Intrepid Announces 2010 Fourth Quarter and Full Year Financial Results

23.02.2011  |  Business Wire

Intrepid Potash, Inc. (NYSE:IPI) announced today 2010 fourth quarter and
full year financial results, with net income for the fourth quarter of
$18.2 million, resulting in $0.24 of earnings per diluted share.
Adjusted earnings before interest, taxes, depreciation, and amortization
(Adjusted EBITDA¹) for the fourth quarter of 2010 was $37.3
million.

'During the fourth quarter of 2010, we saw a significant expansion in
nutrient demand, which was more robust than we had expected and was
further bolstered by a strengthening commodity market,? said Bob
Jornayvaz, Intrepid′s Executive Chairman of the Board. 'A number of
factors contributed to the overall strength of the potash market
domestically during the fourth quarter. Mild fall weather and an early
harvest in much of the United States allowed for an extended application
period for potash and other nutrients well into December. Further,
prices for virtually every agricultural commodity moved higher, as yield
estimates were trimmed and global demand continued to grow, driving
farmer economics to historically attractive levels.?

Fourth Quarter 2010 Highlights:

• 
  Potash sales increased 44 percent in the fourth quarter of 2010 to
  216,000 tons as compared to 150,000 tons sold in the same period of
  2009.
  
• 
  Potash production increased 81 percent in the fourth quarter of 2010
  to 224,000 tons compared to 124,000 tons produced in the fourth
  quarter of 2009.
  
• 
  The average net realized sales price² for potash was $386
  per ton ($425 per metric tonne) in the fourth quarter of 2010,
  compared to $408 per ton ($450 per metric tonne) in the fourth quarter
  of 2009.
  
• 
  Our cash operating cost of goods sold, net of by-product credits³,
  for potash was $166 per ton in the fourth quarter of 2010. This
  compares to $186 per ton in the fourth quarter of 2009. There were no
  abnormal production costs recognized in the fourth quarter of 2010,
  whereas, in the comparable period of 2009, $8.8 million of abnormal
  production costs for potash were expensed in the period and were
  excluded from the cash operating cost of goods sold. Our fourth
  quarter 2010 cash operating cost of goods sold per ton results reflect
  all costs attributed to production of potash as we operated within
  normal ranges during this period.
  
• 
  Sales of langbeinite, which we market as Trio ^®, were 27,000
  tons in the fourth quarter of 2010 compared to 25,000 tons in the
  fourth quarter of 2009.
  
• 
  Langbeinite production in the fourth quarter of 2010 decreased to
  31,000 tons from 45,000 tons produced in the fourth quarter of 2009.
  
• 
  The average net realized sales price for Trio ^® was $222 per
  ton ($245 per metric tonne) in the fourth quarter of 2010 compared to
  $190 per ton ($209 per metric tonne) in the fourth quarter of 2009.
  
• 
  Average gross margin in the fourth quarter of 2010 for the sale of
  potash was $169 per ton or 44 percent, compared to $173 per ton or 42
  percent in the fourth quarter of 2009, which excluded the abnormal
  production expense incurred in this period. Average gross margin for
  the sale of Trio ^® was $38 per ton or 17 percent compared to
  $16 per ton or 8 percent in the same period of 2009.
  
• 
  Capital investment in the fourth quarter of 2010 totaled $32.7 million.
  
• 
  As of December 31, 2010, we had $143.0 million of cash and
  investments, no outstanding debt, and $125.0 million of availability
  under our revolving credit facility.
  

The strength of Intrepid's results can also be attributed, in large
part, to the ability to serve the just-in-time truck market. 'The
flexibility that our locations afford us, coupled with our decision to
manage inventories and support the local truck market, was integral to
our solid results for the quarter,? said Mr. Jornayvaz. 'Not only were
we able to service our traditional truck markets in the southern United
States, but we were also able to meet customer demand for tons outside
these locations as customers required timely delivery of product from
suppliers to satisfy farmer demand.?

Additionally, Mr. Jornayvaz stated, 'Given the strong commodity-pricing
environment and level of grain demand, we expect at least a normal
spring season in terms of application rates as farmers look to maximize
yield and margin. We believe Intrepid is well positioned to address the
changing and growing needs of the domestic potassium nutrient market.
Through the successful addition of the new compactor at our Moab, Utah
facility, the anticipated enhancements from our Langbeinite Recovery
Improvement Project, our continued focus on compaction at our Wendover
and Carlsbad operations, and positive progress on developing the HB
Solar Solution Mine, Intrepid is meeting customers′ needs and creating
value for our stockholders.?

Market Conditions

The positive rebound in agricultural commodity pricing is the primary
driver for the recovery of the United States agricultural nutrient
market. During the fall of 2010, we saw strong demand for fertilizer due
to an early harvest and an extended application season that continued
well into December. Further, we believe that farmers focused on
maximizing their yield potential through higher application rates in
order to take advantage of the current strong commodity price
environment.

Crop prices for almost every major agricultural commodity moved up
during the second half of 2010 due to increased demand for grains
worldwide. Prices were also affected by the downward revisions in crop
yield forecasts by the United States Department of Agriculture. These
factors resulted in forecast decreases in world grain stocks by almost
20 percent this year. This reduced the estimated global ending
stock-to-use ratios to levels not seen in 37 years for corn and to
levels not seen since the mid 1960s in the United States for soybeans.
These tight corn and soybean stocks are limiting the downside risk for
farmers and placing a great deal of attention on the need to maximize
yield in the 2011/2012 crop year. Current crop economics support farmers
adding incremental marginal production and acreage. This incremental
acreage is anticipated to require application of additional nutrients to
meet crop yield expectations. We believe that increased fertilization
rates and demand for potash should correlate with farmers′ end goal of
maximizing yield in order to capitalize on high commodity prices.

Industry publications suggest that potash inventories at the producer
level have stabilized in recent weeks. Potash producers are catching up
on outstanding orders and production has returned to levels that are
more normal across the industry in preparation for what should be a
strong domestic spring season. As the spring fill is underway, we have
seen a number of dealers place orders well in advance of anticipated
spring demand as they appear confident in their ability to profitably
sell the tons they have ordered. While we expect sales during the spring
planting season to be normal or slightly above normal based on
historical levels, it seems as though dealers may be more willing to
exit spring with some level of inventory entering the summer.

Fourth Quarter Results and Recent Performance

Income before income taxes for the fourth quarter of 2010 was $29.6
million compared to $9.0 million in the fourth quarter of 2009. Cash
flows from operating activities were $46.8 million for the fourth
quarter of 2010, compared to $23.1 million for the fourth quarter of
2009. Adjusted net income⁴ for the fourth quarter of 2010 was
$17.9 million compared to adjusted net income of $12.2 million in the
same period last year.

Potash

During the fourth quarter of 2010, Intrepid increased production of
potash to 224,000 tons, including tons produced from the harvest of our
Moab solar evaporation ponds that is more heavily concentrated in the
fourth and first quarters of each year, and sold 216,000 tons of potash.
This compares to 124,000 tons produced and 150,000 tons sold in the
fourth quarter of 2009. The 216,000 tons of potash we sold were at an
average net realized sales price of $386 per ton compared to $408 per
ton during the fourth quarter of 2009. The more telling measure however
is that our fourth quarter average net realized sales price was $43
higher than it was in the third quarter of 2010 as the supply and demand
fundamentals of the domestic potash market normalized. Based on our
calculations, our average net realized sales price for the fourth
quarter continued to exceed that of our North American competitors with
an average net realized sales price advantage of $79 per ton.

Our cash operating cost of goods sold, net of by-product credits of $19
per ton, for potash decreased to $166 per ton in the fourth quarter of
2010 from $186 per ton, net of by-product credits of $17 per ton, in the
fourth quarter of 2009. As noted previously, all production costs were
absorbed into inventory costs in the fourth quarter of 2010 and,
therefore, included in the cash operating cost of goods sold results,
whereas, last year, abnormal production costs for potash of $8.8 million
were excluded from the inventory calculation in the quarter and,
therefore, from cash operating cost of goods sold. Our lower cash
operating cost of goods sold per ton for potash during the fourth
quarter of 2010 resulted primarily from higher operating rates at our
Carlsbad facilities as we successfully increased the staffing levels for
our mining operations and had higher sustained operating rates at our
processing facilities.

Langbeinite ? Trio ^®

Intrepid sold 27,000 tons of Trio ^® in the fourth quarter of
2010, the majority of which was granular-sized product, at an average
net realized sales price of $222 per ton. This compares to 25,000 tons
sold at an average net realized sales price of $190 per ton in the prior
year′s fourth quarter.

Demand for granular-sized Trio ^® remains strong and we expect
granular-sized Trio ^® demand will continue to exceed our
production for the next few quarters, resulting in the on-going need to
sell our granular-sized product on an allocated basis. At the beginning
of the fourth quarter of 2010, we completed a maintenance turnaround at
our East facility in Carlsbad, New Mexico. Due to this maintenance
turnaround, langbeinite production reflected only two full months of
production during the fourth quarter. Further, during 2010, we made a
number of operating decisions around langbeinite production designed to
reduce process water usage at various points in the production process
and to prepare for the installation of the new processing equipment for
the Langbeinite Recovery Improvement Project. Currently, our Trio ^®
production is lagging historical levels by approximately 30 ? 35 percent
and we are reviewing our process and recovery data to attempt to restore
recovery rates to historical levels ahead of the completion of the
Langbeinite Recovery Improvement Project.

Full Year 2010 Results

Net income for the full year 2010 was $45.3 million or $0.60 per share,
compared to $55.3 million, or $0.74 per share for the full year 2009.
Income before income taxes for the full year of 2010 was $75.0 million
compared to $92.2 million for the prior year. Cash flows from operating
activities were $123.3 million for the full year 2010, compared to $81.1
million for the full year 2009. Adjusted EBITDA was $104.3 million for
2010, compared to $110.4 million for the full year 2009. Adjusted net
income for the full year 2010 was $45.6 million, compared to $67.7
million for the prior year.

Potash

For the full year 2010, Intrepid produced 727,000 tons of potash and
sold 810,000 tons of potash. This compares to 504,000 tons produced and
440,000 tons sold in the full year 2009. The increase in potash
production reflects Intrepid′s decision to ramp up production to more
historically normal rates during the course of 2010. The increase in
potash sales also reflects the ongoing recovery in the domestic potash
market. Average net realized sales price for potash for 2010 decreased
to $363 per ton ($400 per metric tonne) compared to $541 per ton ($596
per metric tonne) for the full year 2009. Based on our calculations, our
average net realized sales price for the full year of 2010 exceeded that
of our North American competitors, with an average net realized sales
price advantage of $61 per ton.

For 2010, our cash operating cost of goods sold, net of by-product
credits of $8 per ton, for potash decreased to $184 per ton compared to
$196 per ton, net of by-product credits of $17 per ton, for potash for
the full year 2009. There was also only $0.5 million of costs associated
with abnormal production for potash in 2010 compared with $20.7 million
in 2009.

Langbeinite ? Trio ^®

For 2010, we produced 159,000 tons of langbeinite compared to 192,000
tons in 2009. For 2010, Intrepid sold 204,000 tons of Trio ^®
at an average net realized sales price of $174 per ton ($192 per metric
tonne) as compared to 149,000 tons at an average net realized sales
price of $286 per ton ($315 per metric tonne) in 2009.

Capital Investment

Total capital investment in 2010 was $92.5 million, which includes
sustaining, improvement, instrumentation and control projects. We
continued to move forward a number of key capital projects including:

New Mexico

• 
  Commencement of activities in contemplation of construction of the
  Langbeinite Recovery Improvement Project at our East facility
  
• 
  Expansion of distributed control systems at our mines
  
• 
  Installation and commissioning of the underground stacker / reclaim
  system at our West mine
  
• 
  Addition of a new mining panel at both our West and East mines
  
• 
  Significant activities towards the completion of our product storage
  facilities at the East facility
  

Utah

• 
  Addition of a new brine heater in Moab, Utah
  
• 
  Placement into service of a new compactor in Moab, Utah
  

The completion of the compaction project at our Moab, Utah facility is
important to our potash production profile, as it will enable the
compaction of all of our production at that location, if necessary, into
granular-sized product for the agricultural market. It will also provide
us the flexibility to compact excess Wendover, Utah standard production,
based on market demands, ahead of the planned expansion of our Wendover
compaction capabilities.

The Langbeinite Recovery Improvement Project at our Carlsbad, New Mexico
East facility continues to progress, with preliminary construction
activities occurring during the fourth quarter of 2010. The project
schedule, which anticipates completion and commissioning in the fourth
quarter of 2011, is highly dependent upon the timing of obtaining the
required air permits from the New Mexico Environment Department. The
total capital investment for the project is expected to be between $85
and $90 million, with approximately $19.3 million invested during 2010
on engineering, pre-construction activities and procurement of
equipment. The balance is expected to be invested during 2011.

The Environmental Impact Statement review by the Bureau of Land
Management of our HB Solar Solution mine near Carlsbad, New Mexico
continues to progress. The current schedule for receiving the Record of
Decision remains in the first quarter of 2012.

Intrepid routinely posts information about Intrepid on its website under
the Investor Relations tab. Intrepid′s website address is www.intrepidpotash.com.

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 of
our international competitors use, equals 1,000 kilograms or 2,204.68
pounds.

Since adjusted net income and Adjusted EBITDA are non-GAAP financial
measures, we make reference to their respective reconciliations in the
accompanying non-GAAP reconciliation tables towards the end of this
release and the associated financial tables provide the details to
reconcile these numbers to U.S. GAAP line items.Average net
realized sales price and cash operating cost of goods sold are defined
in the text of this release and the associated financial tables provide
additional details regarding these operating measures.

Conference Call Information

The conference call to discuss fourth quarter 2010 results is scheduled
for Thursday, February 24, 2011, at 8:00 a.m. MST (10:00 a.m. EST). The
call participation number is (800) 319-4610. A recording of the
conference call will be available two hours after the completion of the
call at (800) 319-6413. International participants can dial (412)
858-4600 to take part in the conference call and can access a replay of
the call at (412) 317-0088. 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.
In addition, the press release announcing fourth quarter 2010 results
will be available on the Intrepid website before the call under
'Investor Relations - Press Releases.' An audio recording of the
conference call will be available at www.intrepidpotash.com
through March 26, 2011.

¹ This is a financial measure not calculated in accordance
with U.S. Generally Accepted Accounting Principles (Non-GAAP). See the
Non-GAAP reconciliations set forth later in this press release for
additional information.

² Average net realized sales price is calculated as gross
sales less freight costs, divided by the number of tons sold in the
period.

³ Potash cash operating cost of goods sold, net of by-product
credits, is defined as total cost of goods sold excluding royalties,
depreciation, depletion and amortization.

⁴ This is a financial measure not calculated in accordance
with U.S. Generally Accepted Accounting Principles (Non-GAAP). See the
Non-GAAP reconciliations set forth later in this press release for
additional information.

* * * * * * * * * * *

Certain statements in this press release, and other written or oral
statements made by or on behalf of us, are 'forward-looking statements?
within the meaning of the federal securities laws. Statements regarding
future events and developments and our future performance, as well as
management′s expectations, beliefs, plans, estimates or projections
relating to the future, including statements regarding guidance, are
forward-looking statements within the meaning of these laws. Although we
believe that the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, there can be no
assurance that the expectations will be realized. These forward-looking
statements are subject to a number of known and unknown risks and
uncertainties, many of which are beyond our control that could cause
actual results to differ materially and adversely from such statements.
These risks and uncertainties include: changes in the price of potash or
Trio ^®; operational difficulties at our facilities that limit
production of our products; the ability to hire and retain qualified
employees; changes in demand and/or supply for potash or Trio ^®/langbeinite;
changes in our reserves; our ability to successfully execute the
projects that are essential to our business strategy, including but not
limited to the development of the HB Solar Solution mine as a solution
mine and the further development of our langbeinite recovery assets;
weather risks affecting net evaporation rates at our solar solution
mining operations; changes in the prices of our raw materials, including
but not limited to the price of chemicals, natural gas and power;
fluctuations in the costs of transporting our products to customers;
changes in labor costs and availability of labor with mining expertise;
the impact of federal, state or local government regulations, including
but not limited to environmental and mining regulations, and the
enforcement of such regulations; obtaining permitting for applicable
federal and state agencies related to the construction and operation of
assets; competition in the fertilizer industry; declines in U.S. or
world agricultural production; declines in use by the oil and gas
industry of potash products in drilling operations; changes in economic
conditions; adverse weather events at our facilities; our ability to
comply with covenants inherent in our current and future debt
obligations to avoid defaulting under those agreements; disruption in
credit markets; our ability to secure additional federal and state
potash leases to expand our existing mining operations; and governmental
policy changes that may adversely affect our business and the risk
factors detailed in our filings with the U.S. Securities and Exchange
Commission. Please refer to those filings for more information on these
risk factors. These forward-looking statements speak only as of the date
of this press release, and we undertake no obligation to publicly update
or revise any forward-looking statement, whether as the result of future
events, new information or otherwise.

* On a per ton basis, by-product credits were $7 and $17 for the three
month periods ended December 31, 2010, and 2009, respectively.
By-product credits were $1.5 million and $2.6  million for the three
month periods ended December 31, 2010, and 2009, respectively. Costs
associated with abnormal production were zero and $9.4 million for the
three month periods ended December  31, 2010, and 2009, respectively.

* On a per ton basis, by-product credits were $8 and $17 for the years
ended December 31, 2010, and 2009, respectively. By-product credits were
$6.4  million and $7.4 million for the years ended December 31, 2010, and
2009, respectively. Costs associated with abnormal production were $0.5
million and $21.5 million for the years ended December  31, 2010, and
2009, respectively.

INTREPID POTASH, INC.

NON-GAAP ADJUSTED NET INCOME
RECONCILIATIONS

FOR THE THREE AND TWELVE MONTHS ENDED
DECEMBER 31, 2010 AND 2009

(In thousands)

Adjusted net income is calculated as net income adjusted for significant
non-cash and unusual items. Examples of non-cash and unusual charges
include insurance settlements from property and business losses,
non-cash unrealized gains or losses associated with derivative
adjustments, costs associated with abnormal production and other
infrequent items. The non-GAAP measure of adjusted net income is
presented because management believes it provides useful additional
information to investors for analysis of Intrepid's fundamental business
on a recurring basis. In addition, management believes that the concept
of adjusted net income is widely used by professional research analysts
and others in the valuation, comparison, and investment recommendations
of companies in the potash mining industry, and many investors use the
published research of industry research analysts in making investment
decisions.

Adjusted net income should not be considered in isolation or as a
substitute for net income, income from operations, cash provided by
operating activities or other income, profitability, cash flow, or
liquidity measures prepared under U.S. GAAP. Since adjusted net income
excludes some, but not all items that affect net income and may vary
among companies, the adjusted net income amounts presented may not be
comparable to similarly titled measures of other companies.

INTREPID POTASH, INC.

NON-GAAP ADJUSTED EBITDA
(UNAUDITED) RECONCILIATIONS

FOR THE THREE AND TWELVE MONTHS
ENDED DECEMBER 31, 2010 AND 2009

(In thousands)

Adjusted earnings before interest, taxes, depreciation, and amortization
('Adjusted EBITDA?) is computed as net income adjusted for the add back
of interest expense (including derivatives), income tax expense,
depreciation, depletion, and amortization, and asset retirement
obligation accretion. This non-GAAP measure is presented because
management believes it assists investors and analysts in comparing our
performance across reporting periods on a consistent basis by excluding
items that we do not believe are indicative of our core operating
performance. In addition, we use Adjusted EBITDA to evaluate the
effectiveness of our business strategies. In addition, Adjusted EBITDA
is widely used by professional research analysts and others in the
valuation, comparison, and investment recommendations of companies in
the potash mining industry, and many investors use the published
research of industry research analysts in making investment decisions.

Adjusted EBITDA should not be considered in isolation or as a substitute
for performance or liquidity measures calculated in accordance with U.S.
GAAP. Since Adjusted EBITDA excludes some, but not all items that affect
net income and net cash provided by operating activities and may vary
among companies, the Adjusted EBITDA amounts presented may not be
comparable to similarly titled measures of other companies. The
following is a reconciliation of our net income, the most directly
comparable U.S. GAAP measure, to Adjusted EBITDA: