INTREPID POTASH, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________
FORM 10-Q
_______________________________________________________
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x
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the Quarterly Period Ended March 31, 2017
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or
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¨
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from ______ to ______
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Commission File Number: 001-34025
INTREPID POTASH, INC.
(Exact Name of Registrant as Specified in its Charter)
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Delaware
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26-1501877
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(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
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707 17th Street, Suite 4200, Denver, Colorado
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80202
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(Address of principal executive offices)
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(Zip Code)
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(303) 296-3006
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
x
No
¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
¨
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Accelerated filer
x
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Non
-
accelerated filer
¨
(Do not check if a smaller reporting company) |
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Smaller reporting company
¨
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Emerging growth company
¨
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
x
As of
April 26, 2017
, the registrant had outstanding
129,064,296
shares of common stock, par value $0.001.
INTREPID POTASH, INC.
TABLE OF CONTENTS
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Page
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i
INTREPID POTASH, INC.
(In thousands, except share and per share amounts)
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March 31,
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December 31,
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|||||||
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2017
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2016
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|||||||
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ASSETS
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||||||||
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Cash and cash equivalents
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$
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20,770
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$
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4,464
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Accounts receivable:
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||||||||
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Trade, net
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19,119
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10,343
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||||
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Other receivables, net
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892
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492
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Refundable income taxes
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1,384
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1,379
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||||
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Inventory, net
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86,194
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94,355
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||||
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Prepaid expenses and other current assets
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8,317
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12,710
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||||
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Total current assets
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136,676
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123,743
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Property, plant, equipment, and mineral properties, net
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374,293
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388,490
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Long-term parts inventory, net
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23,731
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21,037
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||||
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Other assets, net
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4,381
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7,631
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||||
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Total Assets
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$
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539,081
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$
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540,901
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LIABILITIES AND STOCKHOLDERS' EQUITY
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||||||||
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Accounts payable:
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||||||||
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Trade
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$
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8,981
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$
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10,210
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Related parties
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28
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31
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Accrued liabilities
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10,742
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8,690
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Accrued employee compensation and benefits
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2,762
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4,225
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Other current liabilities
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145
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964
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Total current liabilities
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22,658
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24,120
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Long-term debt, net
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88,017
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133,434
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Asset retirement obligation
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20,365
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19,976
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Total Liabilities
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131,040
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177,530
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Commitments and Contingencies
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Common stock, $0.001 par value; 400,000,000 shares authorized;
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||||||||
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and 125,995,330 and 75,839,998 shares outstanding
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||||||||
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at March 31, 2017, and December 31, 2016, respectively
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126
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76
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Additional paid-in capital
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642,071
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583,653
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Retained deficit
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(234,156
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)
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(220,358
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)
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Total Stockholders' Equity
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408,041
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363,371
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Total Liabilities and Stockholders' Equity
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$
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539,081
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$
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540,901
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||
See accompanying notes to these condensed consolidated financial statements.
1
INTREPID POTASH, INC.
(In thousands, except share and per share amounts)
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Three Months Ended March 31,
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2017
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2016
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Sales
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$
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48,332
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$
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73,277
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Less:
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||||||||
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Freight costs
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8,721
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10,332
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Warehousing and handling costs
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2,770
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2,664
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Cost of goods sold
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35,873
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59,777
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Lower-of-cost-or-market inventory adjustments
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3,824
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9,007
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Costs associated with abnormal production
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—
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650
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Gross Deficit
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(2,856
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)
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(9,153
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)
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Selling and administrative
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4,404
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6,570
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Accretion of asset retirement obligation
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389
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442
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Restructuring expense
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—
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400
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Care and maintenance expense
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692
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—
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Other operating expense (income)
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1,650
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(104
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)
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Operating Loss
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(9,991
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)
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(16,461
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)
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Other Income (Expense)
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||||||||
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Interest expense, net
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(4,421
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)
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(2,229
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)
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Interest income
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3
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123
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Other income
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736
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142
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Loss Before Income Taxes
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(13,673
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)
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(18,425
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)
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Income Tax Expense
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(5
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)
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(2
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)
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Net Loss
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$
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(13,678
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)
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$
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(18,427
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)
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Weighted Average Shares Outstanding:
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||||||||
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Basic
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81,992,071
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75,756,535
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Diluted
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81,992,071
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75,756,535
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Loss Per Share:
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||||||||
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Basic
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$
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(0.17
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)
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$
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(0.24
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)
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Diluted
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$
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(0.17
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)
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$
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(0.24
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)
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||
See accompanying notes to these condensed consolidated financial statements.
2
INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
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Three Months Ended March 31,
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||||||||
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2017
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2016
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|||||||
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Net Loss
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$
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(13,678
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)
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$
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(18,427
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)
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||
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Other Comprehensive Income:
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||||||
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Net change in unrealized gain on investments available for sale,
net of tax |
—
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30
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Other Comprehensive Income
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—
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30
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||||
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Comprehensive Loss
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$
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(13,678
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)
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$
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(18,397
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)
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See accompanying notes to these condensed consolidated financial statements.
3
INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
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Common Stock
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Additional Paid-in Capital
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Retained Deficit
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Total Stockholders' Equity
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||||||||||||||||
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Shares
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Amount
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||||||||||||||||||
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Balance, December 31, 2016
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75,839,998
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$
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76
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$
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583,653
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$
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(220,358
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)
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$
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363,371
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|||||
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Adjustment to opening balance
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120
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(120
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)
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—
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|||||||||||||
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Issuance of common stock
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50,072,917
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50
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57,418
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57,468
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Net loss
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—
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—
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—
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(13,678
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)
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(13,678
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)
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Stock-based compensation
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—
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—
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989
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—
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989
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|||||||||
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Vesting of restricted common stock, net of restricted common stock used to fund employee income tax withholding due upon vesting
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82,415
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—
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(109
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)
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—
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(109
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)
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|||||||||
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Balance, March 31, 2017
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125,995,330
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|
$
|
126
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$
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642,071
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$
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(234,156
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)
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$
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408,041
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|
|||||
See accompanying notes to these condensed consolidated financial statements.
4
INTREPID POTASH, INC.
(In thousands)
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Three Months Ended March 31,
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||||||||
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2017
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2016
|
|||||||
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Cash Flows from Operating Activities:
|
||||||||
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Net loss
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$
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(13,678
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)
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$
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(18,427
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)
|
||
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Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
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||||||||
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Depreciation, depletion, and accretion
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9,323
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14,368
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|
||||
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Amortization of deferred financing costs
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821
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|
783
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|
||||
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Stock-based compensation
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989
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1,046
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|
||||
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Lower-of-cost-or-market inventory adjustments
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3,824
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9,007
|
|
||||
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Loss (gain) on disposal of assets
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1,559
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|
(15
|
)
|
||||
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Allowance for parts inventory obsolescence
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—
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|
532
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|
||||
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Other
|
3,006
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258
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|
||||
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Changes in operating assets and liabilities:
|
||||||||
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Trade accounts receivable, net
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(8,776
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)
|
(14,689
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)
|
||||
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Other receivables, net
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(399
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)
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(191
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)
|
||||
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Refundable income taxes
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(5
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)
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40
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|
||||
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Inventory, net
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1,643
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|
(7,745
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)
|
||||
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Prepaid expenses and other current assets
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4,393
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7,303
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|
||||
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Accounts payable, accrued liabilities, and accrued employee
compensation and benefits |
(65
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)
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6,596
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|
||||
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Other liabilities
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(819
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)
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40
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|
||||
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Net cash provided by (used in) operating activities
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1,816
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(1,094
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)
|
||||
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Cash Flows from Investing Activities:
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||||||||
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Additions to property, plant, equipment, and mineral properties
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(2,423
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)
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(6,018
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)
|
||||
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Proceeds from sale of property, plant, equipment, and mineral properties
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5,553
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|
—
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|
||||
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Proceeds from sale of investments
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1
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23,634
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|
||||
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Net cash provided by investing activities
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3,131
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17,616
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|
||||
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Cash Flows from Financing Activities:
|
||||||||
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Issuance of common stock, net of transaction costs
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57,468
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|
—
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|
||||
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Repayments of long-term debt
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(46,000
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)
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—
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|
||||
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Debt issuance costs
|
—
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(1,235
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)
|
||||
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Employee tax withholding paid for restricted stock upon vesting
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(109
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)
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(172
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)
|
||||
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Net cash provided by (used in) financing activities
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11,359
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(1,407
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)
|
||||
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Net Change in Cash and Cash Equivalents
|
16,306
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15,115
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|
||||
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Cash and Cash Equivalents, beginning of period
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4,464
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|
9,307
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|
||||
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Cash and Cash Equivalents, end of period
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$
|
20,770
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$
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24,422
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|
||
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Supplemental disclosure of cash flow information
|
||||||||
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Net cash paid (refunded) during the period for:
|
||||||||
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Interest
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$
|
2,467
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$
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134
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|
||
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Income taxes
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$
|
10
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$
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(38
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)
|
||
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Accrued purchases for property, plant, equipment, and mineral properties
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$
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214
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$
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2,004
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||
See accompanying notes to these condensed consolidated financial statements.
5
INTREPID POTASH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
"Intrepid," "our," "we," or "us" means Intrepid Potash, Inc. and its consolidated subsidiaries.
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Note 1
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— COMPANY BACKGROUND
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We are the only producer of muriate of potash ("potassium chloride" or "potash") in the United States and are one of two producers of langbeinite ("sulfate of potash magnesia"), which we market and sell as Trio
®
. We sell potash and Trio
®
primarily into the agricultural market as a fertilizer. We also sell these products into the animal feed market as a nutritional supplement and sell potash into the industrial market as a component in drilling and fracturing fluids for oil and gas wells and other industrial inputs. In addition, we sell by-products including salt, magnesium chloride, and brine. These by-product credits represented approximately
6%
of total cost of goods sold for the three months ended March 31, 2017. We also sell water, which is recorded in other income.
We produce potash from
three
solution mining facilities: our HB solar solution mine in Carlsbad, New Mexico, our solution mine in Moab, Utah, and our solar brine recovery mine in Wendover, Utah. We also operate the North compaction facility in Carlsbad, New Mexico, which compacts and granulates product from the HB mine. We produce Trio
®
from our conventional underground East mine in Carlsbad, New Mexico.
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Note 2
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— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Principles of Consolidation
—Our consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation of interim financial information, have been included.
Reclassifications of Prior Period Presentation
—Certain prior period amounts have been reclassified in order to conform to the current period presentation. These reclassifications had no effect on the reported results of operations.
Use of Estimates
—The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.
Significant estimates include, but are not limited to, those for proven and probable mineral reserves, the related present value of estimated future net cash flows, useful lives of plant assets, asset retirement obligations, normal inventory production levels, inventory valuations, the valuation of equity awards, valuation of investments, the valuation of receivables, valuation of our deferred tax assets, and estimated blended income tax rates utilized in the current and deferred income tax calculations. There are numerous uncertainties inherent in estimating quantities of proven and probable reserves, projecting future rates of production, and the timing of development expenditures. Future mineral prices may vary significantly from the prices in effect at the time the estimates are made, as may estimates of future operating costs. The estimate of proven and probable mineral reserves, the related present value of estimated future cash flows, and useful lives of plant assets can affect various other items, including depletion; the net carrying value of our mineral properties; the useful lives of related property, plant, and equipment; depreciation expense; and estimates associated with recoverability of long-lived assets and asset retirement obligations. Specific to income tax items, we experience fluctuations in the valuation of the deferred tax assets and liabilities due to changing state income tax rates and the blend of state tax rates.
Revenue Recognition
—Revenue is recognized when evidence of an arrangement exists; risks and rewards of ownership have been transferred to customers, which is generally when title passes; the selling price is fixed and determinable; and collection is reasonably assured. Title passes at the designated shipping point for the majority of sales, but, in a few cases, title passes at the delivery destination. The shipping point may be the plant, a distribution warehouse, a customer warehouse, or a port. Title passes for some international shipments upon payment by the purchaser; however, revenue is not recognized for these transactions until shipment because the risks and rewards of ownership have not transferred pursuant to a contractual arrangement. Prices are generally set at the time of, or prior to, shipment. In cases where
6
the final price is determined after shipment and agreed to with our customer, revenue is recognized when the final sales price is fixed and determinable and the other revenue recognition criteria have been met.
Sales are reported on a gross basis. We quote prices to customers both on a delivered basis and on the basis of pick-up at our plants and warehouses. When a sale occurs on a delivered basis, we incur and, in turn, bill the customer and record as gross revenue the product sales value, freight, packaging, and certain other distribution costs. Many customers, however, arrange and pay for these costs directly and, in these situations, only the product sales are included in gross revenues.
By-Products
—
When by-product inventories are sold, we record the sale of by-products as a credit to cost of goods sold. By-product inventory is carried at net realizable value.
Inventory
—
Inventory consists of product and by-product stocks that are ready for sale; mined ore; potash in evaporation ponds, which is considered work-in-process; and parts and supplies inventory. Product and by-product inventory cost is determined using the lower of weighted average cost or estimated net realizable value and includes direct costs, maintenance, operational overhead, depreciation, depletion, and equipment lease costs applicable to the production process. Direct costs, maintenance, and operational overhead include labor and associated benefits.
We evaluate our production levels and costs to determine if any should be deemed abnormal and therefore excluded from inventory costs and expensed directly during the applicable period. The assessment of normal production levels is judgmental and unique to each period. We model normal production levels and evaluate historical ranges of production by operating plant in assessing what is deemed to be normal.
Property, Plant, Equipment, Mineral Properties, and Development Costs
—Property, plant, and equipment are stated at historical cost. Expenditures for property, plant, and equipment relating to new assets or improvements are capitalized, provided the expenditure extends the useful life of an asset or extends the asset's functionality. Property, plant, and equipment are depreciated under the straight-line method using estimated useful lives. The estimated useful lives of property, plant, and equipment are evaluated periodically as changes in estimates occur.
No
depreciation is taken on assets classified as construction in progress until the asset is placed into service. Gains and losses are recorded upon retirement, sale, or disposal of assets. Maintenance and repair costs are recognized as period costs when incurred. Capitalized interest, to the extent of debt outstanding, is calculated and capitalized on assets that are being constructed, drilled, or built or that are otherwise classified as construction in progress.
Mineral properties and development costs, which are referred to collectively as mineral properties, include acquisition costs, the cost of drilling production wells, and the cost of other development work, all of which are capitalized. Depletion of mineral properties is calculated using the units-of-production method over the estimated life of the relevant ore body. The lives of reserves used for accounting purposes are shorter than current reserve life determinations due to uncertainties inherent in long-term estimates. These reserve life estimates have been prepared by us and reviewed and independently determined by mine consultants. Tons of potash and langbeinite in the proven and probable reserves are expressed in terms of expected finished tons of product to be realized, net of estimated losses. Market price fluctuations of potash or Trio
®
, as well as increased production costs or reduced recovery rates, could render proven and probable reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of reserves. In addition, the provisions of our mineral leases, including royalty provisions, are subject to periodic readjustment by the state and federal government, which could affect the economics of our reserve estimates. Significant changes in the estimated reserves could have a material impact on our results of operations and financial position.
Loss per Share
—Basic loss per common share of stock is calculated by dividing net loss by the weighted average basic common shares outstanding for the respective period.
Potentially dilutive securities, including restricted stock, stock options, and performance units, are excluded from the diluted weighted average shares outstanding computation in periods in which they have an anti-dilutive effect, such as when there is a net loss. The treasury-stock method is used to measure the dilutive impact of restricted stock, stock options outstanding, and performance units. Following the lapse of the vesting period of restricted stock, the shares are considered issued and therefore are included in the number of issued and outstanding shares for purposes of these calculations.
7
|
Note 3
|
— LOSS PER SHARE
|
Potentially dilutive securities, including restricted stock, stock options, and performance units, are excluded from the diluted weighted average shares outstanding computation in periods in which they have an anti-dilutive effect, such as when there is a net loss. The treasury-stock method is used to measure the dilutive impact of restricted stock, stock options outstanding, and performance units. The following table shows the shares that have an anti-dilutive effect and are excluded from the diluted weighted average shares outstanding computations:
|
Three Months Ended March 31,
|
||||||
|
2017
|
2016
|
|||||
|
Anti-dilutive shares of restricted common stock
|
3,398,777
|
|
336,330
|
|
||
|
Anti-dilutive shares of stock options outstanding
|
1,866,038
|
|
235,854
|
|
||
|
Anti-dilutive shares of performance units
|
63,025
|
|
126,050
|
|
||
The following table sets forth the calculation of basic and diluted loss per share (in thousands, except per share amounts):
|
Three Months Ended March 31,
|
||||||||
|
2017
|
2016
|
|||||||
|
Net loss
|
$
|
(13,678
|
)
|
$
|
(18,427
|
)
|
||
|
Basic weighted average common shares outstanding
|
81,992
|
|
75,757
|
|
||||
|
Add: Dilutive effect of restricted stock
|
—
|
|
—
|
|
||||
|
Add: Dilutive effect of performance units
|
—
|
|
—
|
|
||||
|
Diluted weighted average common shares outstanding
|
81,992
|
|
75,757
|
|
||||
|
Loss per share:
|
||||||||
|
Basic
|
$
|
(0.17
|
)
|
$
|
(0.24
|
)
|
||
|
Diluted
|
$
|
(0.17
|
)
|
$
|
(0.24
|
)
|
||
In March 2017, we issued
50.1 million
shares of common stock in an underwritten public offering for net proceeds of
$57.5 million
. All of the shares issued were newly issued shares.
The net proceeds from the issuance have been or will be used to partially repay indebtedness and for general corporate purposes.
Note 4
— CASH AND CASH EQUIVALENTS
As of
March 31, 2017
, and
December 31, 2016
, our cash and cash equivalents consisted of only cash as follows (in thousands):
|
March 31, 2017
|
December 31, 2016
|
||||||
|
Cash
|
$
|
20,770
|
|
$
|
4,464
|
|
|
8
|
Note 5
|
— INVENTORY AND LONG-TERM PARTS INVENTORY
|
The following summarizes our inventory, recorded at the lower of weighted average cost or estimated net realizable value, as of
March 31, 2017
, and
December 31, 2016
(in thousands):
|
March 31, 2017
|
December 31, 2016
|
|||||||
|
Finished goods product inventory
|
$
|
52,396
|
|
$
|
52,571
|
|
||
|
In-process mineral inventory
|
16,377
|
|
22,126
|
|
||||
|
Total product inventory
|
68,773
|
|
74,697
|
|
||||
|
Current parts inventory, net
|
17,421
|
|
19,658
|
|
||||
|
Total current inventory, net
|
86,194
|
|
94,355
|
|
||||
|
Long-term parts inventory, net
|
23,731
|
|
21,037
|
|
||||
|
Total inventory, net
|
$
|
109,925
|
|
$
|
115,392
|
|
||
Parts inventories are shown net of any required allowances. At
March 31, 2017
, and
December 31, 2016
, allowances for parts inventory obsolescence were
$2.5 million
and
$3.1 million
, respectively.
During the
three months ended March 31, 2017
, and
2016
, we recorded charges of approximately
$3.8 million
and
$9.0 million
, respectively, as a result of routine assessments of the lower of weighted average cost or estimated net realizable value of our finished goods product inventory.
During the beginning of 2016 before the conversion of the East facility to Trio
®
-only, we suspended potash production at our East facility for a total of seven days as we performed a testing run and converted the East facility to a Trio
®
-only facility. As a result of the suspension of production, we determined that approximately
$0.7 million
of production costs at our East facility would have been allocated to additional tons produced, assuming we had been operating at normal production rates for the first quarter of March 31, 2016. Accordingly, these costs were excluded from our inventory values and instead expensed in 2016 as period production costs.
|
Note 6
|
— PROPERTY, PLANT, EQUIPMENT, AND MINERAL PROPERTIES
|
Property, plant, equipment, and mineral properties were comprised of the following (in thousands):
|
March 31, 2017
|
December 31, 2016
|
|||||||
|
Buildings and plant
|
$
|
79,432
|
|
$
|
82,457
|
|
||
|
Machinery and equipment
|
225,570
|
|
227,987
|
|
||||
|
Vehicles
|
4,743
|
|
4,750
|
|
||||
|
Office equipment and improvements
|
12,598
|
|
12,505
|
|
||||
|
Ponds and land improvements
|
54,990
|
|
57,474
|
|
||||
|
Total depreciable assets
|
$
|
377,333
|
|
$
|
385,173
|
|
||
|
Accumulated depreciation
|
(121,559
|
)
|
(116,194
|
)
|
||||
|
Total depreciable assets, net
|
$
|
255,774
|
|
$
|
268,979
|
|
||
|
Mineral properties and development costs
|
$
|
138,785
|
|
$
|
138,578
|
|
||
|
Accumulated depletion
|
(23,742
|
)
|
(21,974
|
)
|
||||
|
Total depletable assets, net
|
$
|
115,043
|
|
$
|
116,604
|
|
||
|
Land
|
$
|
519
|
|
$
|
719
|
|
||
|
Construction in progress
|
$
|
2,957
|
|
$
|
2,188
|
|
||
|
Total property, plant, equipment, and mineral properties, net
|
$
|
374,293
|
|
$
|
388,490
|
|
||
9
We incurred the following expenses for depreciation, depletion, and accretion, including expenses capitalized into inventory, for the following periods (in thousands):
|
Three Months Ended March 31,
|
||||||||
|
2017
|
2016
|
|||||||
|
Depreciation
|
$
|
7,160
|
|
$
|
12,482
|
|
||
|
Depletion
|
1,774
|
|
1,444
|
|
||||
|
Accretion
|
389
|
|
442
|
|
||||
|
Total incurred
|
$
|
9,323
|
|
$
|
14,368
|
|
||
|
Note 7
|
|
Senior Notes
—In 2013, we originally issued
$150 million
aggregate principal amount of senior notes (the "Notes") pursuant to a note purchase agreement entered into in August 2012. On October 31, 2016, we entered into a revised note purchase agreement governing the Notes.
As of
March 31, 2017
, after the repayment of
$46 million
of principal in the first quarter, we had outstanding
$89 million
of the Notes consisting of the following series:
|
•
|
$35.6 million
of Senior Notes, Series A, due April 16, 2020
|
|
•
|
$26.7 million
of Senior Notes, Series B, due April 14, 2023
|
|
•
|
$26.7 million
of Senior Notes, Series C, due April 16, 2025
|
Under the revised agreement, we granted to the collateral agent for the noteholders a first lien on substantially all of our non-current assets and a second lien on substantially all of our current assets.
The revised agreement provides for the following:
|
•
|
The agreement requires us to maintain a minimum trailing twelve-month adjusted EBITDA, which adjusts over time and is measured quarterly through March 2018, ranging from negative
$15 million
in the period ended March 31, 2017 to negative
$7.5 million
in the period ending March 31, 2018. Adjusted EBITDA is a non-GAAP measure that is calculated as adjusted earnings before interest, income taxes, depreciation, amortization, and certain other expenses for the prior four quarters, as defined under the agreement. Our adjusted EBITDA as calculated under the agreement was
$3.7 million
for the four quarters ended March 31, 2017.
|
|
•
|
The agreement requires us to maintain a minimum fixed charge coverage amount of negative
$15 million
and negative
$10 million
for the quarters ending June 30, 2018, and September 30, 2018, respectively. The agreement also includes requirements relating to a leverage ratio and a fixed charge coverage ratio to be tested on a quarterly basis commencing with the quarter ending June 30, 2018, with respect to the leverage ratio, and December 31, 2018, with respect to the fixed charge coverage ratio. The maximum leverage ratio will be
11.5
to 1.0 for the quarter ending June 30, 2018, and decreases to
3.5
to 1.0 for the quarter ending September 30, 2019, and each quarter thereafter. The minimum fixed charge coverage ratio will be
0.25
to 1.0 for the quarter ending December 31, 2018, and increases to
1.3
to 1.0 for the quarter ending September 30, 2019, and each quarter thereafter. In general, our fixed charge coverage amount is calculated as adjusted EBITDA for the prior four quarters, minus capital expenditures, cash paid for income taxes, and interest expense plus scheduled principal amortization of long-term funded indebtedness; our leverage ratio is calculated as the ratio of funded indebtedness to adjusted EBITDA for the prior four quarters; and our fixed charge coverage ratio is calculated as the ratio of adjusted EBITDA for the prior four quarters, minus capital expenditures and cash paid for income taxes, to interest expense plus scheduled principal amortization of long-term funded indebtedness.
|
|
•
|
The interest rates for the Notes increased by
4.5%
above the previous rates such that the Series A Senior Notes now bear interest at
7.73%
, the Series B Senior Notes now bear interest at
8.63%
, and the Series C Senior Notes now bear interest at
8.78%
, which reflect the highest rates in a pricing grid under the agreement. The interest rates are adjusted quarterly based upon our financial performance and certain financial covenant levels. In addition, additional interest of
2%
, which may be paid in kind, will begin to accrue on April 1, 2018, unless we satisfy certain financial covenant tests.
|
|
•
|
We are required to make certain offers to prepay the Notes with the proceeds of dispositions of certain specified property and with the proceeds of certain equity issuances, as set forth in the agreement. During the quarter
|
10
ended March 31, 2017, we repaid the Notes by
$5.5 million
in conjunction with the sale of an asset and
$40.5 million
with the proceeds of an equity offering.
We were in compliance with the applicable covenants under the revised agreement as of March 31, 2017.
Our outstanding long-term debt, net, as of March 31, 2017, and December 31, 2016 (in thousands), is as follows:
|
March 31, 2017
|
December 31, 2016
|
||||||
|
Senior Notes
|
$
|
89,000
|
|
$
|
135,000
|
|
|
|
Less deferred financing costs
|
983
|
|
1,566
|
|
|||
|
Long-term debt, net
|
$
|
88,017
|
|
$
|
133,434
|
|
|
The obligations under the Notes are unconditionally guaranteed by several of our subsidiaries.
Interest expense is recorded net of any capitalized interest associated with investments in capital projects. We incurred gross interest expense of
$4.5 million
and
$2.3 million
for the three months ended
March 31, 2017
, and
2016
, respectively.
Amounts included in interest expense for the three months ended
March 31, 2017
, and 2016 (in thousands) are as follows:
|
Three Months Ended March 31,
|
||||||||
|
2017
|
2016
|
|||||||
|
Interest on notes and line of credit commitment fees
|
$
|
2,836
|
|
$
|
1,536
|
|
||
|
Make-whole payment made March 31, 2017
|
794
|
|
—
|
|
||||
|
Amortization of deferred financing costs
|
821
|
|
783
|
|
||||
|
Gross interest expense
|
4,451
|
|
2,319
|
|
||||
|
Less capitalized interest
|
(30
|
)
|
(90
|
)
|
||||
|
Interest expense, net
|
$
|
4,421
|
|
$
|
2,229
|
|
||
Credit Facility
—On October 31, 2016, we entered into a credit agreement with Bank of Montreal that provides an asset-based revolving credit facility of up to
$35 million
in aggregate principal amount. The amount available is subject to monthly borrowing base limits based on our inventory and receivables. If our total remaining availability under the credit facility was to fall below
$6 million
, we would be subject to a minimum fixed charge coverage ratio of
1
to 1, which we would not currently meet. Any borrowings on the credit facility bear interest at
1.75%
to
2.25%
above LIBOR (London Interbank Offered Rate), based on average availability under the credit facility. We have granted to Bank of Montreal a first lien on substantially all of our current assets and a second lien on substantially all of our non-current assets. The credit facility expires on October 31, 2018. We occasionally borrow and repay amounts under the facility for near-term working capital needs and may do so in the future. As of March 31, 2017, there were
no
amounts outstanding under the facility, other than
$3.5 million
in letters of credit. Considering the outstanding letters of credit and the fixed charge coverage ratio requirement described above, we have
$25.5 million
available under the facility as of March 31, 2017. We were in compliance with the applicable covenants under the facility as of March 31, 2017.
OF POSSIBLE FUTURE PUBLIC DEBT
Intrepid Potash, Inc., as the parent company, has no independent assets or operations, and operations are conducted solely through its subsidiaries. Cash generated from operations is held at the parent company level as cash on hand. Cash on hand totaled
$20.8 million
and
$4.5 million
at
March 31, 2017
, and
December 31, 2016
, respectively. In the event that one or more of our wholly-owned operating subsidiaries guarantee public debt securities in the future, those guarantees will be full and unconditional and will constitute the joint and several obligations of the subsidiary guarantors. Our other subsidiaries are minor. There are no restrictions on our ability to obtain cash dividends or other distributions of funds from the subsidiary guarantors, except those imposed by applicable law.
11
We recognize an estimated liability for future costs associated with the abandonment and reclamation of our mining properties. A liability for the fair value of an asset retirement obligation and a corresponding increase to the carrying value of the related long-lived asset are recorded as the mining operations occur or the assets are acquired.
Our asset retirement obligation is based on the estimated cost to abandon and reclaim the mining operations, the economic life of the properties, and federal and state regulatory requirements. The liability is discounted using credit adjusted risk-free rate estimates at the time the liability is incurred or when there are revisions to estimated costs. The credit adjusted risk-free rates used to discount our abandonment liabilities range from
6.9%
to
9.7%
. Revisions to the liability occur due to construction of new or expanded facilities, changes in estimated abandonment costs or economic lives, or if federal or state regulators enact new requirements regarding the abandonment or reclamation of mines.
Following is a table of the changes to our asset retirement obligation for the following periods (in thousands):
|
Three Months Ended March 31,
|
||||||||
|
2017
|
2016
|
|||||||
|
Asset retirement obligation, at beginning of period
|
$
|
19,976
|
|
$
|
22,951
|
|
||
|
Accretion of discount
|
389
|
|
442
|
|
||||
|
Total asset retirement obligation, at end of period
|
$
|
20,365
|
|
$
|
23,393
|
|
||
The undiscounted amount of asset retirement obligation was
$59.3 million
as of
March 31, 2017
.
Cash Bonus Programs
—At times, we use cash bonus programs that allow participants to receive varying percentages of their aggregate base salary. Any awards under the cash bonus programs are based on a variety of elements related to our performance in certain production, operational, financial, and other areas, as well as the participants' individual performance. We accrue cash bonus expense related to the applicable year's performance. As part of our cost savings initiatives, we did not implement a cash bonus programs for 2016 and have not implemented a cash bonus program for 2017.
Equity Incentive Compensation Plan
—Our Board of Directors and stockholders adopted a long-term incentive compensation plan called the Intrepid Potash, Inc. Amended and Restated Equity Incentive Plan (the "Plan"). We have issued common stock, restricted shares of common stock, performance units, and non-qualified stock option awards under the Plan. As of
March 31, 2017
, the following awards were outstanding under the Plan:
3,254,164
shares of restricted stock; performance units representing
126,050
shares of common stock; and options to purchase
1,846,645
shares of common stock. As of
March 31, 2017
,
460,640
shares of common stock remained available for issuance under the Plan.
Restricted Stock
•
Restricted Stock with Service-Based Vesting
—Under the Plan, the Compensation Committee of the Board of Directors (the "Compensation Committee") has granted restricted stock to members of the Board of Directors, executive officers, and other key employees. The awards contain service conditions associated with continued employment or service. The terms of the restricted stock provide voting and regular dividend rights to the holders of the awards. Upon vesting, the restrictions on the restricted stock lapse and the shares are considered issued and outstanding for accounting purposes.
In 2016, 2015, and 2014, the Compensation Committee granted restricted stock to executives and key employees under the Plan as part of our annual equity award program. The 2016 awards vest over
four
years, and the 2015 and 2014 awards vest over
three
years, subject to continued employment or service. From time to time, the Compensation Committee grants restricted stock to newly hired or promoted employees or other employees or consultants who have achieved extraordinary personal performance objectives. Restricted stock awards generally vest over
one
to
four
years, subject to continued employment or service.
In 2016, the Compensation Committee granted
562,010
shares of restricted stock to non-employee members of the Board of Directors and one employee member of the Board of Directors under the Plan for their annual service as directors. The restricted stock vests one year after the date of grant, subject to continued service.
In measuring compensation expense associated with the grant of restricted stock, we use the fair value of the award, determined as the closing stock price for our common stock on the grant date. Compensation expense is recorded
12
monthly over the vesting period of the award. Total compensation expense related to the restricted stock awards was
$0.7 million
for each of the three months ended
March 31, 2017
, and
2016
. As of
March 31, 2017
, there was
$3.2 million
of total remaining unrecognized compensation expense related to restricted stock that will be expensed through 2020.
•
Restricted Stock with Service- and Market-Condition-Based Vesting
—In 2016, the Compensation Committee granted restricted stock to a member of our executive team as part of his annual compensation package. The restricted stock vests in
four
equal installments, subject to his continued employment; provided however, that no vesting occurs unless and until the closing market price of our common stock equals or exceeds
$2.06
per share, which is double the closing price of our common stock on the date of grant, for 20 consecutive trading days, on or before the five-year anniversary of the grant date. As of March 31, 2017, this market condition has not been met.
In measuring compensation expense associated with this grant of restricted stock, we use the fair value of the award, determined using a Monte Carlo simulation valuation model. Compensation expense is recorded monthly over the vesting period of the award.
A summary of activity relating to our restricted stock for the quarter ended
March 31, 2017
, is presented below:
|
Weighted Average
Grant-Date Fair Value |
|||||||
|
Shares
|
|||||||
|
Restricted stock, beginning of period
|
3,531,418
|
|
$
|
1.78
|
|
||
|
Granted
|
—
|
|
$
|
—
|
|
||
|
Vested
|
(131,183
|
)
|
$
|
14.39
|
|
||
|
Forfeited
|
(146,071
|
)
|
$
|
1.29
|
|
||
|
Restricted stock, end of period
|
3,254,164
|
|
$
|
1.52
|
|
||
Performance Units
In 2015, the Compensation Committee granted at-risk performance units under the Plan to a member of our executive team as part of his annual compensation package. The performance units vest in February 2018, and payout, if any, is based on market-based conditions relating to one-, two- and three-year performance periods beginning on the grant date. No shares were earned under the first, one-year performance period or the second, two-year performance period. As of
March 31, 2017
, a total of
126,050
shares of common stock were available for future payout under these performance units, subject to the third, three-year performance measure being met and continued employment through the vesting date.
Non-qualified Stock Options
•
Non-qualified Stock Options with Service-Based Vesting
—In 2016 and from 2009 to 2011, the Compensation Committee issued non-qualified stock options under the Plan to our executives and other key employees as part of our annual award program. The stock options granted in 2016 vest over four years and have a ten-year term from the grant date. The stock options granted from 2009 to 2011 generally vested over three years. In measuring compensation expense for options, we estimated the fair value of the award on the grant dates using the Black‑Scholes option valuation model. Option valuation models require the input of highly subjective assumptions, including the expected volatility of the price of the underlying stock.
The following assumptions were used to compute the weighted average fair market value of options granted in 2016:
|
Risk free interest rate
|
1.8
|
%
|
|
|
Dividend yield
|
0.0
|
%
|
|
|
Estimated volatility
|
63.8
|
%
|
|
|
Expected option life
|
6.25 years
|
|
|
Our estimate of volatility was based on our historic volatility. The estimate of expected option life was determined based on the "simplified method," giving consideration to the overall vesting period and the contractual terms of the award. This method was used because we have no option exercise history for options issued prior to 2016. The risk-
13
free interest rate for the period that matched the option awards' expected life was based on the U.S. Treasury constant maturity yield at the time of grant.
•
Non-qualified Stock Options with Service- and Market-Condition-Based Vesting
—In 2016, the Compensation Committee granted
600,000
non-qualified stock options with service- and market-condition-based vesting requirements under the Plan to a member of our executive team as part of his annual compensation package. The stock options vest in
four
equal annual installments, subject to continued employment; provided, however, that no vesting occurs unless and until the closing market price of our common stock equals or exceeds
$2.06
per share, which is double the closing price of our stock on the date of grant, for 20 consecutive trading days on or before the five-year anniversary of the grant date. As of March 31, 2017, this market condition has not been met.
In measuring compensation expense associated with this grant of non-qualified stock options, we used the fair value of the award, determined using a Monte Carlo simulation valuation model. Compensation expense is recorded monthly over the vesting period of the award.
Non-Qualified Stock Option Activity
A summary of our stock option activity for the
three months ended March 31, 2017
, is as follows:
|
Shares
|
Weighted Average Exercise Price
|
||||
|
Outstanding non-qualified stock
options, beginning of period |
1,883,706
|
|
$3.90
|
||
|
Granted
|
—
|
|
$—
|
||
|
Exercised
|
—
|
|
$—
|
||
|
Forfeited
|
(30,165
|
)
|
$1.03
|
||
|
Expired
|
(6,896
|
)
|
$27.33
|
||
|
Outstanding non-qualified stock
options, end of period |
1,846,645
|
|
$3.86
|
||
|
Vested or expected to vest,
end of period |
1,846,645
|
|
$3.86
|
||
|
Exercisable non-qualified stock
options, end of period |
211,961
|
|
$25.68
|
||
Our effective tax rate is impacted primarily by the amount of taxable income associated with each jurisdiction in which our income is subject to income tax, permanent differences between the financial statement carrying amounts and tax bases of assets and liabilities.
During the three-month periods ended
March 31, 2017
, and 2016, our effective tax rate was
0%
which differed from the statutory rate primarily as a result of the impact of recording a valuation allowance to offset the amount of additional deferred tax asset generated during the periods.
As of
March 31, 2017
, we do not believe it is more likely than not that we will fully realize the benefit of our deferred tax assets. As such, we increased the valuation allowance related to our deferred tax assets by
$4.4 million
for the
three months ended March 31, 2017
. We recognized a full valuation allowance against our net deferred tax assets as of
March 31, 2017
, and
December 31, 2016
.
14
A summary of our valuation allowance activity is as follows (in thousands):
|
Three Months Ended March 31,
|
||||||||
|
2017
|
2016
|
|||||||
|
Valuation allowance, beginning of period
|
$
|
326,097
|
|
$
|
300,601
|
|
||
|
Additions
|
4,425
|
|
8,004
|
|
||||
|
Valuation allowance, end of period
|
$
|
330,522
|
|
$
|
308,605
|
|
||
|
Note 12
|
— COMMITMENTS AND CONTINGENCIES
|
Reclamation Deposits and Surety Bonds
—As of
March 31, 2017
, and
December 31, 2016
, we had
$18.4 million
and
$21.4 million
, respectively, of security placed principally with the State of Utah and the Bureau of Land Management for eventual reclamation of our various facilities. Of this total requirement, as of
March 31, 2017
, and
December 31, 2016
,
$0.5 million
and
$3.5 million
, respectively, consisted of long-term restricted cash deposits reflected in "Other assets, net" on the condensed consolidated balance sheets and
$17.9 million
was secured by surety bonds issued by an insurer. The surety bonds are held in place by an annual fee paid to the issuer.
We may be required to post additional security to fund future reclamation obligations as reclamation plans are updated or as governmental entities change requirements.
Legal
—In February 2015, Mosaic Potash Carlsbad Inc. ("Mosaic") filed a complaint and application for preliminary injunction and permanent injunction against Steve Gamble and us in the Fifth Judicial District Court for the County of Eddy in the State of New Mexico. Mr. Gamble is a former Intrepid employee and former Mosaic employee. The complaint alleges against us violations of the Uniform Trade Secrets Act and tortious interference with contract relating to alleged misappropriation of Mosaic's trade secrets. Mosaic seeks monetary relief of an unspecified amount, including damages for actual loss and unjust enrichment, exemplary damages, attorneys' fees, and injunctive relief and has alleged that it has spent hundreds of millions of dollars to research and develop its alleged trade secrets. In August 2015, the court denied Mosaic's application for preliminary injunction. The lawsuit is currently progressing through discovery. We are vigorously defending against the lawsuit. Because this matter is at an early stage, we are unable to reasonably estimate the potential amount of loss, if any.
In July 2016, Mosaic filed a complaint against Steve Gamble and us in US District Court for the District of New Mexico. The complaint alleges violations of the Computer Fraud and Abuse Act, conversion, and civil conspiracy relating to alleged misappropriation of Mosaic's confidential information. Mosaic seeks injunctive relief and compensatory and punitive damages of an unspecified amount. We are vigorously defending against the lawsuit. Because this matter is at an early stage, we are unable to reasonably estimate the potential amount of loss, if any.
We are subject to other claims and legal actions in the ordinary course of business. While there are uncertainties in predicting the outcome of any claim or legal action, we believe that the ultimate resolution of these other claims or actions is not reasonably likely to have a material adverse effect on our financial condition, results of operations, or cash flows.
Future Operating Lease Commitments
—We have operating leases for land, mining and other operating equipment, offices, and railcars, with original terms ranging up to
20
years. In May 2015, we exercised an option to terminate our existing corporate office lease prior to its original expiration date. Under the provisions of the lease agreement, we incurred a termination penalty of
$1.1 million
, which was included in selling and administrative expense in the second quarter of 2015. In December 2015, we paid
$0.5 million
of this termination penalty in connection with an amendment reducing the leased square footage and extending the expiration date to May 2017. We further extended our lease expiration to September 2017 and paid the remaining
$0.6 million
of termination penalty in March 2017.
Rental and lease expenses for the three months ended March 31, 2017, and 2016, were
$1.5 million
.
15
We applied the provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification™ ("ASC") Topic 820,
Fair Value Measurements and Disclosures,
for all financial assets and liabilities measured at fair value on a recurring basis. The topic establishes a framework for measuring fair value and requires disclosures about fair value measurements. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The topic establishes market or observable inputs as the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The topic also establishes a hierarchy for grouping these assets and liabilities based on the significance level of the following inputs, as follows:
|
•
|
Level 1—Quoted prices in active markets for identical assets and liabilities.
|
|
•
|
Level 2—Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active, and model‑derived valuations whose inputs are observable or whose significant value drivers are observable.
|
|
•
|
Level 3—Significant inputs to the valuation model are unobservable.
|
Financial assets or liabilities are categorized within the hierarchy based upon the lowest level of input that is significant to the fair value measurement. As of
March 31, 2017
, and
December 31, 2016
, we had no assets required to be measured at fair value.
The carrying value and estimated fair value of our financial instrument liabilities as of
March 31, 2017
, and
December 31, 2016
, were as follows (in thousands):
|
March 31, 2017
|
December 31, 2016
|
|||||||||||||||
|
Carrying Value
|
Fair Value
|
Carrying Value
|
Fair Value
|
|||||||||||||
|
Senior notes
|
$
|
89,000
|
|
$
|
88,000
|
|
$
|
135,000
|
|
$
|
131,000
|
|
||||
Below is a general description of our valuation methodologies for financial assets and liabilities, which are measured at fair value and are included on the condensed consolidated balance sheets. For cash and cash equivalents, certificates of deposit and time deposit investments, accounts receivable, refundable income taxes, and accounts payable, the carrying amount approximates fair value because of the short-term maturity of these instruments. The estimated fair value of the long‑term debt is estimated using a discounted cash flow analysis based on current borrowing rates for debt with similar remaining maturities and ratings (a Level 2 input) and is designed to approximate the amount at which the instruments could be exchanged in an arm's length transaction between knowledgeable willing parties.
The methods described above may result in a fair value estimate that may not be indicative of net realizable value or may not be reflective of future fair values and cash flows. While we believe that the valuation methods used are appropriate and consistent with the requirements of ASC Topic 820 and the methods used by other marketplace participants, we recognize that third parties may use different methodologies or assumptions to determine the fair value of certain financial instruments that could result in a different estimate of fair value at the reporting date.
In January 2016, in response to declining potash prices, we undertook a number of cost saving actions that were intended to better align our cost structure with the business environment. These initiatives included the elimination of approximately
5%
of the workforce, elimination of the bonus programs for most employees, as well as reductions in compensation. For the three months ended
March 31, 2016
, we recognized restructuring expense of
$0.4 million
related to these events. We recorded
no
restructuring expenses for the three months ended March 31, 2017.
As a result of pricing pressure and the resulting economic factors giving rise to the conversion of our East facility to Trio
®
-only and the idling of our West facility in 2016, the chief operating decision maker separately evaluates our potash and Trio
®
operations. Accordingly, we reevaluated our segments and determined that, beginning in the second quarter of 2016, we have
two
segments: potash and Trio
®
. The reportable segments are determined by management based on a number of factors including the types of potassium based fertilizer produced, production processes, markets served and the financial information available for our chief operating decision maker. We evaluate performance based on the gross margins of the respective
16
business segments and do not allocate corporate selling and administrative expenses, among others, to the respective segments. Information for each segment is provided in the tables that follow (in thousands).
|
Three Months Ended March 31, 2017
|
Potash
|
Trio
®
|
Corporate
|
Consolidated
|
||||||||||||
|
Sales
|
$
|
27,220
|
|
$
|
21,112
|
|
$
|
—
|
|
$
|
48,332
|
|
||||
|
Less: Freight costs
|
2,959
|
|
5,762
|
|
—
|
|
8,721
|
|
||||||||
|
Warehousing and handling costs
|
1,512
|
|
1,258
|
|
—
|
|
2,770
|
|
||||||||
|
Cost of goods sold
|
20,421
|
|
15,452
|
|
—
|
|
35,873
|
|
||||||||
|
Lower-of-cost-or-market inventory
adjustments |
—
|
|
3,824
|
|
—
|
|
3,824
|
|
||||||||
|
Gross Margin (Deficit)
|
$
|
2,328
|
|
$
|
(5,184
|
)
|
$
|
—
|
|
$
|
(2,856
|
)
|
||||
|
Depreciation, depletion and amortization incurred
1
|
$
|
7,563
|
|
$
|
1,699
|
|
$
|
61
|
|
$
|
9,323
|
|
||||
|
Three Months Ended March 31, 2016
|
Potash
|
Trio
®
|
Corporate
|
Consolidated
|
||||||||||||
|
Sales
|
$
|
53,695
|
|
$
|
19,582
|
|
$
|
—
|
|
$
|
73,277
|
|
||||
|
Less: Freight costs
|
6,551
|
|
3,781
|
|
—
|
|
10,332
|
|
||||||||
|
Warehousing and handling costs
|
2,154
|
|
510
|
|
—
|
|
2,664
|
|
||||||||
|
Cost of goods sold
|
47,288
|
|
12,489
|
|
—
|
|
59,777
|
|
||||||||
|
Lower-of-cost-or-market inventory
adjustments |
9,007
|
|
—
|
|
—
|
|
9,007
|
|
||||||||
|
Costs associated with abnormal
production |
650
|
|
—
|
|
—
|
|
650
|
|
||||||||
|
Gross (Deficit) Margin
|
$
|
(11,955
|
)
|
$
|
2,802
|
|
$
|
—
|
|
$
|
(9,153
|
)
|
||||
|
Depreciation, depletion and amortization incurred
1
|
$
|
12,233
|
|
$
|
1,675
|
|
$
|
460
|
|
$
|
14,368
|
|
||||
1
Depreciation, depletion and amortization incurred for potash and Trio
®
excludes depreciation, depletion and amortization amounts absorbed in or (relieved from) inventory.
Total assets are not presented for each reportable segment as they are not reviewed by, nor otherwise regularly provided to, the chief operating decision maker. All sales of both segments are to external customers.
During the
three months ended March 31, 2016
, we recorded restructuring charges of
$0.4 million
, of which
$0.2 million
was attributable to the potash segment and
$0.2 million
was attributable to corporate.
In July 2015, the FASB issued Accounting Standards Update No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory." An entity using an inventory method other than last-in, first-out or the retail inventory method should measure inventory at the lower of cost and net realizable value. This standard clarifies that net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation and was effective for us beginning January 1, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements.
In March 2016, the FASB issued Accounting Standards Update No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," which became effective for us beginning January 1, 2017. This standard changes several aspects of how we account for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liabilities, classification of excess tax benefits on the statement of cash flows, forfeitures, minimum statutory tax withholding payments, and classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. In accordance with adoption of this standard share-based payment award forfeiture expense will no longer be estimated and will be recorded as forfeitures occur and we have recorded a
$120,000
adjustment to beginning retained earnings for the impact of this cumulative change.
17
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
|
AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward‑looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Securities Act of 1933, as amended (the "Securities Act"). These forward‑looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements in this Quarterly Report on Form 10-Q other than statements of historical fact are forward‑looking statements. Forward-looking statements include statements about our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, among other things. In some cases, you can identify these statements by forward‑looking words, such as "estimate," "expect," "anticipate," "project," "plan," "intend," "believe," "forecast," "foresee," "likely," "may," "should," "goal," "target," "might," "will," "could," "predict," and "continue." Forward‑looking statements are only predictions based on our current knowledge, expectations, and projections about future events.
These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including the following:
|
•
|
our ability to expand Trio
®
sales internationally and manage risks associated with international sales, including pricing pressure;
|
|
•
|
our ability to successfully identify and implement any opportunities to expand operations to include more by-products and non-potassium related products;
|
|
•
|
our ability to successfully execute on our plans to transition our sales model after the idling of our West facility and the transitioning of our East facility to Trio
®
-only production;
|
|
•
|
our ability to comply with the revised terms of our senior notes and revolving credit facility, including the covenants in each agreement, to avoid a default under these agreements;
|
|
•
|
changes in the price, demand, or supply of potash or Trio
®
/langbeinite;
|
|
•
|
the costs of, and our ability to successfully construct, commission, and execute, any of our strategic projects;
|
|
•
|
declines or changes in agricultural production or fertilizer application rates;
|
|
•
|
further write-downs of the carrying value of our assets, including inventories;
|
|
•
|
circumstances that disrupt or limit our production, including operational difficulties or variances, geological or geotechnical variances, equipment failures, environmental hazards, and other unexpected events or problems;
|
|
•
|
changes in our 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;
|
|
•
|
declines in the use of potash products by oil and gas companies in their drilling operations;
|
|
•
|
interruptions in rail or truck transportation services, or fluctuations in the costs of these services;
|
|
•
|
our inability to fund necessary capital investments; 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, 2016
, as updated by this Quarterly Report on Form 10-Q.
|
In addition, new risks emerge from time to time. It is not possible for our management to predict all risks that may cause actual results to differ materially from those contained in any forward-looking statements we may make.
In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in these forward-looking statements. As a result, you should not place undue reliance on these forward-looking statements. We undertake no duty to update or revise publicly any forward-looking statements to conform those statements to actual results or to reflect new information or future events.
18
Our Company
We are the only producer of potash in the United States and are one of two producers of langbeinite, which we market and sell as Trio
®
. We sell potash and Trio
®
primarily into the agricultural market as a fertilizer. We also sell these products into the animal feed market as a nutritional supplement and sell potash into the industrial market as a component in drilling and fracturing fluids for oil and gas wells and other industrial inputs. In addition, we sell by-products including salt, magnesium chloride, and brine. These by-product credits represented approximately 6% of total cost of goods sold for the quarter ended March 31, 2017. We also sell water, which is recorded in other income.
We produce potash from three solution mining facilities: our HB solar solution mine in Carlsbad, New Mexico, a solar solution mine in Moab, Utah, and a solar brine recovery mine in Wendover, Utah. We also operate the North compaction facility in Carlsbad, New Mexico, which compacts and granulates product from the HB mine. We produce Trio
®
from our conventional underground East mine in Carlsbad, New Mexico.
We have additional opportunities to develop mineralized deposits of potash in New Mexico, as well as to continue the optimization of our processing plants. These opportunities potentially include additional solution mining activities, additional recoveries of langbeinite, development of by-product and water markets, and acceleration of production from our reserves.
We routinely post important information about us and our business, including information about upcoming investor presentations, on our website under the Investor Relations tab. We encourage investors and other interested parties to enroll on our website to receive automatic email alerts or Really Simple Syndication (RSS) feeds regarding new postings. Our website is
www.intrepidpotash.com
.
Significant Business Trends and Activities
Our financial results have been impacted by several significant trends and activities, which are described below. We expect that these trends will continue to impact our results of operations, cash flows, and financial position.
•
Trio
®
pricing and demand.
In 2016, we transitioned our East facility from a mixed-ore processing facility to a Trio
®
-only facility. As a result of this transition, our Trio
®
production in the first quarter of 2017 increased by
61%
over the same period in 2016. In turn, our first quarter sales volume also increased, by
52%
, over the first quarter of 2016 due to solid domestic demand and increased international sales. Our average net realized sales price per ton for Trio
®
was
$202
for the first quarter of 2017 compared to
$316
in the same period last year. Increased international sales, which have a lower average net realized sales price per ton contributed to the lower price in 2017.
Over the past year, some domestic Trio
®
purchasers have moved to more of a just‑in‑time purchasing model as these purchasers gained increased confidence in our ability to supply product. We expect that this will result in more seasonality in Trio
®
demand, with more domestic purchases coming in the first and second quarters. In turn, we expect increased inventory levels in the third and fourth quarters in anticipation of expected demand for the following year. We continue our efforts to expand our marketing reach for Trio
®
. Given the current pricing and demand environment, we intend to operate our facilities at production levels that approximate expected demand.
•
Potash prices and demand.
Our average realized net sales price for potash increased in the first quarter of 2017 to
$240
per ton compared to
$216
per ton for the first quarter of 2016. Our potash production in the first quarter of 2017 was less than the first quarter of 2016 due to the transition of our East facility to a Trio
®
-only facility in April 2016 and the idling of our West facility in July 2016. With this lower production, we can be more selective in our sales to maximize our sales prices. During the first quarter of 2017 as compared to the same period in 2016, we increased our sales into the industrial and feed markets, which generally have higher average net realized sales prices.
We sold
101,000
tons of potash in the
first quarter
of
2017
, a decrease of
117,000
tons compared to the
first quarter
of
2016
. As noted above, in 2016 we curtailed potash production from our conventional East and West facilities and thus had fewer tons available for sale.
Although production curtailments from us and other producers in 2015 and 2016 have reduced potash supply in North America, global effective capacity continues to exceed demand. Potash prices are a significant driver of profitability for our business. Domestic pricing of our potash is influenced principally by the price established by our competitors. The interaction of global potash supply and demand, ocean, land, and barge freight rates, and currency fluctuations also influence pricing.
The specific timing of when farmers apply potash remains highly weather dependent and varies across the numerous growing regions within the U.S. The timing of potash sales is significantly influenced by the marketing programs of potash producers, as well as storage volumes closer to the farm gate. The combination of these items results in variability in potash
19
sales and shipments, thereby increasing volatility of sales volumes from quarter to quarter and season to season. Our sales volumes into the industrial market are correlated to drilling activity in the oil and gas market.
•
By-products and water sales.
We produce salt, magnesium chloride, and brines as a result of our potash and Trio
®
operations. Our salt is used in a variety of markets. Magnesium chloride is typically used as a road-treatment agent. Our brines are used primarily by the oil and gas industry to support well development and completion activities. The sales of these by-products are accounted for as by-product credits to our cost of sales. Historically, our by-products represented approximately 2%-5% of total cost of goods sold, but have increased to 6% of cost of goods sold in the first quarter of 2017.
We also have water rights under which we sell water primarily for industrial uses such as in the oil and gas services industry. We are in the process of negotiating deals to expand sales of our by-products and water, particularly to service the oil and gas markets near our operating plants.
•
Execution of equity offering and completion of strategic alternatives review.
Under the terms of our senior notes, in December 2016 we engaged Cantor Fitzgerald & Co. as our investment bank to assess, evaluate, and assist in pursuing potential strategic alternatives available to us, as we determined to be appropriate. In March 2017, we issued 50.1 million shares of common stock in an underwritten public offering for net proceeds of $57.5 million. We have completed the strategic alternatives review process.
•
Secured notes principal repayments.
During the first quarter of 2017, we repaid a total of $46 million of principal on our senior notes, decreasing the outstanding principal balance to $89 million at March 31, 2017, from $135 million at December 31, 2016. We repaid $5.5 million of principal with the proceeds from the sale of an asset and $40.5 million of principal with the net proceeds from the underwritten public offering discussed above.
•
Weather impact.
Our solar facilities experienced average to above-average evaporation rates in 2016. As a result, we expect our potash production from our solar solution facilities to increase in 2017 compared to 2016.
20
Results of Operations
|
(in thousands)
|
Three Months Ended March 31,
|
|||||||
|
2017
|
2016
|
|||||||
|
Sales
|
$
|
48,332
|
|
$
|
73,277
|
|
||
|
Less:
|
|
|
||||||
|
Freight costs
|
8,721
|
|
10,332
|
|
||||
|
Warehousing and handling costs
|
2,770
|
|
2,664
|
|
||||
|
Cost of goods sold
|
35,873
|
|
59,777
|
|
||||
|
Lower-of-cost-or-market inventory adjustments
|
3,824
|
|
9,007
|
|
||||
|
Costs associated with abnormal production
|
—
|
|
650
|
|
||||
|
Gross Deficit
|
(2,856
|
)
|
(9,153
|
)
|
||||
|
Net Loss
|
|
$
|
(13,678
|
)
|
|
$
|
(18,427
|
)
|
|
Production volume (in thousands of tons):
|
||||||
|
Potash
|
118
|
|
215
|
|
||
|
Langbeinite
|
71
|
|
44
|
|
||
|
Sales volume (in thousands of tons):
|
||||||
|
Potash
|
101
|
|
218
|
|
||
|
Trio
®
|
76
|
|
50
|
|
||
|
Average Net Realized Sales Price per Ton
1
|
||||||||
|
Potash
|
$
|
240
|
|
$
|
216
|
|
||
|
Trio
®
|
$
|
202
|
|
$
|
316
|
|
||
1
Average net realized sales price is a non-GAAP measure that we calculate as sales less freight costs then divided by sales tons. A reconciliation to GAAP and more information about this non-GAAP measure is below under the heading "Non-GAAP Financial Measure."
Consolidated Results for the Three-Month Periods Ended
March 31, 2017
, and 2016
Total sales in the first quarter of 2017 decreased as compared to
2016
due to lower sales volumes of potash, partially offset by a higher average net realized sales price for potash. In addition, total sales were impacted by a lower average net realized sales price for Trio
®
, due to price decreases announced last year and an increase in international sales, which had a lower average net realized sales price. The decrease was partially offset by increased Trio
®
sales volumes into international markets.
Our total cost of goods sold decreased in the
first quarter 2017
as compared to the same period in
2016
primarily due to selling fewer potash tons after the transition of our East facility to Trio
®
-only production and the idling of our West facility in 2016. As a result of these changes, all of our potash production now comes from solution-mining facilities, which further positively impacted our total cost of goods sold. Due to the decrease in average net realized sales price for Trio
®
and the lower potash production, we incurred a gross deficit and net loss for the
first quarter 2017
. However, we reduced our deficit and net loss in the first quarter of 2017 as compared to the same period in the previous year.
Based on our expectations for potash and Trio
®
pricing for the remainder of the year, we anticipate that we will incur a net loss for the full year ending December 31, 2017.
Selling and Administrative Expense
Selling and administrative expenses decreased
$2.2 million
, or
33%
, to
$4.4 million
for the
three months ended March 31, 2017
, from
$6.6 million
for the
three months ended March 31, 2016
. The decrease was primarily due to decreased administrative headcount, and the elimination of aircraft-related costs in 2017 as compared to 2016.
21
Restructuring Expense
In January 2016, in response to declining potash prices, we undertook several cost saving actions that were intended to better align our cost structure with the business environment. These initiatives included the elimination of approximately 5% of our workforce, suspension of our cash bonus programs for most employees, and salary decreases for most employees. For the three months ended March 31, 2016, we recorded restructuring expense of $
0.4 million
related to these initiatives. We did not record any restructuring expenses for the first quarter of 2017.
Care and Maintenance Expenses
In the
first quarter
of
2017
, we incurred care and maintenance expenses of
$0.7 million
related to the West facility, which was idled in July 2016. These costs included labor and related benefits, maintenance supplies, utilities, property taxes, and insurance.
Other Operating Expense
In the
three months ended March 31, 2017
, we recorded other operating expense of
$1.7 million
primarily related the loss on the sale of an asset. In the first quarter of 2016, we recorded an immaterial amount of other operating income.
Interest Expense
Interest expense is recorded net of any capitalized interest associated with investments in capital projects. Amounts included in interest expense for the three months ended
March 31, 2017
, and
2016
(in thousands) are as follows:
|
Three Months Ended March 31,
|
||||||||
|
2017
|
2016
|
|||||||
|
Interest on notes and line of credit commitment fees
|
$
|
2,836
|
|
$
|
1,536
|
|
||
|
Make-whole payment made March 31, 2017
|
794
|
|
—
|
|
||||
|
Amortization of deferred financing costs
|
821
|
|
783
|
|
||||
|
Gross interest expense
|
4,451
|
|
2,319
|
|
||||
|
Less capitalized interest
|
(30
|
)
|
(90
|
)
|
||||
|
Interest expense, net
|
$
|
4,421
|
|
$
|
2,229
|
|
||
22
Potash Segment
|
|
Three Months Ended March 31,
|
|||||||
|
(in thousands)
|
2017
|
2016
|
||||||
|
Sales
|
$
|
27,220
|
|
$
|
53,695
|
|
||
|
Less: Freight costs
|
2,959
|
|
6,551
|
|
||||
|
Warehousing and handling costs
|
1,512
|
|
2,154
|
|
||||
|
Cost of goods sold
|
20,421
|
|
47,288
|
|
||||
|
Lower-of-cost-or-market inventory
adjustments |
—
|
|
9,007
|
|
||||
|
Costs associated with abnormal
production |
—
|
|
650
|
|
||||
|
Gross Margin (Deficit)
|
$
|
2,328
|
|
$
|
(11,955
|
)
|
||
|
Depreciation, depletion and amortization incurred
2
|
$
|
7,563
|
|
$
|
12,233
|
|
||
|
Sales Volumes (tons in thousands)
|
101
|
|
218
|
|
||||
|
Production Volumes (tons in thousands)
|
118
|
|
215
|
|
||||
|
Average Net Realized Sales Price per Ton
1
|
$
|
240
|
|
$
|
216
|
|
||
1
Average net realized sales price is a non-GAAP measure that we calculate as sales less freight costs then divided by sales tons. A reconciliation of this non-GAAP measure and more information is below under the heading "Non-GAAP Financial Measure."
2
Depreciation, depletion and amortization incurred excludes depreciation, depletion and amortization amounts absorbed in or (relieved from) inventory.
Three Months Ended March 31, 2017
, and
2016
Our potash sales volume in the
first quarter
of
2017
was less than the same period of
2016
as a result of curtailment of potash production from our conventional East and West mines in 2016. Sales into the industrial market increased slightly year over year due to increased oil and gas drilling activity.
Our decreased sales volume was partially offset by an
11%
increase in our average net realized sales price. By producing fewer tons we can be more selective in our sales locations and customers to maximize our sales prices and freight costs.
Our freight costs decreased primarily due to lower sales volumes. In addition, we were able to more strategically sell our product into various geographic destinations, which positively impacted freight costs. Freight costs are impacted by the proportion of customers paying for their own freight, the geographic distribution of our products and the freight rates of our carriers.
Our potash cost of goods sold decreased due to an overall decrease in our production costs primarily resulting from no longer producing potash from our conventional mines. Depreciation and depletion expense for potash decreased in 2017, because depreciation was accelerated on the potash assets in the first quarter of 2016 in anticipation of the transition of our East facility to Trio
®
-only production in April 2016.
As a result of now producing potash only from our solution mine facilities and the increased average net realized sales price per ton, we incurred no lower-of-cost-or market charges during the
three months ended March 31, 2017
. During the
three months ended March 31, 2016
, we recorded lower-of-cost-or-market charges as our weighted average finished goods product inventory cost exceeded the estimated net realizable value of our finished goods product inventory.
Our evaluation of production levels in the first quarter of 2017 indicated no abnormal production adjustments were necessary. However, during the first quarter of 2016, we temporarily suspended potash production at our East facility for a total of three days as we performed a langbeinite-only testing run. As a result of the temporary suspension of production, we determined that approximately $0.7 million would have been allocated to additional tons produced, assuming we had been operating at normal production rates. Accordingly, these costs were excluded from our inventory values and instead expensed in the first quarter of 2016 as period production costs. We compare actual production relative to what we estimated could have been produced if we had not incurred the temporary production suspensions and lower operating rates in order to determine the abnormal cost estimate.
23
Additional Information Relating to Potash
The table below shows our potash sales mix for the three months ended
March 31, 2017
, and
2016
:
|
Three Months Ended March 31,
|
||||
|
2017
|
2016
|
|||
|
Agricultural
|
78%
|
91%
|
||
|
Industrial
|
10%
|
4%
|
||
|
Feed
|
12%
|
5%
|
||
Trio
®
Segment
|
|
Three Months Ended March 31,
|
|||||||
|
(in thousands)
|
2017
|
2016
|
||||||
|
Sales
|
$
|
21,112
|
|
$
|
19,582
|
|
||
|
Less: Freight costs
|
5,762
|
|
3,781
|
|
||||
|
Warehousing and handling costs
|
1,258
|
|
510
|
|
||||
|
Cost of goods sold
|
15,452
|
|
12,489
|
|
||||
|
Lower-of-cost-or-market inventory
adjustments |
3,824
|
|
—
|
|
||||
|
Gross (Deficit) Margin
|
$
|
(5,184
|
)
|
$
|
2,802
|
|
||
|
Depreciation, depletion and amortization incurred
2
|
$
|
1,699
|
|
$
|
1,675
|
|
||
|
Sales Volumes (tons in thousands)
|
76
|
|
50
|
|
||||
|
Production Volumes (tons in thousands)
|
71
|
|
44
|
|
||||
|
Average Net Realized Sales Price per Ton
1
|
$
|
202
|
|
$
|
316
|
|
||
1
Average net realized sales price is a non-GAAP measure that we calculate as sales less freight costs then divided by sales tons. A reconciliation of this non-GAAP measure and more information is below under the heading "Non-GAAP Financial Measure."
2
Depreciation, depletion and amortization incurred excludes depreciation, depletion and amortization amounts absorbed in or (relieved from) inventory.
Three Months Ended March 31, 2017
, and
2016
Total sales from Trio
®
increased by
8%
in the
three months ended March 31, 2017
, as compared to the same period in 2016 primarily due to a
52%
increase in sales volume partially offset by a
36%
decrease in the average net realized sales price for Trio
®
. Both the increase in sales volume and the decrease in average net realized sales price resulted from increased international Trio
®
sales, which have lower average net realized sales prices. Additionally, pricing was impacted due to price decreases announced last year. As noted in the table below, our international sales increased from
3%
for the three months ended March 31, 2016, to
25%
for the three months ended March 31, 2017. We expect Trio
®
prices to remain under pressure for the remainder of 2017. Over the past year, some domestic Trio
®
purchasers have moved to more of a just-in-time purchasing model as these purchasers gained increased confidence in our ability to supply product. We expect that this will result in more seasonality in Trio
®
demand, with more domestic purchases coming in the first and second quarters. In turn, we expect increased inventory levels in the third and fourth quarters in anticipation of expected demand for the following year.
Our freight costs increased due to increased sales volume and the cost of international shipping.
Cost of goods sold for Trio
®
increased in conjunction with increased sales volumes. However, our production costs have decreased as a result of our transition of the East facility to a Trio
®
-only facility in 2016. We generally intend to operate our facilities at production levels that approximate expected demand.
As a result of the transition of our East facility to a Trio
®
-only facility during April 2016, our Trio
®
production increased
61%
in the
first quarter
of
2017
, from
44,000
tons in the
first quarter
of
2016
to
71,000
tons in the first quarter of 2017.
24
In the
three months ended March 31, 2017
, we recorded lower-of-cost-or-market charges related to Trio
®
inventory, primarily because our average net realized sales price for international sales was lower than for domestic sales and product carrying costs slightly exceeded our average net realized sales price.
Additional Information Relating to Trio
®
Our export sales of Trio
®
tend to have more variability as to the timing than domestic sales. As a result, the percentage of sales into the export market as compared to the domestic market can fluctuate significantly from period to period.
|
United States
|
Export
|
|||
|
For the three months ended March 31, 2017
|
75%
|
25%
|
||
|
For the three months ended March 31, 2016
|
97%
|
3%
|
||
Specific Factors Affecting Our Results
Sales
Our gross sales are derived from the sales of potash and Trio
®
and are determined by the quantities of product we sell and the sales prices we realize. We quote prices to customers both on a delivered basis and on the basis of pick-up at our plants and warehouses. Freight costs are incurred on only a portion of our sales as many of our customers arrange and pay for their own freight directly. When we arrange and pay for freight, our quotes and billings are based on expected freight costs to the points of delivery. Although our gross sales include the freight that we bill, we do not believe that gross sales provide a representative measure of our performance in the market due to variations caused by ongoing changes in the proportion of customers paying for their own freight, the geographic distribution of our products, and freight rates. Rail freight rates have been steadily increasing, thereby negatively influencing our average net realized sales price. We manage our sales and marketing operations centrally, and we work to achieve the highest average net realized sales price we can by evaluating the product needs of our customers and associated logistics and then determining which of our production facilities can best satisfy these needs.
The volume of product we sell is determined by demand for our products, our inventory storage capabilities and by our production capabilities. We generally intend to operate our facilities at production levels that approximate expected demand. By having adequate warehouse capacity, we can maintain production levels during periods of fluctuating product demand and have product inventory positioned closer to the fields in order to meet peak periods of fertilizer demand.
Cost of Goods Sold
Our cost of goods sold reflects the costs to produce our potash and Trio
®
products, less credits generated from the sale of our by-products. Many of our production costs are largely fixed, and, consequently, our costs of sales per ton on a facility-by-facility basis tend to move inversely with the number of tons we produce, within the context of normal production levels. Historically, we have experienced variability in our potash cost of goods sold due to fluctuations in the relative mix of product that we produce through conventional and solar solution mining. Our cost of goods sold for our solar solution facilities is less than our cost of goods sold incurred previously for our conventional facilities. Our solar solution production is impacted by weather variability. Our principal production costs include labor and employee benefits, maintenance materials, contract labor, materials for operating or maintenance projects, natural gas, electricity, operating supplies, chemicals, depreciation and depletion, royalties, and leasing costs. A smaller component of our cost base includes variable costs associated with contract labor, consumable operating supplies, reagents, and royalties. Our periodic production costs and costs of goods sold will not necessarily match one another from period-to-period based on the fluctuation of inventory, sales, and production levels at our facilities.
Our production costs are also impacted when our production levels change, due to factors such as changes in the grade of ore mined, levels of Trio
®
mine development, plant operating performance, downtime, and periodic maintenance turnarounds. We expect that our labor and contract labor costs in Carlsbad, New Mexico, will continue to be influenced most directly by the demand for labor in the local Carlsbad, New Mexico, region where we compete for labor with the mining, oil and gas, and nuclear waste storage industries. Additionally, the East mine has a complex mineralogy. Historically, and through the first quarter of 2016, we produced both potash and Trio
®
at our East facility using a mixed-ore body and processing the ore through a singular product flow at the surface facility. The specific grade, volume, and characterization of the ore that was mined at any particular time was subject to fluctuations due to the nature of the mineral deposits and influenced the tons of potash and langbeinite ultimately produced from the facility, which affected our production costs per ton for both products and affected our quarter-to-quarter results. With the conversion of our East facility to a Trio
®
-only facility in April 2016, we have simplified the operation at East which has lowered the overall cost structure for our East operations.
25
We pay royalties to federal, state, and private lessors under our mineral leases. These payments typically equal a percentage of sales, after subtracting freight costs, of minerals extracted and sold under the applicable lease. In some cases, federal royalties for potash are paid on a sliding scale that varies with the grade of ore extracted. For the three-month periods ended March 31, 2017, and 2016, our average royalty rate was 4.0% and 5.0%, respectively.
Income Taxes
We are subject to federal and state income taxes on our taxable income. Our effective tax rate for the three months ended March 31, 2017, and 2016, was
zero
. During the three months ended March 31, 2017, and 2016, our effective tax rate was impacted primarily by a valuation allowance placed on the additional deferred tax assets recorded during the period.
Our federal and state income tax returns are subject to examination by federal and state tax authorities.
For the three months ended March 31, 2017, and 2016, we recognized an immaterial amount of current income tax expense.
We evaluate our deferred tax assets and liabilities each reporting period using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted most significantly by the states in which we do business. Changing business conditions for normal business transactions and operations, as well as changes to state tax rate and apportionment laws, potentially alter our apportionment of income among the states for income tax purposes. These changes in apportionment laws result in changes in the calculation of our current and deferred income taxes, including the valuation of our deferred tax assets and liabilities. The effects of any such changes are recorded in the period of the adjustment. These adjustments can increase or decrease the net deferred tax asset on the balance sheet and impact the corresponding deferred tax benefit or deferred tax expense on the income statement.
Capital Investments
During the first quarter of 2017, cash paid for property, plant and equipment was
$2.4 million
. We expect total capital investment for 2017 to be approximately $13 million to $17 million. The majority of our capital investment in 2017 is expected to be sustaining capital. We anticipate our remaining 2017 operating plans and capital programs will be funded out of operating cash flows, existing cash and cash equivalents, or our credit facility.
We hold permits, governmental approvals, and leases necessary for the continued operations at each of our facilities. A decision by a governmental agency or lessor to deny or delay a new or renewed permit, approval, or lease, or to revoke or substantially modify an existing permit, approval, or lease, could prevent or limit us from continuing our operations at the affected facility. In addition, we could be required to expend significant amounts to obtain these permits, approvals, or leases, or we could be required to make significant capital investments to modify or suspend our operations at one or more of our facilities.
Liquidity and Capital Resources
As of
March 31, 2017
, we had cash of
$20.8 million
and no cash equivalents.
In March 2017, we issued 50.1 million shares of common stock in an underwritten public offering for net proceeds of $57.5 million. The net proceeds from the issuance have been or will be used to partially repay indebtedness and for general corporate purposes.
Our operations have primarily been funded from cash on hand and cash generated by operations. We will continue to monitor our future sources and uses of cash, and anticipate that we will make adjustments to our capital allocation strategies when, and if, determined by our Board of Directors. We expect to continue to look for opportunities to improve our capital structure by reducing debt and its related interest expense. We may, at any time we deem conditions favorable, also attempt to improve our liquidity position by accessing debt or equity markets in accordance with our existing debt agreements. We cannot provide any assurance that we will pursue any of these transactions or that we will be successful in completing them on acceptable terms or at all. We believe that we have sufficient liquidity for the next twelve months.
26
The following summarizes our cash flow activity for the
three months ended March 31, 2017
, and
2016
(in thousands):
|
Three Months Ended March 31,
|
||||||||
|
2017
|
2016
|
|||||||
|
Cash flows provided by (used in) operating activities
|
$
|
1,816
|
|
$
|
(1,094
|
)
|
||
|
Cash flows provided by investing activities
|
$
|
3,131
|
|
$
|
17,616
|
|
||
|
Cash flows provided by (used in) financing activities
|
$
|
11,359
|
|
$
|
(1,407
|
)
|
||
Operating Activities
Total cash provided by operating activities through
March 31, 2017
, was
$1.8 million
, an increase of
$2.9 million
compared with the first three months of 2016. The increase was driven by improved production costs as a result of curtailing conventional mining in 2016 and lower selling, general and administrative spend in the first three months of 2017 as compared to the same period in 2016, resulting in a smaller net loss.
Investing Activities
Total cash provided by investing activities decreased by
$14.5 million
in the first three months of 2017 compared with the same three-month period in 2016 as a result of liquidation of investments in 2016 offset by lower capital investment activity in the first quarter of 2017.
Financing Activities
Total cash provided by financing activities increased by
$12.8 million
due to the aforementioned equity offering offset by a principal payment on our Notes of $46 million.
Senior Notes
In 2013, we originally issued $150 million aggregate principal amount of senior notes (the "Notes") pursuant to a note purchase agreement entered into in August 2012. On October 31, 2016, we entered into a revised note purchase agreement governing the Notes.
As of March 31, 2017, after the repayment of $46 million of principal in the first quarter, we had outstanding $89 million of the Notes consisting of the following series:
|
•
|
$35.6 million of Senior Notes, Series A, due April 16, 2020
|
|
•
|
$26.7 million of Senior Notes, Series B, due April 14, 2023
|
|
•
|
$26.7 million of Senior Notes, Series C, due April 16, 2025
|
Under the revised agreement, we granted to the collateral agent for the noteholders a first lien on substantially all of our non-current assets and a second lien on substantially all of our current assets.
The revised agreement provides for the following:
|
•
|
The agreement requires us to maintain a minimum trailing twelve-month adjusted EBITDA, which adjusts over time and is measured quarterly through March 2018, ranging from negative $15 million in the period ended March 31, 2017, to negative $7.5 million in the period ending March 31, 2018. Adjusted EBITDA is a non-GAAP measure that is calculated as adjusted earnings before interest, income taxes, depreciation, amortization, and certain other expenses for the prior four quarters, as defined under the agreement. Our adjusted EBITDA as calculated under the agreement was
$3.7 million
for the four quarters ended March 31, 2017.
|
|
•
|
The agreement requires us to maintain a minimum fixed charge coverage amount of negative $15 million and negative $10 million for the quarters ending June 30, 2018, and September 30, 2018, respectively. The agreement also includes requirements relating to a leverage ratio and a fixed charge coverage ratio to be tested on a quarterly basis commencing with the quarter ending June 30, 2018, with respect to the leverage ratio, and December 31, 2018, with respect to the fixed charge coverage ratio. The maximum leverage ratio will be 11.5 to 1.0 for the quarter ending June 30, 2018, and decreases to 3.5 to 1.0 for the quarter ending September 30, 2019, and each quarter thereafter. The minimum fixed charge coverage ratio will be 0.25 to 1.0 for the quarter ending December 31, 2018, and increases to 1.3 to 1.0 for the quarter ending September 30, 2019, and each quarter thereafter. In general, our fixed charge coverage amount is calculated as adjusted EBITDA for the prior four quarters, minus capital expenditures, cash paid for income taxes and interest expense, plus scheduled principal amortization of long-term funded indebtedness; our leverage ratio is calculated as the ratio of funded
|
27
indebtedness to adjusted EBITDA for the prior four quarters; and our fixed charge coverage ratio is calculated as the ratio of adjusted EBITDA for the prior four quarters, minus capital expenditures and cash paid for income taxes, to interest expense plus scheduled principal amortization of long-term funded indebtedness.
|
•
|
The interest rates for the Notes increased by 4.5% above the previous rates such that the Series A Senior Notes now bear interest at 7.73%, the Series B Senior Notes now bear interest at 8.63%, and the Series C Senior Notes now bear interest at 8.78%, which reflect the highest rates in a pricing grid under the agreement. The interest rates are adjusted quarterly based upon our financial performance and certain financial covenant levels. In addition, additional interest of 2%, which may be paid in kind, will begin to accrue on April 1, 2018, unless we satisfy certain financial covenant tests.
|
|
•
|
We are required to make certain offers to prepay the Notes with the proceeds of dispositions of certain specified property and with the proceeds of certain equity issuances, as set forth in the agreement. During the quarter ended March 31, 2017, we repaid the Notes by $5.5 million in conjunction with the sale of an asset and $40.5 million with the proceeds of an equity offering.
|
We were in compliance with the applicable covenants under the revised agreement as of March 31, 2017.
Our outstanding long-term debt, net, as of
March 31, 2017
, and
December 31, 2016
(in thousands), is as follows:
|
March 31, 2017
|
December 31, 2016
|
||||||
|
Senior Notes
|
$
|
89,000
|
|
$
|
135,000
|
|
|
|
Less deferred financing costs
|
(983
|
)
|
(1,566
|
)
|
|||
|
Long-term debt, net
|
$
|
88,017
|
|
$
|
133,434
|
|
|
The obligations under the Notes are unconditionally guaranteed by several of our subsidiaries.
Credit Facility
On October 31, 2016, we entered into a credit agreement with Bank of Montreal that provides an asset-based revolving credit facility of up to $35 million in aggregate principal amount. The amount available is subject to monthly borrowing base limits based on our inventory and receivables. If our total remaining availability under the credit facility was to fall below $6 million, we would be subject to a minimum fixed charge coverage ratio of 1 to 1, which we would not currently meet. Any borrowings on the credit facility bear interest at 1.75% to 2.25% above LIBOR (London Interbank Offered Rate), based on average availability under the credit facility. We have granted to Bank of Montreal a first lien on substantially all of our current assets and a second lien on substantially all of our non-current assets. The credit facility expires on October 31, 2018. We occasionally borrow and repay amounts under the facility for near-term working capital needs and may do so in the future. As of March 31, 2017, there were
no
amounts outstanding under the facility, other than
$3.5 million
in letters of credit. Considering the outstanding letters of credit and the fixed charge coverage ratio requirement described above, we have
$25.5 million
available under the facility as of March 31, 2017. We were in compliance with the applicable covenants under the facility as of March 31, 2017.
Off-Balance Sheet Arrangements
As of
March 31, 2017
, we had no off-balance sheet arrangements aside from the operating leases and bonding obligations described in the accompanying notes to the condensed consolidated financial statements.
Critical Accounting Policies and Estimates
Our Annual Report on Form 10-K for the year ended
December 31, 2016
,
describes the critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. There have been no significant changes to our critical accounting policies since
December 31, 2016
.
Pronouncements Issued But Not Yet Adopted
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, as amended by Accounting Standards Update No. 2016-12, "Revenue from Contracts with Customers (Topic 606)," which requires revenue to be recognized based on the amount an entity is expected to be entitled to for promised goods or services provided to customers. The standard also requires expanded disclosures regarding contracts with customers. The guidance in this standard supersedes the revenue recognition requirements in Topic 605, "Revenue Recognition," and most industry-specific guidance. This guidance is effective for us beginning January 1, 2018, with retrospective application required, subject to certain practical expedients. We
28
are analyzing our sales contracts, particularly those where the final pricing of our product is determined subsequent to shipment, in order to evaluate the impact on our consolidated financial statements.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, "Leases (Topic 842)," which requires, among other things, lessees to recognize lease assets and liabilities on their balance sheets for those leases classified as operating leases under previous generally accepted accounting principles. These assets and liabilities must be recorded generally at the present value of the contracted lease payments, and the cost of the lease must be allocated over the lease term on a straight-line basis. This guidance is effective for us for annual and interim periods in fiscal years beginning after December 15, 2018, with a modified retrospective transition method mandated. We are currently evaluating the requirements of this standard and have not yet determined the impact on our consolidated financial statements.
In August 2016, the FASB issued Accounting Standards Update No. 2016-15, "Statement of Cash Flows (Topic 230)" which is intended to clarify and align how certain cash receipts and cash payments are presented and classified in the statement of cash flows where there is currently diversity in practice. ASU 2016-15 specifically addresses eight classification issues within the statement of cash flows including debt prepayments or debt extinguishment costs; proceeds from the settlement of insurance claims; and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for annual and interim periods in fiscal years beginning after December 15, 2017. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In November 2016, the FASB issued ASU Updated 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" which will require entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows and will no longer require transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. This standard is effective for us in annual and interim periods in fiscal years beginning after December 15, 2017. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
Non-GAAP Financial Measure
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, from time to time we use average net realized sales price per ton, a non-GAAP financial measure to monitor, and evaluate our performance. This non-GAAP financial measure 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 this non-GAAP financial measure varies among companies, our non-GAAP financial measure may not be comparable to similarly titled measures used by other companies.
We believe this non-GAAP financial measure provides useful information to investors for analysis of our business. We use this non-GAAP financial measure as one of our tools in comparing performance period over period on a consistent basis and when planning, forecasting, and analyzing future periods. We believe this non-GAAP financial measure is used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the potash mining industry. Many investors use the published research reports of these professional research analysts and others in making investment decisions.
Below is additional information about the non-GAAP financial measure used in this filing, including a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure, for the periods presented.
29
Average Net Realized Sales Price per Ton
Average net realized sales price per ton is calculated as sales, less freight costs, divided by the number of tons sold in the period. We consider average net realized sales price per ton to be useful because it shows average per-ton pricing without the effect of certain transportation and delivery costs. When we arrange transportation and delivery for a customer, we include in revenue and in freight costs the costs associated with transportation and delivery. However, many of our customers arrange for and pay their own transportation and delivery costs, in which case these costs are not included in our revenue and freight costs. We use average net realized sales price per ton as a key performance indicator to analyze sales and price trends.
|
|
Three Months Ended March 31,
|
|||||||||||||||||||||||
|
2017
|
2016
|
|||||||||||||||||||||||
|
(in thousands except per ton amounts)
|
Potash
|
Trio
®
|
Total
|
Potash
|
Trio
®
|
Total
|
||||||||||||||||||
|
Sales
|
$
|
27,220
|
|
$
|
21,112
|
|
$
|
48,332
|
|
$
|
53,695
|
|
$
|
19,582
|
|
$
|
73,277
|
|
||||||
|
Freight costs
|
2,959
|
|
5,762
|
|
8,721
|
|
6,551
|
|
3,781
|
|
10,332
|
|
||||||||||||
|
Subtotal
|
$
|
24,261
|
|
$
|
15,350
|
|
$
|
39,611
|
|
$
|
47,144
|
|
$
|
15,801
|
|
$
|
62,945
|
|
||||||
|
Divided by:
|
||||||||||||||||||||||||
|
Tons sold
|
101
|
|
76
|
|
218
|
|
50
|
|
||||||||||||||||
|
Average net realized sales price per ton
|
$
|
240
|
|
$
|
202
|
|
$
|
216
|
|
$
|
316
|
|
||||||||||||
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Part II, Item 7A., "Quantitative and Qualitative Disclosure About Market Risk," of our Annual Report on Form 10-K for the year ended
December 31, 2016
, describes our exposure to market risk. There have been no significant changes to our market risk exposure since
December 31, 2016
.
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain "disclosure controls and procedures," as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms. Our disclosure controls and procedures are also designed to ensure that this information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our management, including our principal executive offer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures as of
March 31, 2017
. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of
March 31, 2017
, at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the three months ended
March 31, 2017
, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Intrepid have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance
30
that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
31
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
In February 2015, Mosaic Potash Carlsbad Inc. ("Mosaic") filed a complaint and application for preliminary injunction and permanent injunction against Steve Gamble and us in the Fifth Judicial District Court for the County of Eddy in the State of New Mexico. Mr. Gamble is a former Intrepid employee and former Mosaic employee. The complaint alleges against us violations of the Uniform Trade Secrets Act and tortious interference with contract relating to alleged misappropriation of Mosaic's trade secrets. Mosaic seeks monetary relief of an unspecified amount, including damages for actual loss and unjust enrichment, exemplary damages, attorneys' fees, and injunctive relief and has alleged that it has spent hundreds of millions of dollars to research and develop its alleged trade secrets. In August 2015, the court denied Mosaic's application for preliminary injunction. The lawsuit is currently progressing through discovery. We are vigorously defending against the lawsuit.
In July 2016, Mosaic filed a complaint against Steve Gamble and us in US District Court for the District of New Mexico. The complaint alleges violations of the Computer Fraud and Abuse Act, conversion, and civil conspiracy relating to alleged misappropriation of Mosaic's confidential information. Mosaic seeks injunctive relief and compensatory and punitive damages of an unspecified amount. We are vigorously defending against the lawsuit.
We are subject to other claims and legal actions in the ordinary course of business. While there are uncertainties in predicting the outcome of any claim or legal action, we believe that the ultimate resolution of these other claims or actions is not reasonably likely to have a material adverse effect on our financial condition, results of operations, or cash flows.
|
ITEM 1A.
|
RISK FACTORS
|
Our future performance is subject to a variety of risks and uncertainties that could materially and adversely affect our business, financial condition, results of operations, and the trading price of our common stock. These risks and uncertainties are described in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended
December 31, 2016
. There have been no material changes to these risks and uncertainties, except as disclosed in this report.
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
Issuer Purchases of Equity Securities
|
||||||||
|
Period
|
(a)
Total Number of Shares Purchased (1) |
(b)
Average Price Paid Per Share |
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
(d)
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Programs |
||||
|
January 1, 2017, through January 31, 2017
|
—
|
—
|
—
|
N/A
|
||||
|
February 1, 2017, through February 28, 2017
|
48,768
|
$2.23
|
—
|
N/A
|
||||
|
March 1, 2017, through March 31, 2017
|
—
|
—
|
—
|
N/A
|
||||
|
Total
|
48,768
|
$2.23
|
—
|
N/A
|
||||
|
(1)
|
Represents shares of common stock withheld by us as payment of withholding taxes due upon the vesting of restricted stock held by our employees.
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
None.
32
ITEM 4.
MINE SAFETY DISCLOSURES
We are committed to providing a safe and healthy work environment. The objectives of our safety programs are to eliminate workplace accidents and incidents, to preserve employee health, and to comply with safety- and health-based regulations. We seek to achieve these objectives by training employees in safe work practices; establishing, following, and improving safety standards; involving employees in safety processes; openly communicating with employees about safety matters; and recording, reporting, and investigating accidents, incidents, and losses to avoid recurrence. As part of our ongoing safety programs, we collaborate with regulators to identify and implement new accident prevention techniques and practices.
Our East, West and North facilities in New Mexico are subject to regulation by MSHA under the Federal Mine Safety and Health Act of 1977 (the "Mine Act") and the New Mexico Bureau of Mine Safety. MSHA inspects these facilities on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. Exhibit 95.1 to this Quarterly Report on Form 10-Q provides the information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K. Our Utah facilities and our HB solar solution mine are subject to regulation by the Occupational Health and Safety Administration and, therefore, are not required to be included in the information provided in Exhibit 95.1.
|
ITEM 5.
|
OTHER INFORMATION
|
None.
|
ITEM 6.
|
EXHIBITS
|
The list of exhibits in the Exhibit Index to this Quarterly Report on Form 10-Q is incorporated herein by reference.
33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
INTREPID POTASH, INC.
(Registrant) |
||
|
Dated: May 2, 2017
|
/s/ Robert P. Jornayvaz, III
|
|
|
Robert P. Jornayvaz III - Executive Chairman of the Board, President, and Chief Executive Officer
(Principal Executive Officer and Duly Authorized Officer) |
||
|
Dated: May 2, 2017
|
/s/ Joseph G. Montoya
|
|
|
Joseph G. Montoya - Vice President and Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer)
|
||
34
EXHIBIT INDEX
|
Exhibit No.
|
Description
|
|
|
10.1
|
Letter Agreement, dated March 8, 2017, by and between Intrepid Potash, Inc. and John G. Mansanti.*+
|
|
|
31.1
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.*
|
|
|
31.2
|
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.*
|
|
|
32.1
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
|
|
32.2
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
|
|
95.1
|
Mine Safety Disclosure Exhibit.*
|
|
|
99.1
|
Eighth Amendment to Transition Services Agreement, dated March 22, 2017, between Intrepid Potash, Inc. and Intrepid Oil & Gas, LLC.*
|
|
|
101.INS
|
XBRL Instance Document.*
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema.*
|
|
|
101.CAL
|
XBRL Extension Calculation Linkbase.*
|
|
|
101.LAB
|
XBRL Extension Label Linkbase.*
|
|
|
101.PRE
|
XBRL Extension Presentation Linkbase.*
|
|
|
101.DEF
|
XBRL Extension Definition Linkbase.*
|
|
|
*
|
Filed herewith.
|
|
**
|
Furnished herewith.
|
|
+
|
Management contract or compensatory plan or arrangement.
|
35
TABLE OF CONTENTS
Part I - Financial InformationItem 1. Condensed Consolidated Financial Statements (unaudited)Note 1 Company BackgroundNote 2 Summary Of Significant Accounting PoliciesNote 3 Loss Per ShareNote 4 Cash and Cash EquivalentsNote 5 Inventory and Long-term Parts InventoryNote 6 Property, Plant, Equipment, and Mineral PropertiesNote 7 DebtNote 8 Financial Information For Subsidiary GuarantorsNote 9 Asset Retirement ObligationNote 10 Compensation PlansNote 11 Income TaxesNote 12 Commitments and ContingenciesNote 13 Fair Value MeasurementsNote 14 Restructuring ChargeNote 15 Business SegmentsNote 16 Recently Adopted Accounting PronouncementsItem 2. Management S Discussion and Analysis Of Financial ConditionItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II - Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits