April 24, 2018 - 7:01 AM EDT
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Intrepid Potash Announces First Quarter 2018 Results

DENVER, April 24, 2018 - Intrepid Potash, Inc. (Intrepid) (NYSE:IPI) today reported its results for the first quarter of 2018.

Key Q1 Takeaways

·        Net income of $1.8 million, or $0.01 per share, an improvement of $15.5 million, or $0.18 per share, from the first quarter of 2017.
·         Cash flow from operations of $13.9 million.
·        Adjusted EBITDA(1) of $11.6 million.
·        Potash segment gross margin of $5.0 million, a $2.7 million increase compared to the prior-year period.
·        Trio® segment gross deficit of $2.1 million, a $3.1 million improvement compared to the first quarter of 2017.
·        Total sales of $53.2 million.
·        Total water activity(1) of $9.2 million in the first quarter consisted of sales of $4.8 million, by-product credits of $0.7 million, and $3.7 million received from a separate prearranged water commitment.

"Solid operational execution, combined with the strategic moves we have made to strengthen our business, provided a solid start to 2018." said Bob Jornayvaz, Intrepid's Executive Chairman, President and CEO. "Our focus on by-products led to lower potash costs and an improvement in margin compared to the prior year. We have also seen healthy demand in the domestic Trio® market and expect that to continue in the second quarter. These factors, combined with a record quarter for our water business, yielded meaningful cash flow, improved our liquidity position, and marked what we believe is a transition for the business toward increased profitability and a more growth-focused strategy. Internationally, having worked to establish a footprint in several new markets with our specialty Trio® product, we are refining our strategy to concentrate our sales into markets with more favorable shipping and margin opportunities."

Jornayvaz continued, "Entering the second quarter, we expect our dedicated water team to drive continued growth in water sales. Our new oilfield services group and trucking initiatives are ramping up, and combined with the domestic price increases announced late last year, should provide a boost to the bottom line. We remain on track to achieve the $20-30 million in water sales for 2018."

Consolidated Results

Intrepid generated net income of $1.8 million, or $0.01 per share and consolidated gross margin of $7.2 million in the first quarter of 2018. Increases in net income and gross margin when compared to the first quarter of 2017 were primarily the result of lower potash cost of goods sold, increased water sales, and reduced lower-of-cost-or-market adjustments in the Trio® segment. Net income also benefited from lower interest expense as a result of a reduced outstanding debt balance and lower effective interest rate on Intrepid's senior notes.

Segment Highlights

Potash

    Three Months Ended March 31,
    2018   2017
    (in thousands, except per ton data)
Potash sales   $ 27,064     $ 27,220  
Potash gross margin   $ 4,976     $ 2,328  
         
Potash production volume (in tons)   125     118  
Potash sales volume (in tons)   97     101  
         
Average potash net realized sales price per ton(1)   $ 243     $ 240  

During the first quarter of 2018, the potash segment generated gross margin of $5.0 million, an increase of $2.7 million compared with the same period in 2017. The increase in gross margin was driven primarily by increased by-product production and sales and improved evaporation, which led to a lower total cost of goods sold.

Potash sales were similar to the prior year as robust sales into agricultural markets were offset by fewer tons sold into the industrial market. Potash production increased 6% compared to the prior year due to increased runtime.

Trio®

    Three Months Ended March 31,
    2018   2017
    (in thousands, except per ton data)
Trio® sales   $ 21,237     $ 21,112  
Trio® gross deficit   $ (2,078 )   $ (5,184 )
         
Trio® production volume (in tons)   47     71  
Trio® sales volume (in tons)   77     76  
         
Average Trio® net realized sales price per ton(1)   $ 194     $ 202  

The Trio® segment generated a gross deficit of $2.1 million in the first quarter of 2018, an improvement of $3.1 million compared to the first quarter of 2017. Lower gross deficit was driven by a reduction in lower-of-cost-or-market adjustments on international shipments.

Sales volumes were similar to the prior year with strong domestic demand offsetting a decrease in international sales as Intrepid continues to refine its international strategy. Average net realized sales price1 decreased compared to the prior period due to price decreases announced during the second half of 2017. The price increase announced in December 2017 became effective on spot tons sold during the first quarter and tons shipped in March. Intrepid expects the full effect of the price increase to be realized on domestic sales in the second quarter.

Production decreased 34% in the first quarter of 2018, compared to the prior year, as Intrepid began operating at a reduced rate in June 2017 to manage inventory levels and match production to expected demand.

Liquidity

Cash provided by operations was $13.9 million during the first quarter and cash spent on capital investments was $6.5 million. As of March 31, 2018, Intrepid had $6.1 million in cash and cash equivalents and $31.4 million available under its credit facility. The amount outstanding under Intrepid's senior notes was $60 million, with a required principal prepayment of $10 million due December 31, 2018. In addition, Intrepid had $1.5 million outstanding under its credit facility.

Notes

1 Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA), total water activity, and average net realized sales price per ton are non-GAAP financial measures. See the non-GAAP reconciliations set forth later in this press release for additional information.

Unless expressly stated otherwise or the context otherwise requires, references to tons in this press release refer to short tons. One short ton equals 2,000 pounds. One metric tonne, which many international competitors use, equals 1,000 kilograms or 2,204.62 pounds.

Conference Call Information

A teleconference to discuss the quarter is scheduled for April 24, 2018, at 10:00 a.m. ET. The dial-in number is 1-800-319-4610 for U.S. and Canada, and is +1-631-891-4304 for other countries. The call will also be streamed on the Intrepid website, intrepidpotash.com.

An audio recording of the conference call will be available through May 24, 2018, at intrepidpotash.com and by dialing 1-800-319-6413 for U.S. and Canada, or +1-631-883-6842 for other countries. The replay will require the input of the conference identification number 2192.

About Intrepid

Intrepid Potash (NYSE:IPI) is the only U.S. producer of muriate of potash. Potash is applied as an essential nutrient for healthy crop development, utilized in several industrial applications and used as an ingredient in animal feed. Intrepid also produces a specialty fertilizer, Trio®, which delivers three key nutrients, potassium, magnesium, and sulfate, in a single particle. Intrepid also sells water and by-products such as salt, magnesium chloride, and brine.

Intrepid serves diverse customers in markets where a logistical advantage exists; and is a leader in the utilization of solar evaporation production, one of the lowest cost, environmentally friendly production methods for potash. Intrepid's production comes from three solar solution potash facilities and one conventional underground Trio® mine.

Intrepid routinely posts important information, including information about upcoming investor presentations and press releases, on its website under the Investor Relations tab. Investors and other interested parties are encouraged to enroll on the Intrepid website, intrepidpotash.com to receive automatic email alerts or Really Simple Syndication (RSS) feeds regarding new postings.

Forward-looking Statements

This document contains forward-looking statements - that is, statements about future, not past, events. The forward-looking statements in this document relate to, among other things, statements about Intrepid's future financial performance, production costs, and operating plans, and its market outlook. These statements are based on assumptions that Intrepid believes are reasonable. Forward-looking statements by their nature address matters that are uncertain. The particular uncertainties that could cause Intrepid's actual results to be materially different from its forward-looking statements include the following:

  • changes in the price, demand, or supply of Intrepid's products;
  • Intrepid's ability to successfully identify and implement any opportunities to expand sales of water, by-products, and other non-potassium related products or other revenue diversification activities;
  • challenges to Intrepid's water rights;
  • Intrepid's ability to comply with the terms of its senior notes and its revolving credit facility, including the underlying covenants, to avoid a default under those agreements;
  • Intrepid's ability to expand Trio® sales internationally and manage risks associated with international sales, including pricing pressure and freight costs;
  • Intrepid's ability to successfully identify and consummate profitable growth opportunities;
  • the costs of, and Intrepid's ability to successfully execute, any strategic projects;
  • declines or changes in agricultural production or fertilizer application rates;
  • declines in the use of potassium-related products or water by oil and gas companies in their drilling operations;
  • further write-downs of the carrying value of assets, including inventories;
  • circumstances that disrupt or limit production, including operational difficulties or variances, geological or geotechnical variances, equipment failures, environmental hazards, and other unexpected events or problems;
  • changes in reserve estimates;
  • currency fluctuations;
  • adverse changes in economic conditions or credit markets;
  • the impact of governmental regulations, including environmental and mining regulations, the enforcement of those regulations, and governmental policy changes;
  • adverse weather events, including events affecting precipitation and evaporation rates at Intrepid's solar solution mines;
  • increased labor costs or difficulties in hiring and retaining qualified employees and contractors, including workers with mining, mineral processing, or construction expertise;
  • changes in the prices of raw materials, including chemicals, natural gas, and power;
  • Intrepid's ability to obtain and maintain any necessary governmental permits or leases relating to current or future operations;
  • interruptions in rail or truck transportation services, or fluctuations in the costs of these services;
  • Intrepid's inability to fund necessary capital investments; and
  • the other risks, uncertainties, and assumptions described in Intrepid's periodic filings with the Securities and Exchange Commission, including in "Risk Factors" in Intrepid's Annual Report on Form 10-K for the year ended December 31, 2017.

In addition, new risks emerge from time to time. It is not possible for Intrepid to predict all risks that may cause actual results to differ materially from those contained in any forward-looking statements Intrepid may make.

All information in this document speaks as of the date of this release. New information or events after that date may cause our forward-looking statements in this document to change. We undertake no duty to update or revise publicly any forward-looking statements to conform the statements to actual results or to reflect new information or future events.

Contact:
Matt Preston, Investor Relations                     
Phone:  303-996-3048
Email: [email protected]




INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
 (In thousands, except share and per share amounts)

    Three Months Ended March 31,
    2018   2017
Sales   $ 53,195     $ 48,655  
Less:        
Freight costs   9,734     8,721  
Warehousing and handling costs   2,276     2,770  
Cost of goods sold   33,280     35,873  
Lower-of-cost-or-market inventory adjustments   705     3,824  
Gross Margin (Deficit)   7,200     (2,533 )
         
Selling and administrative   3,970     4,404  
Accretion of asset retirement obligation   417     389  
Care and maintenance expense   128     692  
Other operating expense   168     1,650  
Operating Income (Loss)   2,517     (9,668 )
         
Other Income (Expense)        
Interest expense, net   (878 )   (4,421 )
Interest income   98     3  
Other income   20     413  
Income (Loss) Before Income Taxes   1,757     (13,673 )
         
Income Tax Expense   -     (5 )
Net Income (Loss)   $ 1,757     $ (13,678 )
         
Weighted Average Shares Outstanding:        
Basic   127,661,458     81,992,071  
Diluted   130,764,998     81,992,071  
Earnings (Loss) Per Share:        
Basic   $ 0.01     $ (0.17 )
Diluted   $ 0.01     $ (0.17 )


INTREPID POTASH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AS OF MARCH 31, 2018 AND DECEMBER 31, 2017
(In thousands, except share and per share amounts)

    March 31,   December 31,
    2018   2017
ASSETS        
Cash and cash equivalents   $ 6,085     $ 1,068  
Accounts receivable:        
Trade, net   29,605     17,777  
Other receivables, net   969     762  
Refundable income taxes   -     2,663  
Inventory, net   75,916     83,126  
Prepaid expenses and other current assets   5,175     6,088  
Total current assets   117,750     111,484  
         
Property, plant, equipment, and mineral properties, net   359,362     364,542  
Long-term parts inventory, net   31,106     30,611  
Other assets, net   3,804     3,955  
Total Assets   $ 512,022     $ 510,592  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Accounts payable:        
Trade   $ 8,262     $ 11,103  
Related parties   31     28  
Income taxes payable   180     -  
Accrued liabilities   8,618     8,074  
Accrued employee compensation and benefits   3,579     4,317  
Advances on credit facility   1,500     3,900  
Current portion of long-term debt   10,000     10,000  
Other current liabilities   3,746     65  
Total current liabilities   35,916     37,487  
         
Long-term debt, net   49,470     49,437  
Asset retirement obligation   21,893     21,476  
Other non-current liabilities   -     102  
Total Liabilities   107,279     108,502  
         
Commitments and Contingencies        
Common stock, $0.001 par value; 400,000,000 shares authorized;        
127,688,437 and 127,646,530 shares outstanding        
at March 31, 2018, and December 31, 2017, respectively   128     128  
Additional paid-in capital   646,709     645,813  
Retained deficit   (242,094 )   (243,851 )
Total Stockholders' Equity   404,743     402,090  
Total Liabilities and Stockholders' Equity   $ 512,022     $ 510,592  


INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(In thousands)

    Three Months Ended March 31,
    2018   2017
Cash Flows from Operating Activities:        
Net income (loss)   $ 1,757     $ (13,678 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:        
Depreciation, depletion, and accretion   8,932     9,323  
Amortization of deferred financing costs   183     821  
Stock-based compensation   947     989  
Lower-of-cost-or-market inventory adjustments   705     3,824  
(Gain) loss on disposal of assets   (34 )   1,559  
Changes in operating assets and liabilities:        
Trade accounts receivable, net   (11,828 )   (8,776 )
Other receivables, net   (207 )   (399 )
Refundable income taxes   2,844     (4 )
Inventory, net   6,009     1,643  
Prepaid expenses and other current assets   914     3,872  
Accounts payable, accrued liabilities, and accrued employee
  compensation and benefits
  1     (64 )
Other liabilities   3,681     (819 )
Net cash provided by (used in) operating activities   13,904     (1,709 )
         
Cash Flows from Investing Activities:        
Additions to property, plant, equipment, and mineral properties   (6,470 )   (2,423 )
Proceeds from sale of property, plant, equipment, and mineral properties   34     5,553  
Net cash (used in) provided by investing activities   (6,436 )   3,130  
         
Cash Flows from Financing Activities:        
Issuance of common stock, net of transaction costs   -     57,468  
Repayments of long-term debt   -     (46,000 )
Proceeds from short-term borrowings on credit facility   13,500     -  
Repayments of short-term borrowings on credit facility   (15,900 )   -  
Employee tax withholding paid for restricted stock upon vesting   (62 )   (109 )
Proceeds from exercise of stock options   11     -  
Net cash (used in) provided by financing activities   (2,451 )   11,359  
         
Net Change in Cash, Cash Equivalents and Restricted Cash   5,017     12,780  
Cash, Cash Equivalents and Restricted Cash, beginning of period   1,549     8,470  
Cash, Cash Equivalents and Restricted Cash, end of period   $ 6,566     $ 21,250  
         
Supplemental disclosure of cash flow information        
Net cash paid (refunded) during the period for:        
  Interest   $ 95     $ 2,467  
  Income taxes   $ (2,843 )   $ 10  
Accrued purchases for property, plant, equipment, and mineral properties   $ 933     $ 214  

INTREPID POTASH, INC.
SELECTED OPERATING AND SEGMENT DATA (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017

    Three Months Ended March 31,
    2018   2017
Production volume (in thousands of tons):        
  Potash   125     118  
  Langbeinite   47     71  
Sales volume (in thousands of tons):        
  Potash   97     101  
  Trio®   77     76  
         
Average net realized sales price per ton (1)        
  Potash   $ 243     $ 240  
  Trio®   $ 194     $ 202  

Three Months Ended March 31, 2018 (in thousands):   Potash   Trio®   Other   Consolidated
Sales   $ 27,064     $ 21,237     $ 4,894     $ 53,195  
Less: Freight costs   3,458     6,276     -     9,734  
  Warehousing and handling costs   1,154     1,118     4     2,276  
  Cost of goods sold   17,476     15,216     588     33,280  
  Lower-of-cost-or-market inventory adjustments   -     705     -     705  
Gross Margin (Deficit)   $ 4,976     $ (2,078 )   $ 4,302     $ 7,200  
Depreciation, depletion and accretion incurred(2)   $ 7,138     $ 1,690     $ 104     $ 8,932  
                 
Three Months Ended March 31, 2017 (in thousands):   Potash   Trio®   Other   Consolidated
Sales   $ 27,220     $ 21,112     $ 323     $ 48,655  
Less: Freight costs   2,959     5,762     -     8,721  
  Warehousing and handling costs   1,512     1,258     -     2,770  
  Cost of goods sold   20,421     15,452     -     35,873  
  Lower-of-cost-or-market inventory
  adjustments
  -     3,824     -     3,824  
Gross Margin (Deficit)   $ 2,328     $ (5,184 )   $ 323     $ (2,533 )
Depreciation, depletion and accretion incurred(2)   $ 7,563     $ 1,699     $ 61     $ 9,323  

(1)  Average net realized sales price is a non-GAAP financial measure.  See the non-GAAP reconciliations set forth later in this press release for additional information.

(2)  Depreciation, depletion and accretion incurred for potash and Trio® excludes depreciation, depletion and accretion amounts absorbed in or (relieved from) inventory.


INTREPID POTASH, INC.
UNAUDITED NON-GAAP RECONCILIATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(In thousands, except per share amounts)

To supplement Intrepid's consolidated financial statements, which are prepared and presented in accordance with GAAP, Intrepid uses several non-GAAP financial measures to monitor and evaluate its performance. These non-GAAP financial measures include adjusted net income (loss), adjusted net income (loss) per diluted share, adjusted EBITDA, average net realized sales price per ton, and total water activity. These non-GAAP financial measures should not be considered in isolation, or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.  In addition, because the presentation of these non-GAAP financial measures varies among companies, these non-GAAP financial measures may not be comparable to similarly titled measures used by other companies.

Intrepid believes these non-GAAP financial measures provide useful information to investors for analysis of its business. Intrepid uses these non-GAAP financial measures as one of its tools in comparing period-over-period performance on a consistent basis and when planning, forecasting, and analyzing future periods. Intrepid believes these non-GAAP financial measures are used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the potash mining industry. Many investors use the published research reports of these professional research analysts and others in making investment decisions.

Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Diluted Share

Adjusted net income (loss) and adjusted net income (loss) per diluted share are calculated as net income (loss) or income (loss) per diluted share adjusted for certain items that impact the comparability of results from period to period, as set forth in the reconciliation below. Intrepid considers these non-GAAP financial measures to be useful because they allow for period-to-period comparisons of its operating results excluding items that Intrepid believes are not indicative of its fundamental ongoing operations.

Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss):

  Three Months Ended March 31,
  2018   2017
  (in thousands)
Net Income (Loss) $ 1,757     $ (13,678 )
Adjustments      
  Write-off of deferred financing fees(1) -     518  
  Make-whole payment(2) -     794  
  Calculated income tax effect(3) -     -  
  Total adjustments -     1,312  
Adjusted Net Income (Loss) $ 1,757     $ (12,366 )

Reconciliation of Net Income (Loss) per Share to Adjusted Net Income (Loss) per Share:

  Three Months Ended March 31,
  2018   2017
Net Income (Loss) Per Diluted Share $ 0.01     $ (0.17 )
Adjustments      
  Write-off of deferred financing fees(1) -     0.01  
  Make-whole payment(2) -     0.01  
  Calculated income tax effect(3) -     -  
  Total adjustments -     0.02  
Adjusted Net Income (Loss) Per Diluted Share $ 0.01     $ (0.15 )

(1) During the first quarter of 2017, Intrepid made an early repayment of $46.0 million of principal on its senior notes. As a result, Intrepid wrote off a portion of the financing fees that had previously been capitalized related to the senior notes. The write-off of deferred financing fees is reflected in Intrepid's financial statements as interest expense.

(2) During the first quarter of 2017, Intrepid made an early repayment of principal on its senior notes. The payment totaled $46.8 million, of which $0.8 million related to an additional make-whole payment.

(3) Due to Intrepid's valuation allowance against its deferred tax asset, this calculation assumes a 0% effective tax rate.


Adjusted EBITDA

Adjusted earnings before interest, taxes, depreciation, and amortization (or adjusted EBITDA) is calculated as net income (loss) adjusted for certain items that impact the comparability of results from period to period, as set forth in the reconciliation below. Intrepid considers adjusted EBITDA to be useful because the measure reflects Intrepid's operating performance before the effects of certain non-cash items and other items that Intrepid believes are not indicative of its core operations. Intrepid uses adjusted EBITDA to assess operating performance.
               
Reconciliation of Net Income (Loss) to Adjusted EBITDA:

    Three Months Ended March 31,
    2018   2017
    (in thousands)
Net Income (Loss)   $ 1,757     $ (13,678 )
  Interest expense   878     4,421  
  Income tax expense   -     5  
  Depreciation, depletion, and accretion   8,932     9,323  
  Total adjustments   9,810     13,749  
Adjusted EBITDA   $ 11,567     $ 71  


Average Net Realized Sales Price per Ton

Average net realized sales price per ton is calculated as sales, less freight costs, divided by the number of tons sold in the period. Intrepid considers average net realized sales price per ton to be useful because it shows average per-ton pricing without the effect of certain transportation and delivery costs. When Intrepid arranges transportation and delivery for a customer, it includes in revenue and in freight costs the costs associated with transportation and delivery. However, many of the Intrepid's customers arrange for and pay their own transportation and delivery costs, in which case these costs are not included in Intrepid's revenue and freight costs. Intrepid uses average net realized sales price per ton as a key performance indicator to analyze sales and pricing trends.

Reconciliation of Sales to Average Net Realized Sales Price per Ton:

    Three Months Ended March 31,
    2018   2017
    (in thousands, except per-ton data)

 
    Potash   Trio®   Total   Potash   Trio®   Total
Sales   $ 27,064     $ 21,237     $ 48,301     $ 27,220     $ 21,112     $ 48,332  
Freight costs   3,458     6,276     9,734     2,959     5,762     8,721  
  Subtotal   $ 23,606     $ 14,961     $ 38,567     $ 24,261     $ 15,350     $ 39,611  
                         
Divided by:                        
Tons sold   97     77         101     76      
  Average net realized sales price per ton   $ 243     $ 194         $ 240     $ 202      

Total Water Activity

Total water activity is calculated as sales adjusted for items shown below. Depending on the source of the water sold, Intrepid records the sale of water as either sales or a by-product credit. Intrepid also receives payments for future water sales from time to time. As the location of water sold can vary each quarter, total water activity may be a useful indicator of overall water demand.

    Three Months Ended March 31,
    2018
    (in thousands)
Sales   $ 53,195  
Less: Non-water sales   (48,346 )
By-product credits - water   675  
Contract liabilities - water   3,687  
  Total Adjustments   (43,984 )
Total Water Activity   $ 9,211  




This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Intrepid Potash Inc via Globenewswire


Source: Thomson Reuters ONE (April 24, 2018 - 7:01 AM EDT)

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