Intrepid Potash, Inc. (Intrepid) today reported its financial results for the fourth quarter and full year of 2018.

Key Takeaways

  • Net income improved $9.3 million and $34.4 million in the fourth quarter and full year 2018, respectively, compared with the same periods in the prior year.
  • Potash segment gross margin of $10.7 million in the fourth quarter contributed to full year potash segment gross margin of $29.0 million, an increase of $13.3 million compared to the prior year.
  • Trio® segment delivered fourth quarter gross margin of $0.7 million. Full year gross deficit was $3.8 million, an improvement of $5.7 million compared to the prior year.
  • Oilfield solutions segment gross margin of $13.0 million in 2018 driven by water sales of $16.0 million.
  • Total company water sales of $19.8 million in 2018 with by product water included.
  • Full year cash received from water of $30.2 million.
  • Cash generated from operations increased $47.5 million year over year, totalling $64.2 million in 2018.

“Fourth quarter results benefited from strong potash sales, higher market prices for potash and Trio®, and another quarter of solid demand for oilfield solutions,” said Bob Jornayvaz, Intrepid’s Executive Chairman, President, and CEO. “The fourth quarter also marks the first quarter of positive gross margin for our Trio® segment since 2016 as we saw the benefits of a focused international strategy and increased byproduct sales. Price increases announced in January for both potash and Trio® provide stability heading into the spring selling season and we believe Intrepid is well-positioned for another year of strong cash flow generation in 2019.”

Jornayvaz continued, “Our success in generating cash in 2018 provides us with additional flexibility to execute upon our growth strategy. To that end, we recently agreed to purchase the Dinwiddie Jal Ranch in southeastern New Mexico as part of our expanding oilfield solutions. The acquisition of this property and the associated water rights will increase our footprint in the prolific Delaware Basin and allow us to offer a more complete midstream infrastructure system and additional supply to our water partners in the region. For the full year 2019, we expect cash received from our total company water sales, including by products but excluding the pending acquisition, of between $25 and $35 million, and revenue of between $20 and $30 million.”

Presentation Changes

Due to the growth of its oilfield products and services and continued diversification and growth of by product sales in addition to recent accounting changes, Intrepid is now presenting a third segment, in addition to its potash and Trio® segments, and is accounting for by product sales as revenue instead of as a credit to cost of goods sold. The new oilfield solutions segment includes certain sales of water, high-speed KCl mixing, saltwater disposal, trucking, and other activities associated with oil and gas production. Prior period amounts have been recast to be consistent with current presentation and will be posted on Intrepid’s website.

Consolidated Results

Intrepid recorded fourth quarter net income of $7.6 million, or $0.06 per share, resulting in full year net income of $11.8 million, or $0.09 per share. Consolidated gross margin of $14.8 million and $38.3 million in the fourth quarter and full year 2018, respectively, were increases of $11.2 million and $26.4 million, respectively, compared to the same year-ago periods. Improvements in net income and gross margin were driven by increased water sales, higher average net realized sales prices(1) for potash and Trio®and reduced lower of cost or net realizable value adjustments related to international Trio® shipments.

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, water sales, production costs, acquisition expectations and operating plans, 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 Trio®, water, by products, and other non-potassium related products or other revenue diversification activities;
    challenges to Intrepid’s water rights;
  • Intrepid’s ability to close its acquisition of the Dinwiddie Jal Ranch, integrate the acquired assets into its existing business, and achieve the expected benefits of the acquisition;
  • 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;
  • 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; 
  • 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, 2017.

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.

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