Q2 2024 Compass Minerals International Inc Earnings Call

Regina: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Compass Minerals Inc. Second Quarter Fiscal 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Hello, and thank you for standing by my name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the Compass Minerals, Inc. Second quarter fiscal 'twenty 'twenty four earnings conference call. All lines have been placed on mute to prevent any background noise.

Regina: 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 1 on your telephone keypad. To withdraw your question, simply press star 1 again. I would now like to turn the conference over to Brent Collins, Vice President of Investor Relations. Please go ahead.

Regina: After the Speakers' 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.

Regina: 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.

Brent Collins: 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 will begin with prepared remarks from our president and CEO, Edward Dowling, and our CFO, Lorin 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, our Chief Supply Chain Officer.

Brent Collins: Thank you operator, good morning, and welcome to the Compass minerals fiscal 2024 second quarter earnings Conference call.

Brent Collins: Today, we'll discuss our recent results and update our outlook for fiscal 2024, we will begin with prepared remarks from our president and CEO Edward Daily and our CFO Lorin Crenshaw joining.

Speaker Change: 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 Ginnie Hood, Chief supply chain Officer.

Brent Collins: 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.

Brent Collins: 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 eight 2024.

Ed: These outlooks entail assumptions and expectations that involve risks and uncertainties that could cause the company's actual results to differ materially.

Brent Collins: A discussion of these risks can be found in our SEC filings located online at investors that compass minerals Dot com.

Ed: Our remarks today also include certain non-GAAP financial measures.

Brent Collins: You can find reconciliations of these items in our earnings release or in our presentation. Both of which are also available online.

Brent Collins: I'll 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 and 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 nestle.

Edward C. Dowling: 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, this winter has been especially mild across much of North America.

Edward C. Dowling: Terry to unlock the intrinsic value of our company.

Edward C. Dowling: As we all know the winter has been especially mild across much of North America and a representative cities that we track for snow event purposes. This is the second worst winter in 2007 years of snow events, our operating results for the quarter clearly reflect that reality with salt segment volumes down 21% year over year.

Edward C. Dowling: 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, with salt segment volumes down 21 percent year over year. Notwithstanding these recent challenges, the basic fundamentals of the salt business remain sound. Gross revenue per ton was up 9 percent year over year. Net revenues were up 11 percent per ton, and adjusted EBITDA was 19% per ton to just under $24.

Edward C. Dowling: Notwithstanding these recent challenges.

Edward C. Dowling: Basic fundamentals of the Salt business remains sound gross revenue per ton was up 9% year over year net revenues was up 11% per ton.

Edward C. Dowling: Adjusted EBITDA was 19% per ton to just under $24.

Edward C. Dowling: 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 normalize to around historic levels after 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 decrease.

Edward C. Dowling: Problem is that we just didn't have enough whether to generate sales volume, which resulted in the salt revenue declining 14%.

Edward C. Dowling: <unk> EBITDA declining 7% year over year.

Edward C. Dowling: And the plant nutrition business the results for the quarter a bit of a mixed bag.

Edward C. Dowling: 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.

Edward C. Dowling: So sales price per ton for SLP increased 3% on a sequential basis after five quarters of price decreases.

Edward C. Dowling: 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, and every facet of that operation. One of the primary things the team at Ogden is focused 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.

Edward C. Dowling: 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 are seeing there and we're making a fresh set of eyes renewed energy in every facet of that operation.

Edward C. Dowling: One of the primary things the teams are going to focus on 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.

Edward C. Dowling: The obvious negative for the quarter was the impairment of goodwill in the plant nutrition segment, Laura will provide detail in a moment.

Edward C. Dowling: Lorin will provide detail on that in a moment. Moving on to Fortress, our prior return visit. As we've previously announced, the path forward for magnesium chloride-based aerial fire returns is uncertain. Coordinately, we recognized a $56 million non-cash loss on impairment of goodwill and tangible assets in the quarter.

Lorin: Moving onto the fortress, our fire retardant business. So we've previously announce a path forward for magnesium chloride based aerial fire returns is uncertain.

Lorin: And Lee we recognize a 56 million noncash loss on impairment of goodwill and intangible assets in the quarter. We are evaluating various alternatives regarding the path forward for the fire retardant business given the development over the last few weeks.

Edward C. Dowling: We're evaluating various alternatives in regard to the path forward for the fire retardant business given the developments 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.

Edward C. Dowling: Now I will transition to the actions that we announced yesterday to improve our ability to maximize cash flow to pay down debt. After several consecutive mild winters in several substantial investments in the past years aimed at trying to grow the business. The fact is the balance sheet is clear now in a place where we are.

Edward C. Dowling: A 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.

Edward C. Dowling: 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 that the company's board of directors decided not to declare quarterly dividends for the foreseeable future.

Edward C. Dowling: To that end in most immediately yesterday, we announced the company's board of directors decided not to declare a quarterly dividend for the foreseeable future.

Edward C. Dowling: 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 laid off approximately 20% of the mine's represented workforce.

Edward C. Dowling: That frees up approximately $25 million on an annual basis, our second action, which we announced earlier was our decision to temporarily curb production at our <unk> mine.

Edward C. Dowling: This is being done to build and enhance operating flexibility as well as address excess inventory. We're currently carefully following two mild winters as part of this curtailment, we've laid off approximately 20% of the mine's represented workforce, if and when market conditions improve we will be ready to recall impacted <unk>.

Edward C. Dowling: If and when market conditions improve, we'll be ready to recall impacted employees as needed. Assuming a 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 a multifaceted G&A cost-saving initiative that is intended to improve the 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 recently implemented another headcount reduction at the company headquarters.

Edward C. Dowling: <unk> as needed.

Edward C. Dowling: Assuming a normal winter ahead, our plan is to aggressively reduced production to position us to substantially reduce inventory levels and released the cash as the next layers de icing season begins and we start selling highway deicing salt.

Edward C. Dowling: We've advanced our multifaceted G&A cost saving initiatives 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 or our proxy peer group as part of this effort. We've recently implemented another head count reduction at the company headquarters we've begun.

Edward C. Dowling: We've begun the process of rationalizing functional support across the organization, restructuring contracts, eliminating or pairing back on professional services, to name a few. We expect some of the improvement in 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 expenditure and assessing the relative criticality of individual projects. This will be a tool that enables us to challenge historical assumptions around what is the right amount of maintenance capex for the business.

Edward C. Dowling: The process of rationalizing functional support across the organization restructuring contracts, eliminating or paring back on professional services to name a few.

Edward C. Dowling: We expect some of the improvement in SG&A will be recognized in 2024 and increasingly in 2025 and our full run rate improvement will come in fiscal 2026, we enjoy a full year contribution from the various actions that we're advancing.

Edward C. Dowling: Lastly, we have 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.

Edward C. Dowling: While improvements from this action are not as readily visible to investors, it's an 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 the 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, which are discussed today, help us make progress toward these goals.

Edward C. Dowling: While improvements from this action are not as readily visible to investors. So 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.

Edward C. Dowling: 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.

Edward C. Dowling: Actions are discussed today help us progress towards these goals.

Edward C. Dowling: As a leadership team, we are acutely aware that most of these actions I outlined have had a direct impact on shareholders and employees. We do not take these steps lightly, and most were not easy decisions to make.

Edward C. Dowling: As a leadership team we are acutely aware that most of these actions are outlined to have a direct impact on shareholders and employees do not take these steps lately and.

Edward C. Dowling: Most were not easy decisions to make our for us to realize the inherent value of the company, we need to take device of 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 <unk> season.

Edward C. Dowling: However, for us to realize the inherent value of the company, we need to take decisive action 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.

Edward C. Dowling: Our 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 and strong winners as the health of the balance sheet is restored over time back towards two or two five times net.

Edward C. Dowling: 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 focus 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 and asset efficiency of our salt and plant nutrition businesses and maximize the potential performance of our unique proven assets. We'll share more details of these plans over time.

Edward C. Dowling: Leverage we would expect to consider returning our FERC <unk> to returning capital to shareholders through share buybacks <unk> dividends over.

Edward C. Dowling: Over the medium term, we will 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 will share more details of these plans over time.

Edward C. Dowling: For those of you attending our Goddard Mine tour in mid-June, we'll show you some of the things that we're planning, and we expect the mine to be more efficient and profitable. Compass Minerals is composed of high-quality assets and benefits from the contribution of talented and committed employees. We're excited to lead the company through this period of balance sheet restoration and believe that we will have a great opportunity to create value for shareholders over time. With that, I'll turn the call over to Lorin to review the quarter in more detail.

Edward C. Dowling: For those of you attending our Broadridge mine tour in mid June we will show you some of the things that we're planning and we will 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 I'm excited to lead the company through this period.

Lorin: 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 Loren to review the quarter in more detail.

Lorin: Thanks, Ed there were a lot of moving parts this quarter that impacted our financials consolidated revenue was $364 million for the second quarter down 11% year over year.

Lorin James Crenshaw: As I said, there were a lot of moving parts this quarter that impacted our financials. Consolidated revenue was $364 million for the second quarter, down 11% year over year.

Lorin James Crenshaw: Our profitability this quarter was impacted by the $107 million aggregate loss on impairments we recognized during the quarter related to write-downs of goodwill and intangible assets related to the Fortress fire retardant business and a goodwill impairment in the plant nutrition segment. As further background on the write-downs, given the sustained decrease in the company's share price and market capitalization continuing into fiscal 24 and recent developments related to its mag chloride-based fire retardant business impacting Fortress, we determined that there were indicators of impairment and therefore performed long-lived asset and goodwill impairment testing across our portfolio of assets.

Lorin: Our profitability this quarter was impacted by the $107 million aggregate loss on impairments, we recognized during the quarter related to write downs of goodwill and intangible assets related to the fortress fire retardant business and a goodwill impairment in the plant nutrition segment.

Lorin James Crenshaw: The analysis for plant nutrition resulted in no long-lived asset impairment but did result in a goodwill impairment, while the fortress analysis resulted in an impairment of our magnesium chloride-related assets and goodwill. For the quarter, the company recognized $107 million in impairments, which were partially offset by a recognition of $21 million of other operating income primarily related to the decline in the valuation of the contingent consideration liability associated with the Fortress acquisition.

Lorin James Crenshaw: Further background on the write downs given the sustained decrease in the company's share price and market capitalization continuing into fiscal 'twenty four and recent developments related to its mag chloride base fire Retardants business impacting fortress, we determined that there were indicators of impairment and therefore perform.

Lorin James Crenshaw: Long lived assets and goodwill impairment testing across our portfolio of assets the.

Lorin James Crenshaw: The analysis for plant nutrition resulted in no long lived asset impairment, but did result in a goodwill impairment while the fortress analysis resulted in an impairment of our magnesium chloride related assets and goodwill.

Lorin James Crenshaw: For the quarter the company recognized <unk>.

Lorin James Crenshaw: $107 million in impairments, which were partially offset by a recognition of $21 million.

Lorin James Crenshaw: Other operating income primarily related to the decline in the valuation of the contingent consideration liability associated with the fortress acquisition.

Lorin James Crenshaw: The change in that liability reflects substantial changes to our assumptions regarding the future value of the associated milestone and turnout payments, given the obstacles that gave rise to the U.S. Forest Service deciding not to award us a contract for mag chloride-based fire retardants for the upcoming fire season. Ed touched on those items briefly, and I'll elaborate on them a little more in a moment.

Lorin James Crenshaw: The change in net liability reflects substantial changes to our assumptions regarding the future value of the associated milestone and earn out payments given the obstacles that gave rise to the U S Forest service deciding not to award US a contract for Mag chloride based fire retardants for the upcoming fire season.

Lorin James Crenshaw: Ed touched on those items briefly and I'll elaborate on them a little more in a moment.

Lorin James Crenshaw: The consolidated operating loss for the quarter was $46 million versus operating income of $48 million last year. We reported a net loss of $48 million for the quarter, which compares to a net loss of $22 million last year. Adjusted EBITDA was approximately $87 million, up 13% year over year. In the salt segment, revenue totaled $310 million for the quarter, down 14% year over year. The mild weather that we experienced in the first quarter unfortunately continued through the second quarter, and we ultimately experienced one of the mildest winters that we have seen in our served markets over the last 25 years.

Lorin James Crenshaw: The consolidated operating loss for the quarter with $46 million versus operating income of $48 million last year, we reported a net loss of $48 million for the quarter, which compares to a net loss of $22 million last year adjusted.

Lorin James Crenshaw: Adjusted EBITDA was approximately $87 million up 13% year over year.

Lorin James Crenshaw: And the Salt segment revenue totaled $310 million for the quarter down 14% year over year, the mild weather that we experienced in the first quarter. Unfortunately continue through the second quarter and we ultimately experience one of the mildest winters that we have seen in our served markets over the last 25 years.

Lorin James Crenshaw: Highway de-icing volumes were down 22% year over year, and C&I volumes, which include retail de-icing products, were down 14% over the same period. Total segment volumes were down 21% year-over-year. As Ed mentioned, the salt business is operating well from a production standpoint, but we unfortunately simply didn't have enough weather this winter to pull sales through the income statement. As one would expect with these kinds of volume declines, we saw segment operating earnings and adjusted EBITDA decline by 9% and 7%, respectively, in absolute dollars.

Lorin James Crenshaw: Highway Deicing volumes were down 22% year over year, and C&I volumes, which includes retail deicing products were down 14% over the same period.

Lorin James Crenshaw: Total segment volumes were down 21% year over year.

Lorin James Crenshaw: As Ed mentioned, the Salt business is operating well from a production standpoint. However, we unfortunately simply didn't have much weather this winter to pull sales through the income statement.

Lorin James Crenshaw: As one would expect with these kinds of volume declines we saw segment operating earnings and adjusted EBITDA declined by 9% and 7% respectively. In absolute dollars. However, the profitability of the business improved year over year with adjusted EBITDA margin, increasing by approximately 200 basis points.

Lorin James Crenshaw: However, the profitability of the business improved year over year with the adjusted EBITDA margin increasing by approximately 200 basis points and adjusted EBITDA per ton increasing by 19% to just shy of $24. Moving on to our plant nutrition segment, investors and analysts will remember that calendar 23 saw very abnormal weather conditions that impacted sales throughout last year. Demand has continued to be in a more normalized range, with volumes up 23% from the prior year. The pricing dynamic for SOP continues to track with global trade of potassium-based fertilizers, which led to a 15% decrease in price per ton year-over-year to $680 per ton. However, as Ed pointed out,

Lorin James Crenshaw: And adjusted EBITDA per ton, increasing by 19% to just shy of $24.

Lorin James Crenshaw: Moving onto our plant nutrition segment investors and analysts will remember that calendar 'twenty three saw very abnormal weather conditions that impacted sales throughout last year.

Lorin James Crenshaw: Demand has continued to be in a more normalized range with volumes up 23% from the prior year.

Lorin James Crenshaw: The pricing dynamic for Sop continued to track with global trade of potassium based fertilizers, which led to a 15% decrease in price per ton year over year to $680 per ton. However.

Lorin James Crenshaw: However, as Ed pointed out.

Lorin James Crenshaw: Delta price per ton actually increased this quarter on a sequential basis after five consecutive quarters of price decline. The net effect of higher volumes and lower sales pricing was an increase in plant nutrition revenue of 5% year over year. A significant portion of the plant nutrition business' distribution costs are fixed, so the increase in sales volumes benefited distribution costs per ton in the quarter by 12%. As noted in the press release yesterday, we recognized an impairment of goodwill in the plant nutrition segment of $51 million during the quarter, in the context of impairment indicators evidenced by the sustained decline in our share price and market cap. The impairment reflects tempered long-term financial assumptions for this asset.

Lorin James Crenshaw: Sales price per ton actually increase this quarter on a sequential basis after five consecutive quarters of price declines.

Lorin James Crenshaw: The net effect of higher volumes and lower sales pricing was an increase in plant nutrition revenue, a 5% year over year.

Lorin James Crenshaw: A significant portion of the plant nutrition business is distribution costs are fixed so the increase in sales volumes benefited distribution cost per ton in the quarter by 12% as.

Lorin James Crenshaw: As noted in the press release yesterday, we recognize an impairment of goodwill in the plant nutrition segment, a $51 million during the quarter.

Lorin James Crenshaw: In the context of impairment indicators evidenced by the sustained decline in our share price and market cap.

Lorin James Crenshaw: The impairment reflects temporary long term financial assumptions for this asset.

Lorin James Crenshaw: U S. GAAP requires that these impairment cost being reflected in operating earnings and as a result on a reported basis you get an all in product cost on a per ton basis that isn't very meaningful.

Lorin James Crenshaw: U.S. GAAP requires that these impairment costs be reflected in operating earnings, and as a result, on a reported basis, you get an all-in product cost on a per ton basis that isn't very meaningful. Excluding the goodwill impairment, all-in product costs per ton were down 12% year-over-year due to higher absorption of fixed costs resulting from higher sales value. The net impact of these drivers was that second quarter adjusted EBITDA declined slightly year over year as the favorable impact of higher volumes was more than offset by significantly lower pricing and higher cash costs.

Lorin James Crenshaw: Excluding the goodwill impairment all in product costs per ton were down 12% year over year due to higher absorption of fixed costs, resulting from higher sales volumes.

Lorin James Crenshaw: Net impact of these drivers is that second quarter adjusted EBITDA declined slightly year over year as the favorable impact of higher volumes was more than offset by significantly lower pricing and higher cash costs.

Lorin James Crenshaw: As a result of the developments in the fire retardant business and the uncertainty surrounding the future use of these mag chloride-based products, we recognized a loss on impairment in the quarter of $55.6 million related to write-downs of goodwill and intangible assets at Fortran. We also recognized a non-cash gain of $24.3 million for the quarter within another operating income line item related to the decline in the valuation of the contingent consideration liability associated with the Fortress acquisition.

Lorin James Crenshaw: As a result of the developments in the fire retardant business and the uncertainty surrounding the future use of these non chloride based products, we recognized a loss on impairment in the quarter of $55 $6 million related to write downs of goodwill and intangible assets at fortress.

Lorin James Crenshaw: We also recognized a noncash gain of $24 $3 million for the quarter within other operating income line item related to the decline in the valuation of the contingent consideration liability associated with the <unk> acquisition.

Lorin James Crenshaw: As a reminder, when we purchased Fortress, approximately 50% of the purchase price was contingent, with roughly half of that linked to the achievement of certain business development milestones, and the other half based on volume sold and paid over a 10-year period.

Lorin James Crenshaw: As a reminder, when we purchased fortress approximately 50% of the purchase price was contingent with roughly half of that linked to the achievement of certain business development milestones and the other half based on volumes sold and paid over a 10 year period.

Lorin James Crenshaw: As our expectations of the future value of those liabilities rise, we recognize non-cash losses reflecting that change. Similarly, when our expectations of the future value of those liabilities decline, as they did this quarter in a major way, we recognize non-cash gains to reflect the change in value. As of March 31st, the net present value of this liability was approximately $13 million. Each quarter, there will be gains and losses as the liability is revalued to reflect changes in the discount rate used in the valuation, changes in our outlook for the business, and the passage of time.

Lorin James Crenshaw: As our expectations of the future value of those liabilities rise, we recognized non cash losses, reflecting that change when our expectations of the future value of those liabilities decline as they did this quarter in a major way, we recognized noncash gains to reflect the change in value.

Lorin James Crenshaw: As of March 31, the net present value of this liability was approximately $13 million each quarter, there will be gains and losses as the liability is revalued to reflect changes in the discount rate used in the valuation changes in our outlook for the business and the passage of time.

Lorin James Crenshaw: These changes are not included as adjustments in the calculation of adjusted EBITDA in accordance with accounting guidance. Overall, our adjusted EBITDA as a company would have been $24 million lower if we removed that non-cash gain. Moving on to the balance sheet, at quarter end, we had liquidity of $278 million, comprised of $40 million of cash and revolver capacity of around $238 million. During the quarter, the company amended its existing credit facility to provide covenant relief and provide for greater flexibility over time across a broad range of operating scenarios. At quarter end, the consolidated total net leverage ratio was 4.3 times, well within the amended covenant of six times.

Lorin James Crenshaw: These changes are not included as adjustments in the calculation of adjusted EBITDA in accordance with accounting guidance.

Lorin James Crenshaw: Overall, our adjusted EBITDA as a company would have been $24 million lower if we remove that noncash gain.

Lorin James Crenshaw: Moving on to the balance sheet at quarter end, we had liquidity of $278 million comprised of $40 million of cash and revolver capacity of around $238 million.

Lorin James Crenshaw: During the quarter the company amended its existing credit facility to provide covenant relief and provides for greater flexibility over time across a broad range of operating scenarios.

Lorin James Crenshaw: At quarter end the consolidated total net leverage ratio was four three times well within the amended covenant of six times as Ed noted the actions that we have undertaken will improve our ability to generate more cash for paying down debt.

Lorin James Crenshaw: As Ed noted, the actions that we have undertaken will improve our ability to generate more cash to pay down debt. Given the seasonal nature of the majority of our sales and the timing of when most of the SG&A initiatives we are working on will manifest in the financial statements, we expect the benefits of our cash flow-enhancing actions will start making a major impact on debt in fiscal 25. Moving on to our outlook for the rest of the year, regarding our salt segment, with the conclusion of the highway de-icing season, we can now narrow the range of guidance for fiscal 24.

Lorin James Crenshaw: Given the seasonal nature of the majority of our sales and the timing of when most of the SG&A initiatives. We are working on will manifest in our financial statements. We expect the benefits of our cash flow enhancing actions will start making a major impact on that in fiscal 'twenty five.

Lorin James Crenshaw: Moving onto our outlook for the rest of the year.

Lorin James Crenshaw: Regarding our salt segment with the conclusion of the highway Deicing season, we can now narrow the range of guidance for fiscal 'twenty four as a reminder, we entered the year with guidance resembling a bell curve that laid out $205 million and adjusted EBITDA in the event of a mild winter.

Lorin James Crenshaw: As a reminder, we entered the year with guidance resembling a bell curve that laid out $205 million in adjusted EBITDA in the event of a mild winter, $290 million in the event of a strong winter, and somewhere between $230 and $270 million in the event of a normal winter.

Lorin James Crenshaw: $290 million in the event of a strong winter and somewhere between $230 and $270 million in the event of a normal winter clearly coming out of a winter that saw snow events track at only approximately 60% of normal our current guidance for the year a range of 200 to 210 million.

Lorin James Crenshaw: Clearly, coming out of a winter that saw snow events track at only approximately 60% of normal, our current guidance for the year, a range of $200 to $210 million, reflects the weak side of the original bell curve of possible outcomes we initially shared for guidance, specifically, while sales volumes and revenues are expected to be slightly lower than what we originally projected in a mild winter scenario. Our projected adjusted EVADOC for the fiscal year is in line with our original mild winter guidance of approximately $205 million.

Lorin James Crenshaw: Reflects the weak side of the original bell curve of possible outcomes. We initially shared for guidance.

Lorin James Crenshaw: Specifically, while sales volumes and revenues are expected to be slightly lower.

Lorin James Crenshaw: Than what we originally projected and a mild winter scenario.

Lorin James Crenshaw: Our projected adjusted EBITDA for the fiscal year is in line with our original mild winter guidance of approximately $205 million.

Lorin James Crenshaw: Mild weather is not the only driver of the decline in full-year guidance for the salt segment. We are also reducing full-year guidance to reflect our expectation that we will incur certain costs in connection with temporarily reducing production levels at Goddard. Ed mentioned that we are taking steps to lower our production at Goddard's Mine. The decision to curtail production at Goderich Mine results in incremental costs that adversely impact adjusted EBITDA guidance for this year by approximately $14 million.

Lorin James Crenshaw: Mild weather is not the only driver of the decline in full year guidance for the Salt segment.

Lorin James Crenshaw: We are also reducing full year guidance to reflect our expectation that we will incur certain costs in connection with temporarily reducing production levels at Goderich, Ed mentioned that we are taking steps to lower our production at Goderich mine.

Lorin James Crenshaw: The decision to curtail production at Goderich mine results in incremental cost that adversely impact adjusted EBITDA guidance for this year by approximately $14 million.

Lorin James Crenshaw: These costs are split roughly evenly between the remaining quarters of the year and include accelerated recognition of certain production costs. When operating within normalized production levels, fixed production costs are inventory and then recognized as cost of goods sold, an expense, when inventory is sold.

Lorin James Crenshaw: These costs are split roughly evenly between the remaining quarters of the year and include the accelerated recognition of certain production costs.

Lorin James Crenshaw: When operating within normalized production levels fixed production costs, our inventory and then recognized as cost of goods sold expense when inventory is sold.

Lorin James Crenshaw: As a result of the curtailed production levels being implemented at Goddard's mine being well below the mine's long-run average, U.S. GAAP requires a portion of the company's fixed production costs to be reflected as expense in the periods in which they are incurred rather than as a component of inventory. Thus, our current guidance for this segment of between $200 and $210 million would be roughly $215 to $225 million. Without these costs, we would be incurring as a result of the actions we are taking at Goddard's Mine.

Lorin James Crenshaw: As a result of curtailed production levels being implemented at Goderich mine being well below the mines long run average U S. GAAP required a portion of the company's fixed production cost to be reflected as expense in the periods in which they are incurred rather than as a component of inventory.

Lorin James Crenshaw: Our current guidance for this segment of between 200 $210 million would be roughly $215 million to $225 million absent. These costs, we will be incurring as a result of the actions we are taking at Goderich mine.

Lorin James Crenshaw: We are confident that the focus on cash flow, rather than short-term impacts on EBITDA, is the right approach to driving cash flow to apply towards debt reduction and, ultimately, the right approach to creating shareholder value by shifting to plant nutrition.

Lorin James Crenshaw: We are confident that the focus on cash flow rather than short term impacts on EBITDA is the right approach to driving cash flow to apply towards debt reduction and ultimately the right approach to creating shareholder value.

Lorin James Crenshaw: Shifting to plant nutrition.

Lorin James Crenshaw: We have trimmed the high end of our plant nutrition guidance by $5 million to $30 million and left the lower end unchanged from prior guidance at $15 million, reflecting the passage of time and our current thinking on the most likely range of potential outcomes between now and year end. Our commercial team has managed to maintain strong product pricing relative to alternative products, staying disciplined not to chase sales volumes, which are tracking towards the lower part of the provided range. Moving on to corporate, our corporate expense includes everything not related to salt and plant nutrition.

Lorin James Crenshaw: We have trimmed the high end of our plant nutrition guidance by $5 million to $30 million and left the lower end unchanged from prior guidance at $15 million, reflecting the passage of time and our current thinking on the most likely range of potential outcomes.

Lorin James Crenshaw: Between now and year end.

Lorin James Crenshaw: Our commercial team has managed to maintain strong product pricing relative to alternative products staying disciplined not to chase sales volumes, which are tracking towards the lower part of the provided range.

Lorin James Crenshaw: Moving on to corporate our corporate expense includes everything not related to salt and plant nutrition. So it includes our corporate overhead the cost of our now terminated lithium program and the impact of fortress overall at the midpoint, our total corporate cost guidance of $10 million more favorable than our prior guide.

Lorin James Crenshaw: So it includes our corporate overhead, the cost of our now terminated lithium program, and the impact of Fortress. Overall, at the midpoint, our total corporate cost guidance is $10 million more favorable than our prior guidance, including approximately $21 million in year-to-date non-cash gains related to the decline in the Fortress contingent consideration liability. As I referred earlier, this gain is being partially offset by a $10 million reduction in our expected earnings contribution from Fortress, which has fallen to a new range of $2 to $3 million from $13 million previously.

Lorin James Crenshaw: <unk>, including approximately $21 million and year to date noncash gains related to the decline in the fortress contingent consideration liability I referred to earlier.

Lorin James Crenshaw: This gain is being partially offset by a $10 million reduction in our expected earnings contribution from fortress, which has fallen to a new range of $2 million to $3 million from $13 million previously.

Lorin James Crenshaw: This decline reflects the absence of a 2024 U.S. Forest Service contract and the cost of maintaining staffing while the company evaluates various alternatives for the path of this business. Our corporate expense, excluding Fortress, is tracking in line with prior guidance. Lithium-related costs are included in this number and are unchanged from what we previously reported. With respect to plan CAPEX for the year, we lowered the bottom end of the range, and we now expect to invest $115 million to $130 million in 2024. The change relates to the fire recharges business, where we expect CAPEX to be in a range of $5 to $10 million.

Lorin James Crenshaw: This decline reflects the absence of a 2024 U S Forest service contract and the cost of maintaining staffing while the company evaluates various alternatives for the path of this business.

Lorin James Crenshaw: Our corporate expense, excluding fortress is tracking in line with prior guidance.

Lorin James Crenshaw: Lithium related costs are included in this number and are unchanged from what we previously reported.

Lorin James Crenshaw: With respect to plan Capex for the year, we lowered the bottom end of the range and we now expect to invest 115 million to $130 million in 2020 for.

Lorin James Crenshaw: The change relates to the fire Retardants business, where we expect capex to be in a range of $5 million to $10 million.

Operator: That summarizes our second quarter results and our outlook for the remainder of the year. With that, I'll turn the call over to questions. Operator. If you'd like to ask a question, simply press star 1.

Speaker Change: That summarizes our second quarter results and our outlook for the remainder of the year with that I'll turn the call over for questions operator.

Operator: We will now begin the question and answer session. If you'd like to ask a question, simply press star 1 on your telephone keypad. Our first question will come from the line of David Begleiter with Deutsche Bank. Please go ahead.

Operator: We will now begin the question and answer session, if you'd like to ask a question simply press star one on your telephone keypad. Our first question will come from the line of David Begleiter with Deutsche Bank. Please go ahead.

David L. Begleiter: Good morning, and thank you.

David L. Begleiter: The malware into weather and the elevated inventories do you have any early thoughts on pricing for the upcoming highway deicing season.

Ben Nichols: Yeah, good morning. This is Ben.

David L. Begleiter: Yes. Good morning. This is Ben I would I would first.

David L. Begleiter: First say, we're just starting to get into to our bid process for the 2425 season. So it is a bit early to start extrapolating against the data points that we have in house. So I would just.

Ben Nichols: I'm not going to offer up anything of substance, but one thing I would say though is.

David L. Begleiter: While we've seen to date.

David L. Begleiter: <unk> is working hard against I think we're going to find a way to continue pushing momentum in that business and we're going to remain focused on driving the type of values, we've driven in the past.

Ben Nichols: I would, I would first say we're just starting to get into our bid process for the 24-25 season, so it is a bit early to start extrapolating against the data points that we have in house. So I would just, you know, I'm not going to offer up anything of substance. The one thing I would say, though, is what we've seen today, the team is working hard against, and I think we're going to find a way to continue pushing momentum in that business. And we're going to remain focused on driving the type of values we've driven in the past. Very good And Ed, in terms of Fortress, what's the time frame to determine which path?

Ben Nichols: Very good and Ed in terms of fortress whats the timeframe to determine which path to pursue.

Speaker Change: And so what are the various options you are looking at right now thank you.

Edward C. Dowling: Look, I mean, we're limited in what we can say because of things going on in part of the investigation. Much of this information is new, and we're looking at a number of strategic alternatives. And when we've got that information, we'll share that. Jenny, do you want to add anything?

Ed: Look I mean, we're limited in what we can say because of things going on in front of investors much of this.

Jenny: Information is new.

Jenny: And we're looking at a number of strategic alternatives.

Edward C. Dowling: And when we got that information, we will share that Jenny you want to add anything.

Jenny: I think that's perfect that I would just say it's too premature at this point obviously there has been several developments over the last several weeks. So we're just evaluating the options at this point. Thank you.

Jenny: Thank you.

Operator: Your next question will come from the line of Jeff Zekauskas with J.P. Morgan. Please go ahead.

Jenny: Your next question will come from the line of Jeff Zekauskas with JP Morgan. Please go ahead.

Jeffrey John Zekauskas: Thanks very much, from a longer-term standpoint. I think if you look at your 10-year Salt Cells on Average, and you compare it to the previous 10 years.

Jeffrey John Zekauskas: Thanks very much.

Jeffrey John Zekauskas: Okay.

Jenny: From a longer term standpoint.

Jeffrey John Zekauskas: I think if you look at your 10 year.

Jeffrey John Zekauskas: Salt sales.

Jeffrey John Zekauskas: On average and you compare it to the previous 10 years.

Jeffrey John Zekauskas: Maybe it's down by 13%. And there's, you know, the weather's changed in the United States. It seems so.

Jeffrey John Zekauskas: It's down by 13%.

Jeffrey John Zekauskas: And.

Speaker Change: There is.

Jeffrey John Zekauskas: Whether it's changed in the United States.

Jeffrey John Zekauskas: It seems.

Edward C. Dowling: Each year you talk about whether you know you've had a good winter or a bad winter as though it's random rather than that there's a downward pattern. Do you think in doing your longer-term forecasts and trying to determine what your staffing should be and how many mines you should have, using... sort of an idea that there's no change in the weather is not the best base case? That maybe the cost structure needs to be, you know, rethought over a longer period of time in the light of longer-term demand trends. Or do you think, you know, that there's just not enough evidence to do that and that the way you're going about it is reasonable?

Jeffrey John Zekauskas: Each year, you talk about whether you have had a good winter or a bad winter as though its random rather than their said downward pattern.

Edward C. Dowling: Do you think in doing your longer term forecast and trying to determine what your staffing should be and how many mines you should have.

Edward C. Dowling: That using.

Edward C. Dowling: Sort of an idea of that there is no change in the weather is not the best base case.

Speaker Change: That may be.

Edward C. Dowling: The cost structure needs to be.

Edward C. Dowling: Rethought over a longer period of time.

Edward C. Dowling: In the light of the longer term demand trends or do you think there's just not enough evidence to do that and that's the way you're going about it is reasonable.

Ben Nichols: Yeah, look, it's a totally fair question. And we totally agree with you on that. And that's why, speaking operationally, we're working on the changes that we make to build flexibility in our minds to ramp up or ramp down to manage inventory and cash flow in the business. We've taken some of those actions now, and we'll continue to do that as things progress. You know, our crystal ball is no better than anyone else's, and weather is variable, and we need to have a business that accommodates that. Ben, do you want to add something to that? No, I

Speaker Change: Yeah look it's a totally fair question and we totally agree with you.

Ben Nichols: Pat.

Ben Nichols: And Thats why speaking operationally, we're working on.

Ben Nichols: The changes that we make to build flexibility our mines ramp up or ramp down to manage inventory and cash flow in the business. We've taken some of those actions now.

Ben Nichols: And we will continue to do that.

Ben Nichols: As things progress our Crystal ball is no better than anyone else on whether is variable and we need to have a business that does that.

Ben Nichols: Comedies.

Ben Nichols: Ben do you want to add subject to that.

Ben Nichols: No, I think that's right. The other factor, as you think about how we plan and look at annual operating plans, we get information from our customers directly, which ties to our contractual obligations. And so, I think in aggregate, your point is spot on in what Ed has said is correct, but there's another factor: we plan our business to fulfill our contractual obligations that are a function of what our customers are telling us.

Ben Nichols: No I think thats right. The other factor as you think about how we plan and look at annual operating plans, we get information from our customers directly which ties to our contractual obligations and so I think in aggregate. Your point is spot on and what Ed said is correct, but there is another factor of we're planning our business to fulfill our.

Ben Nichols: <unk> obligations that are a function of what our customers are telling us.

Ben Nichols: Okay.

Ben Nichols: Do you have a target for what your inventories might be at the end of the year and what your payables might be at the end of the year.

Jeffrey John Zekauskas: Do you have a target for what your inventories might be at the end of the year and what your payables might be at the end of the year?

Lorin James Crenshaw: We don't have a target that we would share around either of those numbers, but what I would tell you is that all of the efforts we're taking and that we've announced today, specifically around Goderich, are in the service of driving our inventory days down through next winter. As we approach this year, 930 of this year, at a total company level, our days were in excess of 200. Every 10-day reduction is worth $20 to $25 million in cash.

Speaker Change: We don't have a target that we share around either of those numbers, but what I would tell you is that all of the efforts, we're taking and that we've announced today specifically around goderich.

Lorin James Crenshaw: In the service of driving our inventory days down through next winter as we approach. This year 930 of this year at a total company level our days were in excess of 200.

Lorin James Crenshaw: Every 10 day reduction.

Lorin James Crenshaw: It is worth 20% to $25 million of cash.

Lorin James Crenshaw: And if you look at our five-year average, we're 30 to 40 days away from where we ought to be. How long it takes us to get there is in part a function of Mother Nature, but everything we're doing is not in the spirit of Ibadan, but in the spirit of driving cash flow. I will share with you a target for inventory days. I would tell you that coming on the heels of a 60% winter, you should not expect end-of-the-year inventory to be that different from 9-30-2023 but that the harvesting of cash would happen through next winter.

Lorin James Crenshaw: And if you look at our five year average, we're 30% to 40 days away from where we ought to be how long. It takes us to get there is in part a function of mother nature, but everything we're doing is not in the spirit of EBITDA, but in the spirit of driving cash flow and so we will see.

Lorin James Crenshaw: Share with you a target for inventory days I would tell you that coming on the heels of a 60% winter you should not expect.

Lorin James Crenshaw: The end of the year inventory to be that.

Lorin James Crenshaw: 932023.

Lorin James Crenshaw: The harvesting of cash would happen through next winter.

Lorin James Crenshaw: And so that's what I was.

Lorin James Crenshaw: And so thats, what I would say.

Speaker Change: Okay, great. Thank you so much.

Operator: Again, for any questions, press star 1 on your telephone keypad, and your next question will come from the line David Silver with CL King. Please go ahead.

Lorin James Crenshaw: Again for any questions Press star one on your telephone keypad and your next question will come from the line of David Silver with CL King. Please go ahead.

David Cyrus Silver: Yeah, hi. Thank you.

David Cyrus Silver: Yes, hi, thank you.

David Cyrus Silver: I'm following up, I guess, on your action plan, the fourth initiative, MRO reassessments, and whatnot. You know, I guess there is still some portion of the Goderich underground mine plan that is yet to be completed. And, you know, with this reassessment, is there, you know, could you maybe just update us on your thinking about the underground improvements at Goderich? You know, will they be continued in full, or is there some, you know, reassessment, let's say, compared to the last quarter? Thank you.

David Cyrus Silver: I am calling up I guess on your action plan, the fourth initiative MRO reassessment and whatnot.

David Cyrus Silver: Yes.

David Cyrus Silver: I guess there is still some portion of the <unk> underground mine plan.

David Cyrus Silver: That is yet to be completed and when.

David Cyrus Silver: This reassessment is there could you maybe just update us on your thinking about.

David Cyrus Silver: The underground improvements at Goderich.

David Cyrus Silver: Will they be continued in full or is there some.

David Cyrus Silver: Reassessment, let's say compared to last quarter. Thank you.

David Cyrus Silver: Sure.

Edward C. Dowling: Thanks. What we've done is overlaid a risk assessment approach to capital allocation in the company. And, and, you know, we don't have capital; we don't have the balance sheet to do everything everybody would want to do. And so we've got to be able to say no to certain things.

David Cyrus Silver: Thanks.

Speaker Change: What we've done is overlaid our risk assessment approach to capital allocation.

Edward C. Dowling: Company.

Edward C. Dowling: Sure.

Edward C. Dowling: We don't have capital, we don't have the balance sheet to do everything everybody would want to do and so we've got to be able to say no to certain things and so we need that we needed a way to assess that.

Edward C. Dowling: Put the capital to where it's best served for the health of our business.

Edward C. Dowling: And so we needed a way to assess that and put the capital where it's best served for the health of our business. I would say, in terms of your specific question with regard to Godrej, all of those things are being considered in how you may or may not allocate the capital for the mill relocation and things like that that we've talked about in the past. And we're running these numbers as part of our planning process right now. Once we have answers to that, it'll become more self-evident. I would invite you to come, if you're not on the list, come up to Godrej in June, and we'll be able to talk more about that.

Edward C. Dowling: I would say in terms of the specific question with regard to doddridge all of those things are being considered and how you may or may not allocate the capital or the mill relocation and things like that that we've talked about in the past and were running these numbers as part of our planning process right now once we have answers to.

Edward C. Dowling: Or that.

Edward C. Dowling: It'll become more software.

Edward C. Dowling: Baidu to come if youre not on the list from up to <unk> in June and we will be able to talk more about that.

Lorin James Crenshaw: Or do you want anything to do with capital allocation? You know, I would just say I'm thrilled with this new prioritization framework where we're looking very deeply at MRO capital. And I think it's going to elevate the rigor and the discourse around what's truly required to run the business. And so I'm thrilled with the framework. And I think it's going to step up our game there. One final comment I would make.

Speaker Change: Or do you want to add anything to the capital allocation I would just say im thrilled with this new prioritization framework, where we're looking.

Lorin James Crenshaw: Very deeply at MRO capital and I think it's going to elevate the rigor.

Lorin James Crenshaw: And the discourse around what's truly required to.

Lorin James Crenshaw: Run the business and so I'm thrilled with the framework and I think it's got a step up our game there.

Lorin James Crenshaw: Final comment I would make.

Lorin James Crenshaw: Is that.

Lorin James Crenshaw: This is a big cultural effect and the business I'm, a big believer in culture in the business and this is driving a culture of understanding the business better and discipline will then.

Lorin James Crenshaw: All differently than things that we've done in the past.

Lorin James Crenshaw: Youll see improvements from that.

Lorin James Crenshaw: Over the over the future.

Lorin James Crenshaw: Okay, thank you. And my next question regards the amended credit agreement. You know, the 8K was out on March 27th, I believe.

Speaker Change: Okay. Thank you.

Speaker Change: And my next question regards the amended credit agreement.

Speaker Change: The 8-K was out on March 27, I believe.

Speaker Change: I was trying to read through the amendments and then related to maybe the.

Lorin James Crenshaw: The expected cash free cash flow positive negative.

Speaker Change: For the next year or so, but I am sure you ran many scenarios but.

David Cyrus Silver: But I was trying to, you know, read through the amendments and then relate them to maybe the expected cash, free cash flow, positive, and negative for the next year or so. Assuming that the next 12 months are exactly the same as the last 12 months in terms of salt volumes and pricing, SOP volumes and pricing, and whatnot, does that amended credit agreement provide sufficient flexibility that you wouldn't be bumping up against those particular covenants?

Speaker Change: Assuming that the next 12 months are exactly the same as the last 12 months in terms of sold volumes.

David Cyrus Silver: Pricing.

David Cyrus Silver: Volumes and pricing and whatnot.

David Cyrus Silver: Does that amended credit agreement provides sufficient flexibility that you wouldn't be bumping up against those particular covenants I think you mentioned, a six times, maybe maximum but the <unk>.

David Cyrus Silver: I think you mentioned it six times, maybe maximum, but the devil's always in the details. So, assuming we had another subpar winter and whatnot, is there sufficient headroom in that amended credit agreement such that you wouldn't be violating any of the covenants? Thank you.

David Cyrus Silver: <unk> always in the details.

David Cyrus Silver: So assuming we had another subpar winter and whatnot.

David Cyrus Silver: Is there sufficient headroom in that amended credit agreements such that you wouldn't be violating any of the covenants. Thank you.

Lorin James Crenshaw: David, I appreciate that question, and I would say we're thrilled with the package that we were able to negotiate and also thankful for unanimous support from our banks.

Speaker Change: David I appreciate that question and I would say, we're thrilled with the package that we were able to negotiate and.

Speaker Change: Also thankful for a unanimous support from our from our banks and to Ed's point earlier.

Lorin James Crenshaw: And to Ed's point earlier, we structured these covenants not assuming normal winter weather out of an abundance of caution and to give us greater degrees of freedom. And so these covenants are set not using a normal winter but something other than a normal winter, precisely so that we have the degrees of freedom to deliver and to manage prudently with adequate headroom. And so as you see those covenants, some people have asked, why are the covenant levels where they are? They're higher than perhaps some might have expected. And it's because we set them in a conservative fashion to accommodate a warmer winter.

Lorin James Crenshaw: We structured these covenants not assuming normal winter weather out of an abundance of caution and to give us greater degrees of freedom.

Lorin James Crenshaw: And so these covenants are set not using a normal winter, but something other than a normal winter precisely so that we have the degrees of freedom.

Lorin James Crenshaw: To delever and to manage.

Lorin James Crenshaw: Prudently with with adequate headroom and so as you see those type of that some people have asked.

Lorin James Crenshaw: Why are the covenant levels.

Lorin James Crenshaw: Where they are there they are higher than.

Lorin James Crenshaw: Perhaps some might have expected and it's because we set them.

Lorin James Crenshaw: In a conservative fashion too.

Lorin James Crenshaw: Accommodate a warmer winter.

Lorin James Crenshaw: Oops.

Lorin James Crenshaw: Bruce.

Lorin James Crenshaw: The answer to that.

David Cyrus Silver: Sorry, people are calling. Sorry about that. No, thank you very much. I will get back in queue. I do have at least one other question, but thank you. I appreciate the detail.

Speaker Change: Sorry, sorry.

Speaker Change: All are calling sorry about that thank you very much I will get back in queue I do have at least one other question, but thank you I appreciate the detail.

Operator: Your next question will come from the line of Joel Jackson with BMO Capital Markets. Please go ahead.

David Cyrus Silver: Your next question will come from the line of Joel Jackson with BMO capital markets. Please go ahead.

Joel Jackson: Good morning, everyone.

Joel Jackson: Hi everyone. I spoke a little earlier; it's a little premature about bid season. Can we talk about as we transition some of this past winter's contracts to some of the things we're seeing in the new season? Talk about, you know, what percentage. It was one of the mildest winters ever, right?

Joel Jackson: You spoke a little earlier, it's a little premature about bid season can we talk about as we transition some of the passengers contracts at some of the things we're seeing in the new season.

Joel Jackson: Talk about what percentage of it was the mountain one of the mildest winters ever right. So you had a lot of customers are under the minimum who decided to take their minimums. How do those discussions work, we know that states like Minnesota, and Wisconsin, I believe have decided to take the minimums and also negotiate I believe rollovers that maybe three or 4% gross price increases this year.

Joel Jackson: So you had a lot of customers that were under their minimums. Who decides to take their minimums? How do those discussions work? We know that states like Minnesota and Wisconsin, I believe, have decided to take their minimums and also negotiate, I believe, rollovers of maybe 3 or 4% gross price increases this year. So you talk about what we're seeing for what is out there in the public, minimum commitments here, the rollovers, and how that might inform things going forward. Thank you.

Joel Jackson: So you're talking about what we're seeing for what is out there in the public minimum commitments here, the rollovers and how that might inform things going forward. Thank you.

Ben Nichols: Yeah, Joel, good morning. Thanks for the question. This is Ben.

Joel Jackson: Hey, Joe Good morning. Thanks for the question this is Ben.

Ben Nichols: I would tell you I am not going to speak to any states, specifically, but I would tell you in aggregate we are moving minimums relative to what we previously reported and what you would expect with our prior bid results as it relates to rollovers in other negotiations again, I'm not going to call out specific states or regions that were doing work against but.

Ben Nichols: I would tell you, I'm not going to speak to any states specifically, but I would tell you, in aggregate, we are moving minimums relative to what we previously reported and what you would expect with our prior, you know, bid results. As it relates to rollovers and other negotiations, again, I'm not going to call out specific states or regions that we're doing work against, but we're pursuing all levers to drive the value and the strategy that we've previously spoken about. I would anticipate that by the next quarter, we'll be able to provide a little more color on where the bid season is tracking to help you guys model and understand where that market is moving.

Ben Nichols: We're pursuing all levers to drive the value and the strategy that we've previously spoken to I would anticipate by the next quarter, we'll be able to provide a little more color on where the bid season is tracking.

Ben Nichols: Do you guys model and understand where that market is moving.

Joel Jackson: Okay, let's stay with this. So you presented slides for the last few quarters of what a normal winter range would be for 24 for Highway DIC. On average, that's about 9.6 or 9.7 million tons of demand for 24, if everything had been normal weather, which it wasn't. Should we expect for fiscal 25, 9.6, 9.7 would be the normal range, or would that be lower because, you know, the government customers are going to be starting fiscal 25 flush with salt they took because of their minimums.

Speaker Change: Okay, let's stay with that so you presented slides last few quarters of what a normal winter range would be for 'twenty four for highway Deicing on average its about $9 six or $9 7 million tonnes demands for 24, if everything had been normal weather, which wasn't should we expect for fiscal 'twenty, 596% 97 would be the normal.

Joel Jackson: They had to pay up for minimums. That's what I'm trying to get at. Should we expect fiscal 25's normal winter sales range to be lower than what it would have been in fiscal 24 because of what we're describing?

Joel Jackson: Range or would that be lower because.

Joel Jackson: The government customers are going to be starting fiscal 'twenty five flushed with salt data because of their minimum that could be up to a minimum that's what I'm trying to get at should we expect fiscal 'twenty five normal winter sales range to be lower than what it would've been in fiscal 'twenty four because of what we're describing.

Lorin James Crenshaw: First for Ben, as I say, of course, we'll provide perspective in November. It's a little premature to talk with specificity about our volumes. Nothing that's happened in the past year changes the fundamental earnings power, you know, of our business, but perhaps then you can share conceptually around puts and takes on our bidding strategy and our book of business. Yeah, I wouldn't add much there.

Speaker Change: First before Ben.

Speaker Change: I would say of course, we will provide perspective in November.

Lorin James Crenshaw: A little premature to talk with specificity about our volumes.

Lorin James Crenshaw: Nothing that happened in the past year.

Lorin James Crenshaw: Changes the fundamental earnings power.

Lorin James Crenshaw: Of our of our business, but perhaps then you can share conceptually around.

Lorin James Crenshaw: Puts and takes on our <unk>.

Lorin James Crenshaw: Bidding strategy and our book of business.

Ben Nichols: Yeah, I wouldn't add much there, Lorin. Joel, that's going to be a function of how tender size is and what the states tell us they need and then those contractual obligations. So, again, we'll know more as we get through this bid process and how that impacts what you would call early fill and early movement, but it would be premature for me to speak on it.

Ben Nichols: Yes, I wouldn't add much there Lauren Jo thats going to be a function of how tender sizes and what the state is tell us they need and then those contractual obligations. So again, we will know more as we get through this bid process and how that impacts what you would call early fill an early movement.

Ben Nichols: But it would be premature for me to speak on.

Joel Jackson: Okay, and finally, on the salt mine operation, you chose not to take any temporary layoffs at Côte Blanche in Louisiana. Talk about that decision because it may also inform how you're going to play bid season and what you know what you're going to pursue, but are you not temporarily downsizing production at Côte Blanche? And then at Goderich, you know, is there a goal here to maybe, and I relate a sense of topic, to convert some of these temporary layoffs maybe to more permanent ones or to change shifts or to lower production over time, you know, as a runway based on Jeff's prior question and also, you know, what we're seeing this year's dynamics.

Ben Nichols: Okay, and finally on the Salt mine operation So.

Joel Jackson: So as not to.

Joel Jackson: Take any temporary layoffs at Cote Blanche.

Joel Jackson: Talk about that decision.

Joel Jackson: They may also inform how youre going to say bid season, and what what are you going to pursue.

Joel Jackson: Are you not downsizing temporarily production at Cote Blanche and then I've got a rich is there a goal here to maybe and I related sensitive topic to convert some of the temporary layoffs, maybe to more permanent or to change shifts towards a lower production overtime either runway based on Jeff's prior question and also.

Joel Jackson: What we're seeing this year's dynamic.

Joel Jackson: Yes.

Edward C. Dowling: Right now, the Coke Watch, we're operating to meet our customers' demand. I'll just put it that way.

Joel Jackson: Right now the Coke luxury properties meet our customers' demands and just put it that way.

Edward C. Dowling: And but all options are on the table, you know, and it's something that we regularly review at Goderich. We, you know. You know, we're going to run at a lower rate probably through much of next winter to see where we stand at that point, and at that point, you know, if we have a good winter, we could, hopefully, bring some of the people back into the workforce, but we don't have any plans right now to make this a permanent layoff. This is a temporary layoff.

Edward C. Dowling: But all options are on table.

Edward C. Dowling: No.

Edward C. Dowling: Something that we.

Edward C. Dowling: Regulatory review.

Edward C. Dowling: At Goderich.

Edward C. Dowling: <unk>.

Edward C. Dowling: Sure.

Edward C. Dowling: We're going to run at a lower rate probably through.

Edward C. Dowling: Much of next winter to see where we stand at that point.

Edward C. Dowling: And at which point.

Edward C. Dowling: Have a good winter.

Edward C. Dowling: Hopefully to bring some of the people back into.

Edward C. Dowling: Into the workforce, but.

Edward C. Dowling: We don't have any plans right now so it makes us a permanent layoffs this as a temporary layoff.

Edward C. Dowling: Yes.

Joel Jackson: I'll just ask one more question. I'm starting to be greedy here.

Speaker Change: I will ask one more question I'm trying to ingredient so just to put it all together.

Joel Jackson: So just to put us all together, wouldn't that mean that in fiscal 25, in a normal winter scenario, compasses, high-radio icing, salt volumes would be lower in a normal winter scenario than what you presented for this year? You're running Goddard, it's your biggest mine, at a lower volume, and the government customers are sitting with more inventory probably starting the year than they did the prior year. Doesn't it make sense that a normal run rate compass in fiscal 25 would have lower high-radio icing in a normal scenario than the fiscal 24 numbers presented?

Speaker Change: That mean that in fiscal 'twenty five in a normal winter scenario campuses highway deicing salt volumes will be lower the normal winter scenario than what you presented for this year, you're running God or it's your biggest mine at lower volume.

Joel Jackson: And then and there.

Joel Jackson: And the government customers are sitting with more inventory, probably starting the year and it did the prior year isn't it makes sense at a normal run rate companies in fiscal 'twenty five would be lower highway deicing and the normal scenario than the fiscal 'twenty four numbers presented.

Edward C. Dowling: Please recall that we're going to be, you know, the salt that we're making this year gets sold next year for a large profit... And so much of the revenue going to our customers during what will be fiscal year 24-25 is coming from inventory. That's what we want to do to free up cash. So we're going to keep Godrej at a lower rate until the inventory gets to a point where we think it should be, which at that point will just be the mine production quarterly.

Joel Jackson: So recall that we're going to be.

Edward C. Dowling: Salt that we're making this year gets sold next year, a large extent and so much of.

Edward C. Dowling: Also point to our customers.

Edward C. Dowling: What will be done.

Edward C. Dowling: Full year 'twenty four 'twenty five is coming from inventory.

Edward C. Dowling: What we want to do to free up cash so we're going to keep <unk> at a lower rate until the inventory gets to a point, where we think.

Edward C. Dowling: It should be at that point, we'll we'll just commodity production quarterly and I'll also add Joel its way that we have.

Edward C. Dowling: And I'll also add, Joel, that the way that we've decided to manage. The temporary layoffs in the production level at Goddard give us flexibility in that regard and also minimizes our fixed costs during this period. Anyway, we've come up with such a way to do that, okay? Thanks, Ed.

Edward C. Dowling: Decided to manage the temporary layoffs in the east and the production level at Goderich, which gives us flexibility in that regard and also minimizing our fixed costs are during this period.

Edward C. Dowling: Anyway, thats, such a way to do that okay.

Speaker Change: Thanks, Ed.

Operator: Once again, to ask a question, press star 1 on your telephone keypad, and your next question is a follow-up from the line David Silver with CL King. Please go ahead.

Edward C. Dowling: So Dan you ask a question press Star one on your telephone keypad and your next question is a follow up from the line of David Silver with CL King. Please go ahead.

Operator: Yeah.

David Cyrus Silver: Yeah, hi, thank you. This question I would like to direct to Gordon Dunn, if possible, but, you know, you've recently assumed greater responsibilities within Compass after spending a very long time running the UK operations and before that, you know, working for some very sophisticated industrial companies. You know, the UK business has much smaller mines. It's, I think, more sensitive to imports, competition, etc. You know, when you look at the North American assets and maybe try to apply your, you know, UK-based experience or your industrial experience before that.

David Cyrus Silver: Yes, hi, thank you.

David Cyrus Silver: This question I would like to direct to Gordon Dunn.

David Cyrus Silver: If possible but.

Speaker Change: <unk> <unk>.

David Cyrus Silver: Recently assumed greater responsibilities within encompass after spending a very long time running the UK operations and before that.

David Cyrus Silver: Working for some very sophisticated industrial companies.

David Cyrus Silver: The U K business has much smaller mines, it's I think more sensitive to import competition et cetera.

David Cyrus Silver: When you look at the North American.

David Cyrus Silver: Assets and maybe try to apply your UK base to experience where you are.

David Cyrus Silver: Industrial experience before that I mean, maybe.

David Cyrus Silver: I mean, maybe if you could just comment on where you see the greatest opportunities, are there some, are there some low-hanging fruit that you can identify or best practices you could transfer just to, you know, if you could just give us your assessment, you know, it is early days, but your assessment at this point on what can be done or the extent of efficiency gains you think are possible. Thank you. Yeah, thank you for that, David.

Gordon Dunn: Maybe if you could just comment on where you see the greatest opportunities are there. Some is there some low hanging fruit that you can identify or.

Speaker Change: Best practices you could transfer just.

Speaker Change: If you could just give us your assessment. It is early days, but youre assessment at this point on.

Speaker Change: What what can be done or the extent of.

Speaker Change: Efficiency gains you think are possible. Thank you.

Gordon Dunn: Yeah, thank you for that, David. Yes, I've been working in the UK for the last 10 years. I've been closely associated with Godrej for a long time and was briefly in charge of Godrej on an interim basis, so I'm very familiar with the US operation. Yes, I agree there is some. We just jumped about. In the UK, we've always worked our inventory in relation to what the weather has been because it's extremely flexible, and that's the type of model that we're introducing in the US and Canada as

Speaker Change: Yes, thank you for that David.

David Cyrus Silver: Yes.

Gordon Dunn: <unk> in the UK for the last 10 years have been closely associated to the cartridge for a long time.

Gordon Dunn: Briefly.

Gordon Dunn: In charter contracts as an interim basis, so I'm very familiar with the with the U S operation.

Gordon Dunn: Yes, I agree there is some.

Gordon Dunn: Just jumped over in the UK, we've always we've always worked our inventory in relation to what the weather is Baker's is extremely flexible and that's the model.

Gordon Dunn: So we will take the opportunity to flex the operation and match it in line with what the true demand is. I agree there are some low-hanging fruits. I completely agree with you, continuous improvement is a big focus, and that's something that Ed and I were speaking about yesterday, with how we get that up and running and introduced so it becomes part of the culture of the organization.

Gordon Dunn: Model that we're introducing in the in the U S and Canada as well so we will take the opportunity to flex the operation and much in line with what the true demand is.

Gordon Dunn: I agree this low hanging fruits.

Gordon Dunn: Hi.

Gordon Dunn: Completely agree with your continuous improvement is a big focus.

Gordon Dunn: Ed and I have only been speaking about yesterday with how do we get up and running and entities. So it becomes part of the culture of the organization.

Gordon Dunn: Okay.

David Cyrus Silver: Thank you very much. I appreciate the comments.

Speaker Change: Thank you very much I appreciate the comments.

Edward C. Dowling: With that, I'll turn the call back to Ed for any closing remarks.

David Cyrus Silver: With that I will turn the call back to Ed for any closing remarks.

Operator: Thank you again for your interest in Compass Minerals. Please don't hesitate to reach out to Brent if you have any follow-up questions. We look forward to speaking to you in the next quarter. Everyone, that will conclude our call for today. Thank you all for joining, and you may now disconnect.

Ed: Thank you again for your interest in Compass minerals. Please don't hesitate to reach out to Brent do you have any follow up questions. We look forward to speaking to you in the next quarter.

Operator: ...

Operator: Everyone that we will conclude our call for today. Thank you all for joining and you may now disconnect.

Operator: [music].

Operator: Yes.

Operator: Yes.