Intrepid Potash Inc. (IPI)
Q1 2010 Earnings Call Transcript
May 5, 2010 10:00 a.m. ET

Executives

William Kent – Director of Investor Relations
Robert P. Jornayvaz III – Chairman & Chief Executive Officer
John G. Mansanti – Vice President of Operations
R.L. Moore – Senior Vice President of Marketing & Sales
David W. Honeyfield – Executive Vice President & Chief Financial Officer

Analysts

Edlain Rodriguez - Broadpoint AmTech
Robert Koort - Goldman Sachs
Mark Gulley – Soleil - Gulley & Associates
Fai Lee – RBC Capital Markets
Douglas Chudy – KeyBanc Capital Markets
Elaine Yip – Credit Suisse
David Silver – Bank of America/Merrill Lynch
Sandy Klugman – UBS
Horst Hueniken – Thomas Weisel Partners

Presentation

Operator

Good morning and welcome to the Intrepid Potash First Quarter 2010 Earnings Conference Call. At this time, all call participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. I would like to remind everyone that this conference is being recorded today on May 5, 2010 at 8 o’clock a.m. Mountain Time. It is my pleasure to turn the conference over to William Kent, Director of Investor Relations. Mr. Kent, please go ahead.

William Kent

Good morning. Thank you all for joining us for our first quarter 2010 earnings conference call.

I would like to start by introducing today''s participants from the company. We have with us on the call today Bob Jornayvaz, Chairman and Chief Executive Officer; Hugh Harvey, Chief Technology Officer; David Honeyfield, Executive Vice President and Chief Financial Officer; Martin Litt, Executive Vice President and General Counsel; RL Moore, Senior Vice President of Marketing and Sales; and John Mansanti, Vice President of Operations.

I would also like to remind everyone that statements made on this call which express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements within the meaning of the United States securities laws. A number of assumptions which we believe are reasonable were made in connection with the expectations reflected in such forward-looking statements. The forward-looking statements involve risks and uncertainties which could cause actual results to differ from our expectations.

For material information with respect to the risks, uncertainties and factors which could cause our actual results to differ from our forward-looking statements, we direct you to our news release issued last night and the risk factors described in our filings with the SEC. All forward-looking statements are qualified in their entirety by such factors. Our earnings release which is posted on our website at www.intrepidpotash.com includes a reconciliation of certain non-GAAP financial measures to the most directly comparable GAAP measures including EBITDA which will be used on this call. All references to tons are to short tons of 2,000 pounds.

I will now turn the call over to Bob Jornayvaz.

Robert P. Jornayvaz III

Thanks Will. And thanks to everyone for taking the time today to learn more about Intrepid’s first quarter 2010 results. The first quarter of 2010 Amsterdam would appears to be the return to more normal demand in application levels for potash in the United States. In terms of tons sold, Intrepid had it second best quarter ever, selling 243,000 tons of potash.

We earned $0.16 per diluted share, net income of $11.8 million and generated $26.6 million in EBITDA; and build upon on already solid cash positioned in the quarter with a $129 million of cash and investments. We expect to use these cash in hand along with cash generated from operations in order to fund our capital investment program in 2010, including our recently approved langbeinite recovery improvement project, which we’ll address later in the call.

Our first quarter results confirm the potash demand trend that began to emerge in the fall of 2009. Looking for a moment, in November of 2009, we saw very good volume movement of 66,000 tons at an average net realized price of $405. Clearly, given the volume movement, former saw good value for potash at these higher prices, with the sales volumes, we saw these prices in November, 2009, $51 higher than the price we realized during the first quarter of 2010.

We had anticipated that market pricing had bottomed, however, prices unexpectedly continued to fall in late December, when the Canadian producers reduce the price by approximately $50 a ton. Moving back to the first quarter of 2010, the most significant trend that we have seen is the dealers, who took put the most part last year had only purchased product when they had firm orders from downstream buyers in hand. Have actively been purchasing product for the spring fertilizer application season.

During the first quarter of 2010, some of our distributor customers, purchased product from us at volumes above historic norms, presumably to fill orders and modest inventories for future sales. The robust demand from dealers has substantially drawn down our granular inventory, we are essentially sold out of our red granular production to April and inventory will remain tight through midnight. While we are not allocating product to our customers, we are reserving part of our production to ensure, we have products available to service the needs of our truck customers.