Intrepid Potash CEO Discusses Q3 2010 Results - Earnings Call Transcript
Intrepid Potash, Inc. (
)
Q3 2010 Earnings Call
November 04, 2010 10:00 am ET
Executives
William Kent - Director of IR
Bob Jornayvaz - Executive Chairman of the Board
David Honeyfield - President, CFO and Treasurer
R.L. Moore - SVP of Marketing and Sales
John Mansanti - VP of Operations
Analysts
Vincent Andrews - Morgan Stanley
Don Carson - Susquehanna
Mark Connelly - CLFA
David Silver - Bank of America-Merrill Lynch
Fai Lee - RBC Capital Markets
Lindsay Druckerman - Goldman Sachs
Charles Neivert - Dahlman Rose
Farooq Hamed - Barclays Capital
Presentation
Operator
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Intrepid Potash, Inc. Q3 2009 Earnings Call Transcript
Good morning and welcome to the Intrepid Potash third quarter 2010 earnings conference call. At this time, all called-in participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. (Operator Instructions).
I would now like to remind everyone that this conference is being recorded today Thursday, November 4, 2010, at 8.am 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 and thank you all for joining us today for our third quarter 2010 earnings conference call. I'd like to start by introducing today's participants from the company. We have with us today on the call Bob Jornayvaz, Executive Chairman of Board; Hugh Harvey, Executive Vice Chairman of Board; David Honeyfield, President and Chief Financial Officer; Martin Litt, Executive Vice President and General Counsel; R.L 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 facts are forward-looking statements within the meaning of the United States securities laws. These statements are not guarantees of future performance.
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 more information with respect to risks, uncertainties and other factors that could cause actual results to differ from our forward-looking statements, we directly from our news release issued last night and risk factors and management’s discussion and analysis of financial conditions and result of operation in our most recent annual report on Form 10-k, and the most recent quarterly report on Form 10-Q as filed with the SEC. All forward-looking-statements are qualified in their entirety by such factors.
Our earnings news release which is posted on our website 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.
Bob Jornayvaz
Thanks Will and thank you for everyone for joining our discussion about Intrepid’s third quarter 2010 results. The third quarter of 2010 was solid from both the demand and a market fundamental perspective. Dealers after the announcement of a number of summer incentive programs from our North American competitors began to buy for their own accounts in preparation for what has turned out to be one of the strongest fall demand periods in recent memory.
A number of fundamental factors including healthy and greatly improved pharma incomes lower forecasted crop yields and overall strong prices in the agricultural sector have propelled product prices upward. During the quarter we earned $0.16 per diluted share on net income of 11.7 million. We generated $27.1 million in EBITDA and maintained our solid cash position exiting the quarter with a $126.5 million in cash and investments. The summer fill cycle did not begin in earnest until late July. At that time commodity prices specifically for corn were [hubbering] around $4 per bushel. And there seemed to be a mildly positive sentiment among distributors that fall products demand would be strong.
As summer progressed, we saw that a number of factors come into play that have brought about a very bullish sentiment in the Ag sector, and specifically in the fertilizer market. The factors that I believe have brought us to this current point in the cycle include extremely low potash inventories at the dealer level.
According to our customers, Canadian producers are 60 to 90 days behind on potash shipments which would indicate to us that their currently producing half or near full capacity. They announced a ban of Russian wheat exports that was followed by, not one but two forecasted corn yield downgrade by the USDA.
In the last two months, prices for nearly all ad commodities have moved higher. What is different from a few years ago is that’s it not just corn and soybeans that have moved higher, but also cotton, cocoa, coffee, rice and sugar that are seeing dramatic increase.
Cotton prices are in an all-time-high. Cocoa is trading significantly higher that the 2006 to 2008 market period. This is some of the highest prices since the late 70.
World sugar stocks-to-use ratio is at its lowest level in 30 years, and its price too is significantly higher. Rice prices seem to have put in a solid bottom and are trending up. Wheat prices have bottomed firmed and are trending up significantly as well. Coffee stocks are at historically low levels and coffee prices are significantly higher.
The market reflects these facts. Stocks-to-use ratio for world class grains are forecasted to be one of the lowest levels since 1973. US sending corn stocks are forecasted to be at the second lowest level in recent memory.
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