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Intrepid Announces Third Quarter 2022 Results

Denver, CO, Nov. 02, 2022 (GLOBE NEWSWIRE) -- Intrepid Potash, Inc. ("Intrepid", the "Company", "we", "us", "our") (NYSE:IPI) today reported its results for the third quarter of 2022.

Key Highlights for Third Quarter 2022

Financial & Operational

  • Total sales of $74.8 million, an increase of $15.6 million compared to the third quarter of 2021, as potash and Trio® average net realized sales prices(1) increased to $734 and $488 per ton, respectively.
  • Net income of $13.1 million (or $0.97 per diluted share), a $9.1 million improvement compared to the third quarter of 2021.
  • Gross margin of $26.8 million, a $16.2 million improvement over the same prior year period.
  • Cash flow used in operations was $14.1 million, as we refunded a customer's $32.6 million prepayment balance; absent this repayment, cash flow from operations would have totaled approximately $18.5 million in the third quarter of 2022.
  • Adjusted EBITDA(1) of $27.0 million, which was a $13.9 million improvement over the same prior year period.

Liquidity

  • In August 2022, we amended our revolving credit facility to, among other things, increase the amount available under the facility from $75 million to $150 million, as well as extend the maturity date to August 2027.
  • As of October 31, 2022, Intrepid had approximately $46 million in cash and cash equivalents and $149 million available under its revolving credit facility, for total liquidity of approximately $195 million.

Capital Investments & Growth Projects

  • Incurred capital expenditures of $14.3 million in the third quarter of 2022 and expect full year 2022 capital investment to be in the range of $65 million to $75 million.
  • Continued progress on projects to improve brine quality, increase production, and improve unit economics:

HB

  • Installation of an improved pipeline system to our HB Solar Solution Mine is progressing well, with the majority of the key infrastructure purchased and nearing delivery. The improved pipeline system should allow us to efficiently produce additional solar tons and conduct the operations of our processing facilities at a lower cost. We expect to improve the injection rate capability of our pipeline system as early as Q1 2023, and expect greater flow rates within the improved pipeline system in H2 2023.

Moab

  • Drilling of an additional potash cavern in Moab to increase production tons through higher extraction brine grade; drilling expected to begin in mid-November and conclude in early 2023, in-time for the upcoming evaporation season.

Wendover

  • Upgrading brackish and deep-brine wells in Wendover to increase brine availability and better manage variability in weather and evaporation rates; new deep brine well also placed in-service Q4 2022.

Intrepid South

  • Continued development of sand mine opportunity on our strategically located Intrepid South property; targeting a late Q1 2023 startup, although ongoing supply chain issues and permitting uncertainty could delay first production to the second half of 2023.

Consolidated Results, Outlook, & Management Commentary

Intrepid generated third quarter 2022 sales of $74.8 million, which compares to third quarter 2021 sales of $59.2 million. Consolidated gross margin in third quarter of 2022 totaled $26.8 million, while net income totaled $13.1 million, or $0.97 per diluted share, which compares to third quarter 2021 net income of $4.0 million, or $0.30 per diluted share. Net income for the nine months ended September 30, 2022 was $68.2 million, which compares to net income of $26.0 million in the same prior year period. The Company delivered adjusted EBITDA of $27.0 million in the third quarter of 2022, bringing adjusted EBITDA during the first nine months of 2022 to $118.6 million. The strong profitability continues to be primarily driven by high prices for potash and Trio®, which averaged $734 per ton and $488 per ton, respectively, in the third quarter of 2022.

Bob Jornayvaz, Intrepid's Executive Chairman and CEO commented: "Intrepid continues to deliver strong execution in the backdrop of high fertilizer pricing and a broadly supportive agriculture market, with adjusted EBITDA of approximately $119 million in the first nine months of 2022 being 177% higher than the same prior year period. While farmer economics remain quite robust, we saw the trend of mostly just-in-time purchasing in agriculture markets continue through the third quarter and into the fall harvest. Moreover, lingering and persistent inflation in farmer cost inputs is driving some uncertainty, despite spot pricing for key crops remaining substantially higher than previous decade averages, with futures into the 2023 fall harvest and beyond also showing strength. Putting this together, while a more pronounced pickup in sales for our potash and Trio® in the second half of 2022 has been slower than we previously expected for timing reasons, the demand is still robust and the outlook for agricultural and fertilizer markets into 2023 and longer-term remains overwhelmingly positive, with this view being supported by 71k shares repurchased in the third quarter under our $35 million share repurchase program."

Segment Highlights

Potash

  Three Months Ended September 30, Nine Months Ended September 30,
   2022  2021  2022  2021
  (in thousands, except per ton data)
Sales $        42,354         $        31,673         $        147,622         $        112,944        
Gross margin $        19,872         $        4,525         $        73,862         $        23,329        
         
Potash sales volumes (in tons)          46                  62                  172                  270        
Potash production volumes (in tons)          36                  37                  164                  201        
         
Average potash net realized sales price per ton(1) $        734         $        381         $        718         $        319        

Potash segment sales in the third quarter of 2022 increased 34% to $42.4 million when compared to the same period in 2021. The higher revenue was primarily driven by a 93% increase in our average net realized sales price per ton to $734, which compares to $381 per ton in the prior year period. The higher average net realized sales price per ton offset lower potash sales volumes, which totaled 46k tons, a 26% decrease from the third quarter of 2021.

Potash segment gross margin totaled $19.9 million, which compares to $4.5 million in the third quarter of 2021. While we sold 26% fewer tons of potash in the third quarter of 2022, our cost of goods sold per ton was higher due to an increase in certain potash production costs, such as natural gas and electricity, caused by inflation, which had a negative impact on segment gross margin in the third quarter of 2022.

During the nine months ended September 30, 2022, potash segment sales totaled $147.6 million, which was 31% higher than the same prior year period, with the average net realized sales price per ton of $718 offsetting lower potash sales volumes of 172k tons. During the same prior year period, potash segment tons sold totaled 270k tons at an average net realized sales price per ton of $319.

Potash segment gross margin totaled $73.9 million tons in the nine months ended September 30, 2022, which was 217% higher than the same prior year period. Similar to the comments above, despite the increase in gross margin year-over year for the nine months ended September 30, 2022, inflationary factors negatively impacted segment gross margin, in addition to higher production costs related to below average evaporation rates across our facilities in 2021.

During the third quarter of 2022, our potash segment sales into agriculture markets comprised 61% of sales, while sales into feed and industrial markets totaled 28% and 11%, respectively. In agriculture markets, potash sales continue to be impacted by just-in-time purchasing, some uncertainty around fall grower demand as the fall harvest wraps up, and carryover inventory from the Spring, leading to reduced needs to restock potash inventory for immediate application.

Third quarter 2022 potash production totaled 36k tons, which compares to 37k tons produced in the same prior year period. For the nine months ended September 30, 2022, potash production totaled 164k tons, which was 37k tons lower than the same prior year period, owing to below average evaporation rates across our facilities in 2021.

Trio®

  Three Months Ended September 30, Nine Months Ended September 30,
   2022  2021  2022  2021
  (in thousands, except per ton data)
Sales $        24,043         $        20,827         $        100,561         $        71,444        
Gross margin $        6,503         $        5,436         $        35,694         $        8,528        
         
Trio® sales volume (in tons)          39                  46                  169                  191        
Trio® production volume (in tons)          52                  56                  175                  175        
         
Average Trio® net realized sales price per ton(1) $        488         $        336         $        482         $        271        

Trio® segment sales of $24.0 million for the third quarter of 2022 were $3.2 million higher compared to the same prior year period, driven by a higher average net realized sales price per ton of $488 in the quarter, which was 45% higher than the third quarter of 2021. The higher sales price helped offset lower Trio® sales volumes, which totaled 39k tons, and compares to 46k tons in the same prior year period. During the nine months ended September 30, 2022, Trio® segment sales totaled $100.6 million, which was 41% higher than the same prior year period. The higher sales were driven by a 78% increase in our average net realized sales price per ton to $482, with the higher pricing offsetting lower sales volumes compared to the prior year.

Trio® segment gross margin totaled $6.5 million in Q3 2022, an increase of $1.1 million from Q3 2021, while Trio® segment gross margin during the nine months ended September 30, 2022 totaled $35.7 million, which compares to $8.5 million in gross margin generated in the prior year period. Despite the higher year-over-year segment gross margin for both the third quarter of 2022 and nine months ended September 30, 2022, we incurred increased labor costs as we operated an additional underground shift at our East facility, while other production costs also increased due to continued inflationary pressure.

During the third quarter of 2022, domestic Trio® sales were impacted from buyers working through Spring carryover inventory, while purchases are mostly being deferred as distributors are reluctant to commit to inventory at current price levels given the seasonality of most Trio® applications.

In our Trio® segment, production totaled 52k tons in Q3 2022, which was 4k tons lower than the 56k tons produced in Q3 2021, while for the nine months ended September 30, 2022, Trio® production totaled 175k tons, which was flat from the same prior year period.

Oilfield Solutions

  Three Months Ended September 30, Nine Months Ended September 30,
   2022  2021  2022  2021
  (in thousands)
Sales $        8,423         $        6,708         $        22,936         $        14,293        
Gross margin $        395         $        647         $        6,201         $        2,058        

Our oilfield solutions segment sales increased $1.7 million in the third quarter of 2022 compared to the same period in 2021, due to a $1.0 million increase in water sales, a $0.4 million increase in surface use, rights-of-way and easement revenues, and a $0.5 million increase in brine water sales. The increase in sales of our oilfield solutions products was due to the increased oil and gas activities as oil prices were generally higher in the third quarter of 2022, compared to the same period in 2021. Our cost of goods sold increased $2.0 million, or 32%, for the third quarter of 2022, compared to the same period in 2021, due to increased volumes of third-party water purchased to meet customer water demand, increased royalty expense due to increased water revenues and increased fuel and electrical costs caused by inflationary pressures. Gross margin for the third quarter of 2022 decreased $0.3 million compared to the third quarter of 2021, due to the factors discussed above.

Our oilfield solutions segment sales increased $8.6 million, or 60%, during the first nine months of 2022, compared to the same period in 2021, due to a $3.8 million increase in water sales, a $2.7 million increase in surface use, rights-of-way and easement revenues, a $1.4 million increase in brine water sales, a $0.6 million increase in produced water royalty revenues, and a $0.2 million increase in surface minerals sales. Our cost of goods sold increased during the first nine months of 2022 compared to the first nine months of 2021, due to purchasing more third-party water to meet customer demand, increased water transfer costs as we sold more water, increased contract labor related to the development of a full-cycle water management operation, increased royalty expense as water revenues increased, and increased fuel and electrical expenses due to continued inflation.

Liquidity
During the third quarter of 2022, cash used in operations was approximately $14.1 million, while cash used in investing activities was approximately $14.8 million. During the third quarter, we refunded a customer's $32.6 million prepayment balance which was the primary driver of the cash outflow. As of October 31, 2022, we had approximately $46 million in cash and cash equivalents, no outstanding borrowings, and $149 million available to borrow under our revolving credit facility, for total liquidity of roughly $195 million.

Notes
1 Adjusted net income, adjusted net income per diluted share, adjusted earnings before interest, taxes, depreciation, and amortization (or adjusted EBITDA) and average net realized sales price per ton 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 Thursday, November 3, 2022, at 12:00 p.m. Eastern Time to discuss the results and other operating and financial matters and answer investor questions.

Management invites you to listen to the conference call by using the toll-free dial-in number 1 (888) 210-4149 or toll-in dial-in 1 (646) 960-0145; please use conference ID 9158079. The call will also be streamed on the Intrepid website, intrepidpotash.com. A recording of the conference call will be available approximately two hours after the completion of the call by dialing 1 (800) 770-2030 for toll-free, 1 (647) 362-9199 for toll-in, or at intrepidpotash.com. The replay of the call will require the input of the conference identification number 9158079. The recording will be available through November 10, 2022.

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, cash flow from operations expectations, 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 our products and services;
  • challenges and legal proceedings related to our water rights;
  • our ability to successfully identify and implement any opportunities to grow our business whether through expanded sales of water, Trio®, byproducts, and other non-potassium related products or other revenue diversification activities;
  • the costs of, and our 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;
  • our ability to prevail in outstanding legal proceedings against us;
  • our ability to comply with the terms of our revolving credit facility, including the underlying covenants, to avoid a default under that agreement;
  • 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 our 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;
  • our 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;
  • our inability to fund necessary capital investments;
  • the impact of the COVID-19 pandemic on our business, operations, liquidity, financial condition and results of operations; and
  • the other risks, uncertainties, and assumptions described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021, as updated by our 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 obligation 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:
Evan Mapes, CFA, Investor Relations Manager
Phone: 303-996-3042
Email: evan.mapes@intrepidpotash.com

INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(In thousands, except per share amounts)

  Three Months Ended September 30, Nine Months Ended September 30,
   2022   2021   2022   2021 
Sales $        74,752          $        59,153          $        270,891          $        198,504         
Less:        
Freight costs          7,793                   7,911                   27,257                   30,104         
Warehousing and handling costs          2,541                   2,066                   7,221                   7,076         
Cost of goods sold          37,648                   34,974                   120,656                   123,815         
Costs associated with abnormal production          —                   3,594                   —                   3,594         
Gross Margin           26,770                   10,608                   115,757                   33,915         
         
Selling and administrative          8,551                   5,890                   22,558                   18,293         
Accretion of asset retirement obligation          491                   441                   1,471                   1,323         
Loss (gain) on sale of assets          10                   5                   1,176                   (2,560)
Other operating expense (income)          264                   192                   1,239                   (385)
Operating Income          17,454                   4,080                   89,313                   17,244         
         
Other Income (Expense)        
Equity in earnings of unconsolidated entities          766                   —                   766                   —         
Interest expense, net          (28)          (82)          (85)          (1,426)
Interest income          77                   —                   94                   —         
Other income          (258)          25                   281                   42         
Gain on extinguishment of debt          —                   —                   —                   10,113         
Income Before Income Taxes          18,011                   4,023                   90,369                   25,973         
         
Income Tax Expense          (4,903)          —                   (22,131)          —         
Net Income $        13,108          $        4,023          $        68,238          $        25,973         
         
Weighted Average Shares Outstanding:        
Basic          13,256                   13,123                   13,221                   13,089         
Diluted          13,489                   13,367                   13,567                   13,352         
Earnings Per Share:        
Basic $        0.99          $        0.31          $        5.16          $        1.98         
Diluted $        0.97          $        0.30          $        5.03          $        1.95         

INTREPID POTASH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021
(In thousands, except share and per share amounts)

  September 30, December 31,
   2022   2021
ASSETS    
Cash and cash equivalents $        49,209          $        36,452        
Short-term investments          4,970                   —        
Accounts receivable:    
Trade, net          38,229                   35,409        
Other receivables, net          2,124                   989        
Inventory, net          96,913                   78,856        
Prepaid expenses and other current assets          6,558                   5,144        
Total current assets          198,003                   156,850        
     
Property, plant, equipment, and mineral properties, net          358,729                   341,117        
Water rights          19,184                   19,184        
Long-term parts inventory, net          25,398                   29,251        
Long-term investments          11,696                   4,576        
Other assets, net          7,377                   6,842        
Non-current deferred tax asset, net          187,527                   209,075        
Total Assets $        807,914          $        766,895        
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
Accounts payable $        14,114          $        9,068        
Accrued liabilities          22,996                   22,938        
Accrued employee compensation and benefits          8,157                   6,805        
Other current liabilities          3,847                   34,612        
Total current liabilities          49,114                   73,423        
     
Asset retirement obligation, net of current portion          27,204                   27,024        
Operating lease liabilities          2,116                   1,879        
Other non-current liabilities          1,007                   1,166        
Total Liabilities          79,441                   103,492        
     
Commitments and Contingencies    
Common stock, $0.001 par value; 40,000,000 shares authorized;    
13,195,080 and 13,149,315 shares outstanding    
at September 30, 2022, and December 31, 2021, respectively          13                   13        
Additional paid-in capital          658,860                   659,147        
Retained earnings          72,481                   4,243        
Less treasury stock, at cost          (2,881)          —        
Total Stockholders' Equity          728,473                   663,403        
Total Liabilities and Stockholders' Equity $        807,914          $        766,895        

INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(In thousands)

  Three Months Ended September 30, Nine Months Ended September 30,
   2022   2021   2022   2021 
Cash Flows from Operating Activities:        
Net income $        13,108          $        4,023          $        68,238          $        25,973         
Adjustments to reconcile net income to net cash (used in) provided by operating activities:        
Depreciation, depletion and amortization          8,362                   8,430                   25,285                   26,509         
Accretion of asset retirement obligation          491                   441                   1,471                   1,323         
Amortization of deferred financing costs          67                   60                   187                   254         
Amortization of intangible assets          80                   80                   241                   241         
Stock-based compensation          1,407                   634                   3,965                   2,289         
Loss (gain) on disposal of assets          10                   5                   1,176                   (2,560)
Allowance for parts inventory obsolescence          150                   —                   1,750                   —         
Gain on extinguishment of debt          —                   —                   —                   (10,113)
Equity in earnings of unconsolidated entities          (766)          —                   (766)          —         
Changes in operating assets and liabilities:        
Trade accounts receivable, net          (5,590)          (9,701)          (2,820)          (9,936)
Other receivables, net          (465)          (979)          (1,111)          (1,872)
Inventory, net          (13,195)          (2,089)          (15,954)          11,678         
Prepaid expenses and other current assets          (2,177)          (1,643)          (1,504)          (1,148)
Deferred tax assets, net          4,607                   —                   21,548                   —         
Accounts payable, accrued liabilities, and accrued employee
compensation and benefits
          12,411                   9,231                   999                   15,254         
Operating lease liabilities          (386)          (555)          (1,619)          (1,616)
Other liabilities          (32,231)          50                   (31,974)          3,147         
Net cash (used in) provided by operating activities          (14,117)          7,987                   69,112                   59,423         
         
Cash Flows from Investing Activities:        
Additions to property, plant, equipment, mineral properties and other assets          (14,326)          (5,811)          (37,100)          (12,437)
Purchase of investments          (1,965)          —                   (12,864)          —         
Proceeds from sale of assets          —                   —                   46                   6,042         
Proceeds from redemptions/maturities of investments          1,504                   —                   1,504                   —         
Net cash used in investing activities          (14,787)          (5,811)          (48,414)          (6,395)
         
Cash Flows from Financing Activities:        
Debt prepayment costs          —                   —                   —                   (505)
Repayments of long-term debt          —                   —                   —                   (15,000)
Payments of financing lease          —                   —                   —                   (1,258)
Repayments of short-term borrowings on credit facility          —                   (29,817)          —                   (29,817)
Capitalized debt fees          (933)          —                   (933)          —         
Employee tax withholding paid for restricted stock upon vesting          —                   (2)          (4,362)          (382)
Repurchases of common stock          (2,881        )          —                   (2,881        )          —         
Proceeds from exercise of stock options          —                   30                   110                   81         
Net cash used in financing activities          (3,814)          (29,789)          (8,066)          (46,881)
         
Net Change in Cash, Cash Equivalents and Restricted Cash          (32,718)          (27,613)          12,632                   6,147         
Cash, Cash Equivalents and Restricted Cash, beginning of period          82,496                   53,944                   37,146                   20,184         
Cash, Cash Equivalents and Restricted Cash, end of period $        49,778          $        26,331          $        49,778          $        26,331         

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 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 September 30, Nine Months Ended September 30,
  2022   2021  2022   2021 
 (in thousands)
Net Income$        13,108          $        4,023         $        68,238          $        25,973         
Adjustments       
Loss (gain) on sale of assets         10                   5                  1,176                   (2,560)
Gain on extinguishment of debt         —                   —                  —                   (10,113)
Write-off of deferred financing fees         —                   —                  —                   60         
Make-whole payment         —                   —                  —                   505         
Calculated income tax effect(1)         (3)          —                  (306)          —         
Total adjustments         7                   5                  870                   (12,108)
Adjusted Net Income$        13,115          $        4,028         $        69,108          $        13,865         

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

 Three Months Ended September 30, Nine Months Ended September 30,
  2022  2021  2022   2021 
Net Income Per Diluted Share$        0.97         $        0.30         $        5.03          $        1.95         
Adjustments       
Loss (gain) on sale of assets         —                  —                  0.09                   (0.19)
Gain on extinguishment of debt         —                  —                  —                   (0.76)
Write-off of deferred financing fees         —                  —                  —                   —         
Make-whole payment         —                  —                  —                   0.04         
Calculated income tax effect(1)         —                  —                  (0.02)          —         
Total adjustments         —                  —                  0.07                   (0.91)
Adjusted Net Income Per Diluted Share$        0.97         $        0.30         $        5.10          $        1.04         

(1) Assumes an annual effective tax rate of 26% for 2022, and zero percent for 2021. Our tax rate for the three and nine months ended September 30, 2021 was zero percent because of the valuation allowance recorded against our deferred tax assets.

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, and believe it to be useful for investors, 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 September 30, Nine Months Ended September 30,
   2022  2021  2022  2021 
  (in thousands)
Net Income $        13,108         $        4,023         $        68,238         $        25,973         
Loss (gain) on sale of assets          10                  5                  1,176                  (2,560)
Gain on extinguishment of debt          —                  —                  —                  (10,113)
Interest expense          28                  82                  85                  1,426         
Income tax expense          4,903                  —                  22,131                  —         
Depreciation, depletion, and amortization          8,362                  8,430                  25,285                  26,509         
Amortization of intangible assets          80                  80                  241                  241         
Accretion of asset retirement obligation          491                  441                  1,471                  1,323         
Total adjustments          13,874                  9,038                  50,389                  16,826         
Adjusted EBITDA $        26,982         $        13,061         $        118,627         $        42,799         

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 Net Realized Sales Price per Ton:

  Three Months Ended September 30,
   2022  2021
(in thousands, except per ton amounts) Potash Trio® Potash Trio®
Total Segment Sales $        42,354         $        24,043         $        31,673         $        20,827        
Less: Segment byproduct sales          6,177                  885                  5,100                  1,332        
Freight costs          2,430                  4,135                  2,879                  4,038        
Subtotal $        33,747         $        19,023         $        23,694         $        15,457        
         
Divided by:        
Tons sold          46                  39                  62                  46        
Average net realized sales price per ton $        734         $        488         $        381         $        336        
         
  Nine Months Ended September 30,
   2022  2021
(in thousands, except per ton amounts) Potash Trio® Potash Trio®
Total Segment Sales $        147,622         $        100,561         $        112,944         $        71,444        
Less: Segment byproduct sales          15,938                  3,100                  15,696                  3,096        
Freight costs          8,117                  16,054                  11,174                  16,515        
Subtotal $        123,567         $        81,407         $        86,074         $        51,833        
         
Divided by:        
Tons sold          172                  169                  270                  191        
Average net realized sales price per ton $        718         $        482         $        319         $        271        
         


  Three Months Ended September 30, 2022
Product Potash Segment Trio® Segment Oilfield Solutions Segment Intersegment Eliminations Total
Potash $        36,177         $        —         $        —         $        (68) $        36,109        
Trio®          —                  23,158                  —                  —                   23,158        
Water          427                  796                  5,380                  —                   6,603        
Salt          2,845                  89                  —                  —                   2,934        
Magnesium Chloride          2,008                  —                  —                  —                   2,008        
Brine Water          897                  —                  792                  —                   1,689        
Other          —                  —                  2,251                  —                   2,251        
Total Revenue $        42,354         $        24,043         $        8,423         $        (68) $        74,752        
           
  Nine Months Ended September 30, 2022
Product Potash Segment Trio® Segment Oilfield Solutions Segment Intersegment Eliminations Total
Potash $        131,684         $        —         $        —         $        (228) $        131,456        
Trio®          —                  97,461                  —                  —                   97,461        
Water          1,564                  2,722                  13,260                  —                   17,546        
Salt          8,137                  378                  —                  —                   8,515        
Magnesium Chloride          4,022                  —                  —                  —                   4,022        
Brine Water          2,215                  —                  2,179                  —                   4,394        
Other          —                  —                  7,497                  —                   7,497        
Total Revenue $        147,622         $        100,561         $        22,936         $        (228) $        270,891        


  Three Months Ended September 30, 2021
Product Potash Segment Trio® Segment Oilfield Solutions Segment Intersegment Eliminations Total
Potash $        26,573         $        —         $        —         $        (55) $        26,518        
Trio®          —                  19,495                  —                  —                   19,495        
Water          263                  1,310                  4,382                  —                   5,955        
Salt          2,540                  22                  —                  —                   2,562        
Magnesium Chloride          1,921                  —                  —                  —                   1,921        
Brine Water          376                  —                  301                  —                   677        
Other          —                  —                  2,025                  —                   2,025        
Total Revenue $        31,673         $        20,827         $        6,708         $        (55) $        59,153        
           
  Nine Months Ended September 30, 2021
Product Potash Segment Trio® Segment Oilfield Solutions Segment Intersegment Eliminations Total
Potash $        97,248         $        —         $        —         $        (177) $        97,071        
Trio®          —                  68,348                  —                  —                   68,348        
Water          1,942                  2,808                  9,507                  —                   14,257        
Salt          6,587                  288                  —                  —                   6,875        
Magnesium Chloride          5,829                  —                  —                  —                   5,829        
Brine Water          1,338                  —                  735                  —                   2,073        
Other          —                  —                  4,051                  —                   4,051        
Total Revenue $        112,944         $        71,444         $        14,293         $        (177) $        198,504        


Three Months Ended
September 30, 2022
 Potash Trio® Oilfield Solutions Other Consolidated
Sales $        42,354         $        24,043         $        8,423         $        (68) $        74,752        
Less: Freight costs          3,726                  4,135                  —                  (68)          7,793        
Warehousing and handling
costs
          1,414                  1,127                  —                  —                   2,541        
Cost of goods sold          17,342                  12,278                  8,028                  —                   37,648        
Gross Margin $        19,872         $        6,503         $        395         $        —          $        26,770        
Depreciation, depletion, and amortization incurred1 $        6,318         $        1,072         $        867         $        185          $        8,442        
           
Nine Months Ended
September 30, 2022
 Potash Trio® Oilfield Solutions Other Consolidated
Sales $        147,622         $        100,561         $        22,936         $        (228) $        270,891        
Less: Freight costs          11,430                  16,055                  —                  (228)          27,257        
Warehousing and handling
costs
          3,947                  3,274                  —                  —                   7,221        
Cost of goods sold          58,383                  45,538                  16,735                  —                   120,656        
Gross Margin $        73,862         $        35,694         $        6,201         $        —          $        115,757        
Depreciation, depletion, and amortization incurred1 $        19,350         $        3,122         $        2,458         $        596          $        25,526        
           
Three Months Ended
September 30, 2021
 Potash Trio® Oilfield Solutions Other Consolidated
Sales $        31,673         $        20,827         $        6,708         $        (55) $        59,153        
Less: Freight costs          3,928                  4,038                  —                  (55)          7,911        
Warehousing and handling
costs
          1,241                  825                  —                  —                   2,066        
Cost of goods sold          18,385                  10,528                  6,061                  —                   34,974        
Costs associated with
abnormal production
          3,594                  —                  —                  —                   3,594        
Gross Margin $        4,525         $        5,436         $        647         $        —          $        10,608        
Depreciation, depletion, and amortization incurred1 $        6,257         $        1,321         $        818         $        114          $        8,510        
           
Nine Months Ended
September 30, 2021
 Potash Trio® Oilfield Solutions Other Consolidated
Sales $        112,944         $        71,444         $        14,293         $        (177) $        198,504        
Less: Freight costs          13,766                  16,515                  —                  (177)          30,104        
Warehousing and handling
costs
          4,004                  3,072                  —                  —                   7,076        
Cost of goods sold          68,251                  43,329                  12,235                  —                   123,815        
Costs associated with
abnormal production
          3,594                  —                  —                  —                   3,594        
Gross Margin $        23,329         $        8,528         $        2,058         $        —          $        33,915        
Depreciation, depletion and amortization incurred1 $        19,895         $        4,204         $        2,206         $        445          $        26,750        

(1) Depreciation, depletion, and amortization incurred for potash and Trio® excludes depreciation, depletion, and amortization amounts absorbed in or relieved from inventory.


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