solution sales. As we have discussed previously, our customers have been ordering higher concentrated chlorine products. This reduces sales volumes, but increases average selling prices. In addition, we continue to experience lagging sales in the oil and gas industry. On the agriculture product side of the South America business, sales were slightly below prior year and below our original expectations.

This is partially a timing issue as the weaker US dollar has caused farmers in Brazil to hold on to their grain inventories from the prior harvest longer than expected. This in effect delayed crop input purchases and initially impacted our B2B sales. As we move through the third quarter, which is typically our strongest sales quarter for this business, our sales mix shifts more toward the B2C channel. The portfolio of products we sell here includes nutrients for the full lifecycle of the plant, with full-year products being a very important component. Because farmers delayed plantings this season, orders for full year are also delayed.

This is creating a compressed sales season and putting pressure on the Brazilian trucking market which causes challenges. Our US dollar reported results benefited from a stronger Brazilian real with the exchange rate improving about 11% versus prior year. In local currency, total plant nutrition South America revenue declined less than 1% as increased selling prices offset lower sales volumes. Operating earnings were 13% lower year-over-year. This decline was driven primarily by increased marketing spending, a depreciation true up and higher public company compliance costs.

One point to keep in mind is that this is a more SG&A intensive business than our semi specialty SOP business. Although we've trimmed expenses as we adjusted to lower earnings expectations in this segment, we continue to invest in sales, marketing and innovation in Brazil. Our agronomists and sales force make more than 4,000 contacts annually with farmers in Brazil and together with our marketing and innovation efforts are critical to driving the long-term growth of this business. Because underlying demand for our specialty plant nutrients in Brazil remains strong with customers, we believe this is largely a timing issue, although we're likely to be at the low end of our guidance range for full-year sales volumes. Before turning to our outlook, I'd like to briefly discuss the depreciation true-up I just mentioned.

This true-up trip is related to the finalization of our purchase accounting review process on the Produquimica acquisition. In this process we have adjusted our book value and recalibrated certain asset lives which increased our depreciation expense by about $500,000 each quarter since the acquisition date. This quarter we had to book that catch up depreciation. We have now completed this process and will have no more purchase price accounting adjustments to report related to the Produquimica acquisition. On Slide 12, we've included our 2017 outlook summary.

Little has changed from what we presented at our Investor Day last month. In our salt segment, we've slightly lowered the bottom of our range to account for lower package deicing demand and a little additional contraction in bid volumes. Plant nutrition North America and South America volumes for the year are unchanged. Although given the issues I have discussed today, both are likely to be at the lower end of the ranges. Operating margins however are expected to expand due to the product mix improvements when compared to prior year.

As a result, we expect earnings growth in both plant nutrition segments. Before beginning our Q&A session, let me recap the key points of the quarter. Importantly, our Goderich mine operations have been fully restored. Plant nutrition in North America achieved earnings and margin growth in the third quarter and we expect continued growth in the fourth quarter. In our South America segment, we expect a subtle shift in high value agriculture sales from the third quarter to the fourth quarter, which should help drive sequential margin improvement.

Finally, we remain focused on controlling the things we can, picking out costs wherever possible and completing our major capital projects. With that, I'll turn it over to the operator so we can begin the Q&A session.

Operator: [Operator Instructions] We'll go to our first question from Christopher Parkinson from Credit Suisse.

Graeme Welds: This is Graeme Welds on for Chris. I wanted to kick off with a quick question in plant nutrition North America.

You guys talked about how sales of micronutrient is up substantially this quarter versus the same quarter last year and how you're expecting kind of better mix to go forward into the year. I was wondering if you could walk us through a little more of the details about what you're seeing on the ground in terms of the demand from micronutrient and what's driving some of that success that you're seeing and how you kind of see that playing out going forward?

Fran Malecha: This is Fran. I just think we're continuing to build our sales and marketing effort out there on these products and continue to make progress with our distribution customers in North America. Keep in mind that in North America, we're going through distribution with these sales and in South America, it's a combination, but primarily direct to the growers. So we are making progress there.

I think the demand is really being pulled by the farmers. They like our products and we just continue to build on that and traditionally the fourth quarter is our biggest quarter for this business. So I think that's why we talked about kind of that outlook going forward.

Graeme Welds: And then just switching to the South American business really quickly, I know you guys are kind of expecting that to catch up some of the sales you missed out on the agricultural portion in 4Q from 3Q. I'm just curious kind of beyond the next couple of quarters, as you think about the - actually the chemical side of the business, I want to try and get a better sense of how to think of that moving forward.

You mentioned oil and gas seems to still be lagging that there are some kind of shifts in purchasing patterns in the chemical chlorine section of that business. I'm wondering how should we think about that moving forward.

Fran Malecha: Sure. I mean the bulk of the earnings in that chemical business is the chlor-alkali business, the chlorine business and I think it's a combination there of - it's a good business, it's a solid business with good margins. It has been growing.

We expect that to continue. So it's really driving the results when we used to talk about that part of the business, but it's still only about a third of the overall business and our growth in this business and the reason why we acquired it is really on the ag side. We expect with the improved caustic soda pricing kind of globally, that that business will continue to perform well, but it's really not the focus of our growth in Brazil.

Operator: And we will move to our next question from Vincent Anderson from Stifel.

Vincent Anderson: I just wanted to go through some of the noise around the quarter in salt in North America related to the volumes and what that means for fourth quarter operating earnings.

On both segments, we saw unit cash costs come in really pretty strong, considering the light volumes in both plant nutrition and salt. And so it looks like fourth quarter operating earnings could maybe be a bit conservative. Can you just walk us through maybe some of the things we're seeing, whether it's on the transportation side, whether it's on SG&A, whether it's on asset commissioning, just trying to get a feel for reconciling that.

Jamie Standen: Sure, Vince. This is Jamie.

I think as far as the quarter goes, we really saw a mix impact there from the lower C&I sales. So we talked about it impacting the price side of the business, but it also impacts the cost side. C&I products are more costly to produce. So as the mix shifted more toward highway, we kind of got a benefit on the cost side in the quarter from that mix shift. So as you move into fourth quarter and the mix, let's say, normalizes, you would see some of that benefit go away as we would expect winter to start coming.

And then if we get close to average mix between highway and C&I, that's why we feel like that that operating margin guidance isn't necessarily conservative. We would just go back to a more normal mix, which would increase the cost a bit.

Vincent Anderson: And then in North America, I know it's a heavy SG&A quarter for you, but considering where your unit costs were in 4Q '16, given the step up in volume guidance, I kind of - I would have expected comparable operating earnings. It looks like you did margins close to 18% in 4Q '16. Can you talk about the year-over-year variance there?

Jamie Standen: Are you talking about - are you over to North America plant nutrition?

Vincent Anderson: Yes.

Jamie Standen: Yes. So what we're getting there is the price benefit. When we look at fourth quarter '17 verses fourth quarter '16, the improvement is mostly on the price side and the improved mix. So we feel pretty comfortable with our 13% to 15% operating margin guidance in North America for fourth quarter.

Operator: [Operator Instructions] And we will go to our next question from Joel Jackson from BMO Capital Markets.

Fahad Tariq: This is Fahad on for Joel. First question I had was, we're having a tough time trying to reconcile the Q4 volume guidance for salt as well as the price guidance. Is it possible that the highway deicing prices are down 3% for Q4, but is it possible that there is an offset in pricing, highway deicing pricing from the UK sales or multi-year contracts or anything like that that would end up making highway deicing prices flat year over year versus down. That's my question.

Jamie Standen: So I think we mentioned some mix in terms of where we were placing tons.

We talked about US West for example in the third quarter. So, it would be reasonable to assume that year-over-year, in the fourth quarter, in highway, you could see flat or better highway deicing pricing. Of course, there's an offset to that that would come through on distribution cost.

Fahad Tariq: And then just a quick follow-up. For the lower C&I sales that happened in Q3, are those loss sales or can that be recovered in part in Q4?

Jamie Standen: So there is - although we're disappointed with missing in the third quarter, every year, predicting the pre-fill in the C&I deicing market is very difficult.

You have us trying - we're talking to our customers, trying to find out what they need, what they're ordering and our customers themselves, large big box companies are evaluating their own inventories, watching the weather themselves, trying to predict how much, John Smith has in his garage a bag of salt from last year. So there are a lot of factors that make the fourth - the third quarter sales difficult. But specifically to your question, at this point going forward, the C&I deicing sales in the fourth quarter will fully be a function of winter weather activity. So the customers continue to take early fill, even through October and as weather starts to pick up, we would expect that alone at this point to drive sales.

Operator: And we will go to our next question from Robert Koort from Goldman Sachs.

Gavin Parsons: This is Gavin on for Bob. I was just wondering real quickly if you could run through the asset premium that you guys are currently seeing to the MOP in the market, and then kind of what you guys are baking in your expectations over the next 12 months?

Jamie Standen: Yes. So when you think about SOP only price currently at 578 this quarter and MOP prices in the $250 range, we've seen stability in SOP over the last several quarters. We don't have any reason to believe that that would change. We're seeing strong demand at this price level and would expect that to continue through the rest of the year and into 2018.

Gavin Parsons: Great. And then as a follow-up, I'm just kind of curious if you guys can kind of walk us through how you dropped your full year effective tax outlook down to 14% from 20%. Is that just a function of kind of what we saw flow through this quarter or is there anything else in particular to call out?

Jamie Standen: There are always as - I would say that it was at Investor Day, we were talking about 18% and now, we're down to 14%. So excluding the discrete tax benefit of 13 million, there are a number of things that occur. So as our income drops, we have some fixed benefit tax structures in place that lower the effective tax rate as income drops.

We've had some other releases of valuations that are related to the current period. So those are the two main drivers, lower income, fixed benefit from some tax structure items and then some other reserve releases in the period.

Operator: [Operator Instructions] And we will go to our next question from David Begleiter from Deutsche Bank.

David Begleiter: Fran, on highway deicing pricing, you mentioned you were, I guess, a little bit possibly surprised or with the minus 3% for the year. Can you talk about why and what gives you the confidence that next year, I think, this is the third year in row of lower highway deicing pricing.

What gives you confidence that this is not structural and that we can get back to, assuming a normal winter weather, some positive pricing in highway deicing in the next winter season?

Fran Malecha: Sure. I wouldn't say we were surprised. I think it was in line with our expectations is how we described this pricing season, given the weather that we did have. And keep in mind that, we were averageish - winter in Canada, where we saw price increases and much below average in the US where we saw price declines and we have greater weighting to the US than Canada. So overall, we're down that 3%.

We had a stronger season out west and that kind of plays into the numbers a little bit, but that's kind of the flavor of the season from a bid standpoint. And so as I think about on average year, if we get back to more normal weather, we saw price increases in Canada. We would expect to see price increases throughout the market, if the weather is there to drive it and we're coming off of, I think three years in a row of milder winter and lower pricing. So I would expect the market would spring back with the normal season ahead.

David Begleiter: And Jamie, just on the 2018 tax rate, any additional color for next year?

Jamie Standen: Yes.

So I would - we would envision 2018 normalizing in the high-20s, approximately anywhere - around 28%.

Operator: At this time, I would like to turn the conference back over to Theresa Womble for any additional or closing remarks.

Theresa Womble: Great. Thanks, Ashley. Once again, we appreciate your interest in Compass Minerals.

Please feel free to contact the Investor Relations Department with any follow-up questions you may have and have a safe and happy Halloween.

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