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Intrepid Potash Announces First Quarter 2017 Results

DENVER, May 2, 2017 - Intrepid Potash, Inc. (Intrepid) (NYSE:IPI) today reported its results for the first quarter ended March 31, 2017.

First Quarter Results

  • Completion of an underwritten public offering of common stock, generating net proceeds of $57.5 million.
  • Continued principal reduction on existing senior notes; total reduction of $61.0 million since September 30, 2016.
  • Potash segment gross margin of $2.3 million, driven by previous transition to lower-cost solar production and higher average net realized sales prices1 as compared to the first quarter of 2016.
  • Expansion of global Trio® footprint, leading to highest quarterly sales volume since the first quarter of 2008.
  • Trio® segment gross deficit of $5.2 million was pressured by lower average net realized sales prices and $3.8 million in lower-of-cost-or-market adjustments.
  • Continued progress in by-product and water marketing.
  • Net loss of $13.7 million, or $0.17 per share, compared with net loss of $18.4 million, or $0.24 per share, in the first quarter of 2016.

"Our transition to lower-cost solar potash production and Trio®-only production at our East facility is beginning to show the promise we envisioned last year," said Bob Jornayvaz, Intrepid's Executive Chairman, President and CEO. "Solar-only potash production improved our potash margins, and Trio® sales volumes reflected our work to expand our presence in the international market. We continue to make progress in our water marketing and expect water sales to provide meaningful cash flow as the year continues."

Jornayvaz continued, "The success of our public equity offering has put Intrepid in a stronger financial position and we have completed our review of strategic alternatives. We are now focused on optimizing our operations, diversifying our income through increased by-product and water sales, and improving our overall cost profile as we work through challenges in the international Trio® market."

Segment Highlights

Potash

    Three Months Ended March 31,
    2017   2016
    (in thousands, except per ton data)
Potash sales   $ 27,220     $ 53,695  
Potash gross margin (deficit)   $ 2,328     $ (11,955 )
         
Potash production volume (in tons)   118     215  
Potash sales volume (in tons)   101     218  
         
Average potash net realized sales price per ton(1)   $ 240     $ 216  

Potash production decreased 45% compared to the first quarter of 2016, primarily as a result of the elimination of high-cost production from Intrepid's underground West and East facilities. Intrepid expects to produce potash from its solar solution mines until midway through the second quarter, at which time those facilities will begin the summer evaporation period that typically extends to mid-August. Due primarily to the reduced production profile, sales volumes decreased 54% compared to the first quarter of 2016. Average potash net realized sales price per ton increased 11% compared to the first quarter of 2016, as reduced volumes enabled Intrepid to focus its sales into higher margin locations and markets.

During the first quarter of 2017, the potash segment generated a gross margin of $2.3 million, a $14.3 million increase compared to the year-ago comparable period. This increase was a result of no lower-of-cost-or-market adjustments in the first quarter of 2017, the improved cost profile of solar-only production, and an increase in average net realized sales price per ton.

Trio®

    Three Months Ended March 31,
    2017   2016
    (in thousands, except per ton data)
Trio® sales   $ 21,112     $ 19,582  
Trio® gross (deficit) margin   $ (5,184 )   $ 2,802  
         
Trio® production volume (in tons)   71     44  
Trio® sales volume (in tons)   76     50  
         
Average Trio® net realized sales price per ton(1)   $ 202     $ 316  

Trio® production increased 61% compared to the first quarter of 2016 as a result of the transition to Trio®-only production at Intrepid's East facility. Trio® sales volumes increased 52% compared to the first quarter of 2016, primarily as a result of the increase in international sales. Average net realized sales price per ton declined 36% compared with the same period in 2016, due to domestic price decreases announced in the second half of 2016 and an increase in international sales, which had lower average net realized sales prices.

The Trio® segment generated a gross deficit in the quarter, driven by a lower average net realized sale price per ton and lower-of-cost-or-market adjustments totaling $3.8 million. Intrepid plans to continue its practice of matching production to expected sales.

Liquidity

Cash and cash equivalents were $20.8 million at the end of the first quarter of 2017, up from $4.5 million as of December 31, 2016. During the first quarter, Intrepid repaid $46.0 million in outstanding senior note principal utilizing proceeds from its equity offering and an asset sale. As of March 31, 2017, Intrepid had $89.0 million of senior notes outstanding and $25.5 million available for borrowing under its asset-backed credit facility.

Notes

1 Average net realized sales price per ton is a non-GAAP financial measure. 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 2, 2017, 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 2, 2017, 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 1333.

About Intrepid

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

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

Intrepid routinely posts important information, including information about upcoming investor presentations and press releases, on its website under the Investor Relations tab. Investors and other interested parties are encouraged to enroll on the Intrepid website, 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, among other things, statements about the Company's future financial performance, production costs, and operating plans, and its market outlook. These statements are based on assumptions that the Company 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:

·        the Company's ability to expand Trio® sales internationally and manage risks associated with international sales, including pricing pressure;
·        the Company's ability to successfully identify and implement any opportunities to expand operations to include more by-products and non-potassium related products;
·         the Company's ability to successfully execute on its plans to transition the Company's sales model after the idling of the West facility and the transitioning of the East facility to Trio®-only production;
·        the Company's ability to comply with the revised terms of its senior notes and its revolving credit facility, including the covenants in each agreement, to avoid a default under those agreements;
·        changes in the price, demand, or supply of potash or Trio®;
·        the costs of, and the Company's ability to successfully construct, commission, and execute, any strategic projects;
·        declines or changes in agricultural production or fertilizer application rates;
·        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 the Company'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;
·        the Company's 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;
·        the Company's inability to fund necessary capital investments; and
·        the other risks, uncertainties, and assumptions described in the Company's periodic filings with the Securities and Exchange Commission, including in "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.

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

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

Contact:
Matt Preston, Investor Relations                     
Phone:  303-996-3048
Email: matt.preston@intrepidpotash.com




INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
 (In thousands, except share and per share amounts)

    Three Months Ended March 31,
    2017   2016
Sales   $ 48,332     $ 73,277  
Less:        
Freight costs   8,721     10,332  
Warehousing and handling costs   2,770     2,664  
Cost of goods sold   35,873     59,777  
Lower-of-cost-or-market inventory adjustments   3,824     9,007  
Costs associated with abnormal production   -     650  
Gross Deficit   (2,856 )   (9,153 )
         
Selling and administrative   4,404     6,570  
Accretion of asset retirement obligation   389     442  
Restructuring expense   -     400  
Care and maintenance expense   692     -  
Other operating expense (income)   1,650     (104 )
Operating Loss   (9,991 )   (16,461 )
         
Other Income (Expense)        
Interest expense, net   (4,421 )   (2,229 )
Interest income   3     123  
Other income   736     142  
Loss Before Income Taxes   (13,673 )   (18,425 )
         
Income Tax Expense   (5 )   (2 )
Net Loss   $ (13,678 )   $ (18,427 )
         
Weighted Average Shares Outstanding:        
Basic   81,992,071     75,756,535  
Diluted   81,992,071     75,756,535  
Loss Per Share:        
Basic   $ (0.17 )   $ (0.24 )
Diluted   $ (0.17 )   $ (0.24 )


INTREPID POTASH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AS OF MARCH 31, 2017 AND DECEMBER 31, 2016
(In thousands, except share and per share amounts)

    March 31,   December 31,
    2017   2016
ASSETS        
Cash and cash equivalents   $ 20,770     $ 4,464  
Accounts receivable:        
Trade, net   19,119     10,343  
Other receivables, net   892     492  
Refundable income taxes   1,384     1,379  
Inventory, net   86,194     94,355  
Prepaid expenses and other current assets   8,317     12,710  
Total current assets   136,676     123,743  
         
Property, plant, equipment, and mineral properties, net   374,293     388,490  
Long-term parts inventory, net   23,731     21,037  
Other assets, net   4,381     7,631  
Total Assets   $ 539,081     $ 540,901  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Accounts payable:        
Trade   $ 8,981     $ 10,210  
Related parties   28     31  
Accrued liabilities   10,742     8,690  
Accrued employee compensation and benefits   2,762     4,225  
Other current liabilities   145     964  
Total current liabilities   22,658     24,120  
         
Long-term debt, net   88,017     133,434  
Asset retirement obligation   20,365     19,976  
Total Liabilities   131,040     177,530  
         
Commitments and Contingencies        
Common stock, $0.001 par value; 400,000,000 shares authorized;        
and 125,995,330 and 75,839,998 shares outstanding        
at March 31, 2017, and December 31, 2016, respectively   126     76  
Additional paid-in capital   642,071     583,653  
Retained deficit   (234,156 )   (220,358 )
Total Stockholders' Equity   408,041     363,371  
Total Liabilities and Stockholders' Equity   $ 539,081     $ 540,901  


INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
(In thousands)

    Three Months Ended March 31,  
    2017   2016  
Cash Flows from Operating Activities:          
Net loss   $ (13,678 )   $ (18,427 )  
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:          
Depreciation, depletion, and accretion   9,323     14,368    
Amortization of deferred financing costs   821     783    
Stock-based compensation   989     1,046    
Lower-of-cost-or-market inventory adjustments   3,824     9,007    
Loss (gain) on disposal of assets   1,559     (15 )  
Allowance for parts inventory obsolescence   -     532    
Other   3,006     258    
Changes in operating assets and liabilities:          
Trade accounts receivable, net   (8,776 )   (14,689 )  
Other receivables, net   (399 )   (191 )  
Refundable income taxes   (5 )   40    
Inventory, net   1,643     (7,745 )  
Prepaid expenses and other current assets   4,393     7,303    
Accounts payable, accrued liabilities, and accrued employee
  compensation and benefits
  (65 )   6,596    
Other liabilities   (819 )   40    
Net cash provided by (used in) operating activities   1,816     (1,094 )  
           
Cash Flows from Investing Activities:          
Additions to property, plant, equipment, and mineral properties   (2,423 )   (6,018 )  
Proceeds from sale of property, plant, equipment, and mineral properties   5,553     -    
Proceeds from sale of investments   1     23,634    
Net cash provided by investing activities   3,131     17,616    
           
Cash Flows from Financing Activities:          
Issuance of common stock, net of transaction costs   57,468     -    
Repayments of long-term debt   (46,000 )   -    
Debt issuance costs   -     (1,235 )  
Employee tax withholding paid for restricted stock upon vesting   (109 )   (172 )  
Net cash provided by (used in) financing activities   11,359     (1,407 )  
           
Net Change in Cash and Cash Equivalents   16,306     15,115    
Cash and Cash Equivalents, beginning of period   4,464     9,307    
Cash and Cash Equivalents, end of period   $ 20,770     $ 24,422    
           
Supplemental disclosure of cash flow information          
Net cash paid (refunded) during the period for:          
  Interest   $ 2,467     $ 134    
  Income taxes   $ 10     $ (38 )  
Accrued purchases for property, plant, equipment, and mineral properties   $ 214     $ 2,004    

INTREPID POTASH, INC.
SELECTED OPERATING AND SEGMENT DATA (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016

    Three Months Ended March 31,
    2017   2016
Production volume (in thousands of tons):        
  Potash   118     215  
  Langbeinite   71     44  
Sales volume (in thousands of tons):        
  Potash   101     218  
  Trio®   76     50  
         
Average net realized sales price per ton (1)        
  Potash   $ 240     $ 216  
  Trio®   $ 202     $ 316  

Three Months Ended March 31, 2017 (in thousands):   Potash   Trio®   Corporate   Consolidated
Sales   $ 27,220     $ 21,112     $ -     $ 48,332  
Less: Freight costs   2,959     5,762     -     8,721  
  Warehousing and handling costs   1,512     1,258     -     2,770  
  Cost of goods sold   20,421     15,452     -     35,873  
  Lower-of-cost-or-market inventory adjustments   -     3,824     -     3,824  
Gross Margin (Deficit)   $ 2,328     $ (5,184 )   $ -     $ (2,856 )
Depreciation, depletion and amortization incurred(2)   $ 7,563     $ 1,699     $ 61     $ 9,323  
                 
Three Months Ended March 31, 2016 (in thousands):   Potash   Trio®   Corporate   Consolidated
Sales   $ 53,695     $ 19,582     $ -     $ 73,277  
Less: Freight costs   6,551     3,781     -     10,332  
  Warehousing and handling costs   2,154     510     -     2,664  
  Cost of goods sold   47,288     12,489     -     59,777  
  Lower-of-cost-or-market inventory adjustments   9,007     -     -     9,007  
  Costs associated with abnormal production and
  other
  650     -     -     650  
Gross (Deficit) Margin   $ (11,955 )   $ 2,802     $ -     $ (9,153 )
Depreciation, depletion and amortization incurred(2)   $ 12,233     $ 1,675     $ 460     $ 14,368  

(1)  Average net realized sales price is a non-GAAP financial measure.  See the non-GAAP reconciliations set forth later in this press release for additional information.
(2)  Depreciation, depletion and amortization incurred for potash and Trio® excludes depreciation, depletion and amortization amounts absorbed in or (relieved from) inventory.


INTREPID POTASH, INC.
UNAUDITED NON-GAAP RECONCILIATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
(In thousands, except per share amounts)

To supplement the Company's condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company uses several non-GAAP financial measures to monitor and evaluate its performance. These non-GAAP financial measures include adjusted net loss, adjusted net loss 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, the Company's non-GAAP financial measures may not be comparable to similarly titled measures used by other companies.

The Company believes these non-GAAP financial measures provide useful information to investors for analysis of its business. The Company uses these non-GAAP financial measures as one of its tools in comparing performance period over period on a consistent basis and when planning, forecasting, and analyzing future periods. The Company believes 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 the Company's non-GAAP financial measures, including reconciliations of the Company's non-GAAP financial measures to the most directly comparable GAAP measures:

Adjusted Net Loss and Adjusted Net Loss Per Diluted Share

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

Reconciliation of Net Loss to Adjusted Net Loss:

  Three Months Ended March 31,
  2017   2016
Net Loss $ (13,678 )   $ (18,427 )
Adjustments      
  Costs associated with abnormal production(1) -     650  
  Restructuring expense -     400  
  Write-off of deferred financing fees(2) 518     668  
  Make-whole payment(3) 794     -  
  Calculated income tax effect(4) -     -  
  Total adjustments 1,312     1,718  
Adjusted Net Loss $ (12,366 )   $ (16,709 )

Reconciliation of Net Loss per Share to Adjusted Net Loss per Share:

  Three Months Ended March 31,
  2017   2016
Net Loss Per Diluted Share $ (0.17 )   $ (0.24 )
Adjustments      
  Costs associated with abnormal production(1) -     0.01  
  Restructuring expense -     0.01  
  Write-off of deferred financing fees(2) 0.01     0.01  
  Make-whole payment(3) 0.01     -  
  Calculated income tax effect(4) -     -  
  Total adjustments 0.02     0.03  
Adjusted Net Loss Per Diluted Share $ (0.15 )   $ (0.21 )

(1)  As a result of the temporary suspensions of production at Intrepid's East facilities, Intrepid determined that approximately $0.7 million of production costs for the three months ended March 31, 2016, would have been allocated to additional potash tons produced, assuming the facility had been operating at normal production rates. Accordingly, these costs were excluded from Intrepid's inventory values and instead directly expensed as period production costs. Intrepid compares actual production levels relative to what it estimated could have been produced if it had not incurred the temporary production suspensions and lower operating rates in order to determine the abnormal cost adjustment.

(2) During the first quarter of 2017, Intrepid made an early repayment of $46.0 million of principal on its senior notes. As a result of this action, Intrepid wrote off a portion of the financing fees that had previously been capitalized related to the senior notes. In the first quarter of 2016, Intrepid wrote off a portion of previously capitalized financing fees related to the Company's previous unsecured credit facility as a result of amendments to the facility.

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

(4) Intrepid had an effective tax rate of 0% for the three-month periods ended March 31, 2017, and 2016.


Adjusted EBITDA

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

    Three Months Ended March 31,
    2017   2016
Net Loss   $ (13,678 )   $ (18,427 )
  Costs associated with abnormal production(1)   -     650  
  Restructuring expense   -     400  
  Interest expense   4,421     2,229  
  Income tax expense   5     2  
  Depreciation, depletion, and accretion   9,323     14,368  
  Total adjustments   13,749     17,649  
Adjusted EBITDA   $ 71     $ (778 )

(1)  As a result of the temporary suspensions of production at Intrepid's East facilities, Intrepid determined that approximately $0.7 million of production costs for the three months ended March 31, 2016, would have been allocated to additional potash tons produced, assuming the facility had been operating at normal production rates. Accordingly, these costs were excluded from Intrepid's inventory values and instead directly expensed as period production costs. Intrepid compares actual production levels relative to what it estimated could have been produced if it had not incurred the temporary production suspensions and lower operating rates in order to determine the abnormal cost adjustment.


Average Net Realized Sales Price per Ton

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

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

    Three Months Ended March 31,
    2017   2016
    Potash   Trio®   Total   Potash   Trio®   Total
Sales   $ 27,220     $ 21,112     $ 48,332     $ 53,695     $ 19,582     $ 73,277  
Freight costs   2,959     5,762     8,721     6,551     3,781     10,332  
  Subtotal   $ 24,261     $ 15,350     $ 39,611     $ 47,144     $ 15,801     $ 62,945  
                         
Divided by:                        
Tons sold   101     76         218     50      
  Average net realized sales price per ton   $ 240     $ 202         $ 216     $ 316      



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