Intrepid Potash Announces Second Quarter 2014 Results and Senior Executive Transition
30.07.2014 | Globenewswire Europe
DENVER; Jul. 30, 2014 - Intrepid Potash Inc. (Intrepid) (NYSE: IPI) todayannounced financial results and operating highlights for its second quarter
ended June 30, 2014. Intrepid also announced that Dave Honeyfield, current
President and CFO, will be resigning from Intrepid effective August 29, 2014, in
order to pursue an opportunity with a newly formed company in the oil and gas
business. Bob Jornayvaz, Intrepid's co-founder, current Executive Chairman and
largest shareholder, will become President and CEO. Mr. Jornayvaz will be
reassuming the leadership role he held from the Company's inception in 2000
through 2010, including overseeing Intrepid's initial public offering in 2008.
Brian Frantz, Intrepid's VP - Finance, Controller and Chief Accounting Officer,
has been named interim CFO, as the Company performs a search for this position.
"Having the responsibility to lead the transition of Intrepid over the last four
years has been tremendously rewarding for me personally and professionally. I
am thankful to Bob Jornayvaz and Hugh Harvey for the opportunity to serve as
President and Chief Financial Officer. I also want to share the enormous
respect I have for the employees of Intrepid; the talent, skill, and innovation
that they bring to bear make Intrepid the strong company that it is today. It
has been a real pleasure to serve our customers, our employees and our
stockholders," said Dave Honeyfield.
Bob Jornayvaz commented, "I thank Dave for his outstanding execution of
Intrepid's strategy during a period of great change. We have built a stronger
Intrepid through the capital investment stage Dave oversaw. In returning to the
CEO role, I have as my top priorities continued focus on operating and
optimizing our new assets, further development of our long-term growth strategy,
and maximizing our margin and cash flow generation opportunities on every ton of
product we sell."
Financial results for the second quarter of 2014 include:
* Net income of $5.6 million, or $0.07 per diluted share, compared with the
second quarter 2013 net income of $11.3 million, or $0.15 per diluted share
* Adjusted net income((1)) of $5.6 million, or $0.07 per diluted share,
compared with adjusted net income of $12.7 million, or $0.17 per diluted
share, for the second quarter last year
* Adjusted EBITDA((1)) of $28.6 million, compared with $33.0 million in the
second quarter of 2013
* Cash flow from operating activities for the first six months of 2014 of
$55.8 million, compared with $47.4 million in the comparable period of
2013. Cash used for capital expenditures during the first six months of
2014 was $45.1 million.
* Cash, cash equivalents, and investments of $35.1 million at June 30, 2014
Commenting on the results, Mr. Jornayvaz said, "We returned to profitability and
increased our cash flow generation this quarter and delivered a solid first half
of the year. Our ability to supply tons to our customers, despite the industry-
wide logistical challenges, allowed us to meet the healthy demand for potash
through the spring. In the quarter, we earned a sequential increase in our
average net realized sales price((1)) and achieved lower per ton cash operating
costs((1) )on both our potash and Trio(®) products. The second quarter results,
particularly the continued improvements in cash operating costs, highlight the
positive trends we are experiencing and that we expect to continue as we are
more singularly focused on the optimization of our new assets and operations now
that the majority of the multi-year intensive capital project work is
completed."
Second quarter 2014 highlights include:
Potash
* Average net realized sales price per ton was $329 ($363 per metric tonne),
a 4% increase from the previous quarter. Last year's second quarter average
net realized sales price was $402 per ton ($443 per metric tonne).
* Cash operating costs of $188 per ton improved sequentially by 8% from the
first quarter. Cash operating costs were $186 per ton in the second
quarter of 2013.
* Potash sales volume was 235,000 tons in the second quarter, up 28% from
184,000 tons in the same quarter of 2013. For the first six months of
2014, potash sales volume of 478,000 tons increased 30% from the comparable
period of 2013.
* Potash production was 190,000 tons, up 4% compared with the same period a
year ago. In the first six months of this year, production volume was
411,000 tons, up slightly from the first six months of 2013.
Intrepid grew sales and achieved a sequentially higher average net realized
sales price in the second quarter by continuing to meet customers' needs through
its well developed, close-to-the-customer distribution model, and by working
closely with the railroad and customers to coordinate rail deliveries. The
strategy of placing product forward in the market ahead of demand enables
Intrepid to respond to just-in-time purchasing patterns and creates a more
consistent supply of product for customers.
The capital investments together with process improvements aimed at increasing
production and lowering cash operating costs per ton showed positive results for
the second consecutive quarter. Comparing the second quarter to the first
quarter of this year, Intrepid reduced potash cash operating costs by $17 per
ton and total potash cost of goods sold by $13 per ton. Year-over-year, per ton
cash operating costs were 1% higher, while total cost of goods sold per ton
increased 5%, largely as a result of additional depreciation expense from the
recent capital investments.
The second half cash operating costs per ton and total cost of goods sold per
ton for potash are expected to continue to decline. Driving the cost
improvements will be the second, larger harvest from the HB Solar Solution mine,
and anticipated benefits from the multi-year capital investments at the West
plant that were designed to increase production. The HB activities will have a
more pronounced impact in the fourth quarter of 2014 than the third quarter.
While cash operating costs per ton are expected to be lower on a year-over-year
basis for the third quarter, the Company's expectation is that the cash
operating costs per ton in the period will be slightly higher than the second
quarter as a result of scheduled maintenance turnaround activity at Intrepid's
East, West and Wendover facilities. Additionally, the normal cyclical sales and
production mix shifts somewhat in the third quarter because of a greater
concentration of tons produced through conventional underground operations at a
time when the solar solution mining operations are taking advantage of higher
evaporation rates that occur over the summer months.
Langbeinite - Trio(®)
* Average net realized sales price per ton for langbeinite, which is marketed
as Trio(®), in the second quarter was $350 ($386 per metric tonne),
representing a 3% sequential increase from the first quarter. In the second
quarter of 2013, average net realized price was $359 per ton ($396 per
metric tonne).
* Cash operating costs were $192 per ton, a $24 per ton improvement from the
first quarter of 2014. Cash operating costs were $177 per ton in the second
quarter of 2013.
* Trio(® )sales volume was 62,000 tons, up from 35,000 tons for the same
period in the prior year. Sales volume for the first six months of this
year increased 32% to 98,000 tons compared with the same period in 2013.
* Production was 43,000 tons, compared with 50,000 tons in the second quarter
of 2013
Intrepid grew sales volume for Trio(®) in the quarter and year-to-date 77% and
32%, respectively, compared with the same periods in 2013. These results were
driven by a greater emphasis on the higher-value domestic market. The ability
to manufacture and sell the premium products, the pellet form and the natural
granular, generates a higher average net realized sales price. The average net
realized sales price per ton, which increased 3% from first quarter levels,
remained resilient as customers continue to recognize the benefits of this
specialty fertilizer, and as demand exceeds supply.
Trio(® )production, while up sequentially, decreased 22% in the first six months
of this year from the same period in 2013, with the majority of this reflected
in the first quarter. Production was impacted by the work underway to make the
conversion process of standard-sized material into premium-sized product more
efficient. The production increase in the second quarter as compared with the
first quarter was achieved through higher recovery rates at the East facility.
Per ton cash operating costs and cost of goods sold trends generally followed
the quarterly production trends.
Capital project update and highlights include:
Intrepid's capital investment range for 2014 of $40 million to $50 million is
unchanged from prior guidance. Nearly half of the planned investments are for
sustaining capital, with the remainder being used to complete the major
projects. Through the first six months of this year, Intrepid has invested $24
million, which includes completing the remaining work on the HB Solar Solution
mine and the third compactor line at the North Compaction plant. The Company
expects the capital investment to complete the West upgrades to occur in the
third quarter when commissioning on the final component of this upgrade
commences.
HB Solar Solution mine
Construction on the HB Solar Solution mine is complete with only final
commissioning work to be performed during the second half of the year. Intrepid
produced approximately 31,000 tons of potash in the first half of this year from
the initial harvest from the HB Solar Solution mine. The second harvest is
scheduled to commence in August, and, based on the brine concentrate levels and
the pace of evaporation, Intrepid has more certainty about achieving the
estimated 50,000 to 100,000 tons of production in 2014. Cash operating costs
trended down from the first quarter into the second quarter with the plant
generating positive cash flow. The per ton cash operating costs are expected to
trend down further to the targeted range of $80 to $100 per ton at full
production rates of 150,000 to 200,000 tons in the 2015/2016 harvest season.
North Compaction plant
All three compaction lines are in service at the North Compaction plant. With
this new plant complete, Intrepid is producing a high quality granular product.
This high quality product has opened up sales opportunities, and allows Intrepid
to further develop its close-to-the-customer warehouse strategy. The capacity
of the new North plant was designed to granulate 100% of the production from the
HB Solar Solution mine and the West mine. Based on the current design, the
plant can also handle any additional potash tonnage from the East facility,
creating the flexibility to granulate 100% of Intrepid's Carlsbad production,
similar to the Moab and Wendover operations. The capabilities of the new North
plant also make possible some of the process changes underway at the West
facility that are intended to allow for higher recoveries, thereby lowering per
ton costs.
West facility upgrades
Intrepid expects to complete the last in the series of major recovery
improvement projects at the West facility during the third quarter of 2014. The
upgrades have enhanced and will continue to enhance West's ability to stabilize
recovery rates. Increased production at West, combined with the revised
processes, is expected to lower per ton cash operating costs more meaningfully
during the second half of 2014, particularly in the fourth quarter, once the
projects are finished and fully integrated.
Market conditions and 2014 outlook:
Intrepid saw continued sales success through its strategy of placing product
forward in the market, and combining the diversity and expansion of its sales
channels beyond agriculture to include the industrial and feed markets.
Potash demand in the second quarter remained strong and pricing improved from
the previous quarter in response to lower inventory levels in North America,
particularly of granular size product. Further, the announcement by the
Canadian producers of a summer fill price increase supports an outlook for
stability in pricing into the fall season of 2014.
Intrepid has slightly adjusted its second half potash sales forecast partly due
to the higher sales volumes in the first half of 2014 resulting in tighter
inventory levels. Additionally, customer demand in the third quarter and early
fourth quarter is strong, and the Company is closely coordinating sales and
production. Intrepid does not expect potash pricing to fluctuate meaningfully
during the second half of the year in response to current corn and soybean
pricing as current potash pricing provides good value to the farmer.
Intrepid's outlook for the second half and full year of 2014 is presented
below. This information is Intrepid's best estimate at the current time and
will be impacted by actual market conditions, results of operations, and
production results. Cash operating costs per ton and cost of goods sold per ton
for potash are expected to be lower for the second half compared with the first
half. The second half range for potash cost of goods sold per ton has increased
slightly in reflection of the sales mix of tons as Intrepid has low levels of
inventory at the end of the second quarter from its Utah operations based on the
strength of sales through the spring. Additionally, as the sales price
expectations for potash have improved since Intrepid last provided its outlook
on April 30, 2014, there will be less cost flowing through the lower-of-cost-or-
market adjustment line in the second half of the year than previously expected
as these costs will now flow through cost of goods sold.
Second-Half Full-Year
2014 2014
--------------------- --------------------
Potash
Production (tons) 445,000 - 465,000 860,000 - 880,000
Sales (tons) 415,000 - 435,000 890,000 - 910,000
Cash operating costs ($/ton) $185 - $200 $185 - $200
Total COGS ($/ton) $260 - $275 $265 - $280
Trio(®)
Production (tons) 80,000 - 95,000 155,000 - 170,000
Sales (tons) 75,000 - 85,000 175,000 - 185,000
Cash operating costs ($/ton) $175 - $190 $185 - $200
Total COGS ($/ton) $245 - $260 $260 - $275
Other
Interest expense $3.0 - $3.5 million $5.5 - $6.5 million
Depreciation, depletion, and
accretion $38 - $42 million $77 - $81 million
Selling and administrative expense
(excludes approximately $1.8
million of restructuring charges
in the first quarter) $13 - $15 million $26 - $30 million
Capital investment not provided $40 - $50 million
Notes
( (1)) Adjusted net income, adjusted net income per diluted share, adjusted
earnings before interest, taxes, depreciation, and amortization (adjusted
EBITDA), average net realized sales price per ton, and per ton cash operating
costs 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 July 31, 2014, at
10:00 a.m. ET. The dial in number is 800-319-4610 for U.S. and Canada, and is
631-982-4565 for other countries. A recording of the conference call will be
available two hours after the completion of the call at 800-319-6413 for U.S.
and Canada, or 631-883-6842 for other countries. The replay of the call will
require the input of the conference identification number 763324. The call will
also be streamed on the Intrepid website, www.intrepidpotash.com. An audio
recording of the conference call will be available at www.intrepidpotash.com
through September 1, 2014.
About Intrepid
Intrepid (NYSE: IPI) is the largest producer of potash in the U.S. and is
dedicated to the production and marketing of potash, which is essential for
healthy crop development; and Trio(®), a specialty fertilizer supplying three
key nutrients, potassium, magnesium and sulfate, in a single particle. Intrepid
owns six active production facilities across New Mexico and Utah. Intrepid is
unique in the U.S. in its utilization of low-cost solar solution mining at three
of its facilities, including the newly constructed HB Solar Solution 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, www.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 often
relate to our future performance and management's expectations for the future,
including statements about our financial outlook. These statements are based on
assumptions that we believe are reasonable. Forward-looking statements by their
nature address matters that are uncertain. For us, the particular uncertainties
that could cause our actual results to be materially different from our forward-
looking statements include the following:
* changes in the price, demand, or supply of potash or Trio(®)/langbeinite
* circumstances that disrupt or limit our production, including operational
difficulties or operational variances due to geological or geotechnical
variances
* interruptions in rail or truck transportation services, or fluctuations in
the costs of these services
* increased labor costs or difficulties in hiring and retaining qualified
employees and contractors, including workers with mining, mineral
processing, or construction expertise
* the costs of, and our ability to successfully construct, commission, and
execute, any of our strategic projects, including our HB Solar Solution
mine, our North compaction plant, our West plant upgrades, and our Moab
cavern systems
* adverse weather events, including events affecting precipitation and
evaporation rates at our solar solution mines
* changes in the prices of raw materials, including chemicals, natural gas,
and power
* the impact of federal, state, or local governmental regulations, including
environmental and mining regulations; the enforcement of those regulations;
and governmental policy changes
* our ability to obtain any necessary governmental permits relating to the
construction and operation of assets
* changes in our reserve estimates
* competition in the fertilizer industry
* declines or changes in U.S. or world agricultural production or fertilizer
application rates
* declines in the use of potash products by oil and gas companies in their
drilling operations
* changes in economic conditions
* our ability to comply with covenants in our debt-related agreements to avoid
a default under those agreements, or the total amount available to us under
our credit facility is reduced, in whole or in part, because of covenant
limitations
* disruption in the credit markets
* our ability to secure additional federal and state potash leases to expand
our existing mining operations
* the other risks, uncertainties, and assumptions described in Item 1A. Risk
Factors of our Annual Report on Form 10-K for the year ended December
31, 2013, as updated by our subsequent Quarterly Reports on Form 10-Q
In addition, new risks emerge from time to time. It is not possible for our
management to predict all risks that may cause actual results to differ
materially from those contained in any forward-looking statements we may make.
All information in this document speaks as of July 30, 2014. New information or
events after that date may cause our forward-looking statements in this document
to change. We have 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:
Gary Kohn, Investor Relations
Phone: 303-996-3024
Email: gary.kohn@intrepidpotash.com
Intrepid Potash Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(In thousands, except share and per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- ----------------------------
2014 2013 2014 2013
-------------- -------------- -------------- -------------
Sales $ 110,949 $ 92,680 $ 209,824 $ 191,937
Less:
Freight costs 11,760 6,526 21,691 14,623
Warehousing and
handling costs 2,988 3,094 5,800 6,673
Cost of goods sold 79,383 55,003 157,957 108,776
Lower-of-cost-or-
market inventory
adjustments 1,140 4 4,706 12
-------------- -------------- -------------- -------------
Gross Margin 15,678 28,053 19,670 61,853
Selling and
administrative 7,064 8,639 13,810 18,131
Accretion of asset
retirement
obligation 406 374 811 749
Restructuring
expense - - 1,827 -
Other operating
(income) (305) (1,340 ) (3,250 ) (1,169 )
-------------- -------------- -------------- -------------
Operating Income 8,513 20,380 6,472 44,142
Other Income
(Expense)
Interest expense (1,556 ) (219 ) (2,936 ) (432 )
Interest income 22 163 75 215
Other income
(expense) 225 (1,836 ) 460 (1,820 )
-------------- -------------- -------------- -------------
Income Before
Income Taxes 7,204 18,488 4,071 42,105
Income Tax
(Expense) Benefit (1,642 ) (7,171 ) 1,136 (15,869 )
-------------- -------------- -------------- -------------
Net Income $ 5,562 $ 11,317 $ 5,207 $ 26,236
-------------- -------------- -------------- -------------
Weighted Average
Shares
Outstanding:
Basic 75,514,991 75,383,108 75,480,165 75,361,951
-------------- -------------- -------------- -------------
Diluted 75,573,918 75,399,566 75,534,138 75,396,164
-------------- -------------- -------------- -------------
Earnings Per
Share:
Basic $ 0.07 $ 0.15 $ 0.07 0.35
-------------- -------------- -------------- -------------
Diluted $ 0.07 $ 0.15 $ 0.07 0.35
-------------- -------------- -------------- -------------
Intrepid Potash Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AS OF JUNE 30, 2014 AND DECEMBER 31, 2013
(In thousands, except share and per share amounts)
June 30, December 31,
2014 2013
--------------- --------------
ASSETS
Cash and cash equivalents $ 31,069 $ 394
Short-term investments 4,013 15,214
Accounts receivable:
Trade, net 33,036 20,837
Other receivables 5,103 7,457
Refundable income taxes 14,734 15,722
Inventory, net 86,672 105,011
Prepaid expenses and other current assets 3,700 5,653
Current deferred tax asset 5,525 8,341
--------------- --------------
Total current assets 183,852 178,629
--------------- --------------
Property, plant, equipment, and mineral
properties, net 812,172 826,569
Long-term parts inventory, net 13,592 12,469
Long-term investments 2 9,505
Other assets, net 4,132 4,252
Non-current deferred tax asset 146,687 143,849
--------------- --------------
Total Assets $ 1,160,437 $ 1,175,273
--------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable:
Trade $ 15,923 $ 27,552
Related parties 31 50
Accrued liabilities 18,238 29,845
Accrued employee compensation and benefits 10,427 9,122
Other current liabilities 1,206 2,059
--------------- --------------
Total current liabilities 45,825 68,628
--------------- --------------
Long-term debt 150,000 150,000
Asset retirement obligation 20,648 19,959
Other non-current liabilities 2,853 2,715
--------------- --------------
Total Liabilities 219,326 241,302
--------------- --------------
Commitments and Contingencies
Common stock, $0.001 par value; 100,000,000
shares authorized; and 75,528,235 and
75,405,410 shares outstanding at June
30, 2014, and December 31, 2013, respectively 76 75
Additional paid-in capital 574,536 572,616
Accumulated other comprehensive income (loss) 2 (10 )
Retained earnings 366,497 361,290
--------------- --------------
Total Stockholders' Equity 941,111 933,971
--------------- --------------
Total Liabilities and Stockholders' Equity $ 1,160,437 $ 1,175,273
--------------- --------------
Intrepid Potash Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(In thousands)
Three Months Ended June Six Months Ended June
30, 30,
------------------------- ------------------------
2014 2013 2014 2013
------------ ------------ ------------ -----------
Cash Flows from Operating
Activities:
Reconciliation of net
income to net cash
provided by operating
activities:
Net income $ 5,562 $ 11,317 $ 5,207 $ 26,236
Deferred income taxes 2,750 7,145 (28 ) 15,526
Items not affecting cash:
Depreciation, depletion,
and accretion 19,874 14,338 39,523 28,479
Stock-based compensation 1,503 1,537 2,531 2,677
Lower-of-cost-or-market
inventory adjustments 1,140 4 4,706 12
Other (275 ) 928 (52 ) 1,361
Changes in operating
assets and liabilities:
Trade accounts receivable,
net (2,769 ) 8,401 (12,200 ) (4,314 )
Other receivables, net 5,670 (1,148 ) 2,354 (1,492 )
Refundable income taxes (1,036 ) (79 ) 989 (76 )
Inventory, net 5,767 (9,821 ) 12,510 (18,610 )
Prepaid expenses and other
assets 847 778 1,852 1,492
Accounts payable, accrued
liabilities, and accrued
employee
compensation and
benefits (372 ) 890 (707 ) (3,405 )
Other liabilities (136 ) 1,533 (836 ) (442 )
------------ ------------ ------------ -----------
Net cash provided by
operating activities 38,525 35,823 55,849 47,444
------------ ------------ ------------ -----------
Cash Flows from Investing
Activities:
Additions to property,
plant, equipment, and
mineral properties (13,220 ) (62,611 ) (45,139 ) (123,759 )
Proceeds from sale of
property, plant,
equipment, and mineral
properties - 58 - 68
Purchases of investments (2 ) (80,234 ) (7 ) (80,234 )
Proceeds from sale of
investments 2,532 253 20,583 21,839
------------ ------------ ------------ -----------
Net cash used in investing
activities (10,690 ) (142,534 ) (24,563 ) (182,086 )
------------ ------------ ------------ -----------
Cash Flows from Financing
Activities:
Proceeds from long-term
debt - 150,000 - 150,000
Debt issuance costs - (603 ) - (603 )
Employee tax withholding
paid for restricted stock
upon vesting - - (611 ) (577 )
------------ ------------ ------------ -----------
Net cash provided by (used
in) financing activities - 149,397 (611 ) 148,820
------------ ------------ ------------ -----------
Net Change in Cash and
Cash Equivalents 27,835 42,686 30,675 14,178
Cash and Cash Equivalents,
beginning of period 3,234 5,111 394 33,619
------------ ------------ ------------ -----------
Cash and Cash Equivalents,
end of period $ 31,069 $ 47,797 $ 31,069 $ 47,797
------------ ------------ ------------ -----------
Intrepid Potash Inc.
SELECTED OPERATIONS DATA (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
Three Months Ended June
30, Six Months Ended June 30,
------------------------- --------------------------
2014 2013 2014 2013
------------ ------------ ------------- ------------
Production volume (in
thousands of tons):
Potash 190 182 411 404
------------ ------------ ------------- ------------
Langbeinite 43 50 75 96
------------ ------------ ------------- ------------
Sales volume (in
thousands of tons):
Potash 235 184 478 369
------------ ------------ ------------- ------------
Trio(®) 62 35 98 74
------------ ------------ ------------- ------------
Gross sales (in
thousands):
Potash $ 84,804 $ 78,195 $ 169,301 $ 160,973
Trio(®) 26,145 14,485 40,523 30,964
------------ ------------ ------------- ------------
Total 110,949 92,680 209,824 191,937
Freight costs (in
thousands):
Potash 7,496 4,351 15,156 9,817
Trio(®) 4,264 2,175 6,535 4,806
------------ ------------ ------------- ------------
Total 11,760 6,526 21,691 14,623
Net sales (in
thousands)((1)):
Potash 77,308 73,844 154,145 151,156
Trio(®) 21,881 12,310 33,988 26,158
------------ ------------ ------------- ------------
Total $ 99,189 $ 86,154 $ 188,133 $ 177,314
------------ ------------ ------------- ------------
Potash statistics (per
ton):
Average net realized
sales price((1)) $ 329 $ 402 $ 323 $ 409
Cash operating
costs((1)(2)) 188 186 197 180
Depreciation and
depletion 67 50 65 48
Royalties 12 18 11 17
------------ ------------ ------------- ------------
Total potash cost
of goods sold $ 267 $ 254 $ 273 245
------------ ------------ ------------- ------------
Warehousing and
handling costs 11 14 10 15
------------ ------------ ------------- ------------
Average potash
gross margin((1)) $ 51 $ 134 $ 40 149
------------ ------------ ------------- ------------
Trio(®) statistics (per
ton):
Average net realized
sales price((1)) $ 350 $ 359 $ 347 $ 354
Cash operating
costs((1)) 192 177 201 179
Depreciation and
depletion 57 48 61 51
Royalties 17 18 17 18
------------ ------------ ------------- ------------
Total Trio(®) cost
of goods sold $ 266 $ 243 $ 279 $ 248
------------ ------------ ------------- ------------
Warehousing and
handling costs 8 15 8 14
------------ ------------ ------------- ------------
Average Trio(®)
gross margin((1)) $ 76 $ 101 $ 60 $ 92
------------ ------------ ------------- ------------
((1) )Net sales, average net realized sales price, cash operating costs and
average gross margin are non-GAAP financial measures. See the non-GAAP
reconciliations set forth later in this press release for additional
information.
((2)) On a per ton basis, by-product credits were $7 and $7 for the second
quarter of 2014, and 2013, respectively. By-product credits were $1.7 million
and $1.3 million for the second quarter of 2014, and 2013, respectively. On a
per ton basis, by-product credits were $6 and $9 for the six months ended June
30, 2014, and 2013, respectively. By-product credits were $3.1 million and $3.2
million for the six months ended June 30, 2014, and 2013, respectively. Cash
operating costs and GAAP total cost of goods sold are shown net of by-product
credits.
Intrepid Potash Inc.
UNAUDITED NON-GAAP RECONCILIATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(In thousands, except per share amounts)
To supplement our consolidated financial statements, which are prepared and
presented in accordance with GAAP, we use several non-GAAP financial measures to
monitor and evaluate our performance. These non-GAAP financial measures include
adjusted net income, adjusted net income per diluted share, adjusted EBITDA, net
sales, average net realized sales price, cash operating costs, and average
potash and Trio(®) gross margin. 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, our non-GAAP financial measures may not be comparable to similarly
titled measures used by other companies.
We believe these non-GAAP financial measures provide useful information to
investors for analysis of our business. We also refer to these non-GAAP
financial measures in assessing our performance and when planning, forecasting
and analyzing future periods. We believe these non-GAAP financial measures are
widely 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.
Below is additional information about our non-GAAP financial measures, including
reconciliations of our non-GAAP financial measures to the most directly
comparable GAAP measures:
Adjusted Net Income and Adjusted Net Income Per Diluted Share
Adjusted net income and adjusted net income per diluted share are non-GAAP
financial measures that are calculated as net income or earnings per diluted
share adjusted for certain items that impact the comparability of results from
period to period. These items include, among others, restructuring expenses and
reversal of the allowance associated with the employment-related high wage tax
credits in New Mexico. We consider these non-GAAP financial measures to be
useful because they allow for period-to-period comparisons of our operating
results excluding items that we believe are not indicative of our fundamental
ongoing operations.
Three Months Ended Six Months Ended June
June 30, 30,
------------------------ -----------------------
2014 2013 2014 2013
----------- ------------ ----------- -----------
Net Income $ 5,562 $ 11,317 $ 5,207 $ 26,236
Adjustments
Allowance for New Mexico
employment credits((1)) - - (2,563 ) -
Restructuring expense - - 1,827 -
Loss on settlement of
pension obligation termination - 1,871 - 1,871
Compensating tax refund - (1,705 ) - (1,705 )
Calculated income tax
effect((2)) - (66 ) 294 (66 )
Change in blended state
tax rate
to value deferred
income tax asset - 1,260 - 1,260
----------- ------------ ----------- -----------
Total adjustments - 1,360 (442 ) 1,360
----------- ------------ ----------- -----------
Adjusted Net Income $ 5,562 $ 12,677 $ 4,765 $ 27,596
----------- ------------ ----------- -----------
((1)) In the third quarter of 2013, Intrepid received notification that its
application for certain New Mexico employment-related high wage tax credits had
been denied and established a pre-tax, non-cash allowance of approximately $2.8
million for the credits relating to the denied periods. In March of 2014,
Intrepid received notification from the State of New Mexico that the vast
majority of the credits will be allowed and therefore has reversed most of the
allowance to reflect the expected amount of cash to be received.
((2)) Assumes an annual effective tax rate of 40%.
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------------
2014 2013 2014 2013
---------- --------------------- ---------
Net Income Per Diluted Share $ 0.07 $ 0.15 $ 0.07 $ 0.35
Adjustments
Allowance for New Mexico
employment credits - - (0.03 ) -
Restructuring expense - - 0.02 -
Loss on settlement of pension
obligation termination - 0.02 - 0.02
Compensating tax refund - (0.02 ) - (0.02 )
Calculated income tax effect - - - -
Change in blended state tax
rate
to value deferred income tax
asset - 0.02 - 0.02
---------- --------------------- ---------
Total adjustments - 0.02 (0.01 ) 0.02
---------- --------------------- ---------
Adjusted Net Income Per Diluted
Share $ 0.07 $ 0.17 $ 0.06 $ 0.37
---------- --------------------- ---------
Adjusted EBITDA
Adjusted earnings before interest, taxes, depreciation, and amortization (or
adjusted EBITDA) is a non-GAAP financial measure that is calculated as net
income adjusted for the reversal of the allowance associated with the
employment-related high wage tax credits in New Mexico, restructuring expenses,
interest expense, income tax expense, depreciation, depletion, and amortization,
and asset retirement obligation accretion. We consider adjusted EBITDA to be
useful because it reflects our operating performance before the effects of
certain non-cash items and other items that we believe are not indicative of our
core operations. We use adjusted EBITDA to assess operating performance and as
one of the measures under our performance-based compensation programs for
employees.
Three Months Ended June Six Months Ended June
30, 30,
------------------------- ------------------------
2014 2013 2014 2013
------------ ------------ ------------ -----------
Net Income $ 5,562 $ 11,317 $ 5,207 $ 26,236
Allowance for New
Mexico employment credits - - (2,563 ) -
Restructuring expense - - 1,827 -
Interest expense 1,556 219 2,936 432
Income tax expense
(benefit) 1,642 7,171 (1,136 ) 15,869
Depreciation,
depletion, and accretion 19,874 14,338 39,523 28,479
------------ ------------ ------------ -----------
Total
adjustments 23,072 21,728 40,587 44,780
------------ ------------ ------------ -----------
Adjusted Earnings Before
Interest, Taxes,
Depreciation and
Amortization $ 28,634 $ 33,045 $ 45,794 $ 71,016
------------ ------------ ------------ -----------
Net Sales and Average Net Realized Sales Price per Ton
Net sales and average net realized sales price are non-GAAP financial measures.
Net sales are calculated as sales less freight costs. Average net realized
sales price is calculated as net sales, divided by the number of tons sold in
the period. We consider net sales and average net realized sales price to be
useful because they remove the effect of transportation and delivery costs on
sales and pricing. When we arrange transportation and delivery for a customer,
we include in revenue and in freight costs the costs associated with
transportation and delivery. However, many of our customers arrange for and pay
their own transportation and delivery costs, in which case these costs are not
included in our revenue and freight costs. We use net sales and average net
realized sales price as key performance indicators to analyze sales and price
trends. We also use net sales as one of the measures under our performance-
based compensation programs for employees.
Three Months Ended June 30,
-----------------------------------------------------------------------------
2014 2013
--------------------------------------- -------------------------------------
Potash Trio(®) Total Potash Trio(®) Total
------------ ------------ ------------- ------------ ------------ -----------
Sales $ 84,804 $ 26,145 $ 110,949 $ 78,195 $ 14,485 $ 92,680
Freight
costs 7,496 4,264 11,760 4,351 2,175 6,526
------------ ------------ ------------- ------------ ------------ -----------
Net
sales $ 77,308 $ 21,881 $ 99,189 $ 73,844 $ 12,310 $ 86,154
------------ ------------ ------------- ------------ ------------ -----------
Divided
by:
Tons sold
(in
thousands) 235 62 184 35
------------ ------------ ------------ ------------
Average
net
realized
sales
price per
ton $ 329 $ 350 $ 402 $ 359
------------ ------------ ------------ ------------
Six Months Ended June 30,
--------------------------------------------------------------------------------
2014 2013
---------------------------------------- ---------------------------------------
Potash Trio(®) Total Potash Trio(®) Total
------------- ------------ ------------- ------------- ------------ ------------
Sales $ 169,301 $ 40,523 $ 209,824 $ 160,973 $ 30,964 $ 191,937
Freight
costs 15,156 6,535 21,691 9,817 4,806 14,623
------------- ------------ ------------- ------------- ------------ ------------
Net
sales $ 154,145 $ 33,988 $ 188,133 $ 151,156 $ 26,158 $ 177,314
------------- ------------ ------------- ------------- ------------ ------------
Divided
by:
Tons sold
(in
thousands) 478 98 369 74
------------- ------------ ------------- ------------
Average
net
realized
sales
price per
ton $ 323 $ 347 $ 409 $ 354
------------- ------------ ------------- ------------
Cash Operating Costs per Ton
Cash operating costs is a non-GAAP financial measure that is calculated as total
of cost of goods sold divided by the number of tons sold in the period and then
adjusted to exclude per-ton depreciation, depletion, and royalties. Total cost
of goods sold is reported net of by-product credits and does not include
warehousing and handling costs. We consider cash operating costs to be useful
because it represents our core, per-ton costs to produce potash and Trio(®). We
use cash operating costs as an indicator of performance and operating
efficiencies and as one of the measures under our performance-based compensation
programs for employees.
Three Months Ended June 30,
---------------------------------------------------------------------------
2014 2013
-------------------------------------- ------------------------------------
Potash Trio(®) Total Potash Trio(®) Total
------------ ------------ ------------ ------------ ----------- -----------
Cost of
goods sold $ 62,761 $ 16,622 $ 79,383 $ 46,660 $ 8,343 $ 55,003
Divided by
sales volume
(in
thousands of
tons) 235 62 184 35
------------ ------------ ------------ -----------
Cost of
goods sold
per ton $ 267 $ 266 $ 254 $ 243
------------ ------------ ------------ -----------
Less per-ton
adjustments
Depreciation
and
depletion $ 67 $ 57 $ 50 $ 48
Royalties 12 17 18 18
------------ ------------ ------------ -----------
Cash
operating
costs per
ton $ 188 $ 192 $ 186 $ 177
------------ ------------ ------------ -----------
Six Months Ended June 30,
-------------------------------------------------------------------------------
2014 2013
---------------------------------------- --------------------------------------
Potash Trio(®) Total Potash Trio(®) Total
------------- ------------ ------------- ------------ ------------ ------------
Cost of
goods sold $ 130,621 $ 27,336 $ 157,957 $ 90,483 $ 18,293 $ 108,776
Divided by
sales volume
(in
thousands of
tons) 478 98 369 74
------------- ------------ ------------ ------------
Cost of
goods sold
per ton $ 273 $ 279 $ 245 $ 248
------------- ------------ ------------ ------------
Less per-ton
adjustments
Depreciation
and
depletion $ 65 $ 61 $ 48 $ 51
Royalties 11 17 17 18
------------- ------------ ------------ ------------
Cash
operating
costs per
ton $ 197 $ 201 $ 180 $ 179
------------- ------------ ------------ ------------
Average Potash and Trio(®) Gross Margin per Ton
Average potash and Trio(®) gross margin are non-GAAP financial measures and
calculated by subtracting the sum of total cost of goods sold and warehousing
and handling costs from the average net realized sales price. We believe the
average gross margin for both potash and Trio(®) to be useful as they represent
the average amount of margin we realize on each ton of potash and Trio(®) sold.
The reconciliations of average potash and Trio(® )net realized sales price to
GAAP sales is set forth separately above under the heading "Net Sales and
Average Net Realized Sales Price per Ton."
Three Months Six Months Ended
Ended June 30, June 30,
------------------- ------------------
2014 2013 2014 2013
------------------- ------------------
Potash
Average potash net realized sales
price $ 329 $ 402 $ 323 $ 409
Less total potash cost of goods sold 267 254 273 245
Less potash warehousing and handling
costs 11 14 10 15
--------- --------- --------- --------
Average potash gross margin per ton $ 51 $ 134 $ 40 $ 149
--------- --------- --------- --------
Three Months Six Months Ended
Ended June 30, June 30,
------------------- ------------------
2014 2013 2014 2013
------------------- ------------------
Trio(®)
Average Trio(®) net realized sales
price $ 350 $ 359 $ 347 $ 354
Less total Trio(®) cost of goods sold 266 243 279 248
Less Trio(®) warehousing and handling
costs 8 15 8 14
--------- --------- --------- --------
Average Trio(®) gross margin per
ton $ 76 $ 101 $ 60 $ 92
--------- --------- --------- --------
This announcement is distributed by GlobeNewswire on behalf of
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(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Intrepid Potash Inc. via GlobeNewswire
[HUG#1842631]