Compass Minerals International Inc (CMP) 2003 Q4 法說會逐字稿

Good morning. At this time I would like to welcome everyone to the Compass Minerals International fourth-quarter earnings conference call. [OPERATOR INSTRUCTIONS]

Before we begin I will take a moment to provide you with Compass Minerals Safe Harbor statement. Statements in this presentation that are not reported financial results or other historical information are forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. They include, for example, statements about our business outlook, assessment of market conditions, strategies, future plans, future sales, prices for our major products, capital spending, and tax breaks. These forward-looking statements are not guarantees of future performance. They are based on management's expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. The risks and uncertainties relating to the forward-looking statements in this presentation include those described under the caption "Risk Factors" in Compass' Form S1, filed on December 11th, 2003, and from time to time in Compass' other filings with the Securities & Exchange Commission. Reconciliations of non-GAAP financial information were provided in today's news release which can be found in the Investor Relations section of the company's Web site at www.CompassMinerals.com.

Now it is my pleasure to introduce the President and CEO of Compass Minerals International, Mr. Michael Ducey. Mr. Ducey, you may begin your conference.

Good morning. Thank you for joining us. I'm Mike Ducey and I'll give you an overview of our results and operations. Then I'll turn it over to Rod Underdown, our CFO, who will describe our 2003 performance in more detail.

We've had a very good year in just about every aspect of the business. We continue to focus on operational excellence as our operating philosophy, and those cost savings have continued to improve our results. The most recently completely bid season was very positive as our volume commitments increased and prices were slightly higher. And we've now completed the acquisition and integration of the Carlsbad SOP business. Each of these items have been accretive to shareholder value.

As for our financial results, we achieved significant improvements in 2003. Our product sales increased 19 percent to $435.3 million, in large part due to a very strong first-quarter sales of both our highway de-icing and our general trade groups. Our adjusted EBITDA increased 14 percent to 140 million. Our fourth quarter EPS of 50 cents represents an 11 percent increase over the prior year and our full-year EPS of $1.01 compared to 23 cents the prior year.

Our sales increases were driven by several factors. First, our sales were higher due to the mild prior winter weather in 2002, particularly in the first quarter, for both our highway de-icing and our consumer de-icing salt products. Another reason for our sales being higher was a five percent increase in our general trade sales volumes for the year. In addition to the more normal consumer de-icing season in the first quarter of 2003 when compared to the milder 2002 quarter, we had strong fourth quarter consumer de-icing sales on the East Coast. Finally, we compared our acquisition of the Carlsbad SOP business on November 30th, so we achieved a sales volume increase in our SOP business. We expect a more substantial increase in 2004.

I want to spend a little bit of time discussing the factors that drive our highway de-icing sales. First, there's the bidding process. Each year from May to October our customers provide us with their forecast for salt requirements for the coming season and ask us for bids. Commitments are awarded based upon price and delivery reliability. And while the commitments are not binding contracts for specific tonnage, over time our commitment volumes have equaled our actual sales volumes. So even though the fourth-quarter weather patterns in the market we serve were very similar in 2003 and 2002, we saw a year-over-year sales increase in 2003 primarily because we had increased commitment volumes. Of course weather a strong impact on our sales. In any given year we may be experiencing above-average weather in some parts of our markets and below average weather in others. However, our broad geographic coverage in the snow-belt region of the Great Lakes, where winter weather is more consistent than other areas of North America, tends to reduce the weather volatility. And while the weather influences our sales, total snowfall is not the only determining factor. Our sales are driven by the number of times it snows or ices. For an example, four two-inch snowfalls are better for our business than one eight-inch snowfall, and four ice storms are better than four snow storms. Unfortunately, the number of snow events generally is tracked by weather services and ice events aren't tracked separately at all.

Before I wrap up and turn it over to Rod for the review of the detailed financial results, I want to take a few moments to comment on our strategic principles which drive Compass and the management team. First and foremost we're focused on building intrinsic value by improving our normal winter weather EBITDA and by reducing our debt with our free cash flow. This principle is the cornerstone of our business philosophy. There will be mild winters and there will be harsh winters. The management team stewardship is to generate consistent cash flow regardless of the weather variations and to utilize the cash to maximize the value for the shareholders. We can employ the cash to prudently re-invest back in our business, pay down debt, make small bolt-on acquisitions which are immediately accretive to value, and pay a dividend. We also focus on growing the gross margins through productivity and product cost reductions, product mix enhancements, new products, and value-added services.

Through our Operational Excellence Program we'll maintain or improve our flexible low-cost structure. We have programs in place to measure and continuously improve our operating performance. We continue to drive more of our cost through a variable structure. That way we enhance our ability to flex cost depending upon weather variations. We operate under a strict capital discipline model. Capital discipline to us means, first, while we target to spend 75 percent of depreciation annually, we also build flexibility into our spending so that we can react quickly to operating cash flow variability. Secondly, we maintain high new project hurdles rates to ensure the investments generate accretive value. Third, we target less than our current depreciation in order to accelerate the asset velocity of our business. We successfully demonstrated this strategy over the past few years. The winter season ending in March of 2002 was extremely mild. Despite this, we managed our cash outlays and improved the market pricing and product mix in such a way as to keep a consistent cash flow in our business. For the winter ending in March of 2003, the weather was much more challenging and our earnings grew. But our cash flow from operations remained relatively constant with 2002 and we used our free cash flow in ways that were accretive to shareholder value.

We believe that with this kind of focus we can continue to build the significant growth and the value of this company. Now that I've given you that overview of the business, I'll the call over to Rod to discuss our fourth-quarter and year-end results.

Thank you, Mike. For the full year, Compass Minerals reported sales, net of shipping and handling costs, of $435.3 million, an increase of $70.2 million, or 19 percent, when compared to 2002. The increase is due to both higher volumes and improved pricing related to each of our product lines. Net sales of our salt segment were $390 million, up from $322.3 million in 2002. Net sales of SOP were $45.3 million, up 2.5 million, or 6 percent, compared to 2002. The volume increases were related to the fact that 2002, especially the first quarter of 2002, had particularly mild weather conditions.

To recap these first-quarter 2003 results, in our highway de-icing product line we experienced average winter weather in our markets. Higher-than-normal snowfall in Eastern Canada and the Ohio River Valley region offset significantly lower-than-average snowfall in the Western Great Lakes and the U.K. Highway de-icing sales volumes in the fourth quarter of 2003 were slightly above normal levels. Specifically, we had an increase in highway de-icing volume commitments secured in the recently-completed bid season. We expect to retain the entire level of commitment volumes going forward. Even with the higher commitment levels, sales volumes in the fourth quarter were above normal by approximately 150,000 to 200,000 tons due to weather. 2003 sales volumes in our general trade product line exceeded prior-year sales volumes by over 100,000 tons, or five percent. The increase is likewise primarily related to increased consumer de-icing sales volumes. Demand increased due to a more normal winter weather season in North America when compared to the abnormally mild prior-year winter ending in 2002. Consumer de-icing sales in the fourth quarter of 2003 were also slightly above average. The average net-back price of our highway de-icing and general trade salt products each improved by approximately eight percent in 2003 when compared to 2002. Sales volumes in the SOP segment improved by four percent over the prior year. Net-back prices were up about $3 a ton, or two percent.

Looking back at our results in 2003, we believe winter weather across our markets was slightly above average. We experienced more severe winter weather in North America, which was primarily offset by very mild winter weather in the U.K. The result is that net sales were approximately $8-10 million higher than normal. We will speak to the - I will speak to the EBITDA effect of that in just a moment.

EBITDA improved from 109.8 million in 2002 to 134 million in 2003. Adjusting EBITDA to exclude other income and expenses as well as the restructuring and other costs, such as the IPO costs in 2003, adjusted EBITDA improved from 122.4 million in 2002 to 140.1 million in 2003. The improvements reflect the increase in volumes and pricing across all of our product lines as previously discussed.

Our adjusted EBITDA margin percentage declined approximately one percent compared to 2002 from 33 percent to 32 percent of net sales. As we have mentioned in the past, we have scalable cost structure and we plan our maintenance and other spending to match the demand we have seen in the business based on the winter weather. This means in harsher winter weather years we spend more and in milder winter weather years we spend less. Due to the mild winter weather in 2002 we were able to scale back our spending to lower levels than the slightly above-average levels incurred in the more normal 2003.

Year-to-date selling, general, and administrative cost increased 8.4 million as compared to 2002. The dollar increase is primarily due to higher charges for variable incentive compensation plans and profit-sharing programs which relate to the profitability of the company as well as certain selling expenses. These increases are consistent with the scalable structure we built into the business. Additionally, the impact of foreign currencies resulted in $2 million of higher SG&A during 2003.

As we previously mentioned, 2003 winter weather was slightly above normal, and while this is difficult to precisely quantify, higher North American sales offset lower U.K. sales, led us to conclude that our results were favorably impacted by $3-4 million in EBITDA due to weather, most of which relates to the fourth quarter. However as I just mentioned, the one-percent decline in adjusted EBITDA margin percentage from 2002 to 2003, relates to higher spending in 2003 consistent with management's stated strategy of keeping operating costs as variable as possible. This one percent margin tightening equates to approximately $4 to $5 million of higher spending, thus offsetting the improved winter season. As we look forward to more normal winter whether outlook, we would expect our EBITDA margin percentage to return to 2002 levels.

Full-year net income available for common shareholders was $34.2 million in 2003 compared to 8.3 million in the prior year. The higher sales volumes and prices significantly improved operating income when compared to the prior year. This was offset by higher interest expense on the year due to higher levels of debt, following the issuance of the Compass Minerals' discount notes in December 2002 and May 2003. Excluding non-recurring items, full-year 2003 net income available for common stock was 28.3 million in 2003, a $12.4 million increase over the prior year. Our non-recurring items are an $8.2-million gain related to the redemption earlier in the year of a portion of our preferred stock as well as the IPO costs in 2003 and the transition costs in 2002.

On a full-year, fully diluted earnings per share improved to $1.01 per share, up 23 cents per share in 2002. Excluding the above-mentioned non-recurring items, earnings per share increased from 45 cents per share in 2002 to 83 cents per share in 2003. Additionally, as previously disclosed, during the fourth quarter we adopted the provisions of FAS 123 whereby the company expenses stock options granted. The impact on our earnings was less than $100,000 as a result of the adoption of this FASB.

Now, turning to the fourth quarter. Compass Minerals reported sales, net of shipping and handling costs, of 146 million, an increase of 22 percent compared to 2002. Net sales of salt were 133.1 million while net sales of SOP were $13 million. The increases are primarily due to improved volumes and pricing in all of our products. The increase in volumes in our highway de-icing product line was primarily due to the increase in the commitment volumes awarded for our North American customers during the most recent bid season resulting from a modest increase in our (inaudible) market share. In the U.K., highway de-icing volumes were improved by approximately 100,000 tons. Our general trade volumes were higher during the 2003 quarter, primarily due to the higher consumer de-icing volumes. Although highway de-icing products do not participate in the East Coast market, our consumer de-icing products in general trade do compete along the Eastern seaboard. Above-average winter weather in this region during the quarter were the primary factors driving the improvement in those volumes.

The average net-back price of our highway de-icing salt products improved by approximately five percent. The average net-back price of our general trade products improved by almost 11 percent when compared to last year's fourth quarter. The modest improvement in SOP sales volumes relates primarily to the transfer on December (inaudible), 2003 of the former customers of the IMC Carlsbad, New Mexico, facility to our facility following the effective date of that acquisition. Higher net-back prices in SOP reflect a price increase that went into effect during the last half of 2003. Prices in the fourth quarter improved $8 a ton, or approximately five percent, when compared to last year.

Adjusted EBITDA improved by almost $2 million for the fourth quarter. The improvement relates to highway de-icing and general trade prices and volumes, as previously mentioned, and improved S&P results. Adjusted EBITDA was negatively affected by variable operating expenses in 2003 and higher variable SG&A costs, which I described earlier.

Fourth quarter net income available for common shareholders was equal to the prior year net income of 15.9 million. Higher interest expense in 2003 was offset by lower income taxes and lower dividends on preferred stock. The fourth quarter of 2003 and 2002 each included non-recurring charges. In 2003 we incurred approximately $2.4 million related to the initial public offering. During the 2002 quarter, approximately $1 million of charges were incurred as part of our transition IMC Global to a self-sustaining entity. Net income, excluding these non-recurring items, was 18.2 million in the fourth quarter of 2003 and $17 million in the fourth quarter of 2002. Earnings per share increased 11 percent during the fourth quarter of 2003 from 45 cents per share to 50 cents per share. However, excluding the previously mentioned non-recurring items, earnings per share increased 19 percent to 57 cents per share.

At year end, our debt balance was $630.4 million, including $14 million outstanding under our revolving credit facility. Our cash balance was approximately $2.5 million, and we have over $100 million of available borrowing capacity under our revolving credit facility. We have no significant debt amortization requirements for the next several years. We manage our business to a large extent to maintain the consistency of our cash flows. Cash flows from operations were $69.2 million in 2003. Our cash used in investing includes approximately $25 million related to the purchase of the Carlsbad, New Mexico, SOP business. Consistent with our previous guidance, we spent just over $20 million on capital spending during 2003, including $2 million in payback projects that we anticipate benefits from beginning in 2004.

As we've mentioned in the past, our normal maintenance capital spending level in the business is approximately $22 to $23 million. And each year the company will earmark discretionary payback projects of between $2 and $4 million. We expect our 2004 capital spending to be in line with these estimates.

During 2003 a portion of our free cash flow went to the acquisition of the Carlsbad, New Mexico, SOP business and to repurchase a portion of outstanding common and preferred stock. We will continue to look for opportunistic investment opportunities in the future that are accretive to shareholder value.

We have a lower income tax rate than the statutory rate primarily due to the company's sizeable NOLs and other favorable tax attributes. Our effective tax rate in 2003 of 24 percent is approximately the rate the company would normal expect in a year without any unusual non-taxable transactions. Of course, because the company is a tax player in foreign jurisdictions, the change in the profitability mix between the U.S. and foreign operations can have an impact on the overall tax rate.

The board of directors of Compass Minerals International has declared an 18.75 cent per share dividend on each share of common stock for stockholders of record March 1st to be paid on March 15th. During the IPO process we stated that we intended to pay a 75-cent-per-share annual dividend. We see no reason to change that policy at this time. This quarterly dividend represents one fourth of this annual amount.

I would like to end with some comments briefly discussing our outlook for 2004. On a normal winter basis we expect sales to increase three and a half to four percent. But as I previously described, because sales were slightly higher in 2003 due to the weather, the rate of increase would be slightly lower. Adjusted EBITDA margin percentage should be consistent with our 2002 percentage, which excludes the one percent decline in the current year that I previously mentioned. The result is that on a normal winter basis we would expect adjusted EBITDA growth in the mid-single digits when compared to the 2003 actual results. In addition, besides paying a dividend, we continue to see the ability to de-leverage the balance sheet. Now, all of the above outlook is based on the assumption of normal weather, but we are very optimistic about 2004 given the winter weather experienced in our markets for the first weeks of the year. In most of our markets, 2004 winter precipitation has been above average. And while the winter season is not yet completed, based on the first five weeks we would expect year-on-year improvements in sales and adjusted EBITDA to be better than the 2004 normal winter guidance I just presented as it appears that the first quarter of 2004 will exceed normal winter expectations.

Additionally, this also bodes well for our upcoming highway de-icing bid season for the 2004-2005 winter since even with average winter weather for the remaining part of the winter season we would expect that inventory positions would be tight. This would suggest strong pricing fundamentals as we approach the bid season this summer.

And with that, I'll turn it back to Mike for some concluding remarks.

Thank you, Rod. As we look forward to 2004, I'm pleased to say we're off with a strong start. We're seeing strong consumer and highway de-icing sales so far this quarter. Our board recently declared our first dividend, and it's our intent to pay dividends quarterly. And we continue to be focused on operational excellence programs which is designed to generate and reward improvements in operation and productivity throughout the organization. And our long-term goal is to continue to be the best-operating, best-performing salt company in the world.

Now we'll open the call up for some questions. Janet.

As a reminder, if you would like to ask a question, please press star then the number one on your telephone keypad. We'll pause for a moment to compile the Q&A roster.

Our first question is from Bob Court, of Goldman Sachs.

Good morning, Bob.

Hi. Actually it's Duffy Fischer. Question for you. You talked about inventories being tight coming out of this winter. But at the customer level, how many times per year would they turn their inventory?

Well, at the customers' level, they generally maintain very little inventory in their control. They rely on the salt producers through their depot and network to maintain the salt close to the distribution system. So therefore they are turning their inventories many, many times during the winter season.

If that's the case, then inventory, whether it's a little bit or a little bit low, probably does not have that big of an effect on pricing. Because if they don't have a big chunk of what they use per year, you know, then it's not quite as significant as if they did carry a large chunk. Is that a fair way to look at it?

No, not at all. It is where the inventory is maintained, is at the depot level. So if the depot level at the end of the season is very, very low - in other words, if you're scraping concrete ...

Right.

... that means there's got to be a large production and restocking effort done by the salt producers to logistically get it there in advance of the next season.

OK. So then at the depot level, how many times would that get turned per year?

Once, maybe one and a half times.

OK, one to one - OK. So then that is very significant. OK. Good enough. Then you talked about in the U.K. improved volumes, but yet, you know, called it a very weak weather year there. You know, what was - you know, I guess that would kind of be juxtaposed a little bit. Why were you able to improve volume so much given the weak weather?

Well, from a whole-year perspective, 2003 was a very weak winter - the first quarter of 2002. And 2003 first quarter was also very weak in the U.K. from a winter standpoint. We did see some winter weather in December, the fourth quarter. Actually the volumes were very much near normal or a little bit above normal for the beginning of this winter season in the U.K.

OK, great. Thanks, fellas.

Thank you.

Our next question is from Nancy Traub, of CSFB.

Good morning.

Good morning, Nancy.

I was wondering about your - you said your priority to pay down debt. How much would you anticipate to pay down in 2004 given a general - a regular winter?

Yes, when we look at the free cash flows of the business, you know, after paying - or after capital spending, we view that as $65 to $70 million on the normal winter basis. And so after the dividend we would have somewhere between $40 to $50 million of free cash flow to pay down debt or to do other things with.

Yes. And at year end you were at - well, long-term debt was 602.5. What is your long-term goal to move that down to?

Sure. Right now, if you look at our debt-to-market cap we're at about 60/40. Our long-term goal is move that - to roughly flip that to 40/60. The business, given our cash flow characteristics, you know, we think we're certainly fine where we're at, but we would like to move that down over the next several years.

And any updates onMinosus?

Yes. We had a - our filing for the permit with the U.K. government, that was due - February 2nd was the comment period. They received some comments, which means that the permit will be delayed probably until - our best guidance is right now - April/May timeframe, from the waste side of it. The other side of it, from the document storage business, is proceeding nicely. We got all the recent 20 miles of shelving put in to handle the archives for the U.K. government. The U.K. government right now has about 50 to 60 percent of the documents already in the mine and are continuing to load more documents going forward.

What kind of contribution would you expect to get from that?

From the document storage site?

Yes.

Probably somewhere around 500,000 to 600,000 pounds this coming year.

OK. And that's not assuming that the waste - anything from the waste then.

That's correct. We're not factoring anything into the waste right now in 2004 due to the fact that the permit has been delayed until mid-year.

Thank you.

You're welcome.

Our next question is from David Silver, of J.P. Morgan.

Yes, good morning.

Hi, David.

I guess my question would be maybe to make - I'm going to maybe make you repeat yourself a little bit with the flow of the salt business, I guess, across the fourth quarter of '03 and the first quarter of '04. I guess Rod made a comment that there might have been some extra business to the tune of 150,000-200,000 tons in the 4Q solely related to weather. But I guess if I look back at the 4Q of '02 and 4Q of '01, there does seem to be some additional volumes there. So I guess my question would be if maybe you could just say how much of the pick-up in volume in 4Q '03 maybe is borrowing from the first quarter or if it's a situation here where with low inventories and a normal weather pattern in the first quarter we might be in that situation where we might get some attractive kind of spot business with the higher pricing that could potentially move the EPS above our forecasts. Thanks.

Sure. I'll try and answer all those, if you can hang on just in case I miss a piece of that. The 150,000-200,000 tons of incremental volume due to weather - so above average weather - isn't really stealing, if you will, from Q1.

Right.

We always maintain excess safety margin, safety stock, at our depots in order to cover above-average winter - you know, winter weather, primarily because we do have some contractual commitments to do that. So the 150,000 to 200,000 tons of incremental is fourth quarter due to weather. In terms of being able to go above the contractual commitments and get the premium on pricing, right now given sort of the broad weather impact that we've had across our market regions, we're really just focusing on serving our existing customers and making sure they're well-served for the winter season. So we don't really see a big impact during the year on premium pricing.

The issue you have is the weather this year has been so widely good for us - bad for some people but good for us - across the Great Lakes region. The opportunity to move dislocated products into other markets at premium pricing is probably going to be a little abated this year because of the fact that we're going to be just pretty much widespread full out serving our current customer base.

OK. And just building on that. So when I look at the 4Q highway de-icing volumes, you know, well up over a year earlier and the fourth quarter of '01 as well, I guess I'm just trying to get comfortable with the incremental margins from that. So Rod indicated with your scalable cost structure there was some additional SG&A. I guess I'm just wondering were the 4Q per-ton margins on your highway business kind of where you thought they would be or maybe were they a touch lower for one reason or another.

Yes, I think, the 4Q margins were just right about on where we expected them to be. Again, we do have our costs that we're constantly monitoring as it relates to, you know, where the winter season is and how that's going. But the fourth quarter came in exactly where we expected it to come in at.

OK. Last question on maybe the share count. I guess the 4Q numbers were just a little bit different from what I was modeling. What fully-diluted share number should we be using for our 2004 model? Thanks.

Yes, that's a good question. I think there has been a little bit of confusion around that given the mid-year purchase that we had of some of the common stock in the treasury. The full-year 2004 number to use on a fully diluted basis would be about 32.1 million shares.

32.1. OK. Thank you.

Yes.

Once again, if you would like to ask a question, please press star then the number one on your telephone keypad.

Our next question is from Omar Damma (ph), of Merrill Lynch.

Good morning, guys.

Good morning, Omar.

You talked about the scalability of your costs to the weather and your volumes. Does that also apply to the SG&A? What should we look for in that SG&A number?

Yes, it is - we build a lot of scalable cost in there. Example, promotional spending in our general trade business. We also have broker discounts and stuff that are volume-related. We have incentive plans that are based upon achieving our stretch objectives for the business as far as both incentive pay and also some profit-sharing components to that. We've also scaled our annual increases to all associates based upon winter weather performance. So we've done a lot in our SG&A area to be able to move that up or down, within reason, around the variability of the winter season.

OK. So if there's milder weather, we should expect to see that decline.

That is correct.

Yes.

And then could you just give your bank debt outstandings at the end of the quarter?

Sure. The revolving credit facility was $14 million even. And our bank term loan was $78.3 million at the end of the year.

OK. Thank you.

You bet.

Oh, one other thing.

Yes.

Yes.

Sorry.

That's OK.

The Canadian dollar, what has been the impact of that on your Ontario - your costs there? And is that showing up anywhere in your numbers?

Sure. Our operating earnings were higher about a million and a half dollars for the year due to the impact of the Canadian dollar. That includes both the benefit of a higher exchange rate, a weaker dollar, for sales inside Canada net of the higher cost for the Canadian product coming cross-border. On a net income basis, however, our net income was lower by about $3 million due to the higher exchange rates.

Is there any competitive impact of exchange rates in that region, in that territory?

You know, I think with the significantly lower cost structure that we have than our competitors in that region, it is not a big competitive impact on us.

OK, good. Thank you. That's it.

Our next question is from Bob Court (ph), of Goldman Sachs.

Good morning, guys.

Hi, Bob.

Hi, Bob.

It's really me this time. But I am on a cell phone, so I'm going to put it on mute after I ask this in case I get cut-off. But two questions. First, I did notice in the consumer de-ice, along the Eastern seaboard there's plenty of foreign salt. And I'm wondering what is the outlook next year as - well, the foreign competitors have to pay higher freight price. And then the second question is around the potash markets. You did get a price hike in the fourth quarter. I know the muriate market was getting (inaudible) seeing the same thing in SOP.

I'll answer both of those. Yes, there is a lot of imported both highway de-icing and consumer de-icing product, mostly in just pure rock salt - bagged rock salt that's coming into the East Coast. They are being unfavorably impacted by three issue. First, a lot of that is coming in from a Chilean producer who is encountering significant freight charges, increases. For an example, a year ago it was about $18 a ton freight to get to the East Coast markets. Recent quotes are around $32 to $34-per-ton rates to get to the East Coast markets. They also are encountering a 15-percent increase of Panama Canal charges to get also to the East Coast. On top of that, the Chilean peso has appreciated about 15 percent. So next year I would say there would be a very strong scenario around either higher pricing being required to be competitive in that market from that perspective or losing market to local competition.

From an SOP pricing standpoint, yes, while we try hard to differentiate SOP from regular MOP product, there is some pricing improvement between the two products. And there was a - we have announced a price increase for February 15th, another $10 to $15-a-ton for SOP (inaudible) which also mirrors the price movement of MOP in the marketplace.

Bob?

Great. Thank you.

OK. You're welcome.

Once again, if you would like to ask a question, please press star then the number one on your telephone keypad.

Our next question is from Nancy Traub, of CSFB.

Follow-up. You mentioned that SG&A was up eight million for variable compensation and profit sharing, et cetera. How much was the fourth quarter impacted by variable compensation and profit sharing?

Yes. Because the fourth quarter is one of our two largest quarters, we do our best job of estimating that on an interim period basis. But that period was impacted by about $2.5 million related to some of those items.

And how about foreign exchange?

Foreign exchange, about half of the $2 million was in the fourth quarter.

OK. And I missed - earlier on I think you did break down your sales by different products for the year.

Yes. For our salt segment the sales were $390 million for the year, and for SOP it was $45.3 million. Again, those are both net of shipping and handling costs.

And how about breaking the salt down into the de-icing and the general trade.

Yes, we don't disclose the distinction between general trade and highway de-icing in our numbers.

OK. And do you have anything for operating income?

Yes, I do. Operating income for the year for the salt business was 108.8 million. That's operating earnings. And for the potash business was $7.5 million.

Thank you.

Our next question is from Peter Parker, of Park West Associate Management.

Hi. I think she got both of those wrong. In any event, can you talk about cash taxes in 2003 and what you might expect for '04 in a normal weather year? Thank you.

Yes. Our cash taxes for 2003 were just over $8 million. And I would expect that cash taxes in 2004 would go up from that by $3 to $4 million a year. But, again, you know, a lower cash tax - a cash tax rate that approximates our effective income tax rate.

You're saying that cash taxes are lower than your effective income tax rate.

For 2003 and forward they should be just about the same.

OK. Thanks.

Thank you.

At this time there are no further questions. Thank you for participating in today's Compass Minerals International fourth-quarter earnings conference call. You may now disconnect.