Intrepid Potash Announces First Quarter 2016 Results

DENVER, May 9, 2016 - Intrepid Potash Inc. (Intrepid) (NYSE:IPI) today reported its results for the first quarter ended March 31, 2016.

Intrepid reported a net loss in the first quarter of 2016 of $18.4 million, or $0.24 per diluted share, compared with net income of $6.5 million, or $0.09 per diluted share, in the first quarter of 2015.  Excluding certain items that affect comparability between the two periods, including restructuring costs and the write-off of deferred financing fees, first quarter 2016 adjusted net loss¹ was $17.4 million, or $0.22 per diluted share, compared with adjusted net income of $6.5 million, or $0.09 per diluted share, in last year's first quarter.

Bob Jornayvaz, Intrepid's Executive Chairman, President and CEO, said, "In the quarter, we continued to be significantly impacted by declines in potash pricing and general oversupply in the U.S. markets. In response to this challenging environment, we are taking actions to lower our overall production costs and optimize our mine portfolio.  Accordingly, today we announced the difficult, but necessary, decision to idle the West facility in July.  At the same time, we successfully converted our East facility to Trio^®-only production in early April, ahead of our original timeline.  These two transitions remove our two highest-cost potash production facilities from our portfolio, substantially increase our Trio^® production, and allow us to focus on our lower cost solar production."

Jornayvaz continued, "We also announced today that we reached an agreement with the lenders for our credit facility to extend until no later than July 31, 2016, the previous waiver of the requirements under the facility to meet quarterly financial covenants and to deliver 2015 financial statements without a going concern modification.  While this agreement further reduces the amount under the facility, it provides us with the time to thoughtfully continue our negotiations with the noteholders.  In addition, we are performing due diligence surrounding an alternative credit facility proposal we have received.  Our noteholders have also agreed to waive until June 30, 2016, the financial covenants under the notes.  We continue to work with our lenders towards a mutually agreeable long-term solution to our debt covenant issues."

Cash, cash equivalents, and investments as of March 31, 2016, totaled $54.9 million.  Cash flow used in operations for the first quarter of 2016 was $1.1 million and capital expenditures totaled $6.0 million.

West Facility

Earlier today, Intrepid announced a plan to idle mining operations at its West facility, which is a conventional mining facility located in Carlsbad, New Mexico.  The facility, which generated 42% of Intrepid's potash production in 2015, is expected to transition to care and maintenance in July.  Intrepid anticipates that it will incur charges of $1 to $3 million, or approximately $0.01 to $0.04 per share, related to the idling of the West facility during its second quarter. The West facility is expected to remain under care and maintenance until such time as Intrepid determines that the cost to resume production at the mine justifies the anticipated cash flow, considering potash pricing, the costs to run the facility, and other factors.

Product Highlights

Potash

Intrepid sold 218,000 tons of potash in the first quarter of 2016, down 13,000 tons, or 6%, from the same period last year primarily as a result of the timing of shipments to customers.  Average net realized sales price per potash ton¹ in the 2016 first quarter was $216, a 40% decrease from last year's first quarter and a 22% decrease sequentially from the fourth quarter of 2015.  High levels of global potash supply, combined with the strength of the U.S. dollar and its benefits to global producers importing tonnage into the North American potash market, have resulted in significant price pressure in the markets in which Intrepid operates.

Potash production for the first quarter of 2016 totaled 215,000 tons, a decline of 9% compared to the year-ago quarter as a result of deferred production at the HB facility from early in the first quarter to the second quarter.

Trio^®

During the first quarter of 2016, Intrepid sold 50,000 tons of Trio^® at an average net realized sales price of $316 per ton, compared to 62,000 tons of Trio^® at an average net realized sales price of $367 per ton in the comparable period of 2015.  Trio^® pricing continues to demonstrate some resiliency to the market pressures evident for other commodities, though competition in certain key markets resulted in a 4% price decline compared to the sequential fourth quarter.

During April 2016, Intrepid successfully transitioned the East facility to a Trio^®-only production facility and began ramping up its Trio^® production.  In doing so, Intrepid eliminated 200,000 tons of high-production-cost potash from its annualized operating model and created capacity to produce Trio^® through a more simplified, lower-cost production model at East.  Intrepid expects to ramp up to an annualized Trio^® run rate in the fourth quarter of 2016 that is estimated to be double the 2015 Trio^® production.  Intrepid expects that with this additional Trio^® supply available in the market, combined with the macroeconomic pricing pressure for potash, Trio^® pricing will remain pressured for the remainder of 2016.

Gross (Deficit) Margin

Intrepid generated a gross deficit of $9.2 million during the first quarter, compared to gross margin of $18.7 million during the first quarter of 2015.  This decline in profitability was primarily the result of declining prices for potash and Trio^®, offset somewhat by reduced depreciation, depletion, and amortization charges as a result of the asset impairments taken during the fourth quarter of 2015.

Notes

¹ Adjusted net (loss) income, adjusted net (loss) income per diluted share, 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 May 9, 2016, at 10:00 a.m. ET.  The dial in number is 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, www.intrepidpotash.com.

An audio recording of the conference call will be available through June 9, 2016, at www.intrepidpotash.com and by dialing 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 00448.

About Intrepid

Intrepid Potash (NYSE: IPI) is the only U.S. producer of muriate of potash and supplied approximately 9% of the country's annual consumption in 2015.  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 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.  After the idling of West and the transition of East, Intrepid's production will come 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, 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 relate to the anticipated impacts of the idling of our West facility, our future performance and management's expectations for the future, including statements about our financial performance, production costs, operating plans, and market outlook.  These statements are based on assumptions that we believe are reasonable.  Forward-looking statements by their nature address matters that are uncertain.  The particular uncertainties that could cause our actual results to be materially different from our forward-looking statements include the following:

• our ability to successfully execute on our plans to idle our West facility and transition our East facility to Trio^®-only production;
• adverse impacts to our business as a result of our independent auditor having expressed substantial doubt as to our ability to continue as a going concern due to the existence of a material uncertainty;
• changes in the price, demand, or supply of potash or Trio^®/langbeinite;
• our ability to comply with covenants in our debt-related agreements to avoid a default under those agreements or a reduction in the total amount available to us under our credit facility;
• the costs of, and our ability to successfully construct, commission, and execute, any of our strategic projects;
• declines or changes in agricultural production or fertilizer application rates;
• further write-downs of the carrying value of our assets, including inventories;
• circumstances that disrupt or limit our production, including operational difficulties or variances, geological or geotechnical variances, equipment failures, environmental hazards, and other unexpected events or problems;
• changes in our 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 our 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;
• our ability to obtain and maintain any necessary governmental permits or leases relating to current or future operations;
• declines in the use of potash products by oil and gas companies in their drilling operations;
• interruptions in rail or truck transportation services, or fluctuations in the costs of these services;
• our inability to fund necessary capital investments; and
• the other risks, uncertainties, and assumptions described in our periodic filings with the Securities and Exchange Commission.

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 May 9, 2016.  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:
Brian Frantz, SVP and Chief Accounting Officer             
Phone:  303-996-3023
Email: brian.frantz@intrepidpotash.com

Net Sales and Average Net Realized Sales Price per Ton

Net sales and average net realized sales price per ton are non-GAAP financial measures.  Net sales are calculated as sales less freight costs.  Average net realized sales price per ton 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 per ton 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 per ton as key performance indicators to analyze sales and price trends.

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

Cash Operating Costs per Ton

Cash operating costs per ton is a non-GAAP financial measure that is calculated as total 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 per ton to be useful because it represents our core, per-ton costs to produce potash and Trio^®.  We use cash operating costs per ton as an indicator of performance and operating efficiencies.

Reconciliation of Cost of Goods Sold to Cash Operating Costs Per Ton:

Average Potash and Trio^® Gross Margin and Cash Flow per Ton

Average potash and Trio^® gross margin and cash flow per ton are non-GAAP financial measures.  Average gross margin per ton is calculated by subtracting the sum of per-ton total cost of goods sold and per-ton warehousing and handling costs from the average net realized sales price. Cash flow per ton is calculated by adding depreciation and depletion to average gross margin.  We believe these measures are useful because they represent the average margin and cash flow 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." Amounts presented exclude lower-of-cost-or-market inventory adjustments of  $41 per ton and $2 per ton of potash sold for the three months ended March 31, 2016, and 2015, respectively.  Further, our average potash gross margin per ton excludes costs associated with abnormal production of $3 per ton and $0 per ton of potash produced during the three months ended March 31, 2016, and 2015, respectively.

Reconciliation of Average Potash and Trio^® Gross Margin to Cash Flow per Ton:

Free Cash Flow

Free cash flow is a non-GAAP financial measure that is calculated as net cash (used in) provided by operating activities less cash paid for capital expenditures. We consider free cash flow to be a useful measure of liquidity because it indicates cash generated by normal business operations, including capital expenditures. Free cash flow does not represent cash available for discretionary expenditures because we have non-discretionary obligations, such as debt service obligations, that are not deducted from this measure.

Reconciliation of Net Cash Flow (Used In) Provided By Operating Activities to Free Cash Flow:

Note: Net cash used in investing activities includes cash paid for additions to property, plant, equipment, and mineral properties.