Intrepid Potash Inc. (IPI)
Q4 2009 Earnings Call Transcript
March 1, 2010 1:00 p.m. ET

Executives

William Kent – Director Investor Relations
Bob Jornayvaz – Chief Executive Officer
David Honeyfield – Executive VP, Chief Financial Officer & Treasurer
Hugh Harvey – Chief Technical Officer
R.L. Moore – Senior VP Marketing & Sales
John Mansanti – Vice President Operations

Analysts

Robert Koort - Goldman Sachs
Edlain Rodriguez - Broadpoint.AmTech
Don Carson -- UBS
Vincent Andrews - Morgan Stanley
Dave Silver – Bank of America/Merrill Lynch
Douglas Flutie – No Company Listed
Elaine Yip – Credit Suisse
Mark Gulley - Soleil Securities
Horst Hueniken - Thomas Weisel Partners
Fai Lee - RBC Capital Markets

Presentation

Operator

Good morning and welcome to the Intrepid Potash fourth quarter 2009 earnings conference call. (Operator Instructions) 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’d like to ask a question during that time you may press * then the number 1 on your telephone keypad. I’d like to remind everyone that this conference is being recorded today, Monday, March 1st 2010 at 11:00 A.M local time. It is my pleasure to turn the conference over to William Kent, Director of Investor Relations. Mr. Kent, please go ahead.

William Kent – Director of Investor Relations

Good morning. Thank you all for joining us for our fourth quarter 2009 earnings conference call. I would like to start by introducing today''s participants from the company. We have with us Bob Jornayvaz, Chairman and Chief Executive Officer; Hugh Harvey, Chief Technology Officer; David Honeyfield, Executive Vice President, and Chief Financial Officer; 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 fact are forward-looking statements within the meeting 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 would cause our actual results to differ from our forward-looking statements, we direct you to our news release issued this morning 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 news release, which is posted on our website at 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 - Chief Executive Officer

Thanks Bill and thanks to all those who have taken the time this morning to learn more about our fourth quarter results. We really appreciate your time. On balance the fourth quarter closed out a year that was marked by a number of successes and many challenges for Intrepid. Despite the difficulties we faced during 2009 the fourth quarter began to show signs of recovery in the potash sector. We sold 150,000 tons of potash during the fourth quarter, the highest sales level achieved since the third quarter of 2008. We earned $0.09 per diluted share on a net income of $6.7 million, generated EBITDA of $14.5 million and ended the quarter with $107 million of cash and investments. The fourth quarter was distinctly different than the prior nine months of 2009. Demand for potash improved with farmers applying product when the weather window allowed them to get into the field.

In October and December much of the corn growing region in the United States was either unseasonably wet or under snow which negatively affected the ability of farmers to harvest crops and apply nutrients. November provided for soil application opportunities with favorable harvest and fertilizer application conditions. The activity we saw in November when we sold almost 66,000 tons of potash gave us confidence that farmers were beginning to apply potash at more normal rates after reducing rates in 2008 and early 2009. Potash distributors in the fourth quarter, however, acted as they had in the prior quarters of 2009, taking very little price risk by continuing to hold a limited amount of uncommitted inventory.

We continued to work with a small number of customers in 2010 on our forward warehousing program in selective, strategic locations where we believe it should prove beneficial. It appears that the reluctance of dealers to take on inventory risk has begun to abate in the early part of the 2010 spring season. We are seeing dealers willing to build product inventories in order to have product available for sale when the customer needs it. With dealers actively stepping back into the market for the spring season our red granular inventory is now fully committed to the end of March.

Before I wrap up my comments I want to reflect on some of the decisions that Intrepid made in 2009 that allowed us to navigate the unprecedented market we faced. We stayed true to our goal of being a margin driven company by managing how we deploy capital specifically targeting projects that would increase our long-term efficiency and lower our per ton costs and by matching our production to meet the market demand. These decisions allowed us to end 2009 in a similar liquidity position to where we started the year.

We exited 2009 with a balance sheet that has over $107 million in cash and investments which provides us the flexibility we need to operate our business in a prudent manner and the stability to make long-term decisions. In the face of the market difficulties that we experienced during 2009 we remain confident in the long-standing drivers of our business and the potash industry as a whole. The fundamental need for potash has not changed over the past year. The world’s population continued to increase. Per capita arable land continued to turn lower and farmers now emboldened by supportive crop prices have resumed using potash to seek improved yields through balanced fertilization.

There is no question we are seeing hopeful signs in the potash market. We remain committed to making business decisions for the long-term that are margin focused while also allowing us to maintain a healthy level of cash on our balance sheet. Our confidence in the long-term prospects for potash remains and we believe that 2010 should see a return to more historical fertilization rates in the United States.