Intrepid Potash Management Discusses Q4 2011 Results - Earnings Call Transcript

Intrepid Potash (IPI)

Q4 2011 Earnings Call

February 16, 2012 10:00 am ET

Executives

William Kent -

Robert P. Jornayvaz - Co-Founder, Executive Chairman of The Board and Principal Executive Officer

Kelvin G. Feist - Vice President of Marketing & Sales

David W. Honeyfield - President and Chief Financial Officer

Analysts

Kurt Schoen - Credit Agricole Securities (USA) Inc., Research Division

Bill Carroll - UBS Investment Bank, Research Division

Ted Drangula

Elaine Yip - Crédit Suisse AG, Research Division

Shawn Siddiqui

Lindsay Mann - Goldman Sachs Group Inc., Research Division

Joel Jackson - BMO Capital Markets Canada

Farooq Hamed - Barclays Capital, Research Division

Presentation

Operator

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Good morning, and welcome to the Intrepid Potash Fourth Quarter and Year End 2011 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference is being recorded today, Thursday, February 16, 2012, at 8:00 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, Joe, and thank you all for joining us today for our fourth quarter and year end 2011 earnings conference call. Participants from the company include Bob Jornayvaz, Executive Chairman of the Board; David Honeyfield, President and Chief Financial Officer; Martin Litt, Executive Vice President, General Counsel and Secretary; Kelvin Feist, Senior Vice President of Marketing and Sales; and John Mansanti, Senior Vice President of Operations.

I would like to remind everyone that statements made on this call that are not historical fact or that express a belief, expectation or intention, including statements about our financial and operational outlook, 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 the risks, uncertainties and other factors which could cause our actual results to differ from our forward-looking statements, we direct you to the news release we issued last night and the risk factors and management discussion and analysis of financial conditions and results of operation in our most recent annual report on Form 10-K and subsequent quarterly reports 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 adjusted net income and adjusted EBITDA, both of which will be used on this call. All references to tons are to short tons of 2,000 pounds.

I'll now turn the call over to Bob Jornayvaz.

Robert P. Jornayvaz

Thanks, Will, and thanks to those joining us today to learn more about Intrepid's achievements in our fourth quarter and year end 2011 results. Our fourth quarter performance was quite good. We earned $0.33 per diluted share or net income of $24.9 million, and our adjusted EBITDA was $49.2 million. For the full year 2011, we earned $1.45 per diluted share on 141% increase over 2010. And our adjusted EBITDA was $211.9 million, more than double our 2010 adjusted EBITDA. This financial performance is impressive, and of equal importance are the steps that we have consistently taken each quarter as part of the long-term strategy to grow our production, lower our operating costs and ultimately grow our business.

Since we founded Intrepid Potash, we've made a serious commitment to reinvest in our business. We first acquired the Moab Mine over a decade ago and have consistently reinvested our cash flows. We've worked diligently since acquiring all of our assets to create a culture of innovation and operational discipline necessary to perform as a world-class potash producer. We continue to invent, innovate and commit the capital investment to modernize our previously uninvested facilities. To that end, we have invested nearly $0.5 billion in the business over the last 11 years to enhance the reliability and productivity of our operations. What is even more impressive is that even with this high level of capital reinvestment, we have a debt-free balance sheet with over $176 million of cash and investments on hand at the end of 2011 and the support of a $250 million unsecured line of credit. Our solid financial health provides us with the ability to execute on our robust capital investment strategy, as well as marketing our products with a focus on margin.

In the last couple of years, we have executed on a number of transformational capital projects designed to increase our flexibility and create options to meet the needs of our diverse customer base. We've successfully completed the Moab Compaction Project, coming in under budget in late 2010, and it continues to perform very well and is delivering the benefits and marketing flexibility we expected. We then leveraged this knowledge gained from the project to bring the same level of flexibility to our Wendover operations through the installation of new compaction facility that was completed, again, under budget at the end of 2011. During 2012, we plan to expand our compaction capacities even further by beginning construction of our new North compaction facility. Once this latest project is completed, we will have the capability to compact nearly 90% of our current and anticipated potash production.

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