Compass Minerals International, Inc. (CMP) Earnings Call Transcript & Summary

Hello. I'm Dick Grant, non-Executive Chairman of the Board of Compass Minerals International, Inc. Welcome to our 2021 Annual Meeting of Stockholders. I'm very pleased you could join us. Mary Frontczak, Chief Legal and Administrative Officer and Corporate Secretary for the company, will act as Secretary, and I will act as Chair of today's meeting. The meeting is now called to order. As you all know, in light of public health concerns due to COVID-19, we are broadcasting our meeting via live webcast. I would like to take this opportunity to express our gratitude to our employees and our stockholders during an unprecedented year and acknowledge that this pandemic has, in one way or another, impacted all of us. I believe there is now room for guarded hope that we can start to regain some level of normalcy. In the interim, I hope everyone listening in today is staying safe and healthy. It's my pleasure to introduce the other Directors of Compass Minerals who are present for this meeting. Kevin Crutchfield, our President and CEO; Valdemar Fischer, Eric Ford, Joe Reece, Allan Rothwell, Lori Walker, Paul Williams and Amy Yoder. In particular, on behalf of your Board of Directors and management team, I would like to express our thanks to Valdemar Fischer, our Brazil-based Director, who is not standing for reelection. Over the last 4 years, Valdemar has provided us with important expertise on operating in Brazil and Latin America, and we wish him well in his future endeavors. I would like to introduce John Passanisi and [ Saidi Hebner ] from Ernst & Young, our registered independent accounting firm, who are also present. Now we will hear the Secretary's report from Mary Frontczak. Mary?

Thank you, Dick. Again this year, Compass Minerals elected to provide access to its proxy materials over the Internet. A notice of Internet availability of proxy materials was sent to our stockholders beginning on March 19, 2021. All stockholders had the ability to access the proxy materials on the website referred to in the notice or request and obtain a paper copy of the proxy materials. This process is an environmentally sound way to reduce the cost of printing and distributing our proxy materials. Broadridge Financial Services acted as our independent vote tabulator again this year and also handled proxy distribution for the company. Based on Broadridge's report, more than 90% of the outstanding shares of the company are represented at this meeting. The agenda appears on your screen on the virtual meeting page. We will conduct the meeting in accordance with this agenda. Notice has been given to the Compass Minerals' stockholders in accordance with the company's bylaws, and there is a quorum present. So this meeting is duly convened and is ready for the transaction of business. I would like to introduce Zoe Vantzos who has been appointed the Inspector of Election for the 2021 Annual Meeting and has filed her oath with the Secretary. Any stockholder who would like to vote during this meeting should see the proxy ballot available on your screen on the virtual meeting page. Immediately following the meeting, we will entertain questions from Compass Minerals stockholders. Only validated stockholders may ask questions using the Q&A button on the virtual meeting page. [Operator Instructions] The next order of business is the stockholder vote on the 3 items described in Compass Minerals' proxy statement. The first item for stockholder approval is the election of Directors. This year, the Compass Mineral Board of Directors has nominated and recommended for election: Kevin Crutchfield, Eric Ford, Richard Grant, Joseph Reece, Allan Rothwell, Lori Walker, Paul Williams and Amy Yoder for a 1-year term expiring at the Annual Meeting of Stockholders to be held in 2022 or until their successors are elected and qualified. No written notice of other nominations was received as provided for in the company's bylaws, so the nominations for directors are now closed. The next item before stockholders is an advisory approval of the compensation of the named executive officers for 2020, as set forth in the Compass Minerals' proxy statement. The Board of Directors recommends approval of the compensation of the named executive officers. The next item before stockholders is ratification of the appointment of Ernst & Young LLP as the company's independent registered accounting firm for 2021. The Board of Directors recommends the ratification of the selection of Ernst & Young. The polls are now open. Any stockholder who hasn't yet voted or wishes to change their vote may do so by clicking on the voting button on the virtual meeting website and following the instructions there. Stockholders who have sent in proxies or voted via telephone or Internet and do not want to change their vote, do not need to take any further action. [Voting]

With everyone having had the opportunity to vote, I declare the polls for the 2021 Compass Minerals Annual Stockholder Meeting now closed. The final totals will be released as soon as the Inspector of Election and Broadridge complete their count. And Compass Minerals will announce the voting results via a current report Form 8-K filed with the Securities and Exchange Commission no later than May 24, 2021. From the votes on each item already verified and tabulated today, the Inspector of Election has reported to me that the 8 nominees for Director have been elected, each for a term of 1 year. Stockholders have advised that the compensation of the named executive officers for 2020 is approved and the appointment of Ernst & Young as Compass Minerals independent registered accounting firm for 2021 has been ratified. I will now turn the meeting back to Dick.

Thank you, Mary. The formal business is completed, and the meeting is now adjourned. Do any stockholders have questions? If so, please submit your questions via the Q&A button on the virtual meeting page. Please note, we will attempt to answer as many questions as time allows. Let us pause for a moment to allow the submission of questions.

Now we will have Doug Kris, Senior Director of Investor Relations, share any questions that have been submitted. Doug?

Mr. Chairman, first question. The Carpenter Pension Fund holds a total of 122,070 shares of the company's stock. We strongly believe that the company's executive compensation plan should drive the successful execution of the Board's long-term strategic business plan. Today's public company executive compensation plans are largely formulaic peer-related plans, with simplistic annual say-on-pay voting, reinforcing planned homogeneity. Would you or the Chair of the Compensation Committee speak to whether Compass Minerals might be better served by an executive compensation plan tailored specifically to the company's particular circumstances and its unique long-term strategic business plan?

Perhaps the best person to answer that question for you would be Paul Williams, who chairs our Compensation Committee. So Paul, would you like to take that question?

Yes. Can you hear me? Hello?

Yes. We can hear you, Paul.

Yes. It's fine.

Okay, great. Yes. Absolutely. And I appreciate the question. So I'll start by saying that I think that we definitely, on the Compensation Committee, have tried to stay nimble in our approach because I certainly share the concern about plans that are too formulaic. So in terms of -- and it might be helpful for me to just talk about the overarching philosophy of the company's compensation. There are really a couple of things that we're trying to balance. We're trying to align executive and shareholder interest so that exceptional performance leads to shareholder value. And then secondly, we definitely believe in pay-for performance. And I think if you look at our plan, there is a significant at-risk portion of our compensation, both in the bonus plan as well as the long-term incentive plan, a significant portion is definitely at risk. And then another thing we're trying to balance, of course, is staying competitive in terms of our ability to retain talent. But I think probably the most important thing to mention as far as this question is concerned is that we really do try to align our compensation with the business strategy. And I would say that an example of that is the fact that we have performance hurdles, EBITDA growth performance hurdles for our performance stock units which is part of our long-term incentive plan that are aligned with our enterprise optimization plan. And so to really look at that, that was our intention to align our compensation approach with our business strategy. So I think we would share -- we, on the Compensation Committee, would share that shareholders' intention or suggestion that there'll be a focus on not being formulaic and being nimble. So hopefully, that answers the question.

Thank you, Paul.

Great. Thanks, Paul. Here -- and we do have another question, Mr. Chairman. This question is for probably Ernst & Young and John Passanisi. Mr. Chairman, the Carpenter Funds believe that audit firm independence is critical to protecting the integrity of corporate financial reporting. Given that the audit firm and corporate client relationships are generally long-tenured, federal regulations require that the lead engagement partner be rotated out of that position every 5 years. Ernst & Young has been the company's independent auditor since 2005. Could the chair of the Audit Committee or the representative from Ernst & Young describe the recent lead audit partner rotation process and indicate who makes the decision on the selection of the new lead engagement partner?

This is Dick. We've just had a rotation of partner at E&Y. So perhaps I could ask John Passanisi to -- of E&Y to elaborate on their process. John?

Yes. Very good, Mr. Chairman. Can you hear me?

We can.

Yes.

Yes. Very good. So the process of partner rotation begins in advance of the required rotation date. Clearly, our firm views independence also as a very critical component to protecting the integrity of corporate financial reporting. In the rotation process, my firm's leadership and the current partner would discuss a suitable list of candidates with management and the audit committee. The candidates are ensured to have an appropriate level of experience as well as industry knowledge. While it's a very collaborative process and management and Ernst & Young provide their views, ultimately, the audit committee is the party that makes the decision as to the appropriate partner to serve them going forward. And that's the process that was conducted in the most recent rotation.

Great. Thanks for that answer. Seeing no further questions, this concludes today's meeting. Thank you, everyone, for attending.