Compass Minerals International Inc (CMP) 2014 Q4 法說會逐字稿

Good day, everyone, and welcome to the Compass Minerals fourth-quarter earnings conference. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Theresa Womble, Director of Investor Relations. Please go ahead, ma'am.

Thank you, Rebecca. Today our CEO, Fran Malecha; and our CFO, Matthew Foulston, will be reviewing our fourth-quarter and full-year results.

Before I turn the call over to them, let me remind you that today's discussions may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the Company's expectations as of today's date, February 10, 2015, and involve risks and uncertainties that could cause the Company's actual results to differ materially. These differences could be caused by a number of factors including those identified in the Company's most recent Forms 10-K and 10-Q. The Company undertakes no obligation to update any forward-looking statements made today to reflect future events or developments.

You can find reconciliations of any non-GAAP financial information that we discussed today in our earnings release, which is available in the investor relations section of our website.

Now, I will turn the call over to Fran.

Thank you, Theresa. Good morning, everyone. I'm glad to be with you today to discuss our 2014 fourth-quarter and full-year results. I'm pleased to have our new CFO, Matthew Foulston, on the call today. He's been with us now for just over two months and has been immersed in getting to know our businesses. I'm looking forward to Matthew working with our team to execute our growth plans while being a strong steward of the balance sheet.

So turning to the task at hand today, we're going to cover three topics: first, our strong 2014 results and our confidence in our 2015 outlook; second, material progress in executing our five-year vision; and, third, our 12th consecutive dividend increase. I'll start with some of the high level financial results. We reported very strong results for the full year and the fourth quarter. Total sales for 2014 were up 14% from 2013 due to strong pricing for our essential mineral products in both segments. We expect this pricing strength to carry forward into the first half of 2015.

Sales volumes were particularly robust for the plant nutrition business, which sold 26% more tons of products this year compared to 2013. The plant nutrition average selling price for the full year climbed 8% above 2013 results and moved 15% higher in the quarter. Part of the improvement is due to the inclusion of Wolf Trax's higher-priced micronutrients products, but we have also worked hard to drive home the message to growers regarding the value they can achieve from using our sulfate of potash. Part of this was branding the product as Protassium+ to create a platform for growth and differentiation.

Our educational marketing program for SOP as well as a tight supply in our key North American market resulted in our SOP-only price increasing to $681 per ton in the fourth quarter compared to $626 in the prior year. And we've introduced a $50 per ton price increase effective January 1, 2015. We do have some production headwinds in that segment that Matthew will discuss shortly, but I am pleased with the performance of the business this year and excited about the future of the plant nutrition segment.

Turning to the salt segment, 2014 began with extreme winter weather activity, which has had a meaningful impact on our full-year salt segment results. When we exited the winter we were almost fully depleted of deicing salt inventory, and our customers' inventories were depleted as well. This supply deficit set up a bid season which resulted in the average awarded price increasing 25% for our North American contracts. We began to see the price benefit in the third quarter, and then saw the full benefit in our fourth-quarter results.

In addition to the carry-on effect of pricing, our sales volumes were higher than we would have expected during the fourth quarter in a normal or mild winter scenario. This was due to the need for customers to restock after the prior winter as well as a flurry of order activity resulting from above-average November snow. And these factors more than offset the below-average winter weather we saw in the end of the fourth quarter.

The market dynamics in both segments generated top-line growth, as you can see on slide 3 of our investor presentation. We've also generated meaningful improvements in our EBITDA from both a dollars and a margin percentage perspective. In fact, in our salt segment we set a record high for EBITDA for the fourth quarter.

I'd like to spend a few minutes stepping back from the quarterly details and discussing how we are progressing on the five-year plan that we outlined at our Investor Day in June. Our goal is to exceed $500 million of EBITDA by 2018. To reach that goal we must have a focused effort throughout the Company on strengthening our foundation, improving our performance, and delivering profitable growth.

As a reminder, we expect that about 80% of our growth will come from organic initiatives while the remainder will come from strategic acquisitions such as the acquisition we made last year of Wolf Trax. I think it is important for our investors to know the steps we've taken in each of these areas, that we've completed our action and important initiatives that are instrumental in getting us to our goal.

First, let's turn to strengthening our foundation. There's three areas I will briefly discuss; and they are safety, investment in our assets, and business process improvement. Safety is critical to the success of Compass Minerals. We've begun implementing best-in-the-world practices to eliminate serious safety incidents, and we are engineering out as much of those risks as possible. We will manage the remaining risks by implementing improved companywide standards and metrics which we expect will improve our safety culture and take our safety performance to industry-leading levels. Ultimately, our goal is zero incidents.

Safety and reliability are also important elements of our major capital improvement projects, particularly those special, almost once-in-a-lifetime and estimate we are making in the infrastructure of our key assets. We've begun our shaft realigning project at Goderich, which will update two four-year-old mineshafts, thus ensuring the safe productivity of this flagship asset for decades to come.

At our Ogden facility, we have renovated and upgraded several of the component uses of our SOP processing plant. These investments are expected to lower our costs and increase our productive capacity at both facilities.

Another step we've taken is to link compensation for our senior leaders to the returns they achieve from capital investments. This will create additional accountability and make certain that management interest and shareholder interests are further aligned as we enter this period of increased capital spending.

Last in this area of strengthening our foundation, we are engaged in a comprehensive effort to look at every business process we have and ensure that it's simple and meets the needs of the business now and in the future and is consistent with best practice. This business process improvement project reaches throughout the entire organization and focuses not just on updating software but on reengineering the way we do business and ensuring that we meet our commitment to customers to deliver our essential mineral products when and where it matters.

The next focus of our strategy, improving our performance, is expected to drive most of our organic growth initiatives. This involves strategies across our business to achieve the best margins for our products. In the salt segment we have tightened our focus and our go-to-market strategy in the consumer and industrial business by streamlining our product offerings. In the highway deicing business we are improving our production efficiency through investing in more continuous mining at Goderich and smoothing our production calendar to be more consistent throughout the year. In the plant nutrition business in 2014 we produced a record amount of SOP from our low-cost pond-based feedstock. We do have some headwinds this year from lower pond-based feedstock availability but we have made improvements there which will allow us to more efficiently use KCl to augment our production.

We've also run our Goderich rock salt mine near its 7.5 million tons of annual capacity and are expected to continue at this rate in 2015. At Cote Blanche we've produced consistently at capacity for much of the year, but recently we've encountered some unplanned downtime related to mechanical issue there. We expect to have the mine producing back to the level it was prior in the next few weeks. Given the mild weather in many of the markets served by that mine, we have been able to meet all of our customers' deicing demands and have mitigated any supply impact for our chemical customers.

Turning to the third focus, delivering profitable growth, we are keenly focused on the margin potential of our businesses. Our pricing strategies in both plant nutrition and salt are ultimately based upon extracting the greatest possible value we can for our essential mineral products and doing so in a sustainable, cost-effective manner.

The opening of our end market salt packaging facility in Buffalo is one example. This facility expands our footprint in a key geography and allows us to efficiently serve more customers.

At our Ogden facility we pursued a program to convert more KCl into sulfate of potash, which makes sense for us right now, given the economics of KCl and the price we are achieving in the market for SOP. In addition, we've just approved a project for the Ogden facility to add a second crystallizer and improve our compaction abilities there. Once these investments are completed in 2016 we are expecting to meaningfully increase our production of SOP both from pond-based feedstock and KCl conversion.

We've also made significant improvements in our approach to our agricultural business. First, we've renamed the business Compass Minerals Plant Nutrition to create greater clarity internally and for our customers. Second, we expanded our product offering with acquisition of Wolf Trax, which gives us a wide array of technology driven, value-added micronutrient products. And we've created the Protassium+ brand for our sulfate of potash, which will also become a platform for product development with our micronutrients.

Our goal is to become the go-to source for premium plant nutrition. And these developments are certainly moving us in the right direction. Clearly, we are making progress throughout the Company and these developments are positioning us for long-term strength.

Now, turning back to the near term, we've had the benefit of a strong winter at our backs for the second half of 2014, and we will continue to experience the benefits of improved highway deicing pricing in the first half of this year. Our outlook for the first half of 2015 also includes healthy price improvements for our plant nutrition products. Given the strong fundamentals in our core markets, we are projecting earnings growth in 2015. Currently, we expect to earn between $5.10 and $5.60 per share for the full year. And Matthew will talk through some of the assumptions that are underlying this guidance.

As a further demonstration of our confidence in this five-year plan, our Board of Directors recently approved a 10% increase in our dividend for 2015. This marks the 12th consecutive annual dividend increase and reflects our commitment to returning real value to shareholders while we continue to invest in the Company to achieve our goals.

With that, I'll turn the call over to Matthew to walk us through our detailed financial results.

Thanks, Fran. Before I get into the numbers, I would like to start by saying that I'm delighted to be here at Compass Minerals. When I did my research on the Company a few months ago, three things became clear. The financials are extremely strong with a very healthy balance sheet, great margins, and consistently strong free cash flow. Secondly, the people -- Fran has assembled a great team here to take the Company to the next level. And finally, the chance to be part of the team that grows this business to our stated objective of more than $500 million of EBITDA by 2018 is extremely exciting.

So with that brief introduction, let me drive right into the results. Consolidated revenue increased 12% year-over-year for the quarter and 14% for the full year. Adjusted EBITDA also increased year over year, up 34% for the quarter and 20% for the year. Our adjusted EBITDA margin percent expanded to 30% for the quarter and 24% for the year, driven by strong performance in both segments.

For those of you looking at our investor presentation online, if we turn to slide 8, our salt segment posted record earnings for the quarter. Year-over-year fourth-quarter revenue for this segment increased 10%, driven largely by a 26% increase in the highway deicing sales price and a 6% price improvement on the consumer and industrial side.

These price increases were a combination of three factors. First, we saw a real price improvement across all products in the marketplace. Second, overall consumer and industrial products represented a higher mix of total sales than in 2013. And lastly, there was a year-over-year mix shift to our higher-value packaged deicing products within the consumer and industrial area.

While highway deicing salt sales volumes for the quarter were down 13% from the prior year, sales volume of consumer and industrial products increased 4%, driven primarily by restocking demand for packaged deicing products following the extreme 2013-2014 winter. Even though fourth-quarter weather was mild, our highway deicing sales volume exceeded our expectations. That again can be explained by the very low inventories that our customers had going into this winter season.

The salt segment earned $115.7 million of adjusted EBITDA this quarter compared to $91.9 million last year. Adjusted EBITDA margin increased to 33% from 28% in the prior year. And this increase would have been about one percentage point greater, had we not chosen to purchase imported salt to serve additional customer needs.

Full-year salt segment results, shown on slide 9, were driven by many of the same factors we've just discussed. Perhaps the most important takeaway here is that last winter we set the supply-demand dynamics in the North American highway deicing market. The highway deicing price improvement we realized during the second half of the year is generating attractive margins for the Company.

On the production side we ran our North American mining operations close to capacity. This helped offset higher per-unit cost related to the sales mix increase on the consumer and industrial packaged salt products, general inflation, and the impact of imported salt. We do expect to sell the remainder of this purchased salt in the first half of 2015.

Looking specifically at logistics costs, the salt segment's per-ton shipping and handling costs continue to be burdened by freight rate inflation throughout the year. While this inflation may moderate in 2015, we do expect the continuation will mute the benefit we realize from lower fuel costs.

Before shifting gears to plant nutrition, I will end the salt discussion with the winter weather impact estimate. As usual, we have published the estimated sales and earnings impact from winter weather variances in our press release. This year, although winter weather events were below average in the 11 cities we track, we have estimated a benefit to our earnings from weather variances. This is because we actually sold more deicing salt than we would historically have expected to sell during an average fourth quarter, primarily due to the robust restocking demand created by last year's extreme winter.

Now, turning to plant nutrition on slide 10, strong pricing and increased sales volume continued in the fourth quarter and lifted total segment revenue 23% from last year's results. Segment sales volume at 105,000 tons increased 7% compared to the 2013 quarter. Average selling price for our total portfolio of plant nutrition products increased 15% year over year. A sizable portion of the increase was due to the inclusion of Wolf Trax micronutrients this year; but, as Fran mentioned, our SOP price was $681 a ton compared to $626 in the fourth quarter of 2013.

For the full year, price and volume improvements drove a 39% increase in adjusted EBITDA. Also contributing to this result was improved production at our Ogden facility, where we produced more low-cost pond-based tons than ever before. We also increased our production up to by using more KCl feedstock. Even with the additional cost of KCl, our per-unit production costs declined to $421 a ton versus $456 a ton last year.

Before turning to the outlook, I have a couple of corporate items to mention. SG&A expenses were up year over year, most notably during the fourth quarter. A large portion of the increase was driven by the inclusion of Wolf Trax in our results. We have mentioned previously that these micronutrient products have higher sales and marketing expenses than our SOP products.

Additionally, current-period results were also inflated by restructuring and increased sales-driven variable compensation cost. However, for the full year SG&A is down 30 basis points to 8.6% of revenue.

Turning to slide 13, as you heard from Fran, we have taken significant steps towards simplifying our guidance over the last year and are taking an additional step today by adding full-year EPS guidance. Before we get to that, I'm going to walk through the market dynamics and operational factors that we expect to influence our results in 2015.

It's only February 10 and there's still a lot of winter left, so we can only talk generally about the year and a bit more specifically about the first half, where we largely know what our pricing is expected to be. The outlook for the second half will be determined by the winter weather we experience for the remainder of the season, both in terms of the sales volumes and highway deicing bid season prices.

After a relatively mild fourth quarter, recently there has been a significant uptick in snow events. So if average weather continues for the remainder of the season, we would expect the total number of snow events for 2014-2015 to come in close to the 10-year average.

Given the recent headline movement in oil prices, I would like to step back for a moment and discuss what we expect to report for per-ton shipping and handling costs. As you know, the price of oil has dropped dramatically over the last several months, but the impact on our logistics costs has not been as significant as you might anticipate.

Here are some of the factors. On-road diesel prices, which drive many of our fuel surcharges, have not fallen anywhere near as far as crude oil prices. Some of our carrier contracts have fuel surcharge floors that limit the benefit we realize from lower fuel prices. And lastly, we think base freight rates will continue trending higher in 2015.

Based on the current on-road diesel prices and assuming all prices staying in the $50-$60 range, we would expect to see a $1 per ton year-over-year decrease in total shipping and handling on a full-year basis, with this improvement skewed toward the second half of the year. If on-road diesel prices fall more, coming in line with the lower oil prices by midyear, we would expect an incremental $0.50 per ton improvement.

Turning to slide 14, strong fundamentals continue for the plant nutrition segment. The average price of our portfolio of products is expected to rise when compared to first-half 2014 results, due to the January price increase of $50 per ton on SOP products and the impact of Wolf Trax. Offsetting these benefits will be the impact of higher per-unit costs as a result of the poor 2014 solar evaporation season that manifests itself in our 2015 results. The additional cost of potassium feedstock is expected to increase full-year costs by $100 per ton in 2015. Fortunately, the price we have been able to achieve in the market is helping us mitigate the impact of these additional short-term costs.

On slide 15, we summarize our outlook for the first half and full year. First, for the salt segment, assuming average winter weather continues we are projecting into sell between 5.5 million tons and 6 million tons of salt products in the first half of 2015 at an average selling price in the $74 to $78 per ton range. Operating margins, taking into account price, changes in fuel costs, and the impact of purchased salt, should range from 23% to 24%.

In the plant nutrition segment, for the first half of 2015, we expect to sell between 180,000 tons and 200,000 tons at an average selling price in the $750 to $780 per ton range. Our operating margin will contract slightly to the 23% to 25% range.

Turning to corporate items, we expect corporate and other expense to be about $12 million to $13 million a quarter or approximately $50 million for the full year, about $5 million lower than we reported in 2014. We expect our interest expense to remain around $6 million a quarter, and a full-year tax rate in the 27% to 28% range.

These factors result in our full-year EPS guidance range of $5.10 to $5.60 that Fran mentioned earlier. As usual, our salt guidance assumes average winter weather throughout the period. And within plant nutrition we are expecting consistent pricing with typical seasonality.

Before we open the line for questions, I would like to speak to our capital allocation philosophy and the dividend increase we announced today. Compass Minerals generates strong cash flow from operations. We deploy this cash in a disciplined manner that ensures we maintain and enhance our assets, capitalize on growth opportunities, and return value to shareholders directly.

Today we announced another 10% increase in our dividend, demonstrating our confidence in our operations and our growth plan. We did this even though we have some sizable capital investments planned for the next couple of years. The most significant of these is the Goderich shaft realigning project that we have in discussing since June and which is now underway.

2015 plans also include more investments in continuous mining at Goderich and a number of projects at Ogden that will allow us to increase our production volumes. We expect these investments to provide additional capacity, improved asset reliability, and lower production costs that are critical to delivering our 2018 goal of $500 million of EBITDA.

With that, I will turn the call over to Rebecca for questions.

(Operator Instructions) Chris Parkinson, Credit Suisse.

Just very quickly on Wolf Trax, it's been a little more than a year since you've had that under your wing. Can you just give a little more color and some updates there on what you've seen thus far and then the potential you see going forward, particularly on a geographic basis?

We've actually owned the business little less than a year, so we've had it for about three quarters now. And the first year we -- after closing the transaction we have been implementing and integrating that business into Compass and it's been performing well, slightly accretive to earnings in the first year.

We expect it to grow as we anticipated when we acquired the company. So there's nothing out there that tells us that we won't continue to achieve that 20%-ish growth a year on the top line and see the results all the way to the bottom line as well. And even though the farm economics for corn and soybeans may be lower today than they were a year or two ago, we still believe that the value that these products bring and requirements that growers have to achieve their yields will continue to assure strong demand going forward.

So we are pleased with the business. We think it's a certainly going to help us deliver a profitable growth, which is one of our key strategies.

Perfect. And just a quick follow-up -- you ran through a helpful overview of your 2018 plan. Can you just give a little more color on some of those additional initiatives you mentioned that may be a little more off investors' radar, particularly some of the things you mentioned that could have been incremental at Ogden and Goderich? Thank you.

Sure. At Goderich -- and if you look at our salt business generally, that growth from here forward will really come from cost reduction. So we are investing in things like continuous mining, more technology at our Goderich mine initially to take costs out and drive our per-unit costs lower. And we think that we will continue to be able to hold these price increases and stay on that trend line, but hopefully increase our market share slightly in salt this time goes on. And we talked about that in the past. So that's really the growth we see in the earnings coming from improving our performance there.

At Ogden we've made some recent investments in the plant to allow for greater capacity. But the significant investments in the plant, the compaction and the crystallizer, which will allow us to take that volume, that annual production capacity, up to about [550] a year. We've approved those projects will begin them here shortly. And that's a 2015-2016 capital project with those benefits coming fully in 2017.

Thank you.

Chris Shaw, Monness, Crespi, Hardt.

The first question, just on the -- the salt margin, obviously, was very strong and it sort of exceeded what the guidance has in it. Is that -- is the extra margin there all just due to the higher volumes and higher prices? Or was there anything else logistically that was helping the margin exceed the guidance for the quarter?

It was primarily the volume and the price. We saw the full impact of our price increases from the bid season this last summer take effect in the fourth quarter. So it was primarily price.

Then just a follow-up on margin -- is the drag from the imported salt -- is that -- will the impact be the same for 1Q as it was for 4Q? Or does that lessen up a little bit to 1Q?

I think as we go into 1Q, one of the things we've done to mitigate the impact of the downtime at Cote Blanche is to have a little more imported salt. So I think, Q4 to Q1, that's probably a similar kind of impact, with that diminishing as we move through the year.

Okay. And then just sticking to salt, there's been a lot of -- I guess it's been slightly below average in some of your areas. But I know that the East Coast is getting hammered, particularly in New England. Is there any opportunity -- and actually, I saw an article specifically saying somewhere in Vermont was short on salt. Is there any opportunity for you guys to move into that market on a temporary basis or -- if you have extra salt, say, in regions nearby?

It's difficult for us to reach too far out of our normal area this year, I would say, just mainly because we have those commitments. And we have had reasonably strong weather across the North. I would definitely say it has been weaker on the South, so we have some bifurcation in our delivery area. But it's difficult for us to reach the Northeast from coming out of our southern shipment area.

So I don't see us taking a short-term opportunity there where we could ship salt into the Northeast. But at the end of the day, any weather that uses salt in North America, from our perspective, is good for us as we head into the next year. And we suspect that the competitors in the market that are delivering into their key markets are going to be fully tapped out into the coming year.

Ivan Marcuse, KeyBanc Capital Markets.

Real quick, on your pricing guidance of $74 to $78, why is there such a sequential decline. It seems like more than historically. It's maybe down $2 to $3? Is that more of a mix function or is there something going on in terms of -- I don't know, why is there such a seasonal decline, I guess, is the question?

Ivan, I think it's probably more so from a 2Q impact than it would be from a first-quarter impact. And I think some of that is probably in the mix that drives that. But that's really all that, I would say, comes to mind for us at this time.

Great. And then within your full-year assumptions, right, what are you assuming for price in the back half? In terms of for salt?

Right. We are not going to talk about salt pricing today on the call. I think if you look at the winter being average, the balance of winter, which we are hopeful about, and as I talked about earlier, just mentioned briefly we've been stronger in the North, weaker in the South, and coming off a year where prices were up 25%. I think it's, one, too early to talk about pricing, and we will wait to get through winter to be updating on that going forward.

But we still think that we have strong margins here, and we will be able to maintain their strong margins with average winter into the back half of the year.

Right, and just a quick follow up on your operating costs -- with everything that you have, I know you have a lot of moving parts going on talking specifically to salt, but will you be able to have less imported salt this year, now that you have been running everything with an average winter? And what were your unit operating costs, I guess, going through the year? Will they slowly decline or will they ultimately stay flat on a year-over-year basis?

I think we've got this phenomenon we talked about on the imported salt, which will be in there initially, at the start of the year. And then it's going to gradually trail off as we go through 2015. So I think the impact of imported salt will decline as we go through the year and basically be gone once we get into the second half.

How much did the imported salt impact your operating costs on a year-over-year basis for 2014?

It's in the range of about, I think, $0.70 a ton on average, $0.70 to $0.75 a ton.

Okay, great. Thanks.

Jeff Zekauskas, JPMorgan.

I think you have $267 million cash on your balance sheet. Why is that the right number? Are you holding too much cash or too little, or why is that the number that Compass needs?

I think we raised additional capital debt last summer, took advantage of the market at that time. And I would say that a portion of that cash is earmarked towards the capital projects that we've initiated. And as I mentioned earlier, as an example, some of that cash is in Canada and is earmarked towards the Goderich project to realign the shaft, one, but also the continuous mining equipment that we will be buying there to lower our costs in the future.

So I think, as we look at our platform here to improve performance and delivering profitable growth, we think that we are going to use that cash in a responsible manner and continue to drive the returns that our investors require. We've said that that return target is in the midteens IRR on a risk adjusted basis. And we will continue to find opportunities to invest cash in those types of projects. And if we don't, then we will return more cash to shareholders.

Just to put a bit more texture on that, if I can, Fran, I think we declared back at Analyst Day that our CapEx for 2015 would be about $250 million, which is about double what we spent this year.

Yes. You talk about your targeted leverage ratio of up to 2.5 times adjusted EBITDA. Isn't your leverage ratio more like 1.2 times currently? And does this mean that you intend to lift it up, or are you using simply a debt to EBITDA?

I think the slight difference here may be whether you are looking at it with the tornado proceeds in or the tornado proceeds out. That was about an $80 million piece of income that came in, in 2014, and we prefer to look at it without that in.

Maybe just to add to that, on a gross debt basis we are at about two times. On a net debt basis we're closer to one, I think the 1.2 that you mentioned. And we've and looking at that, at least to this point, on a gross basis just because of where the cash has been sitting. And I think, as we move forward, we plan to continue to stay in that 2.5 times or less. Knowing that it's going to go up and down a bit and knowing that our business has the variability that it has, I think it's the prudent way to look at it.

And then lastly, leaving aside your first-half pricing, just focusing on salt pricing in the first quarter, shouldn't salt pricing in the first quarter be more or less what it was in the fourth quarter?

Yes, I think those prices that we made the commitments on in the summer for the winter will carry into the fourth quarter, for salt.

Okay, great. Thank you so much.

(Operator Instructions) Joel Jackson, BMO Capital Markets.

I just wanted to thank you for starting to give us 2015 outlook guidance. That's a very good incremental add for the investor community. So I had a couple questions. My first question is looking at your salt volume guidance. Your first-half volume guidance suggests -- and there was a bit of, of course, the strong presales in Q4. But if we extrapolate out your full-year number, it seems that you are suggesting that second-half your salt volumes will be about 10% above the last-decade average. Can you just elaborate on that?

Yes. Let me start with the full year. We've got our full year set up around that 10-year average. So we feel very comfortable with where we are on a full-year basis. And I think what you probably done is taken the midpoint of our guidance ranges for the first half and the full year and then backed into the second half. To be honest, that's why we gave you ranges instead of points, because I think there's some give-and-take between those two.

The other factors that we are dealing with is we had a much stronger fourth quarter than we anticipated. And the wildcard really is whether that was true restocking from the impacts of the very extreme winter the year before, or it was some premature buying with that very early snow in November that may have caused some buying that had a pull-ahead impact. So I think, to be fair, we have been just a little bit cautious as we go into the first half, not having complete knowledge around those two dynamics.

If I understand that, though, you decided for your 2015 number, full year, to take the average -- the last 10 -- to bookend around the average of the last decade. So is it fair that if you get normal weather for now and normal weather in the second half of 2015, that full-year 2015 will come in at the lower half, lower end of the range?

It's just so very difficult to call this weather. When you look back over the last 30 days, we've had extremely mild and extremely severe. So we are running with the 10-year average for the full year. And we will have a much better handle on that when we close out the first quarter.

Okay, that was helpful. The second question is on the Canadian dollar FX. It's obviously been weak; the Canadian dollar is really weak. Can you talk about your sensitivity to the Canadian dollar and also -- for earnings -- and also what the tailwinds are, were in Q4 from the weaker Canadian dollar and maybe what they would be in Q1? Thanks.

Yes. We just recently looked at this, obviously, with the movement in the Canadian dollar and in the pound, to be honest. And both are weaker by 10% or more versus the US dollar. And essentially, on a net income basis it's about a wash. So we are essentially in a position of a natural hedge, net-net.

Okay, that's great. Thank you very much.

Garrett Nelson, BB&T Capital Markets.

Congrats on the strong results. I'm curious regarding the 2015 salt shipment guidance. 12 million tons to 13 million tons would be below the 13.3 million tons you've shipped each of the past two years. Obviously, salt demand has been very strong in recent quarters. But is there any reason you wouldn't be able to ship 13.3 million tons again if the weather is favorable and demand is strong? For example, does the Goderich project have a negative impact on your production capacity? Or is there anything else we should be keeping in mind?

You know, we hope the weather is favorable. And I think that would lead to higher volumes for us. But in our assumptions we are assuming kind of average weather. And if you are coming off the last winter with what happened in the last quarter of 2013 and the first quarter of 2014 that was driving a significant amount of that volume increase.

So we -- in our guidance we're looking at average weather, which puts us in that 12 million to 13 million ton range. We would like to -- certainly, over time we've talked about increasing our market share slightly from about 4 points a share that we lost back in, let's say, 2010, 2011, 2012.

And we are just going to have to see coming out of this winter how all that shakes out. It's going to be, I think, an interesting bid season. And I think we are ready for that. We'll be ready for that as we come out of the winter, and we will update on that as we get into that season.

Okay, great. And then how many of them 5.5 million tons to 6 million tons of salt shipments for the first half of this year -- how many tons have been committed in price so far?

Basically, we are locking in those commitments back in the summer. And the municipalities, which is the majority of the volume, we will book that commitment based on a base amount with a minimum and maximum that we have to deliver and they would have to take, depending on the winter. And it really is driven by the extent that winter occurs throughout the year. So if winter comes early, winter comes late, we are there to deliver to our customers. And then we round that out with commercial business, which is a small percentage of that, and then some business that we call chemical business, which goes to some large chemical manufacturers that take that consistently throughout the year. So the majority of that guidance number will go to our highway customers, primarily in the first quarter.

Okay. And then on the $250 million CapEx guidance for this year, how much is maintenance versus growth? And what's the total CapEx breakdown between salt and plant nutrition?

I don't think we'll give you the breakdown between the two. But the maintenance CapEx, what I would call the normal ongoing maintenance CapEx, is about $70 million. And then the balance is split between kind of this one-time capital, mainly for what was spent on the shaft realigning at Goderich, and return capital. It's split about evenly, the balance.

Okay. And then in the past you have implied that 2015 would represent a peak CapEx year and begin to drop off next year and then even more so in 2017. Is that still a reasonable assumption? And what kind of drop-off, roughly, should we expect over the next couple of years?

I think, as we have said, the two biggest spending years will be this year and next year. So it's hard to say exactly what next year will be but it should be close, maybe slightly less to what we plan to spend in 2015. And then we will drop off in 2017. And beyond that we should we be really at, I would say, our core MOB, which would be in that $70 million to $80 million range going out from there.

Okay, great. Thanks very much.

David Begleiter, Deutsche Bank.

Fran, looking out to 2018, what are the unit production costs embedded for both salt and SOP for the $0.5 billion of EBITDA target guidance?

I'm not going to give you the exact numbers out there. I don't have that in front of me. But when we announced our plans in the Investor Day, and we are still continuing with that, we looked at taking real costs out of the business of about -- I think we said about $60 million in salt and about $20 million in the plant nutrition business, so a total of $80 million against the portion of the investments that are going to deliver the real cost savings.

And I think the other thing that may be is just worth mentioning, we know that in the year ahead our cost are going to be inflated at Ogden due to the impact of harvest. And we do have some variability there. But I believe that the work that we are doing on differentiating ourselves in the market and really receiving the value that that unique product delivers to growers -- in more normal conditions we're going to see the cost impact as we go down the road here. And I think, assuming a normal harvest for us out there this summer, there should be real dollars falling to the bottom line in 2016.

So, even though we have some short-term challenges, we are pretty bullish on the future there. And that led to the decisions that we made to expand our capacity and continue to do things to lower our costs in a real way going forward.

Understood. And just maybe back on the oil issue, do you have a sensitivity to maybe a $10 per barrel change in crude and its impact on your either shipping and handling costs or overall corporate cost?

I think what I would like to do is steer clear of the per-barrel thing because we have seen such a disconnect in the diesel that drives our costs and the price of a barrel of oil. Oil is down close to 50%, and we've seen less than half that drop in the diesel fuel. So I think I'd rather stay away from that kind of rule of thumb. And I think in my presentation we talked a little bit like if that relationship reestablishes itself as we go through 2015, it could be another $0.50 a ton pickup on the salt freight end of the business.

Fran, if you achieve your first-half salt volume guidance, where do you think customers will and year-end inventories at? Normal, below normal, above normal, in your view?

I think if we have a normal finish, normal weather here and average snowfall through the end of the season, I think, given the situation at the beginning of the winter, that inventories won't be fully restocked. So that should bode fairly well for pricing and demand as we look into the back half of the year and next winter. I just would caution, though, that the Northeast has been hit particularly hard. And I'm sure most of you on the call are aware of that. And our Northern region has had a better winter, stronger winter than the South.

And so, it's just going to be difficult to paint a brush over this whole thing and say average or what our expectations are. We will certainly have a strong view of that as we head into the pricing season. And I wouldn't be surprised if we have a bit of a compressed pricing season this year. I think the states that maybe bid later in the year last year may have felt they were at a disadvantage. So I think that will be interesting as well. And so I would just stay tuned as we go forward here and start to talk about that pricing as we get into early spring and through the summer.

Thank you very much.

Chris Shaw, Monness, Crespi, Hardt.

Just quickly on the UK situation, right, this winter, I know last year was mild. And I haven't in tracking exactly what it has been this winter. But from a few articles that pulled up it seems like it was a fairly decent snow-event winter so far. Have you guys been tracking the UK? And if so, is it above average or average?

We definitely track it. We have a mine there. So it's come back to average. It was much below average last year. And we think that it's a combination of snowfall and temperatures probably equally or more important there, that the temperatures have been such to where they have had to apply salt to deal with moist roads that tend to ice up. So we are off to a much better start this year than we were last year. And it's looking to be average, at least at this point.

Okay, great. Thanks a lot.

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

Thank you, Rebecca. We appreciate your time today and your interest in Compass Minerals. Please feel free to contact the Investor Relations department with any follow-up questions you may have. Have a great day.

Ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation.