Intrepid Potash Announces Second Quarter 2013 Financial Results, Major Capital Projects on Target and Nearing Completion

Second Quarter Results

• Net income was $11.3 million, or $0.15 per share, compared with second quarter 2012 net income of $19.0 million, or $0.25 per share 

• Adjusted net income¹ was $12.7 million, or $0.17 per share, compared with $18.8 million, or $0.25 per share, in the same period of the prior year 

• Adjusted EBITDA² was $33.0 million, compared with $42.9 million in second quarter of the previous year   

• Cash flows from operating activities were $35.8 million for the second quarter of 2013 compared with $61.2 million for the second quarter of 2012.   

• Intrepid continues to operate with a strong balance sheet having cash and investments totaling $129.4 million and the full amount of its $250.0 million unsecured credit facility available for borrowing as of June 30, 2013.  The capital structure now includes $150.0 million of long-term, low-cost debt outstanding from the issuance of the unsecured senior notes in April 2013.   

Commenting on the results, Mr. Jornayvaz said, "All things considered, we delivered solid potash sales in the second quarter, particularly given the reduced application rates this past spring due to the persistent cool and wet weather across much of the United States.  Our proactive, intentional placement of product into the market allowed us to sell nearly all of our production and meet our customers' needs during the compressed application window.  Trio^® was a standout in the quarter with year-over-year improvement in sales, production, and costs."

Potash

• Potash production in the second quarter of 2013 was 182,000 tons, up from 170,000 tons in the same period a year ago 

• Cash operating cost of goods sold³, net of by-product credits, was $186 per ton in the second quarter.  Cash operating cost of goods sold, net of by-product credits, for the first six months of 2013 was $180 per ton, representing a 4% improvement from the first six months of 2012 

• Cost of goods sold, net of by-product credits, was $254 per ton in the quarter.  Cost of goods sold, net of by-product credits, for the first six months of 2013 was $245 per ton, essentially flat compared to the first six months of 2012 

• Potash sales volume was 184,000 tons in the second quarter of 2013, flat compared with the same period of the previous year 

• Average net realized sales price⁴ in the second quarter of 2013 was $402 per ton ($443 per metric tonne); second quarter of 2012 average net realized sales price was $465 per ton ($512 per metric tonne)  

Intrepid held potash sales volume flat to last year's second quarter by positioning itself to maximize the available opportunities through well-developed customer relationships, close proximity to the market, and strategic utilization of warehouse space.  

Both cash operating costs per ton and total cost of goods sold per ton were higher in the second quarter compared to the second quarter a year ago due to normal quarterly fluctuations in sales levels from each facility relative to total production and to lower production from the West facility.  For the first six months of the year, both cash operating and total cost of goods sold per ton for potash improved compared with the first half of 2012.  

Intrepid's capital investment plan includes an estimated $35 million to $45 million for several ongoing projects in varying stages of completion at the West facility.  As Intrepid has grown its mining capacity and transitioned into different ore zones, this investment sustains and improves the production capability at its West facility by increasing throughput and enhancing recovery.  The integration and implementation of these investments that are transforming the West facility impacted second quarter production and are expected to cause variability in production throughout the remainder of this year.
   
Langbeinite - Trio^®

• Langbeinite production was 50,000 tons in the second quarter of 2013, up 52% from the second quarter of 2012 

• Cash operating cost of goods sold was $177 per ton in the quarter, a 14% improvement from the same quarter of 2012.  Cash operating cost of goods sold for the first six months of 2013 was $179 per ton representing a 14% improvement from the first six months of 2012 

• Cost of goods sold, net of by-product credits, was $243 per ton in the quarter, a 13% improvement from the second quarter of 2012.  Cost of goods sold, net of by-product credits, for the first six months of 2013 was $248 per ton, a 13% improvement from the first six months of 2012 

• Trio^® sales in the second quarter were 35,000 tons, a 35% increase from the same period in the prior year 

• Average net realized sales price for langbeinite, which is marketed as Trio^®, was $359 per ton ($396 per metric tonne), up 11% from the second quarter of 2012 

Intrepid continues to create significant value from its long-term investment to produce and sell Trio^®.  The operating team continues to produce stronger results by managing priorities for improvement and methodically executing the plan.  The increase in Trio^® production was key to lowering the cost of goods sold and cash operating cost of goods sold.  

¹ Adjusted net income and adjusted net income per diluted share are financial measures not calculated in accordance with U.S. Generally Accepted Accounting Principles (non-GAAP). See the non-GAAP reconciliations set forth later in this press release for additional information.
² Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) is a financial measure not calculated in accordance with U.S. Generally Accepted Accounting Principles (non-GAAP). See the non-GAAP reconciliations set forth later in this press release for additional information.
³ Cash operating cost of goods sold and cash operating cost of goods sold, net of by-product credits, are operating performance measures defined as total cost of goods sold excluding royalties, depreciation, depletion, and amortization (and, if applicable, excluding by-product credits), divided by the number of tons sold in the period.
⁴ Average net realized sales price is an operating performance measure calculated as gross sales less freight costs, divided by the number of tons sold in the period.

Income Taxes

The full-year effective income tax rate is still expected to be approximately 36% to 38%.  The cash taxes for 2013 are expected to be at a very low level given the extension of bonus depreciation that was enacted into law this year coupled with the significant amount of capital that the Company is placing into service this year.

Market Conditions

The unfavorable weather this past spring compressed the planting season and impacted second quarter sales volume, which was below dealer and retailer expectations.  Because of the compressed window for farmers to work in their fields, many reduced their spring application of potash in hopes that potassium reserves in the soil would be adequate for the current growing season.  

Intrepid anticipates demand for the upcoming fall season to be stronger than the spring season driven in part by the expectation that farmers will attempt to replenish the potassium depletion from this growing season.  Additionally, fertilizer remains affordable and farmer economics continue to be favorable.  Intrepid expects to continue selling substantially all of its production with no meaningful buildup of inventory.  The near-term outlook is for pricing to soften and to be impacted by farmers' and dealers' reactions to the summer fill and their demand needs and by speculation regarding global potash prices based on recent developments.

Capital Investment

The full-year capital investment estimate remains on track in the $235 million to $285 million range, with $130.7 million invested through June 30, 2013.  The Company expects that the remaining 2013 capital investment will peak in the third quarter, followed by a significant decrease in capital expenditures in the fourth quarter and into next year.    

HB Solar Solution Mine

The total estimated investment for the HB Solar Solution mine is in the range of $225 million to $245 million, of which $176.5 million was invested through June 30, 2013.  All aspects of the construction and development of this significant multi-year project are nearing completion.  Phases of the project are up and running currently as the team is within weeks of completing the pond work, brine is being injected into the mines, and the solar evaporation ponds are being filled with potassium-rich brine.  Getting this brine into the ponds in advance of the associated evaporation season is the key to each successive year's harvest, making this a priority activity for the operations team.  Construction of the HB mill is currently on schedule and the plant is expected to be ready to begin processing potash from the ponds before the end of this year.  

North Compaction Project

Capital investment for the North Compaction project is below budget by approximately $5 million and is now estimated at $90 million to $95 million, of which $84.2 million was invested as of June 30, 2013.  The majority of the construction is complete and commissioning of the individual elements of the first and second compaction lines is underway with the expectation of beginning operations in the new North facility late in the third quarter.  The third compaction line is expected to be put into service in early 2014, as originally planned.  This project upgrades Intrepid's capacity to handle all of the anticipated production from the HB Solar Solution mine as well as the increased production from the investments in the West facility.  

Outlook

Intrepid's outlook for the third quarter and full year 2013 is presented below.  This information reflects management's best estimates at the current time and will be impacted by actual market conditions, results of operations, and production results.  Intrepid's guidance is subject to the impact from the recent developments in Russia, which will be better understood as the market reacts to the news and as North American potash prices become established.      

The mid-points of the full-year production and sales outlook for potash have each been reduced by 9% and 8%, respectively, from Intrepid's previous outlook to reflect the actual spring season results, the revised timing of the upgrades underway at the West facility and the changeover to the new North compaction facility.  Bringing the West facility upgrades into service requires that the plant be stopped and started more often than normal while the new equipment is installed and certain processes are modified and new equipment is calibrated and integrated into the existing system.  These changes result in increased variability in operating and recovery rates and have an impact on near-term potash production rates.  The old compactor facility at North has not been running at historical production levels and the Company is balancing the investment needs associated with this facility that has more than served its useful life, ahead of transitioning over to the new plant.  Annual maintenance turnarounds are scheduled in the third quarter at both the West and East facilities, and the Moab location is scheduled to begin its harvest in September following the peak of the evaporation season.

Steady production improvements continue at the langbeinite plant and, accordingly, the production and sales outlook for Trio^® has been increased.  The sales volume estimate reflects the variability associated with the timing of sales of the standard sized product, which is predominately sold into the export market.

The outlook information for capital investment is provided on a full-year basis only and is unchanged from the previous outlook.

Notes

Adjusted net income, adjusted net income per diluted share, and adjusted EBITDA are non-GAAP financial measures.  Reconciliations of these measures to the most directly comparable U.S. GAAP measures are included in the tables at the end of this release.  Average net realized sales price, cash operating cost of goods sold, and cash operating cost of goods sold net of by-product credits are operating measures.  Definitions of these measures are included in the footnotes in this release.

Unless expressly stated otherwise or the context otherwise requires, references to "tons" in this press release refer to short tons.  One short ton equals 2,000 pounds.  One metric tonne, which many international competitors use, equals 1,000 kilograms or 2,204.62 pounds.

Conference Call Information

A teleconference to discuss the quarter is scheduled for August 1, 2013, at 10:00 a.m. EDT.  The dial in number is 800-319-4610 for U.S. and Canada, and is 631-982-4565 for other countries.  A recording of the conference call will be available two hours after the completion of the call at 800-319-6413 for U.S. and Canada, or 631-883-6842 for other countries.  The replay of the call will require the input of the conference identification number 763324.  The call will also be streamed on the Intrepid website, www.intrepidpotash.com.  An audio recording of the conference call will be available at www.intrepidpotash.com through September 1, 2013.

About Intrepid

Intrepid (NYSE: IPI) is the largest producer of potash in the U.S. and is dedicated to the production and marketing of potash and Trio^®, a product produced from langbeinite ore.  Intrepid owns five active potash production facilities - three in New Mexico and two in Utah.  The HB Solar Solution mine, which is currently under construction, will increase the number of our active potash production facilities to six.

We routinely post important information about our business, including information about upcoming investor presentations, on our website under the Investor Relations tab.  We encourage our 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 address is www.intrepidpotash.com.

Forward-looking Statements

This document contains forward-looking statements - that is, statements about future, not past, events.  The forward-looking statements in this document often relate to our future performance and management's expectations for the future, including statements about our financial outlook.  These statements are based on assumptions that we believe are reasonable.  Forward-looking statements by their nature address matters that are uncertain.  For us, the particular uncertainties that could cause our actual results to be materially different from our forward-looking statements include the following:

• changes in the price, demand, or supply of potash or Trio^®/langbeinite 

• circumstances that disrupt or limit our production, including operational difficulties or operational variances due to geological or geotechnical variances 

• interruptions in rail or truck transportation services, or fluctuations in the costs of these services 

• increased labor costs or difficulties in hiring and retaining qualified employees and contractors, including workers with mining, mineral processing or construction expertise 

• the costs of, and our ability to successfully construct, commission and execute, any of our strategic projects, including the development of our HB Solar Solution mine, the further development of our langbeinite recovery and granulation assets, our North granulation plant, and our Moab cavern systems 

• adverse weather events, including events affecting evaporation rates at our solar solution mines 

• changes in the prices of raw materials, including chemicals, natural gas, and electricity 

• the impact of federal, state, or local government regulations, including environmental and mining regulations, the enforcement of those regulations, and government policy changes 

• our ability to obtain any necessary government permits relating to the construction and operation of assets 

• changes in our reserve estimates 

• competition in the fertilizer industry 

• declines in U.S. or world agricultural production 

• declines in the use of potash products by oil and gas companies in their drilling operations 

• changes in economic conditions 

• our ability to comply with covenants in our debt-related agreements to avoid a default under those agreements 

• disruption in the credit markets 

• our ability to secure additional federal and state potash leases to expand our existing mining operations 

• the other risks and uncertainties described in our periodic filings with the U.S. Securities and Exchange Commission 

All information in this document speaks as of July 31, 2013.  New information or events after that date may cause our forward-looking statements in this document to change.  We have no duty to update or revise publicly any forward-looking statements to conform the statements to actual results or to reflect new information or future events.

Contact:
Gary Kohn, Investor Relations
Phone: 303-996-3024
Email: gary.kohn@intrepidpotash.com

INTREPID POTASH, INC.
SELECTED OPERATIONS DATA (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012

* On a per ton basis, by-product credits were $7 and $6 for the second quarter of 2013, and 2012, respectively.  By-product credits were $1.3 million and $1.2 million for the second quarter of 2013, and 2012, respectively.  On a per ton basis, by-product credits were $9 and $8 for the first six months of 2013, and 2012, respectively.  By-product credits were $3.2 million and $3.0 million for the first six months of 2013, and 2012, respectively.