Intrepid Reports Fourth Quarter and Full Year 2019 Results
Denver, CO, March 02, 2020 (GLOBE NEWSWIRE) — Intrepid Potash, Inc. (NYSE:IPI) (“Intrepid”, the “Company”, “we”, “us”, “our”) today reports its financial results for the fourth quarter and full year of 2019.
Key Takeaways for Fourth Quarter and Full Year 2019
- Trio® and Oilfield Solutions segments continued to deliver strong sales results in the fourth quarter of 2019.
- Cash flow from operations of $11.8 million for the fourth quarter of 2019.
- Net income of $2.1 million, or $0.02 per share for the fourth quarter of 2019.
- Adjusted EBITDA(1) of $12.4 million for the fourth quarter of 2019.
- Total company water sales were $25.7 million in 2019 including by-product water, an increase of $5.9 million compared to 2018.
Management Comment
“We soundly executed on Intrepid’s operations in 2019 while navigating through several macro issues beyond our direct control.” said Bob Jornayvaz, Intrepid’s Executive Chairman, President, and CEO. “The under application of potash in recent seasons should be reversed in 2020 if history is a reliable guide. With China expected to settle its potash contract sometime in the second quarter and indications that corn planting in the US will be up year-over-year, we believe there are potential tailwinds to demand and pricing in 2020.”
Jornayvaz continued, “Intrepid’s team made great progress toward diversifying the Company’s cash flow profile and penetrating deeper into our markets. As Intrepid South grows in significance to our overall operations through partnerships, like the one recently executed with NGL Energy Partners, we continue to look for opportunities that will enhance our ability to create value for Intrepid shareholders. We believe that growing Intrepid’s exposure to natural gas and oil development in the Permian Basin, which carries with it some of the lowest break-even development costs of all shale plays in the U.S., could lead to additional opportunities down the road.”
Consolidated Results
Intrepid recorded net income of $2.1 million, or $0.02 per diluted share in the fourth quarter of 2019, contributing to full year 2019 net income of $13.6 million, or $0.10 per diluted share. Consolidated gross margin of $10.2 million and $43.5 million in the fourth quarter and full year 2019, respectively, was a decrease of $4.6 million and an increase of $5.2 million, respectively, compared to the same year-ago periods. Improvements in net income and gross margin for the full year were primarily driven by, improved domestic pricing for potash earlier in the year and strong water and byproduct sales throughout the year.
Segment Highlights
Potash
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| (in thousands, except per ton data) | ||||||||||||||||
| Sales | $ | 25,556 | $ | 34,884 | $ | 124,648 | $ | 124,058 | ||||||||
| Gross margin | $ | 5,746 | $ | 10,664 | $ | 27,787 | $ | 29,008 | ||||||||
| Potash production volume (in tons) | 110 | 114 | 328 | 344 | ||||||||||||
| Potash sales volume (in tons) | 58 | 95 | 319 | 364 | ||||||||||||
| Average potash net realized sales price per ton(1) | $ | 278 | $ | 270 | $ | 284 | $ | 256 | ||||||||
Gross margin decreased $4.9 million and $1.2 million in the fourth quarter and full year of 2019, respectively, compared to the same periods in 2018. Fourth quarter decreases were primarily driven by lower potash sales volume as customers delayed purchases in anticipation of a winter fill program that was not announced until early January 2020. Full year volumes were largely impacted by poor weather in North America that reduced application rates.
Average net realized sales price per ton for potash increased year-over-year as a result of price strength throughout the second half of 2018 that was maintained though the first half of 2019.
Potash production decreased 4% and 5% in the fourth quarter and full year of 2019, respectively, compared to the same periods in 2018, primarily due to timing of salt production at the Moab facility and timing of harvest from our solar ponds.
Trio®
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| (in thousands, except per ton data) | ||||||||||||||||
| Sales | $ | 15,669 | $ | 14,994 | $ | 69,551 | $ | 66,808 | ||||||||
| Gross margin (deficit) | $ | 23 | $ | 711 | $ | 1,100 | $ | (3,782 | ) | |||||||
| Trio® production volume (in tons) | 45 | 56 | 228 | 217 | ||||||||||||
| Trio® sales volume (in tons) | 53 | 44 | 225 | 225 | ||||||||||||
| Average Trio® net realized sales price per ton(1) | $ | 170 | $ | 215 | $ | 195 | $ | 199 | ||||||||
Fourth quarter and full year 2019 sales improved 5% and 4%, respectively, when compared to the same periods in 2018. Sales in the quarter were supported by strong export volumes which offset weak domestic sales earlier in the year. Similar to potash, full year 2019 Trio® sales were also impacted by wet weather that reduced application. Fourth quarter 2019 gross margin decreased $0.7 million, compared to 2018, primarily due to reduced domestic demand. Byproduct water sales contributed support to Trio® gross margin in the quarter. Full year 2019 gross margin benefited from higher domestic pricing as well as an increase in byproduct water sales.
Production volumes decreased 20% in the fourth quarter of 2019 and increased 5% for the full year of 2019 when compared to the same periods in 2018, primarily due to timing of the conversion of work-in process inventory into premium Trio®.
Oilfield Solutions
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Sales | $ | 8,323 | $ | 4,486 | $ | 27,894 | $ | 17,404 | ||||||||
| Gross margin | $ | 4,421 | $ | 3,451 | $ | 14,591 | $ | 13,045 | ||||||||
Sales increased 86% and 60% for the fourth quarter and full year of 2019 when compared to the same periods in 2018, primarily due to additional sales of water and other oilfield products and services acquired in the acquisition of Intrepid South.
Fourth quarter and full year 2019 gross margin increased 28% and 12%, respectively, compared to 2018. Gross margin in both periods benefited from increased sales, partially offset by third-party costs to move water on Intrepid South while new infrastructure was being built, additional depreciation and amortization related to the Intrepid South assets, and an increase in byproduct water sales which moved high-margin water sales from the oilfield solutions segment to either our potash or Trio® segment.
Liquidity
Cash provided by operations was $11.8 million during the fourth quarter of 2019 and cash used for investing activities was $3.9 million during the fourth quarter of 2019. As of December 31, 2019, Intrepid had $20.6 million in cash and cash equivalents and $54.2 million available to borrow under its credit facility.
Notes
1 Average net realized sales price per ton and Adjusted EBITDA 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
Intrepid will host a conference call on Tuesday March 3, 2020 at 10:00 a.m. Eastern time (8:00 a.m. Mountain time) to discuss the results. The call will be conducted by co-Founder, Executive Chairman, President and CEO, Robert Jornayvaz and Vice President of Finance, Matt Preston. A Q&A session will immediately follow the discussion of the results for the period.
Live event participation details
Domestic dial-in number: 800-319-4610
International dial-in number: +1-631-891-4304
Webcast: https://intrepidpotashinc.gcs-web.com/events-and-presentations/upcoming-events
Replay Information available for 30 days following the live event
Conference ID #: 4131
Replay dial-in (Toll Free US & Canada): 800-319-6413
Replay dial-in (International): +1-631-883-6842
About Intrepid
Intrepid is a diversified mineral company that delivers potassium, magnesium, sulfur, salt, and water products essential for customer success in agriculture, animal feed, and the oil and gas industry. Intrepid is the only U.S. producer of muriate of potash, which is applied as an essential nutrient for healthy crop development, utilized in several industrial applications, and used as an ingredient in animal feed. In addition, Intrepid produces a specialty fertilizer, Trio®, which delivers three key nutrients, potassium, magnesium, and sulfate, in a single particle. Intrepid also provides water, magnesium chloride, brine, and various oilfield products and services.
Intrepid serves diverse customers in markets where a logistical advantage exists and is a leader in the use of solar evaporation for potash production, resulting in lower cost and more environmentally friendly production. Intrepid’s mineral 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 at intrepidpotash.com, to receive automatic email alerts for 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 and cash flows, water sales, production costs, 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 and services;
- Intrepid’s ability to successfully identify and implement any opportunities to grow its business whether through expanded sales of water, Trio®, byproducts, and other non-potassium related products or other revenue diversification activities;
- challenges to Intrepid’s water rights;
- Intrepid’s ability to integrate the Intrepid South assets into its existing business and achieve the expected benefits of the acquisition;
- Intrepid’s ability to sell Trio® internationally and manage risks associated with international sales, including pricing pressure and freight costs;
- 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;
- Intrepid’s ability to prevail in outstanding legal proceedings against it;
- 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;
- 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, 2018, as updated by subsequent Quarterly Reports on Form 10-Q.
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:
John Richardson, Director of Investor Relations
Phone: 303-996-3049
Email: [email protected]
INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(In thousands, except share and per share amounts)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Sales | $ | 48,849 | $ | 54,364 | $ | 220,075 | $ | 208,270 | ||||||||
| Less: | ||||||||||||||||
| Freight costs | 9,581 | 9,893 | 40,056 | 37,052 | ||||||||||||
| Warehousing and handling costs | 1,995 | 2,211 | 8,621 | 9,281 | ||||||||||||
| Cost of goods sold | 26,735 | 26,504 | 126,110 | 121,955 | ||||||||||||
| Lower of cost or net realizable value inventory adjustments | 348 | 930 | 1,810 | 1,711 | ||||||||||||
| Gross Margin | 10,190 | 14,826 | 43,478 | 38,271 | ||||||||||||
| Selling and administrative | 5,846 | 5,157 | 23,556 | 20,438 | ||||||||||||
| Accretion of asset retirement obligation | 446 | 417 | 1,793 | 1,668 | ||||||||||||
| Care and maintenance expense | 132 | 165 | 549 | 530 | ||||||||||||
| Other operating expense | 863 | 205 | 1,220 | 141 | ||||||||||||
| Operating Income | 2,903 | 8,882 | 16,360 | 15,494 | ||||||||||||
| Other Income (Expense) | ||||||||||||||||
| Interest expense, net | (773 | ) | (1,235 | ) | (3,031 | ) | (3,855 | ) | ||||||||
| Other income | 13 | 49 | 355 | 252 | ||||||||||||
| Income Before Income Taxes | 2,143 | 7,696 | 13,684 | 11,891 | ||||||||||||
| Income Tax Expense | (61 | ) | (62 | ) | (53 | ) | (108 | ) | ||||||||
| Net Income | $ | 2,082 | $ | 7,634 | $ | 13,631 | $ | 11,783 | ||||||||
| Weighted Average Shares Outstanding: | ||||||||||||||||
| Basic | 129,392,309 | 128,516,121 | 129,049,168 | 128,070,702 | ||||||||||||
| Diluted | 130,912,939 | 130,899,744 | 131,050,920 | 130,985,919 | ||||||||||||
| Income Per Share: | ||||||||||||||||
| Basic | $ | 0.02 | $ | 0.06 | $ | 0.11 | $ | 0.09 | ||||||||
| Diluted | $ | 0.02 | $ | 0.06 | $ | 0.10 | $ | 0.09 | ||||||||
INTREPID POTASH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AS OF DECEMBER 31, 2019 AND 2018
(In thousands, except share and per share amounts)
| December 31, | ||||||||
| 2019 | 2018 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 20,603 | $ | 33,222 | ||||
| Accounts receivable: | ||||||||
| Trade, net | 23,749 | 25,161 | ||||||
| Other receivables, net | 1,247 | 597 | ||||||
| Inventory, net | 94,220 | 82,046 | ||||||
| Other current assets | 5,524 | 4,332 | ||||||
| Total current assets | 145,343 | 145,358 | ||||||
| Property, plant, equipment, and mineral properties, net | 378,509 | 346,209 | ||||||
| Water rights | 19,184 | 2,311 | ||||||
| Long-term parts inventory, net | 27,569 | 30,031 | ||||||
| Other assets, net | 7,834 | 1,322 | ||||||
| Total Assets | $ | 578,439 | $ | 525,231 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Accounts payable: | ||||||||
| Trade | $ | 9,992 | $ | 9,107 | ||||
| Related parties | — | 28 | ||||||
| Income taxes payable | 50 | 914 | ||||||
| Accrued liabilities | 13,740 | 8,717 | ||||||
| Accrued employee compensation and benefits | 4,464 | 4,124 | ||||||
| Other current liabilities | 19,382 | 11,891 | ||||||
| Advances on credit facility | 19,817 | — | ||||||
| Current portion of long-term debt | 20,000 | — | ||||||
| Total current liabilities | 87,445 | 34,781 | ||||||
| Long-term debt, net | 29,753 | 49,642 | ||||||
| Asset retirement obligation | 22,140 | 23,125 | ||||||
| Operating lease liabilities | 4,025 | — | ||||||
| Other non-current liabilities | 420 | 420 | ||||||
| Total Liabilities | 143,783 | 107,968 | ||||||
| Commitments and Contingencies | ||||||||
| Common stock, $0.001 par value; 400,000,000 shares authorized: | ||||||||
| and 129,553,517 and 128,716,595 shares outstanding | ||||||||
| at December 31, 2019, and 2018, respectively | 130 | 129 | ||||||
| Additional paid-in capital | 652,963 | 649,202 | ||||||
| Retained deficit | (218,437 | ) | (232,068 | ) | ||||
| Total Stockholders’ Equity | 434,656 | 417,263 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 578,439 | $ | 525,231 | ||||
INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(In thousands)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||||||
| Net income | 2,082 | 7,634 | 13,631 | 11,783 | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
| Depreciation, depletion, and amortization | 8,976 | 8,377 | 34,121 | 32,215 | ||||||||||||
| Amortization of intangible assets | 26 | — | 214 | — | ||||||||||||
| Accretion of asset retirement obligation | 446 | 417 | 1,793 | 1,668 | ||||||||||||
| Amortization of deferred financing costs | 86 | 182 | 303 | 732 | ||||||||||||
| Stock-based compensation | 1,044 | 586 | 4,281 | 4,179 | ||||||||||||
| Allowance for doubtful accounts | 25 | — | 75 | 100 | ||||||||||||
| Loss (gain) on disposal of assets | 362 | (3 | ) | 345 | (87 | ) | ||||||||||
| Lower of cost or net realizable value inventory adjustments | 348 | 930 | 1,810 | 1,711 | ||||||||||||
| Other | (38 | ) | (19 | ) | (34 | ) | (4 | ) | ||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||
| Trade accounts receivable, net | 7,363 | (6,872 | ) | 1,337 | (7,484 | ) | ||||||||||
| Other receivables, net | 729 | 3,204 | (650 | ) | 165 | |||||||||||
| Refundable income taxes | — | — | — | 2,663 | ||||||||||||
| Inventory, net | (8,298 | ) | (5,698 | ) | (11,525 | ) | (67 | ) | ||||||||
| Other current assets | (232 | ) | 1,113 | (1,019 | ) | 1,762 | ||||||||||
| Accounts payable, accrued liabilities, and accrued employee compensation and benefits |
(3,541 | ) | (1,336 | ) | 2,280 | 1,740 | ||||||||||
| Income tax payable | 49 | 704 | (865 | ) | 914 | |||||||||||
| Operating lease liabilities | (616 | ) | — | (2,090 | ) | — | ||||||||||
| Other liabilities | 2,953 | 2,073 | 5,374 | 12,247 | ||||||||||||
| Net cash provided by operating activities | 11,764 | 11,292 | 49,381 | 64,237 | ||||||||||||
| Cash Flows from Investing Activities: | ||||||||||||||||
| Additions to property, plant, equipment, mineral properties and other assets | (3,888 | ) | (4,223 | ) | (63,836 | ) | (16,891 | ) | ||||||||
| Proceeds from sale of property, plant, equipment, and mineral properties | — | 18 | 68 | 110 | ||||||||||||
| Additions to intangible assets | — | — | (16,873 | ) | — | |||||||||||
| Net cash used in investing activities | (3,888 | ) | (4,205 | ) | (80,641 | ) | (16,781 | ) | ||||||||
| Cash Flows from Financing Activities: | ||||||||||||||||
| Repayment of long-term debt | — | (10,000 | ) | — | (10,000 | ) | ||||||||||
| Debt prepayment costs | — | (402 | ) | — | (402 | ) | ||||||||||
| Proceeds from short-term borrowings on credit facility | — | — | 30,317 | 13,500 | ||||||||||||
| Repayments of short-term borrowings on credit facility | — | — | (10,500 | ) | (17,400 | ) | ||||||||||
| Capitalized debt costs | (46 | ) | (210 | ) | (503 | ) | (210 | ) | ||||||||
| Employee tax withholding paid for restricted shares upon vesting | (262 | ) | (532 | ) | (540 | ) | (903 | ) | ||||||||
| Proceeds from exercise of stock options | 12 | 67 | 21 | 114 | ||||||||||||
| Net cash (used in) provided by financing activities | (296 | ) | (11,077 | ) | 18,795 | (15,301 | ) | |||||||||
| Net Change in Cash, Cash Equivalents, and Restricted Cash | 7,580 | (3,990 | ) | (12,465 | ) | 32,155 | ||||||||||
| Cash, Cash Equivalents, and Restricted Cash, beginning of period | 13,659 | 37,694 | 33,704 | 1,549 | ||||||||||||
| Cash, Cash Equivalents, and Restricted Cash, end of period | $ | 21,239 | $ | 33,704 | $ | 21,239 | $ | 33,704 | ||||||||
INTREPID POTASH, INC.
DISAGGREGATION OF REVENUE AND SEGMENT DATA (UNAUDITED)
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(In thousands)
| Three Months Ended December 31, 2019 | ||||||||||||||||||||
| Product | Potash Segment | Trio® Segment | Oilfield Solutions Segment | Intersegment Eliminations | Total | |||||||||||||||
| Potash | $ | 18,594 | $ | — | $ | 963 | $ | (590 | ) | $ | 18,967 | |||||||||
| Trio® | — | 14,016 | — | — | 14,016 | |||||||||||||||
| Water | 452 | 1,404 | 5,476 | — | 7,332 | |||||||||||||||
| Salt | 3,917 | 249 | — | — | 4,166 | |||||||||||||||
| Magnesium Chloride | 2,012 | — | — | — | 2,012 | |||||||||||||||
| Brines | 581 | — | — | — | 581 | |||||||||||||||
| Other | — | — | 1,884 | (109 | ) | 1,775 | ||||||||||||||
| Total Revenue | $ | 25,556 | $ | 15,669 | $ | 8,323 | $ | (699 | ) | $ | 48,849 | |||||||||
| Year Ended December 31, 2019 | ||||||||||||||||||||
| Product | Potash Segment | Trio® Segment | Oilfield Solutions Segment | Intersegment Eliminations | Total | |||||||||||||||
| Potash | $ | 103,403 | $ | — | $ | 2,973 | $ | (1,909 | ) | $ | 104,467 | |||||||||
| Trio® | — | 64,299 | — | — | 64,299 | |||||||||||||||
| Water | 1,823 | 4,495 | 19,339 | — | 25,657 | |||||||||||||||
| Salt | 12,022 | 757 | — | — | 12,779 | |||||||||||||||
| Magnesium Chloride | 4,907 | — | — | — | 4,907 | |||||||||||||||
| Brines | 2,493 | — | — | — | 2,493 | |||||||||||||||
| Other | — | — | 5,582 | (109 | ) | 5,473 | ||||||||||||||
| Total Revenue | $ | 124,648 | $ | 69,551 | $ | 27,894 | $ | (2,018 | ) | $ | 220,075 | |||||||||
| Three Months Ended December 31, 2018 | ||||||||||||||||||||
| Product | Potash Segment | Trio® Segment | Oilfield Solutions Segment | Intersegment Eliminations | Total | |||||||||||||||
| Potash | $ | 30,050 | $ | — | $ | — | $ | — | $ | 30,050 | ||||||||||
| Trio® | — | 13,743 | — | — | 13,743 | |||||||||||||||
| Water | 418 | 1,159 | 3,470 | — | 5,047 | |||||||||||||||
| Magnesium Chloride | 2,123 | — | — | — | 2,123 | |||||||||||||||
| Salt | 1,709 | 92 | — | — | 1,801 | |||||||||||||||
| Brines | 584 | — | — | — | 584 | |||||||||||||||
| Other | — | — | 1,016 | — | 1,016 | |||||||||||||||
| Total Revenue | $ | 34,884 | $ | 14,994 | $ | 4,486 | $ | — | $ | 54,364 | ||||||||||
| Year Ended December 31, 2018 | ||||||||||||||||||||
| Product | Potash Segment | Trio® Segment | Oilfield Solutions Segment | Intersegment Eliminations | Total | |||||||||||||||
| Potash | $ | 107,471 | $ | — | $ | — | $ | — | $ | 107,471 | ||||||||||
| Trio® | — | 64,139 | — | — | 64,139 | |||||||||||||||
| Water | 1,368 | 2,430 | 15,999 | — | 19,797 | |||||||||||||||
| Salt | 6,638 | 239 | — | — | 6,877 | |||||||||||||||
| Magnesium Chloride | 6,804 | — | — | — | 6,804 | |||||||||||||||
| Brines | 1,777 | — | — | — | 1,777 | |||||||||||||||
| Other | — | — | 1,405 | — | 1,405 | |||||||||||||||
| Total Revenue | $ | 124,058 | $ | 66,808 | $ | 17,404 | $ | — | $ | 208,270 | ||||||||||
| Three Months Ended December 31, 2019 | Potash | Trio® | Oilfield Solutions | Other | Consolidated | |||||||||||||||
| Sales(1) | $ | 25,556 | $ | 15,669 | $ | 8,323 | $ | (699 | ) | $ | 48,849 | |||||||||
| Less: Freight costs | 4,461 | 5,011 | 218 | (109 | ) | 9,581 | ||||||||||||||
| Warehousing and handling costs | 972 | 1,023 | — | — | 1,995 | |||||||||||||||
| Cost of goods sold | 14,377 | 9,264 | 3,684 | (590 | ) | 26,735 | ||||||||||||||
| Lower of cost or net realizable value inventory adjustments | — | 348 | — | — | 348 | |||||||||||||||
| Gross Margin | $ | 5,746 | $ | 23 | $ | 4,421 | $ | — | $ | 10,190 | ||||||||||
| Depreciation, depletion, and amortization incurred(2) | $ | 6,833 | $ | 1,567 | $ | 397 | $ | 205 | $ | 9,002 | ||||||||||
| Year Ended December 31, 2019 | Potash | Trio® | Oilfield Solutions | Other | Consolidated | |||||||||||||||
| Sales(1) | $ | 124,648 | $ | 69,551 | $ | 27,894 | $ | (2,018 | ) | $ | 220,075 | |||||||||
| Less: Freight costs | 18,715 | 20,514 | 936 | (109 | ) | 40,056 | ||||||||||||||
| Warehousing and handling costs | 4,745 | 3,876 | — | — | 8,621 | |||||||||||||||
| Cost of goods sold | 73,401 | 42,251 | 12,367 | (1,909 | ) | 126,110 | ||||||||||||||
| Lower of cost or net realizable value inventory adjustments | — | 1,810 | — | — | 1,810 | |||||||||||||||
| Gross Margin | $ | 27,787 | $ | 1,100 | $ | 14,591 | $ | — | $ | 43,478 | ||||||||||
| Depreciation, depletion, and amortization incurred(2) | $ | 25,796 | $ | 6,163 | $ | 1,566 | $ | 810 | $ | 34,335 | ||||||||||
| Three Months Ended December 31, 2018 | Potash | Trio® | Oilfield Solutions | Other | Consolidated | |||||||||||||||
| Sales(1) | $ | 34,884 | $ | 14,994 | $ | 4,486 | $ | — | $ | 54,364 | ||||||||||
| Less: Freight costs | 5,593 | 4,300 | — | — | 9,893 | |||||||||||||||
| Warehousing and handling costs | 1,272 | 939 | — | — | 2,211 | |||||||||||||||
| Cost of goods sold | 17,355 | 8,114 | 1,035 | — | 26,504 | |||||||||||||||
| Lower of cost or net realizable value inventory adjustments | — | 930 | — | — | 930 | |||||||||||||||
| Gross Margin | $ | 10,664 | $ | 711 | $ | 3,451 | $ | — | $ | 14,826 | ||||||||||
| Depreciation, depletion, and amortization incurred(2) | $ | 6,660 | $ | 1,473 | $ | 105 | $ | 139 | $ | 8,377 | ||||||||||
| Year Ended December 31, 2018 | Potash | Trio® | Oilfield Solutions | Other | Consolidated | |||||||||||||||
| Sales(1) | $ | 124,058 | $ | 66,808 | $ | 17,404 | $ | — | $ | 208,270 | ||||||||||
| Less: Freight costs | 17,682 | 19,370 | — | — | 37,052 | |||||||||||||||
| Warehousing and handling costs | 5,046 | 4,225 | 10 | — | 9,281 | |||||||||||||||
| Cost of goods sold | 72,322 | 45,284 | 4,349 | — | 121,955 | |||||||||||||||
| Lower of cost or net realizable value inventory adjustments | — | 1,711 | — | — | 1,711 | |||||||||||||||
| Gross Margin (Deficit) | $ | 29,008 | $ | (3,782 | ) | $ | 13,045 | $ | — | $ | 38,271 | |||||||||
| Depreciation, depletion and, amortization incurred(2) | $ | 25,134 | $ | 6,343 | $ | 343 | $ | 395 | $ | 32,215 | ||||||||||
(1) Segment sales include the sales of byproducts generated during the production of potash and Trio®.
(2) Depreciation, depletion, and amortization incurred for potash and Trio® excludes depreciation and depletion amounts absorbed in or (relieved from) inventory.
INTREPID POTASH, INC.
UNAUDITED NON-GAAP RECONCILIATIONS
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(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, adjusted net income per diluted share, adjusted EBITDA, and average net realized sales price per ton. 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 and Adjusted Net Income Per Diluted Share
Adjusted net income and adjusted net income per diluted share are calculated as net income or net income 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 to Adjusted Net Income:
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net Income | $ | 2,082 | $ | 7,634 | $ | 13,631 | $ | 11,783 | |||||||
| Adjustments | |||||||||||||||
| Write-off of deferred financing fees(1) | — | 72 | — | 72 | |||||||||||
| Make-whole payment(2) | — | 402 | — | 402 | |||||||||||
| Total adjustments | — | 474 | — | 474 | |||||||||||
| Adjusted Net Income | $ | 2,082 | $ | 8,108 | $ | 13,631 | $ | 12,257 | |||||||
Reconciliation of Net Income per Share to Adjusted Net Income per Share:
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net Income Per Diluted Share | $ | 0.02 | $ | 0.06 | $ | 0.10 | $ | 0.09 | |||||||
| Adjustments | |||||||||||||||
| Write-off of deferred financing fees(1) | — | — | — | — | |||||||||||
| Make-whole payment(2) | — | — | — | — | |||||||||||
| Total adjustments | — | — | — | — | |||||||||||
| Adjusted Net Income Per Diluted Share | $ | 0.02 | $ | 0.06 | $ | 0.10 | $ | 0.09 | |||||||
(1) As a result of early repayments of principal on its senior notes, Intrepid wrote off a portion of the financing fees that had previously been capitalized related to the senior notes. The write-offs of deferred financing fees are reflected in Intrepid’s financial statements as interest expense.
(2) As a result of early repayments of its senior notes, Intrepid incurred make whole-payments, which are reflected on the income statement as interest expense.
Average Potash and Trio® Net Realized Sales Price per Ton
Average net realized sales price per ton for potash is calculated as potash segment sales less potash segment byproduct sales and potash freight costs and then dividing that difference by the number of tons of potash sold in the period. Likewise, average net realized sales price per ton for Trio® is calculated as Trio® segment sales less Trio® segment byproduct sales and Trio® freight costs and then dividing that difference by Trio® tons sold. Intrepid considers average net realized sales price per ton to be useful, and believe it to be useful for investors, because it shows Intrepid’s potash and Trio® 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, some of 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 potash and Trio® sales and price trends.
Reconciliation of Sales to Average Potash and Trio® Net Realized Sales Price per Ton:
| Potash Segment | ||||||||
| Three Months Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Total Segment Sales | $ | 25,556 | $ | 34,884 | ||||
| Less: Segment byproduct sales | 6,962 | 4,834 | ||||||
| Potash freight costs | 2,469 | 4,400 | ||||||
| Subtotal | $ | 16,125 | $ | 25,650 | ||||
| Divided by: | ||||||||
| Potash tons sold (in thousands) | 58 | 95 | ||||||
| Average net realized sales price per ton | $ | 278 | $ | 270 | ||||
| Potash Segment | ||||||||
| 2019 | 2018 | |||||||
| Total Segment Sales | $ | 124,648 | $ | 124,058 | ||||
| Less: Segment byproduct sales | 21,245 | 16,586 | ||||||
| Potash freight costs | 12,936 | 14,194 | ||||||
| Subtotal | $ | 90,467 | $ | 93,278 | ||||
| Divided by: | ||||||||
| Potash tons sold (in thousands) | 319 | 364 | ||||||
| Average net realized sales price per ton | $ | 284 | $ | 256 | ||||
| Trio® Segment | ||||||||
| Three Months Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Total Segment Sales | $ | 15,669 | $ | 14,994 | ||||
| Less: Segment byproduct sales | 1,653 | 1,251 | ||||||
| Trio® freight costs | 5,011 | 4,300 | ||||||
| Subtotal | $ | 9,005 | $ | 9,443 | ||||
| Divided by: | ||||||||
| Trio® tons sold (in thousands) | 53 | 44 | ||||||
| Average net realized sales price per ton | $ | 170 | $ | 215 | ||||
| Trio® Segment | ||||||||
| 2019 | 2018 | |||||||
| Total Segment Sales | $ | 69,551 | $ | 66,808 | ||||
| Less: Segment byproduct sales | 5,252 | 2,669 | ||||||
| Trio® freight costs | 20,514 | 19,367 | ||||||
| Subtotal | $ | 43,785 | $ | 44,772 | ||||
| Divided by: | ||||||||
| Trio® tons sold (in thousands) | 225 | 225 | ||||||
| Average net realized sales price per ton | $ | 195 | $ | 199 | ||||
Adjusted EBITDA
Adjusted earnings before interest, taxes, depreciation, and amortization (or adjusted EBITDA) is calculated as net income 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 to Adjusted EBITDA:
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net Income | $ | 2,082 | $ | 7,634 | $ | 13,631 | $ | 11,783 | |||||||
| Interest expense | 773 | 1,235 | 3,031 | 3,855 | |||||||||||
| Income tax expense | 61 | 62 | 53 | 108 | |||||||||||
| Depreciation, depletion, and amortization | 8,976 | 8,377 | 34,121 | 32,215 | |||||||||||
| Amortization of intangible assets | 26 | — | 214 | — | |||||||||||
| Accretion of asset retirement obligation | 446 | 417 | 1,793 | 1,668 | |||||||||||
| Total adjustments | 10,282 | 10,091 | 39,212 | 37,846 | |||||||||||
| Adjusted Earnings Before Interest, Taxes, Depreciation, | |||||||||||||||
| and Amortization | $ | 12,364 | $ | 17,725 | $ | 52,843 | $ | 49,629 | |||||||
