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

Theresa Womble: Thank you, Dana.

Good morning, everyone. Today we will discuss our fourth quarter and full-year 2016 results, and our outlook for 2017. In addition to our CEO, Fran Malecha, we have some new voices on the call today. We have our interim CFO, John Craft. John has been with Compass Minerals since 2015, and has served as Vice President, Corporate Controller for most of that time.

Also in the call today joining in our Q&A session will be Jamie Standen, Vice President of Finance. 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 today’s expectations as of February 9, 2017, 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 10-K and 10-Q filings. The company undertakes no obligation to update any forward-looking statements made today to reflect future events or developments.

In our remarks, we may discuss non-GAAP financial information on items we believe provide important perspective on the performance of the business. Reconciliations of these items can be found in our press release and our presentation, which are both available in the Investor Relations section of the website CompassMinerals.com. Now, I’ll turn the call over to Fran.

Fran Malecha: Thank you, Theresa. Good morning.

I am happy to have the opportunity to discuss Compass Minerals’ 2016 results, strategy and outlook with you today. We reported solid results driven by the resilience in our salt business, despite lower average selling prices, and the strong contribution from our new business in Brazil. In addition, last week we announced an increase in our annual dividend to shareholders, marking the 14th consecutive year of dividend growth. This is a strong indicator of our Board’s confidence in our strategy and long-term outlook. Looking briefly at our quarterly results, we ended 2016 with positive momentum in both the salt and Plant Nutrition businesses.

Our salt segment sales volumes increased from last year’s fourth quarter, due to an increase in snow events in some of our key markets compared to the very mild winter we experienced last year. We are optimistic that an average of winter in the first quarter combined with what we’ve experienced thus far will improve market fundamentals as we move into bid season this summer. For the full-year, our salt revenues were limited by lower average selling prices mainly due to highway deicing contracted pricing moving lower throughout the year, and weaker volumes early in the year due to mild winter weather. Despite these challenges, I’m pleased that the business has maintained attractive profit margins. For the full-year, the salt segment generated an operating margin percentage of 25%, which is unchanged from 2015’s operating margin.

This performance once again highlights the resilience of our salt business. It serves as an excellent foundation for Compass Minerals, and is a relatively stable base upon which to build our growth platform. That growth platform is our Plant Nutrition business, which we have greatly expanded with the completion of the Produquímica acquisition in October. This business now includes two segments. Our Plant Nutrition North American segment represents our legacy Plant Nutrition business, while our Plant Nutrition South American segment is the acquired Produquímica business.

Before I turn to some strategic thoughts on Plant Nutrition, I’d like to touch on some of the quarterly results for these segments. Stronger demand from our customers this quarter for SOP and micronutrients resulted in the 53% increase in sales volumes compared to the year-ago period. Some of that demand was driven by affordability as seen in the decline on our average selling price for SOP, which ended the year around $560 per ton. In South America, the year ended strong for agricultural product sales and our chemical solutions business performed well. In fact, the contribution of Plant Nutrition South America was the primary driver for year-over-year growth in adjusted EBITDA.

So the business is already making a difference for us, and it was accretive by $0.18 in the fourth quarter excluding incremental financing costs. And as I mentioned, we view this acquisition as a critical piece of our growth platform for the Plant Nutrition business. We provided some graphs in our earnings presentation that demonstrates just how impactful and transformative this acquisition is for us. It balances the distribution of sales and earnings between salt and Plant Nutrition, expands our portfolio of products, broadens our geographic reach to include one of the most important global agricultural markets in terms of growth and importance for meeting the global challenges of food production, and it increases our R&D capability with more technical staff and research facilities. We mentioned in our earnings release that full-year sales volumes for Plant Nutrition South America segment were 9% ahead of 2015 volumes.

Our North American sales volumes were only 1% higher, driven by our fourth quarter year-over-year increase. This shows the benefits that the geographic diversity can add to our Plant Nutrition results. Brazil’s market for specialty plant nutrition has been more robust throughout 2016 when compared to North American demand. As we look to 2017, we’re focused on several key areas in order to build our Plant Nutrition business. We will be working diligently to maximize the earnings power of our Plant Nutrition South American segment through driving more sales to higher value products within our portfolio and enhancing our commercial strategy.

In addition, we are seeking to bring certain of those products to the U.S. to provide us with a much broader product portfolio that is designed to appeal to the increasing needs of growers for liquid and foliar applications of specialty plant nutrients. We are in the process of improving our go-to-market approach in North America, including developing a better position within the retail market for crop inputs. This means having the right marketing, the right research and the right products where and when our customers need them. We are also building more resources renovation here in North America, that we believe will allow us to extract more value from our Wolf Trax products, facilitate research needed to bring new product lines to North America from Brazil, and further innovate on our Protassium+ SOP products.

Our efforts will also involve more collaboration with third parties to address the unmet agronomic needs of our farmer customers. We believe we are taking the right steps to move this business forward. Here, as in the salt business, we are laser-focused on execution and delivering on our investments. We expect these efforts to ultimately drive higher returns for Compass Minerals and increase shareholder value. Looking at our 2017 outlook, we do face some headwinds.

In our salt business, we have had short-term higher cost at our Goderich mine, driven by our lower planned production level in 2016 and some unplanned downtime in the quarter which has increased the cost to the salt inventory we have carried into 2017. This will pressure our salt operating margins for the first-half of 2017 with most of the impact expected in the first quarter. Where our margins progress after that will in large part be determined by the highway deicing bid season. Before turning to the Plant Nutrition near term outlook, I would like to recap the investment progress we made at Goderich and what we expect to complete in 2017. We are making great progress on our shaft relining project and remain on track to deliver that on our budget and timeline.

We have all the continuous mining and additional haulage equipment underground at the mine, and have commissioned about half of this new equipment. We are on schedule to complete the rest of the commissioning this year, and convert the entire production at the mine over continuous mining by the end of 2017. Further, we still expect annualized savings from this switch to total $30 million beginning in 2018. Our 2017 outlook for Plant Nutrition in North America remains cautious. Although, we’ve seen stabilization in the SOP market, we believe that the sluggishness throughout the broader ag market in North America will limit our ability to drive significant growth this year.

Plant Nutrition North America operating margins for 2017 will also be pressured as we build our organization and implement our commercial strategies for growth. In addition, we expect to complete and commission the bulk of the new capital projects at Ogden that were initiated back in 2014. These investments which totaled around $75 million will give us additional plant production capacity that we can access as demand requires, and lower our costs through improved plant yield, but it will result in increased depreciation expense. On a cash cost basis, we expect our per-unit cost to decline about $50 per ton from what we reported in the fourth quarter. In South America, indications are positive for robust growth throughout the year.

You will see in our guidance that we are calling for breakeven margins in the first-half of 2017. This stems from the fact that a large portion of our ag sales [entered and it’s improved] [ph] in the last six months of the year, as well as the impact of some continuing acquisition related costs. So, all of that taken together leads us to our full-year guidance. We are establishing the 2017 EPS guidance range of $3.20 to $3.70 per share. With that, I’ll turn it over to John for a few brief comments and review of our financial results before taking some questions.

John Craft: Thanks, Fran, and good morning, everyone. If you’re following our presentation online, I would like to review first our salt results on Slide 9. Fourth quarter 2016 salt revenue exceeded 2015 results for the same period by 12%, as more severe winter weather drove a 23% increase in total salt sales volumes. Average selling prices declined mainly as a result of an 8% reduction in highway deicing prices when compared to 2015 results. Consumer and industrial prices on average declined just 1% and that was driven primarily by product sales mix.

Higher operating costs at our salt mines more than offset the increase in revenue and led to 7% decline in EBITDA for the quarter versus the prior year. Turning to Slide 10, for the full-year the salt segment generated $812 million in revenue, a decline of 4% driven by the year-over-year reduction in highway deicing average selling price. Salt operating earnings totaled $201 million for the year, which represents a margin percentage of 25%. This was consistent with last year’s result, as we continue to deliver strong margin performance throughout 2016 despite lower pricing. Turning to Slide 11, if you are following our presentation online, we began our discussion of Plant Nutrition results which now include two business segments, as Fran mentioned, Plant Nutrition North America and Plant Nutrition South America.

I’ll begin first with our North American segment. Our fourth quarter sales volumes for Plant Nutrition North America outperformed guidance and resulted in a 24% increase in segment revenue compared to the fourth quarter of 2015. Some of the benefit of the higher sales volume was offset by an 18% reduction in average selling prices. Operating earnings for the quarter were $8 million. This included a charge of $3.1 million related to the partial write-down of our Wolf Trax trade name as part of the company’s annual impairment assessment.

Excluding that charge, adjusted operating earnings for the segment were $400,000 less than last year’s results of $11.5 million. Turning to Slide 12, full-year Plant Nutrition North America revenue declined 15%, driven by lower average selling prices. Adjusted EBITDA declined 34% due to both lower average selling prices and higher logistics costs, which were primarily driven by increased warehousing costs and geographic sales mix. Moving to Slide 13, we discuss our Plant Nutrition South America results. We are including only one-quarter data as this is the period over which we had full ownership of Produquímica.

Fourth quarter revenue was $114 million and adjusted EBITDA totaled about $22 million. Full-year sales volumes for this segment group of 9% from 723,000 tons to 788,000 tons. I’d like to provide a little bit of context for the seasonality of this new business. In the appendix of our investor presentation, we provided a chart with the three-year average of sales volume, and the split between agricultural products and chemical solutions. The chart shows that chemical solutions are consistent throughout the year, but agricultural volumes peak in the third quarter and also strong in the fourth quarter.

As a result, this business has historically generated about 75% of its earnings on average in the second half of the year. Because of a step-up in depreciation and amortization beginning with our acquisition, the weighting of earnings to the second half of the year will be even more pronounced. Before I move on to discuss some of the details of the outlook, I’d like to explain our special items this quarter. The largest of these items is a gain that we recognized on our initial 35% investment in Produquímica. This occurred when we completed the acquisition of the remainder of the company and removed the initial equity investment from our balance sheet.

The gain which represented about 50% appreciation in our original investment was driven by both foreign exchange rate changes and growth in the Produquímica business. This gain was not taxable, since we intend to permanently reinvest the gain in our foreign operations. As a result, our full-year tax rate was lowered to about 18%. Excluding the gain, our effective tax rate was 28%. Other special items included purchase accounting adjustment of $8.4 million to inventory valuation within our Plant Nutrition South America segment and the $3.1 million partial write-down of the Wolf Trax trade name, which I mentioned earlier.

On Slide 14, we review some of the key factors impacting our outlook. First, fourth quarter winter weather activity was stronger in some key regions of North America, which drove over year-over-year increase in sales volumes. With average winter weather for the remainder of the first quarter, we expect a reset of the highway deicing market in North America with the expectation of lower customer and producer inventories. As a result, we expect an increase in salt sales volumes for 2017. Our margin guidance for the first half of the year reflects the impact of higher cost salt inventories being sold in 2017.

We expect salt cost to improve later in the year. In Plant Nutrition North America, we feel that the market has firmed with expected sales volumes modestly increasing in 2017. For the first half of the year, we expect prices to range from $615 to $645 per ton. We expect Plant Nutrition North America to have higher SGA cost, as we build the organization to drive additional growth and this is expected to mitigate some of the improvements that we are realizing in SOP production cost at Ogden. Our Plant Nutrition South America business is anticipated to grow sales volumes around 10% for the full year, reflecting steady growth for its agriculture and chemical solutions business.

For the first half of the year, earnings from this segment are expected to be limited due to seasonality. For the full year, we expect Plant Nutrition South America segment to generate operating margins similar to 2016 results, which is about 14% including purchase accounting adjustments and increased amortization resulting from the acquisition. On Slide 15, we have provided guidance on some corporate items as well. Our capital expenditures this year are expected to total between $125 million to $140 million compared to $182 million in 2016. This includes about $12 million for Plant Nutrition South America and $50 million for special maintenance of business capital expenditures.

And as our chart on Slide 7 shows, we expect significantly lower levels of capital expenditures in 2018 as well. Our interest expense is expected to increase to around $52 million in 2017, from $34 million in 2016, as a result of increased borrowings to fund the purchase of Produquímica. We have added guidance for depreciation, given the fact that we have major capital investments which have recently been commissioned or will be fully commissioned in 2017. Finally, our tax rate for 2017 is expected to be around 28%. Before turning to the Q&A session, I’d like to recap the key points for the quarter.

First, the underlying performance of the salt segment was strong, even with weaker prices. Second, while short-term increases in salt cost will reduce margins early in the year, with average winter weather we expect to increase our salt volume sales above 2016 results. Third, the Plant Nutrition North America business outperformed on sales volumes, but lower average selling prices kept earnings slightly below prior year when excluding the special item. Last, our outlook for the Plant Nutrition business is improving with greater stabilization in North America and moderate growth in South America. Now, I’ll turn the call over to our operator, Dana, to begin our Q&A session.

Operator: Thank you. [Operator Instructions] And we’ll take our first question from Chris Parkinson with Credit Suisse.

Christopher Parkinson: Thank you. In terms of the Produquímica business, it’s clear that Brazilian markets are improving in terms of profitability and maybe a touch on the credit side. Can you just comment on what you’re generally hearing from your customers both in the near and intermediate term, as well as their own expectations and how this feeds into your, let’s say, 2017 and longer term outlooks? Thank you.

Fran Malecha: Sure, Chris. This is Fran. I think it’s generally positive down there from a grower standpoint. And in our ag business about 60% to 65% of our sales are direct to farmers, which we think is a real strength of the business and creates lot of value from that acquisition. So they generally are in good conditions from a moisture standpoint and also from a profitability standpoint, if you look at their revenues versus input costs in the year ahead.

And our portfolio products is like a system that delivers value to the grower. So that’s why we see kind of this double-digit growth opportunity in 2017 and beyond in that business. We actually have a very good product portfolio. Investments in that have been made over time. And we are going to continue to bolster our go-to-market there with just adding sales and marketing people mainly, to continue to have that value discussion with growers and expand our reach.

Christopher Parkinson: Great. And just you also mentioned that you want to begin selling products into North America over the next 12 months. Can you just comment on some general specifics here, and the general size and the market opportunity in the long-term and whether not it’s across multiple product lines? And also, just any quick update, do you still have optimism on growth for Wolf Trax outside of the U.S. as well? Thank you.

Fran Malecha: Sure.

What we have in North America with our Wolf Trax products are basically dry specialty fertilizer products. And what we are going to be able to add with the PDQ products that we’re currently testing and building our data on, getting registrations on in North America is foliar products, which are really dry ingredients that go to the farm, they add water and spread-on versus soil applied. So it really expands our portfolio and gets us into a portion of the market that we just haven’t accessed to this point. And so, that’s - we’re excited about that. We need to continue to build on the product line in North America, and try to deliver more of a solutions approach like we are currently delivering in South America.

And so that work will be on going into the future. And the market in the U.S. is softer than - obviously, than what we’ve seen in North America due to lower commodity prices over the past couple or three years. But we are seeing strength in both SOP and in micronutrients. We had growth in both, in terms of our sales volumes in the prior year.

We are expecting that to - that strength to continue into the future. I guess, the question is when and will we be able to increase prices in both those businesses. And I think until you see a recovery in the underlying commodity prices, it’s going to be difficult for us to significantly raise prices. And that’s why we’ve cautioned a bit on 2017 and see this recovery as more gradual than certainly that we would like.

Christopher Parkinson: Thank you for the color.

Fran Malecha: You bet.

Operator: And we’ll take our next question from Vincent Anderson with Stifel.

Vincent Anderson: Good morning, thank you. Just want to dig in a little bit more to your Brazil guidance for next year. It’s a pretty wide volume range.

If you could maybe just help point me to any major drivers, what gets you to lower high-end of that? And then reconcile it to your comments, both previously of 12% top line growth assumption, 15% EBITDA growth assumption and your outlook there?

Fran Malecha: Yeah, I would just - a couple of comments maybe on the business down there. We are continuing to grow that value added business. And that’s a part of that volume increase. And certainly, the margins on that business are higher than on more commodity businesses. So the volume down there is a mix of some more general or commodity type products and even some ingredient businesses that were in, but really focused on delivering value-add to the farmer, which over time will actually be probably lower volume but higher margin.

Vincent Anderson: Yeah.

Jamie Standen: Yeah, and I just - this is Jamie, I’d just add to that. In terms of achieving the CAGR, the 15% EBITDA growth, the business - the team down there does a really good job of driving customers and driving product mix toward these high-value products. And Fran mentioned the direct to customer line and that’s where there is very high profitability and very high growth opportunities. And the products that we have, the innovation that they’ve got is really driving most of that.

For example, they’ve launched 13 products in the last five years and that represents about 30% of the ag sector - ag segment revenue. So if these products and improving the product mix to the higher value foliar applications, and particularly direct to farmer, that is driving the profitability in 2017 and beyond.

Vincent Anderson: So I understand, then the range between the $1.1 million and $800,000, is that on the commodity side or your success in marketing the value-add products?

Jamie Standen: I would say that - so typically you would look at that midpoint. We’ve given ourselves a little flexibility. Obviously, there are always weather implications, timing.

So we felt like, given the first full first-half guidance that we would give ourselves a little bit of room. There is - a big part of the volume is pretty stable on the chemical solutions side. So I think that timing, application is the main driver of that range.

Vincent Anderson: Great. Thanks.

It’s helpful.

Operator: [Operator Instructions] And we’ll go next to Joel Jackson with BMO Capital Markets.

Joel Jackson: Hi, good morning. So I start off same question here in South America. I’m also just trying to understand your first half year guidance for South America.

So do I imply that you are assuming very little, almost no sales for ag in South America in the first-half of the year? And the reason I get there is on Slide 17 when you show seasonality, you do show that ag volume is little more than half of typically first-half year numbers. But your average selling price guidance for the first-half of the year is not much about the chemical solutions price you achieved in Q4. So to get your 395 a ton South American average selling price do we have to assume low ag sales or no ag sales in the first-half or what else is going on?

Jamie Standen: Yes. Certainly - hey, Joe, this is Jamie. Certainly, ag sales are significantly lower in the first-half.

We’ve got some product mix issues flowing through there as well. And to your comment on your notice, well, if you referred back to the growth and looking at our revenue, year-to-date revenue 2016 first-half back from second quarter, that’s not a good comparison when you do your math for first-half 2017. When we posted that, we were really showing trajectory and that’s a top line total revenue number. That includes some taxes and returns pass through revenue. So as we report going forward under a consolidated basis, we will have that net of those taxes.

So an apples-to-apples number, if you wanted to look back at first-half 2016 would be more like $490 million [hey-I] [ph] of revenue.

Joel Jackson: Sorry, I kind of missed the answer on that, the first part. So in your seasonality slide, you show, typically ag is more than half of the volume in a first-half year. Are you seeing in the first half of 2017 ag sales would be a very small number now?

Jamie Standen: Now, we do have sales. It is smaller.

But what’s happening from an earnings perspective is we have the purchase price accounting exercise that we went through, has added depreciation and amortization to our earnings on a flat basis throughout the year, so that’s consuming a lot of the income versus historically.

Joel Jackson: Okay. So my second question then, because I have a kind of a follow-up in the first. My second question was, I’m just trying to understand your guidance for salt and for the full year. So your midpoint guidance of $3.45 EPS this year assumes average wintery weather in 2017 and improving deicing conditions.

Now, if we look at data for January and February, snow days in your - representing those target cities seem to be down significantly in January and February. It seems to be implying that if the normal weather continues from today you’re going to have a normal - you should be having a balanced system. I’m just trying to reconcile all of that. It seems like the snow is behind. Does your guidance assume normal snow, therefore you’re already behind in your midpoint guidance?

Fran Malecha: Joel, its Fran.

I think this winter as we look at it in the first quarter, this is similar to what we experienced in the fourth quarter last year especially in December. We’re seeing heavier snows in the north, especially up in Canada, weaker in the south, little heavier in the west. And that continues and there’s been some ice that’s created the opportunity as well. So it’s not just looking at the snow data. And as we look at kind of where we’re at today, obviously we’re through January, and then look forward, so we are seeing I think is that if it’s an average winter the rest of the year that’s what our guidance is based on.

So you can’t just look at the snow data. I think there are other factors - every year that’s the case. But in this year it’s maybe a little more poignant than it has been in the past.

Operator: And we’ll take our next question from Robert Koort with Goldman Sachs.

Ryan Berney: Good morning, this is Ryan Berney on for Rob.

I wanted to ask on your thoughts on maybe some of those substitutes or kind of competitor products some of your competitors in the high-end fertilizer market are planning to kind of expand this year, I think both Intrepid Potash and Mosaic have kind of announced that they’re going to significantly increase their sales volumes this year, for products that I perceive to be substitutes for SOP. So I’d curious to hear your thoughts on what you are seeing in the market from your customers and whether, you compete in different geographic areas, so you don’t see much of an impact there or not.

Fran Malecha: Sure, Ryan. This is Fran. I mean, there are competing potassium products out there in the specialty space.

And you mentioned maybe a couple of them. And they’re all - they have different makeup. And SOP is certainly a premium product in that segment. So there is competition out there, but we’ve seen some strong take up from our customers. Lot of that has been driven by the pricing both of our product and of competing products including MOP.

So we obviously feel confident in our SOP product. We are coming off a strong harvest last year. And so we are going to make all of what we think the demand in the market is this year from our harvest. We are looking at adding MOP and producing any more product or higher cost products that way. But we will wait to see what the market tells us in terms of demand.

But we feel real good about the solid base of demand that we have. And as we look into next year that really form the basis for the guidance that we put out.

Ryan Berney: Great, thank you. And then as a quick follow-up, just curious on - when you fully reach your expanded capacity, you start running close to the full rates envision at Ogden, I think latter half of next year, what do you think is kind of the current cost production delta, kind of from what you’re seeing today to kind of when you reach those full rates?

Fran Malecha: I think we’ve said that we’re - in 2017 we are running basically to maximize our pond production. And we’ll meet the demand in the market with our increased production capacity at the plant over time.

So I wouldn’t necessary think that that’s going to happen by the end of next year, but we expect it to happen over time as the market recovers and we continue to build demand. And we said kind of all along that our cash costs from SOP at Ogden, when we get to that point should be in the low-200s or around $200 per ton from the pond based production. And then the production that comes - the additional production that comes with adding MOP would be a function of whatever the cost of that MOP is. But the incremental operating cost to deliver that is quite low, the variable cost. So that really then would be just a - really looking at the pricing relationship between SOP and MOP that will drive margin on that demand as we are meeting it with production at Ogden.

Ryan Berney: Thank you very much.

Fran Malecha: You bet.

Operator: And with no further questions in the queue at this time, I would like to turn the conference back over to Theresa Womble for any additional or closing remarks.

Theresa Womble: Thank you, Dana. We appreciate your participation today.

Please feel free to contact the Investor Relations department with any follow-up questions. You can find our contact information on the Investor Relations section of the website. Have a great day.

Operator: Again, that does conclude today’s presentation. We thank you for your participation.