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Intrepid Reports Fourth Quarter and Full Year 2019 Results


DENVER, CO --(GlobeNewswire - March 2, 2020) -- 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.

1


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.

2

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.

3


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;

4

•
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

5

Email: john.richardson@intrepidpotash.com


6




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




7


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




8


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


9


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

























10




 
 
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




























11



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.

12


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








13




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.







14

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





15


 
 
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



16

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









17