ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q (this "Quarterly Report") contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Securities Act of 1933, as amended. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements in this Quarterly Report other than statements of historical fact are forward-looking statements. Forward-looking statements include statements about our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, among other things. In some cases, you can identify these statements by forward-looking words, such as "estimate," "expect," "anticipate," "project," "plan," "intend," "believe," "forecast," "foresee," "likely," "may," "should," "goal," "target," "might," "will," "could," "predict," and "continue." Forward-looking statements are only predictions based on our current knowledge, expectations, and projections about future events.
These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including the following:
•changes in the price, demand, or supply of our products and services;
•challenges to our water rights;
•our ability to successfully identify and implement any opportunities to grow our business whether through expanded sales of water, Trio®, byproducts, and other non-potassium related products or other revenue diversification activities;
•our ability to integrate the Intrepid South assets into our existing business and achieve the expected benefits of the acquisition;
•our ability to sell Trio® internationally and manage risks associated with international sales, including pricing pressure and freight costs;
•the costs of, and our ability to successfully execute, any strategic projects;
•declines or changes in agricultural production or fertilizer application rates;
•declines in the use of potassium-related products or water by oil and gas companies in their drilling operations;
•our ability to prevail in outstanding legal proceedings against us;
•our ability to comply with the terms of our senior notes and our revolving credit facility, including the underlying covenants, to avoid a default under those agreements;
•further write-downs of the carrying value of assets, including inventories;
•circumstances that disrupt or limit production, including operational difficulties or variances, geological or geotechnical variances, equipment failures, environmental hazards, and other unexpected events or problems;
•changes in reserve estimates;
•currency fluctuations;
•adverse changes in economic conditions or credit markets;
•the impact of governmental regulations, including environmental and mining regulations, the enforcement of those regulations, and governmental policy changes;
•adverse weather events, including events affecting precipitation and evaporation rates at our solar solution mines;
•increased labor costs or difficulties in hiring and retaining qualified employees and contractors, including workers with mining, mineral processing, or construction expertise;
•changes in the prices of raw materials, including chemicals, natural gas, and power;
•our ability to obtain and maintain any necessary governmental permits or leases relating to current or future operations;
•interruptions in rail or truck transportation services, or fluctuations in the costs of these services;
•our inability to fund necessary capital investments;
•the impact of the novel coronavirus (COVID-19) pandemic on our business, operations, liquidity, financial condition and results of operations;
•our ability to regain compliance with the continued listing criteria of the New York Stock Exchange (“NYSE”); and
•the other risks, uncertainties, and assumptions described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2019, as updated by our subsequent Quarterly Reports on Form 10-Q, including Item 1A. Risk Factors of this Quarterly Report.
In addition, new risks emerge from time to time. It is not possible for our management to predict all risks that may cause actual results to differ materially from those contained in any forward-looking statements we may make.
In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in these forward-looking statements. As a result, you should not place undue reliance on these forward-looking statements. We undertake no duty to update or revise publicly any forward-looking statements to conform those statements to actual results or to reflect new information or future events.
Throughout this Quarterly Report, we refer to average net realized sales price per ton, which is a non-GAAP financial measure. More information about this measure, including a reconciliation of this measure to the most directly comparable GAAP financial measure, is below under the heading "Non-GAAP Financial Measure."
Company Overview
We are a diversified mineral company that delivers potassium, magnesium, sulfur, salt, and water products essential for customer success in agriculture, animal feed and the oil and gas industry. We are the only U.S. producer of muriate of potash (sometimes referred to as potassium chloride, KCl or potash), which is applied as an essential nutrient for healthy crop development, utilized in several industrial applications, and used as an ingredient in animal feed. In addition, we produce a specialty fertilizer, Trio®, which delivers three key nutrients, potassium, magnesium, and sulfate, in a single particle. We also provide water, magnesium chloride, brine and various oilfield products and services.
Our extraction and production operations are conducted entirely in the continental United States. We produce potash from three solution mining facilities: our HB solution mine in Carlsbad, New Mexico, our solution mine in Moab, Utah, and our brine recovery mine in Wendover, Utah. We also operate our North compaction facility in Carlsbad, New Mexico, which compacts and granulates product from the HB mine. We produce Trio® from our conventional underground East mine in Carlsbad, New Mexico.
We have water rights in New Mexico under which we sell water primarily to support oil and gas development in the Permian Basin near our Carlsbad facilities. We continue to work to expand our sales of water. In May 2019, we acquired certain land, water rights, and other related assets from Dinwiddie Cattle Company. We refer to these assets and operations as "Intrepid South."
We have three segments: potash, Trio®, and oilfield solutions. We account for the sale of byproducts as revenue in the potash or Trio® segment based on which segment generated the byproduct.
Recent Developments
New York Stock Exchange Notices
On April 17, 2020, we received notice from the NYSE that we were no longer in compliance with Section 802.01C of the NYSE Listed Company Manual (“Section 802.01C”) that requires listed companies to maintain an average closing share price of at least $1.00 over a period of 30 consecutive trading days (the “Notice”). Pursuant to Section 802.01C, we generally have a period of six months following the receipt of the Notice to regain compliance with the minimum share price requirement, subject to any extensions by NYSE. We can regain compliance with the minimum share price requirement at any time during the cure period if, on the last trading day of any calendar month during the cure period or on the last day of the cure period, we have a closing share price of at least $1.00 per share and an average closing share price of at least $1.00 per share over the 30 trading-day period ending on such date. As required by the NYSE, we have notified the NYSE of our intent to cure the listing standard deficiency and regain compliance with the minimum share price requirement. On June 2, 2020, we received notice that we had regained compliance with the minimum share price requirement.
On July 24, 2020, we received notice from the NYSE that we were once again no longer in compliance with Section 802.01C of the NYSE Listed Company Manual that requires listed companies to maintain an average closing share price of at least $1.00 over a period of 30 consecutive trading days (the “July Notice”). Pursuant to Section 802.01C, we generally have a period of six months following the receipt of the July Notice or until the next annual meeting to regain compliance with the minimum share price requirement, subject to any extensions by NYSE. Due to our reduced stock price, before we received notice of non-compliance we provided notice of a special meeting of shareholders to vote on four proposals that would allow our Board of Directors to enact a reverse stock split of between 1:3 and 1:15. On July 28, 2020, we held the special meeting and all proposals voted on at the special meeting were approved and we expect the Board will implement a reverse split in August 2020. The final split ratio will be determined by our stock price at the time of the split and other factors that could influence the price of our stock. We believe that being able to effect a reverse stock split is in the best interests of us and our stockholders by allowing us more flexibility to, among other things, potentially improve the marketability and liquidity of our commons stock and regain compliance with the listing requirements of the NYSE, which will allow management to focus on our business strategy.
For more information, please see Item 1A. “Risk Factors” under the caption “If we cannot meet the continued listing requirements of the NYSE, the NYSE may delist our common stock.”
Significant Business Trends and Activities
The novel strain of coronavirus (COVID-19) has surfaced in nearly all regions around the world. We have been deemed an essential business and have continued to operate to produce potash and Trio® and serve oil and gas markets through our oilfield solutions business. The safety and protection of our workforce is our first and foremost priority. We continue to follow various procedures we implemented to help minimize the risks to our employees, including changes in our operating procedures to accommodate social distancing guidelines, additional cleaning and disinfection procedures and requiring those employees who can work from home to do so.
We continue to monitor the rapidly evolving situation and guidance from various authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. There may be developments outside our control that would require us to adjust our operating plans.
Our second quarter results were materially impacted by the COVID-19 pandemic, particularly our oilfield solutions segment as many of the actions taken to help prevent the spread of COVID-19 decreased demand for oil. Many areas of the country began to reopen during the second quarter of 2020. However, governmental authorities may reinstate shelter-in-place orders and other restrictive orders due to a continued resurgence of COVID-19 related cases. Such restrictive actions may lead to further decreases in the demand for oil and may impact our other operations if expanded restrictions are deemed necessary to mitigate the public health effects of the COVID-19 pandemic. Given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. We do expect that if governmental authorities reinstate shelter-in-place and other restrictive orders, such actions will have a material effect on revenue growth, financial condition, liquidity, and overall profitability in future reporting periods.
Our financial results have been, or are expected to be, impacted by several significant trends and activities, including impacts from the COVID-19 pandemic, as discussed below. We expect that the trends described below may continue to impact our results of operations, cash flows, and financial position.
• Potash pricing and demand. Potash sales volumes in the second quarter of 2020 decreased 22% compared to the second quarter of 2019 and good early season weather accelerated the spring application season in many parts of the country, pushing some 2020 agricultural tons forward into the first quarter. First half 2020 sales volume was down 5% compared to the prior year as increases in agricultural and feed sales were offset by a significant decrease in industrial potash sales, due in large part to the COVID-19 pandemic. Actions taken in response to the COVID-19 pandemic, such as work from home and limiting travel, have decreased the demand for oil and subsequently reduced oil and gas activities.
Our potash average net realized sales price per ton decreased to $256 for the three months ended June 30, 2020, compared to $299 for the same period in 2019. For the six months ended June 30, 2020 our potash average net realized sale price per ton decreased to $256, compared to $294 for the six months ended June 30, 2019, as price decreases from both the 2019 summer-fill program and the winter-fill program announced in January 2020 lowered overall price levels. Price levels increased by $20 per ton in late January after the order window closed for the 2020 winter-fill program and we realized this pricing in the western United States. In June 2020, a summer-fill program was announced by our competitors that lowered the price $40 per ton and $30 per ton in the corn belt and western United States, respectively, from current list prices. This is in effect a decrease of $20 per ton and $10 per ton for the corn belt and western United States, respectively, when compared to the winter-fill pricing from the first quarter of 2020. After the summer-fill order window closes, list price is scheduled to increase $15 per ton. We expect to sell at the summer-fill pricing levels through the third quarter and we expect to achieve the increased pricing in the fourth quarter, but this could be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases as a result of the COVID-19 pandemic, and the price and availability of other potassium products.
With potash sales comprising 46% of our total sales in the first six months of 2020, potash prices continue to be a significant driver of our profitability. Pricing of our potash is influenced principally by the price established by our competitors. The interaction of global potash supply and demand, ocean, land, and barge freight rates, and currency fluctuations also influence pricing.
We experience seasonality in potash demand, with more purchases historically occurring in March through May and September through November when purchasers are looking to have product on hand for the spring and fall application seasons in the United States. To date, we have not seen any impacts to the seasonal demand patterns for potash. However, further actions taken in response to the COVID-19 pandemic may impact the traditional fall fertilizer application season if there is an effect on available labor, transportation logistics, or supply disruptions. The combination of these items results in variability in potash sales and shipments, thereby increasing volatility of sales volumes from quarter to quarter and season to season. The specific timing of when farmers apply potash remains highly weather dependent and varies across the numerous growing regions within the U.S. The timing of potash sales is also significantly influenced by the marketing programs of potash producers, as well as storage volumes closer to the farm gate. Our sales volumes into the industrial market correlate to drilling activity in the oil and gas market.
• Trio® pricing and demand. Our Trio® average net realized sales price per ton increased 6% during the second quarter of 2020 as compared to the second quarter of 2019 as we sold fewer tons internationally, which generally carry lower per-ton pricing. Our Trio® average net realized sales price per ton was unchanged for the six months ended June 30, 2020 compared to the six months ended June 30, 2019, as decreases in domestic pricing was offset by fewer international sales.
During the second quarter of 2020, year-over-year domestic Trio® pricing continued to be negatively impacted by a summer-fill program announced by our competitor in July 2019, lowering their list price by $35 to $50 per ton depending on product grade, and a winter-fill program announced in January of 2020 that held price at the summer-fill levels until early in the second quarter. After the winter-fill order window expired, we did transact some sales at the higher pricing in the second quarter, although domestic competition remained strong which limited our ability to maintain those price levels. In June 2020, our competitor announced another summer-fill price decrease of $15 to $20 per ton from the current list price, or in effect a $5 to $10 per ton decrease from the winter-fill price level, for orders delivered through the end of the third quarter. This announcement mirrored the potash summer-fill price announced earlier in June. Price is scheduled to increase $15 per ton after the fill window, and we expect to achieve this price in the fourth quarter, but this could be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases as a result of the COVID-19 pandemic, and the price and availability of other potassium products.
Trio® sales volume increased 10% during the first six months of 2020, compared to the first six months of 2019, as good weather in most of our domestic markets resulted in a strong 2020 spring application season. First half 2019 domestic sales were reduced due to wet weather which negatively impacted the 2019 spring application season. International sales decreased significantly in the second quarter of 2020, as compared to the second quarter of 2019, due to the timing of shipments and as we pursue a more limited international sales strategy.
We also experience seasonality in domestic Trio® demand, with more purchases coming in the first and second quarters in advance of the spring application season in the U.S. In turn, we generally have increased inventory levels in the third and fourth quarters in anticipation of expected demand for the following year. Further actions taken in response to the COVID-19 pandemic may also impact seasonal demand patterns if there is an effect on available labor, transportation logistics, or supply disruptions. We continue to operate our facilities at production levels that approximate expected demand and allow us to manage inventory levels. Certain products rely more heavily on international markets, particularly standard Trio®. Our international warehouse temporarily closed in response to the COVID-19 pandemic in the first quarter and was reopened during the second quarter and currently remains open, but we may see additional closures with the continued resurgence of COVID-19 related cases, which could reduce demand in future periods. We reduced the production of fine langbeinite in the second quarter of 2020 to manage inventory levels and if we experience reduced demand for Trio® due to warehouse closures or other effects from the COVID-19 pandemic, we may need to continue to operate at reduced production rates to manage inventory levels.
• Water sales. In the second quarter of 2020, total water sales were $2.5 million compared to $5.7 million during the same period of 2019, and $8.5 million in the first quarter of 2020. During the second quarter, the COVID-19 pandemic impacted the demand for oil as shelter-in-place orders were issued across most major metropolitan areas, significantly reducing automobile and airline travel, two major consumers of oil. In addition, most states required non-essential businesses to close and employees to work from home wherever possible. While shelter-in-place orders were relaxed towards the end of the second quarter and demand began to rebound, there continues to be significant impacts from the COVID-19 pandemic as oil and gas activity in the areas in which we operate has not yet returned to the levels seen prior to the COVID-19 pandemic. In addition, positive cases of COVID-19 are increasing in most areas of the United States, which could lead to reinstating shelter-in-place restrictions in states and major cities. Such restrictions would negatively impact the demand for oil in the second half of 2020 or beyond.
For the six months ended June 30, 2020 and June 30, 2019, total water sales were $11.0 million The decrease in water sales in the second quarter of 2020, as discussed above, was offset by operating Intrepid South for the full six month period in 2020, compared to only two months of the six month period of 2019, as we purchased the Intrepid South assets in May 2019.
We expect the planned reduction in activities by operators will continue to impact our sales of water and other oilfield products and services through at least the second half of 2020, although the unprecedented conditions resulting from the COVID-19 pandemic make forecasting future demand difficult.
Water rights in New Mexico are subject to a stated purpose and place of use, and many of our water rights were originally issued for uses relating to our mining operations. When water rights temporarily exceed the originally permitted use, we and other persons or entities with New Mexico water rights are able to sell water for alternative uses, such as construction, farming, ranching and oil and gas development, thereby ensuring the highest and best use of New Mexico water that may otherwise go unused. When applicable we, or any other New Mexico water right holder, applies for a permit from the New Mexico Office of the State Engineer ("OSE") to change the purpose and/or place of use of the underlying water rights. The OSE reviews and makes a determination as to the validity of the right and if it determines the requested change will not negatively impact other valid interests, the OSE may issue a preliminary authorization for the change. The preliminary authorization allows for water sales to begin immediately, subject to repayment if the underlying water rights were ultimately found to be invalid, thereby ensuring the highest and best use of New Mexico water that may otherwise go unused. Third parties may protest the preliminary authorization at minimal cost and frequently do so. Once protested, the OSE is required to hold a hearing to determine if the preliminary authorization was appropriate. Since 2017, we have faced a protest of our rights to use water from the Pecos River from numerous parties. We have a strong historical and legal basis supporting 19,836 acre feet of water rights on the Pecos River. While some parties have challenged our entire water right, recent and historic analysis from the New Mexico Interstate Stream Commission expert report dated August 30, 2019 by Jennifer Stevens, Ph.D. indicates our rights based on historic consumptive use to a minimum of 5,800 acre feet of established rights. Further, on July 21, 2020 the OSE filed its State of New Mexico's Response to CID/Otis's Motion for Summary Judgment, indicating our rights at up to 6,000 acre feet.
Significant current and historic use of New Mexico Pecos River water rights comes from water sales made under preliminary authorizations issued by the OSE, both for us and many other New Mexico water rights users. Third parties have protested these preliminary authorizations, and the OSE is required to hold a hearing on the protests. In February 2019, certain protestants filed an inter se proceeding in New Mexico District Court at the Pecos Stream System Adjudication Court challenging the validity of certain of Intrepid’s New Mexico Pecos River water rights. In August 2019, all of the parties, including us and the protestants, stipulated to the jurisdiction of the adjudication court. To promote settlement, the adjudication court established a settlement schedule and ordered a trial date in August 2020 if the parties have not reached a settlement by that time. The trial date has since been rescheduled to December 2020, subject to the continued motions of the protestants. Preliminary authorizations allow for water sales to begin immediately, subject to repayment if the underlying water rights are ultimately found to be invalid, which repayment may be made "in-kind" through our utilization of existing water rights which remain unaffected by actions under the affected leases which do not impact our ability to deliver water at numerous other locations and/or from the subject diversion points in service of those unaffected rights. Separate from the adjudication proceeding, the protestants have challenged these preliminary authorizations before the OSE. Although the OSE is required to hold a hearing relating to the protests, it has temporarily stayed the hearing process in this matter until the agreed-upon adjudication process is complete. In the adjudication proceeding, the court is expected to make a determination as to the size of Intrepid's Pecos River water rights.
In February 2020, the protestant CID/Otis filed a Petition of Writ of Mandamus against the OSE concerning these permits, despite its agreed stipulation to jurisdiction of the adjudication court, asking for unspecified monetary and injunctive relief, as well as attorneys' fees and costs, relating to our sale of water under these water rights and breach of contract claims. A hearing regarding this Writ was held in March 2020, and the non-adjudication court granted the Writ against the OSE challenging the OSE's right to grant preliminary authorizations under the New Mexico Water Leasing Act. The non-adjudication court also denied Intrepid’s right to participate as a potentially harmed party. The non-adjudication court’s challenged ruling required the OSE to withdraw and cancel certain preliminary authorizations the OSE had issued to us. This challenged ruling by the non-adjudication court does not impact the validity of our water rights, nor does it impact our ability to deliver water at numerous other locations. The ruling limits our and our lessees ability to use water under certain leases, subject to challenge, but does not affect our continuing ability to utilize the subject diversion points to service other water rights.
The OSE has filed a Petition for Writ of Superintending Control with the New Mexico Supreme Court seeking to reverse the decision by the non-adjudication court and stay any actions taken as a result of the Writ of Mandamus.
The challenged ruling by the non-adjudication court only affects leases, not the underlying rights, on two points of diversion on the Pecos river and does not affect Intrepid's ability to produce potash or Trio®. As stated, we were denied the right to intervene and challenge both the jurisdiction, grounds and legitimacy of the non-adjudication court in this matter and we have filed for a Petition of Writ of Superintending Control in the New Mexico Supreme Court seeking a reversal of the denial of our request to intervene and seeking to stay enforcement while the matter is being decided. Also as stated, the OSE has filed for a Petition for Writ of Superintending Control in the New Mexico Supreme Court seeking to assert its jurisdiction over permitting under the Water Leasing Act. Both petitions seek a stay of the Writ of Mandamus issued by the non-adjudication court. These petitions are currently pending. The adjudication court has scheduled the underlying issue regarding adjudication of the validity of the subject water rights for December of 2020. We continue to vigorously defend our legal position with respect to the validity of our water rights in all forums and assert the proper jurisdiction of the adjudication court in determining the validity and extent of Intrepid’s water rights in this matter.
We may face other political and regulatory issues relating to the potential use of the maximum amount of our rights. However, we believe that our legal position with respect to the validity of our water rights is solid and that we will be able to meet our water commitments.
• Byproduct sales. We sell byproducts such as salt, magnesium chloride, brines, and water that are derived from our potash and Trio® operations. Byproduct sales were $3.4 million for the three months ended June 30, 2020, compared to $4.6 million for the three months ended June 30, 2019. Byproduct sales were $8.7 million for the six months ended June 30, 2020, compared to $11.6 million for the six months ended June 30, 2019. The decrease during the second quarter of 2020 was primarily due to a $0.8 million decrease in salt sales and a $0.9 million decrease in water sales, offset by a $0.7 million increase in sales of magnesium chloride. Salt availability improved in certain regions of the country in the second quarter of 2020, compared to the same period in 2019, which reduced our sales footprint while overall water sales were down significantly due to the impact of the COVID-19 pandemic on oil and gas activity, as discussed above. Our sales of magnesium chloride increased as good early season evaporation allowed for the production of magnesium chloride towards the end of the second quarter of 2020. In the second quarter of 2019, above average wet weather during the spring limited the production and demand of magnesium chloride.
The decrease in byproduct sales during the first half of 2020 was due to a $1.9 million decrease in salt sales, a decrease of $0.5 million in brine water sales, a decrease of $0.3 million in byproduct water sales and a decrease of $0.2 million in magnesium chloride sales. Improved salt availability in certain regions of the country in the first half of 2020 reduced our sales footprint. The decrease in byproduct brine water and byproduct water sales was due to impact of the COVID-19 pandemic on oil and gas activity, as discussed above. The decrease in magnesium chloride sales is due to having less magnesium chloride to sell due to wet weather at our Wendover facility, which reduced our magnesium chloride production.
Magnesium chloride production and sales returned to historic rates towards the end of the second quarter of 2020 and we expect that will continue in the second half of 2020 assuming average evaporation rates at our Wendover facility. We continue to experience decreased demand for water and other oilfield products and services as a result of the COVID-19 pandemic and expect this to continue for at least the second half of 2020.
• Diversification of products and services. We continue to diversify our products and services, particularly on our Intrepid South property. In addition to water sales, Intrepid South generates revenue from right-of-way agreements, surface damages and easements, caliche sales, and a produced water royalty. We added a brine station at our Intrepid South property in February 2020 and are reviewing opportunities to developing a produced water facility, although the expectation of reduced oil and gas operations due to the recent decrease in the price and demand for oil due to the COVID-19 pandemic have made the timing of this development uncertain. Demand for our high-speed mixing service has also been negatively impacted as a result of the decrease in oil prices and oilfield activities.
In March 2020, we sold approximately 320 acres of fee land from our Intrepid South property for $4.8 million and recognized a gain on the sale of the land of $4.7 million. The terms of the sale were highly restrictive and only allow the buyer to drill Acid Gas Injection ("AGI") wells on the property to dispose of natural gas with high concentrations of hydrogen sulfide ("H2S"). No water rights were included in the land sale, we retained surface access, and we restricted the use of caliche located on the property to the acreage that was sold in order to prevent sales to third parties or decrease future sales to the buyer. Our long-term strategic operating plan for Intrepid South includes selling small parcels of land to other companies, where such sales provide a solution to a company's needs. We may have additional strategic sales of small parcels of land in the future.
In May 2020, we acquired an 11% equity stake in the W.D. Von Gonten Laboratories ("WDVGL"), a global industry leader in drilling and completion chemistry and a strong supporter of the use of potassium chloride in oil and gas drilling and completion activities. With this investment we plan to revitalize our industrial sales and high-speed mixing
service given the poor performance of clay-inhibition chemical substitutes. Our investment in WDVGL is also part of our strategy to leverage our existing oil and gas midstream businesses in southeast New Mexico and expand into additional oil and gas midstream and upstream activities. This expansion may be through organic growth, other strategic investments, partnerships, or acquisitions of complementary businesses that expand our product and service offerings beyond our existing assets or products. We believe that the investment opportunities in the current market are generational and provide a unique opportunity to accelerate our pivot towards oil and gas through accretive transactions. Additionally, we may expand into oil and natural gas exploration and production or into new products or services in our current industry or other industries.
Consolidated Results
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(in thousands, except per ton amounts)
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Three Months Ended June 30,
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Six Months Ended June 30,
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2020
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2019
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2020
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2019
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Sales1
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$
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46,450
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$
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62,512
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$
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110,434
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$
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120,066
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Cost of goods sold
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$
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34,008
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$
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35,818
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$
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77,055
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$
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67,512
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Gross (Deficit) Margin
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$
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(599)
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$
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13,171
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$
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5,024
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$
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26,339
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Selling and administrative
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$
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6,673
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$
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6,355
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$
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13,272
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$
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12,162
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Net (Loss) Income
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$
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(8,872)
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$
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5,611
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$
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(16,269)
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$
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11,766
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Average net realized sales price per ton2
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Potash
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$
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256
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$
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299
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$
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256
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$
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294
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Trio®
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$
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208
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$
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196
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$
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200
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$
|
200
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1Sales include sales of byproducts which were $3.4 million and $4.6 million for the three months ended June 30, 2020, and 2019, respectively, and $8.7 million and $11.6 million for the six months ended June 30, 2020, and 2019, respectively.
2Average net realized sales price per ton is a non-GAAP financial measure. More information about this non-GAAP financial measure is below under the heading "Non-GAAP Financial Measure."
Consolidated Results for the Three Months Ended June 30, 2020, and 2019
Our total sales for the three months ended June 30, 2020, decreased $16.1 million, or 26%, as compared to the three months ended June 30, 2019. Our potash sales decreased $10.7 million, or 33%, during the second quarter of 2020 as compared to the second quarter of 2019. Our tons of potash sold decreased 22% in the second quarter of 2020, compared to the second quarter of 2019, as favorable weather resulted in an earlier spring application season in 2020, as compared to 2019. Additionally, we sold fewer tons of potash into the industrial market in the second quarter of 2020 compared to the second quarter of 2019. Our average net realized sales price per ton decreased 14% for the three months ended June 30, 2020, compared to the same period in 2019, as price decreases from both the 2019 summer-fill program and the winter-fill program announced in January 2020 lowered overall price levels.
Our Trio® sales decreased $1.5 million, or 8%, in the second quarter of 2020, as compared to the second quarter of 2019. The decrease was due to selling 10% fewer tons in the second quarter of 2020 compared to the second quarter of 2019, partially offset by a 6% increase in the average net realized sales price per ton during the second quarter of 2020, compared to the second quarter of 2019. As with our potash sales, favorable spring weather in 2020 resulted in an earlier spring application season in 2020, as compared to 2019. Our average net realized sales price per ton increased slightly in the second quarter of 2020, compared to the second quarter of 2019, as we sold fewer tons of Trio® internationally in the second quarter of 2020, compared to the second quarter of 2019. Our Trio® average net realized sales price for international sales is less than our Trio® average net realized sales price for domestic sales, due to higher freight costs related to international sales.
Our water sales decreased $2.2 million, or 52%, in the second quarter of 2020, compared to the second quarter of 2019. Our water sales were negatively impacted by the COVID-19 pandemic as oil demand decreased significantly leading to decreased oil and gas activity, as discussed above. We expect our water sales will continue to be negatively impacted in the second half of 2020, due to the continued economic effects of the COVID-19 pandemic.
Our byproduct sales decreased $1.2 million in the second quarter of 2020, compared to the second quarter of 2019, due to a $0.9 million decrease in byproduct water sales, an $0.8 million decrease in salt sales, a decrease of $0.3 million in byproduct brine water sales, partially offset by an $0.7 million increase in magnesium chloride sales. Byproduct water and byproduct brine water sales decreased due to the negative economic effects related to the COVID-19 pandemic. We expect byproduct water sales and byproduct brine water sales will continue to be negatively impacted in the second half of 2020, due to the continued economic effects of the COVID-19 pandemic. Byproduct salt sales decreased as salt availability improved in certain parts of the U.S. which reduced our geographic footprint for salt sales. Magnesium chloride sales increased as we had more product to sell in the second quarter of 2020 compared to the same quarter in 2019. Wet weather at our Wendover facility reduced our magnesium chloride production in 2019.
Cost of Goods Sold
Our total cost of goods sold decreased 5% during the second quarter of 2020 compared to the second quarter of 2019. Our potash cost of goods sold decreased by $3.6 million, or 17%, during the second quarter of 2020 compared to the second quarter of 2019, mainly driven by a 22% decrease in potash tons sold. This decrease was partially offset by $1.6 million increase, or 13%, in our Trio® cost of goods sold. While Trio® tons sold during the second quarter of 2020, decreased 10% compared to the second quarter of 2019, we sold a higher percentage of premium Trio® tons in the second quarter of 2020, compared to the second quarter of 2019, which carry a higher per ton carrying cost than our other Trio® products.
Gross Margin
During the second quarter of 2020, we generated a gross deficit of $0.6 million compared to a gross margin of $13.2 million during the second quarter of 2019, driven by a decrease of 26% decrease in sales as discussed above. Additionally, during the second quarter of 2020, we recorded a $2.2 million lower of cost or net realizable value inventory adjustment due to declining potash and Trio® prices.
Selling and Administrative Expense
During the second quarter of 2020, selling and administrative expenses increased 5% as compared to the second quarter 2019. The increase was due mainly to increased legal costs associated with protests over the validity of certain of our water rights and settlement of outstanding litigation.
Net Income
We generated a net loss of $8.9 million for the three months ended June 30, 2020, compared to net income of $5.6 million in the same period in 2019 due to the factors discussed above.
Consolidated Results for the Six Months Ended June 30, 2020, and 2019
Our total sales for the six months ended June 30, 2020, decreased $9.6 million or 8%, as compared to the six months ended June 30, 2019. Our potash sales during the first half of 2020 decreased $10.0 million compared to the first half of 2019. We sold 5% fewer tons of potash during the first half of 2020 compared to the first half of 2019, driven by selling fewer tons of potash into the industrial market. Our potash average net realized sales price per ton also decreased 13% in the first half of 2020 compared to the first half of 2019. Price decreases from the both the 2019 summer-fill program and the winter-fill program announced in January 2020 lowered overall price levels. Also, potash tons sold into the industrial market generally earn a higher average net realized sales price per ton compared to potash tons sold into the agriculture markets.
Our Trio® sales increased $3.1 million or 8% during the first half of 2020 compared to the first half of 2019. We sold more tons of Trio® during the first half of 2020 compared to the first half of 2019, while our Trio® average net realized sales price per ton was flat. Our increase in Trio® tons sold was driven by increased domestic sales during the first half of 2020 compared to the first half of 2019.
Water sales increased $0.3 million, or 4%, in the first half of 2020 compared to the first half of 2019, due to the additional water rights acquired as part of Intrepid South in May 2019. However, as discussed above, our second quarter 2020 water sales were materially impacted by the COVID-19 pandemic as significant decreases in the demand for oil and the subsequent decreases in oil and gas activities reduced water demand. We expect a decrease in water sales will continue at least through the second half of 2020 as a result of the COVID-19 pandemic.
Our sales of other oilfield solution segment offerings, including caliche, brine water, right-of-way agreements, surface damages and easements, were flat in the first half of 2020, compared to the first half of 2019.
Our total byproduct sales decreased $2.9 million, or 25%, for the six months ended June 30, 2020, compared to the first six months of June 30, 2019. Our byproduct salt sales decreased $1.9 million, or 32%, in the first half of 2020 compared to the first half of 2019, as salt availability improved in certain regions of the country reducing our geographic footprint for salt sales. Our byproduct brine water sales decreased $0.5 million, or 38%, and our byproduct water sales decreased $0.3 million, or 12%, due to the COVID-19 pandemic, as discussed above.
Cost of Goods Sold
Our cost of goods sold increased $9.5 million, or 14%, during the first half of 2020 compared to the first half of 2019. Our Trio® cost of goods sold increased $8.0 million, or 34% during the first half of 2020, compared to the first half of 2019, as Trio® sales volumes increased 10%. Also, in the first half of 2020, as compared to the first half of 2019, we reduced production of Trio® tons by 22% in order to manage our inventory levels. Because a majority of our production costs are fixed, reductions in tons produced results in a higher per ton production cost. Finally, we sold a higher percentage of premium Trio® tons in the first half of 2020, compared to the first half of 2019, which carry a higher per ton carrying cost than our other Trio® products.
Our potash cost of goods sold were virtually unchanged during the first half of 2020 compared to the first half of 2019, even though our potash tons sold decreased by 5%. Below average evaporation during the 2019 evaporation season at our potash facilities resulted in higher per ton cost of goods sold during the first half of 2020, as compared to the first half of 2019.
Our oilfield solutions cost of goods sold increased $0.2 million during the first half of 2020 compared to the first half of 2019, as water transfer and labor costs at Intrepid South increased $1.5 million, partially offset by a decrease of $1.3 million of intercompany purchases of potash from our potash segment that were used in our high-speed mixing service that were eliminated in consolidation because the cost of goods sold for those intercompany sales are included in the potash segment and the oilfield solutions segment. The increase in water transfer costs is due to the acquisition of Intrepid South in May 2019. During the first half of 2020, our oilfield solutions segment did not have any intercompany purchases of potash as we have not had any high-speed mixing sales in the first half of 2020, due to decreased oil demand as a result of the COVID-19 pandemic which led to decreased oil and gas activities.
Gross Margin
During the first half of 2020, we generated gross margin of $5.0 million compared to a gross margin of $26.3 million, driven by an 8% decrease in total sales coupled with an 14% increase in our total cost of goods sold, as discussed above. Additionally, during the first half of 2020, we recorded $2.8 million of lower of cost or net realizable value inventory adjustments due to declining potash and Trio® prices.
Gain on Sale of an Asset
In March 2020, we sold approximately 320 acres of fee land from our Intrepid South property for $4.8 million and recognized a gain on the sale of the land of $4.7 million. The terms of the sale were highly restrictive and only allow the buyer to drill Acid Gas Injection (AGI) wells on the property to dispose of natural gas with high concentrations of hydrogen sulfide (H2S). No water rights were included in the land sale, we retained surface access, and we restricted the use of caliche located on the property to the acreage that was sold in order to prevent sales to third parties or decrease future sales to the buyer. Our long-term strategic operating plan for Intrepid South includes selling small parcels of land to other companies, where such sales provide a solution to a company's needs. We may have additional strategic sales of small parcels of land in the future.
Litigation Settlement
A settlement conference was held with Mosaic in late March 2020 related to ongoing litigation. Intrepid and Mosaic agreed to settle the matter and we paid Mosaic an aggregate of $10 million to dismiss all claims against us in this litigation, and the matter is now closed. Please see further information in Part II, Item 1, "Legal Proceedings" contained in this Quarterly Report.
Selling and Administrative Expense
During the first half of 2020, selling and administrative expenses increased 9% as compared to the first half of 2019. The increase was mainly due to increased legal costs associated with the settlement agreement with Mosaic as discussed above, and increased legal costs related to various protests against our water rights.
Net Income
We generated a net loss of $16.3 million for the six months ended June 30, 2020, compared to net income of $11.8 million in the same period in 2019, due to the factors discussed above.
Potash Segment
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|
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|
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|
|
|
Three Months Ended June 30,
|
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|
|
Six Months Ended June 30,
|
|
|
|
(in thousands, except per ton amounts)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Sales1
|
|
$
|
24,526
|
|
|
$
|
35,547
|
|
|
$
|
58,317
|
|
|
$
|
69,877
|
|
|
Less: Freight costs
|
|
3,286
|
|
|
4,742
|
|
|
8,727
|
|
|
9,382
|
|
Warehousing and handling
costs
|
|
1,204
|
|
|
1,319
|
|
|
2,500
|
|
|
2,586
|
|
|
Cost of goods sold
|
|
17,650
|
|
|
21,258
|
|
|
40,370
|
|
|
40,317
|
|
Lower of cost or net
realizable value inventory
adjustments
|
|
371
|
|
|
—
|
|
|
371
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
$
|
2,015
|
|
|
$
|
8,228
|
|
|
$
|
6,349
|
|
|
$
|
17,592
|
|
|
Depreciation, depletion, and amortization incurred2
|
|
$
|
5,742
|
|
|
$
|
6,120
|
|
|
$
|
13,054
|
|
|
$
|
12,915
|
|
|
|
|
|
|
|
|
|
|
|
|
Potash sales volumes (in tons)
|
|
74
|
|
|
95
|
|
|
173
|
|
|
183
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|
|
Potash production volumes (in tons)
|
|
4
|
|
|
56
|
|
|
140
|
|
|
167
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|
|
|
|
|
|
|
|
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|
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Average potash net realized sales price per ton3
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|
$
|
256
|
|
|
$
|
299
|
|
|
$
|
256
|
|
|
$
|
294
|
|
1 Sales include sales of byproducts which were $3.0 million and $3.5 million for the three months ended June 30, 2020, and 2019, respectively, and $7.0 million and $9.3 million for the six months ended June 30, 2020, and 2019, respectively.
2 Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization amounts absorbed in or (relieved from) inventory.
3Average net realized per ton sales price per ton is a non-GAAP financial measure. More information about this measure is below under the heading "Non-GAAP Financial Measure."
Three Months Ended June 30, 2020, and 2019
Potash segment sales in the second quarter of 2020 decreased compared to the same period in 2019, due to a 22% decrease in sales volume and a 14% decrease in our average net realized sales price per ton and a $0.6 million decrease in byproduct sales. Agricultural sales volumes decreased in the second quarter of 2020 compared to the second quarter of 2019, due to good weather in the first quarter of 2020 which pushed the delivery of product to earlier in the year. We also sold fewer tons into the industrial market. Our industrial potash sales were negatively impacted by the COVID-19 pandemic as oil demand decreased significantly leading to decreased oil and gas activity. Average net realized sales price per ton was lower due to price decreases announced in the summer of 2019 and under the winter-fill program announced in January 2020 and due to lower industrial sales volume. Above average evaporation in Wendover in the first half of 2020 allowed us to begin normal production and sales rates for magnesium chloride in June which offset a decrease in byproduct water, salt, and brine sales. Salt sales decreased compared to 2019 as salt availability improved in certain regions of the country in the second quarter of 2020 which reduced our sales footprint.
Potash segment freight expense decreased $1.4 million, or 31%, in the second quarter of 2020, compared to the second quarter of 2019 as a result of decreased sales volume of potash. Our freight expense is impacted by the geographic distribution of our potash and byproduct sales and by the proportion of customers arranging for and paying their own freight costs.
Our potash segment cost of goods sold decreased 17% in the second quarter of 2020, compared to the same period in 2019, due to a 22% decrease in potash sales volume offset by higher per ton production costs across our facilities as a result of the below average evaporation in 2019.
Potash production decreased 93% compared to the second quarter of 2019 as we finished the spring production season earlier than the previous year due to reduced pond inventory as a result of lower evaporation rates in the summer of 2019.
Our potash segment gross margin decreased $6.2 million in the second quarter of 2020, compared to the same period in 2019, due to the decrease in average net realized sales price per ton, increased per ton production costs, decreased potash sales volumes, and a decrease in byproduct sales.
Six Months Ended June 30, 2020, and 2019
Potash segment sales for the six months ended June 30, 2020 decreased compared to the same period in 2019, due to a 5% decrease in sales volume, a 13% decrease in our average net realized sales price per ton, and a $2.4 million decrease in byproduct sales. Industrial sales volume decreased 71% as our industrial potash sales were negatively impacted by the COVID-19 pandemic as oil demand decreased significantly leading to decreased oil and gas activity. Historically, our industrial potash sales carried a higher average net realized sales price per ton, and the decrease in industrial potash sales negatively impacted our overall potash average net realized sales price per ton. Agricultural volumes were similar to prior year and feed sales were up 26%. Average net realized sales price per ton was lower due to price decreases announced in the summer of 2019 and under the winter-fill program announced in January 2020 and due to lower industrial sales volume. Byproduct sales decreased as reduced oil and gas activity resulted in decreased byproduct water and brine sales. Salt sales decreased compared to 2019 as salt availability improved in certain regions of the country in the second quarter of 2020 which reduced our sales footprint.
Potash segment freight expense decreased $0.7 million, or 7%, in the first six months of 2020, compared to the first six months of 2019 as a result of decreased sales volume of potash. Our freight expense is impacted by the geographic distribution of our potash and byproduct sales and by the proportion of customers arranging for and paying their own freight costs.
Our potash segment cost of goods sold were similar to the prior year as reduced sales volume was offset by higher per ton production costs across our facilities as a result of the below average evaporation in 2019.
Potash production decreased 16% in the first six months of 2020 compared to the first six months of 2019 due to reduced evaporation during the 2019 evaporation season.
Our potash segment gross margin decreased $11.2 million in the first six months of 2020, compared to the same period in 2019, due to the decrease in average net realized sales price per ton, increased per ton production costs, decreased potash sales volumes, and a decrease in byproduct sales.
Additional Information Relating to Potash
The table below shows our potash sales mix for the three and six months ended June 30, 2020, and 2019:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Agricultural
|
|
78%
|
|
76%
|
|
80%
|
|
74%
|
|
Industrial
|
|
3%
|
|
12%
|
|
4%
|
|
14%
|
|
Feed
|
|
19%
|
|
12%
|
|
16%
|
|
12%
|
Trio® Segment
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
(in thousands, except per ton amounts)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Sales1
|
|
$
|
19,251
|
|
|
$
|
21,435
|
|
|
$
|
41,832
|
|
|
$
|
39,245
|
|
|
Less: Freight costs
|
|
5,523
|
|
|
6,471
|
|
|
12,071
|
|
|
11,506
|
|
Warehousing and handling
costs
|
|
861
|
|
|
911
|
|
|
2,469
|
|
|
1,880
|
|
|
Cost of goods sold
|
|
14,222
|
|
|
12,599
|
|
|
31,652
|
|
|
23,673
|
|
Lower of cost or net
realizable value inventory
adjustments
|
|
1,870
|
|
|
—
|
|
|
2,420
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross (Deficit) Margin
|
|
$
|
(3,225)
|
|
|
$
|
1,454
|
|
|
$
|
(6,780)
|
|
|
$
|
2,186
|
|
|
Depreciation, depletion, and amortization incurred2
|
|
$
|
1,516
|
|
|
$
|
1,520
|
|
|
$
|
3,025
|
|
|
$
|
3,078
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales volumes (in tons)
|
|
64
|
|
|
71
|
|
|
140
|
|
|
127
|
|
|
Production volumes (in tons)
|
|
50
|
|
|
66
|
|
|
100
|
|
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Trio® net realized sales price per ton3
|
|
$
|
208
|
|
|
$
|
196
|
|
|
$
|
200
|
|
|
$
|
200
|
|
1 Sales include sales of byproducts which were $0.4 million and $1.1 million for the three months ended June 30, 2020, and 2019, respectively, and $1.8 million and $2.3 million for the six months ended June 30, 2020, and 2019, respectively.
2 Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization amounts absorbed in or (relieved from) inventory.
3Average net realized per ton sales price per ton is a non-GAAP financial measure. More information about this measure, is below under the heading "Non-GAAP Financial Measure."
Three Months Ended June 30, 2020, and 2019
Trio® segment sales decreased 10% for the three months ended June 30, 2020, as compared to the same period in 2019. The decrease was primarily due to a 10% decrease in Trio® tons sold, while increased average net realized sales price was offset by reduced byproduct sales of water and salt. Record domestic sales volume in the second quarter of 2020 was more than offset by a decrease in international sales volume. International Trio® sales volumes decreased 89% in the second quarter of 2020 compared to the second quarter of 2019, due to our increased focus on domestic shipments and variability in the timing of shipments to international customers. Our international Trio® sales were also negatively impacted as our international Trio® warehouse was closed for a part of the second quarter due to the COVID-19 pandemic. Our Trio® average net realized sales price per ton increased 6% during the second quarter of 2020 as compared to the second quarter of 2019 due primarily to a higher percentage of domestic sales.
Trio® freight costs decreased 15% in the second quarter of 2020, compared to the second quarter of 2019, due to the decrease in total sales volumes and a reduction in international shipments. Our freight expense is impacted by the geographic distribution of our Trio® sales and by the proportion of customers arranging for and paying their own freight costs.
Our Trio® cost of goods sold increased 13% in the second quarter of 2020, compared to the second quarter of 2019. During the second quarter of 2020, we experienced increased losses in our pelletization process and we reduced our fine langbeinite recovery levels to manage inventory levels, both which led to higher per-ton carrying costs. Also, in the second quarter of 2019, a higher percentage of our tons sold had been written down in prior quarters through lower of cost or net realizable value adjustments which resulted in lower per ton costs of product sold.
We recorded a $1.9 million lower of cost or net realizable value inventory adjustment in the second quarter of 2020 due to the summer-fill price announced by our competitor in June 2020 which lowered the list price on Trio® by $15-$20 per ton. We expect to sell at these reduced prices through at least the third quarter of 2020.
Our Trio® production volume decreased 24% in the second quarter of 2020, compared to the second quarter of 2019, as we used fewer tons of work-in-process inventory to convert to premium Trio® , we decreased our fine langbeinite recovery to control inventory levels, and we experienced increased losses in our pelletization process.
Our Trio® segment generated a gross deficit of $3.2 million in the second quarter of 2020, compared to a gross margin of $1.5 million in the second quarter of 2019, due to the factors discussed above.
Six Months Ended June 30, 2020, and 2019
Trio® segment sales increased 7% for the six months ended June 30, 2020, as compared to the same period in 2019. The increase was primarily due to a 10% increase in Trio® tons sold, offset partially by reduced byproduct sales of water and salt. Increased sales volume was a result of strong domestic sales offset by a slight decrease in international sales volume. Our Trio® average net realized sales price per ton was the same as the prior period as lower domestic pricing was offset by reduced international shipments and higher international average net realized sales prices as we focused on higher-priced export markets.
Trio® freight costs increased 5% in the first six months of 2020, compared to the first six months of 2019, due to the increase in total sales volumes, offset by fewer international shipments. Our freight expense is impacted by the geographic distribution of our Trio® sales and by the proportion of customers arranging for and paying their own freight costs.
Our Trio® cost of goods sold increased 34% in the first six months of 2020, compared to the first six months of 2019. During the first six months of 2020, sales volume increased 10% and we sold a higher percentage of premium Trio® which carries a higher per-ton cost than other Trio® products. We also experienced increased losses in our pelletization process and we reduced our fine langbeinite recovery levels in the second quarter of 2020 to manage inventory levels, both which led to higher per-ton carrying costs. Also, in the first six months of 2019, a higher percentage of our tons sold had been written down in prior quarters through lower of cost or net realizable value adjustments which resulted in lower per ton costs of product sold.
We recorded a $2.4 million lower of cost or net realizable value inventory adjustment in the first six months of 2020, primarily due to the summer-fill price announced by our competitor in June 2020 which lowered the list price on Trio® by $15-$20 per ton. We expect to sell at these reduced prices through at least the third quarter of 2020.
Our Trio® production volume decreased 22% compared to the first six months of 2019, as we used fewer tons of work-in-process inventory to convert to premium Trio®, we decreased our fine langbeinite recovery in the second quarter to control inventory levels, and we experienced increased losses in our pelletization process.
Our Trio® segment generated a gross deficit of $6.8 million in the first six months of 2020, compared to a gross margin of $2.2 million in the first six months of 2019, due to the factors discussed above.
Additional Information Relating to Trio®
The percentage of Trio® tons sold into the export market decreased during the three and six months ended June 30, 2020, compared to the same period in 2019, due to our increased focus on domestic shipments and variability in the timing of shipments to international customers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
Export
|
|
For the Three Months Ended June 30, 2020
|
|
97%
|
|
3%
|
|
For the Six Months Ended June 30, 2020
|
|
83%
|
|
17%
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2019
|
|
75%
|
|
25%
|
|
For the Six Months Ended June 30, 2019
|
|
74%
|
|
26%
|
Oilfield Solutions Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
(in thousands)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Sales
|
|
$
|
2,747
|
|
|
$
|
5,641
|
|
|
$
|
10,488
|
|
|
$
|
12,263
|
|
|
Less: Freight costs
|
|
—
|
|
|
80
|
|
|
—
|
|
|
861
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
2,136
|
|
|
2,072
|
|
|
5,033
|
|
|
4,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
$
|
611
|
|
|
$
|
3,489
|
|
|
$
|
5,455
|
|
|
$
|
6,561
|
|
|
Depreciation, depletion, and amortization incurred
|
|
$
|
657
|
|
|
$
|
232
|
|
|
$
|
1,289
|
|
|
$
|
423
|
|
Three Months Ended June 30, 2020, and 2019
Our oilfield solutions segment sales decreased $2.9 million in the second quarter of 2020, compared to the same period in 2019, mainly due to a $2.2 million decrease in water sales and a $0.7 million decrease in sales of other oilfield products and services. Our oilfield solutions water sales decreased as the COVID-19 pandemic pressured oil prices and reduced oil and gas
completion activity. We expect the COVID-19 pandemic and related global economic conditions will reduce sales of water and other oilfield products in the second half of 2020. Water that we sell that was used in the production of potash and Trio® is accounted for as byproduct water sales in the potash or Trio® segments.
Cost of goods sold increased 3%, or $0.1 million, as reduced water transfer expense was offset by the addition of water and real property assets at Intrepid South in May 2019 which increased depreciation expense compared to the prior year.
Gross margin decreased $2.9 million compared to the prior year, due to the factors discussed above.
Six Months Ended June 30, 2020, and 2019
Our oilfield solutions segment sales decreased $1.8 million in the first six months of 2020, compared to the same period in 2019, mainly due to a $2.0 million decrease in potash used in our high-speed mixing service. Sales of water and oilfield related products and services were similar to the prior year as a strong first quarter of 2020 was offset by reduced sales in the second quarter due to the COVID-19 pandemic. Water that we sell that was used in the production of potash and Trio® is accounted for as byproduct water sales in the potash or Trio® segments.
Cost of goods sold increased 4%, or $0.2 million, as reduced expense related to our high-speed mixing service was offset by increased water transfer expense and the addition of water and real property assets at Intrepid South in May 2019 which increased depreciation expense compared to the prior year.
Gross margin decreased $1.1 million compared to the prior year, due to the factors discussed above.
In March 2020, we sold approximately 320 acres of fee land from our Intrepid South property for $4.8 million and recognized a gain on the sale of the land of $4.7 million. The terms of the sale were highly restrictive and only allow the buyer to drill Acid Gas Injection (AGI) wells on the property to dispose of natural gas with high concentrations of hydrogen sulfide (H2S). No water rights were included in the land sale, we retained surface access, and we restricted the use of caliche located on the property to the acreage that was sold in order to prevent sales to third parties or decrease future sales to this customer. Our long-term strategic operating plan for Intrepid South includes selling small parcels of land to other companies, where such sales provide a solution to a company's needs. We anticipate we will continue to have additional strategic sales of small parcels of land in the future.
Specific Factors Affecting Our Results
Sales
Our gross sales are derived from the sales of potash, Trio®, water, salt, magnesium chloride, brine water and various other products and services offered to oil and gas producers. Total sales are determined by the quantities of product we sell and the sales prices we realize. For potash, Trio® and salt, we quote prices to customers both on a delivered basis and on the basis of pick-up at our plants and warehouses. Freight costs are incurred on most of our potash, Trio® and salt sales, but some customers arrange and pay for their own freight directly. When we arrange and pay for freight, our quotes and billings are based on expected freight costs to the points of delivery. When we calculate our potash and Trio® average net realized sales price per ton, we deduct any freight costs included in sales before dividing by the number of tons sold. We believe the deduction of freight costs provides a more representative measure of our performance in the market due to variations caused by ongoing changes in the proportion of customers paying for their own freight, the geographic distribution of our products, and freight rates. Freight rates have been increasing, and if we are unable to pass the increased freight costs on to the customer, our average net realized sales price per ton is negatively affected. We manage our sales and marketing operations centrally and we work to achieve the highest average net realized sales price per ton we can by evaluating the product needs of our customers and associated logistics and then determining which of our production facilities can best satisfy these needs.
The volume of product we sell is determined by demand for our products and by our production capabilities. We operate our potash and Trio® facilities at production levels that approximate expected demand and take into account current inventory levels and expect to continue to do so for the foreseeable future.
Our water sales and other products and services offered through our oilfield solutions segment are driven by demand from oil and gas exploration companies drilling in the Permian Basin. As such, demand for our water is generally stronger during a cyclical expansion of oil and gas drilling. Likewise, a cyclical contraction of oil and gas drilling may decrease demand for our water and the other products and services offered through our oilfield solutions segment. The COVID-19 pandemic has caused an unprecedented decrease in the demand for oil, resulting in lower prices and significant decreases in oil and gas activity, and our water sales, including byproduct water sales, decreased 55% in the second quarter of 2020 compared to the second quarter of 2019. We expect our water sales and sales of other products and services offered through our oilfield
solutions segment will continue to be negatively impacted through at least the second half of 2020, due to the continued economic effects of the COVID-19 pandemic.
Cost of Goods Sold
Our cost of goods sold reflects the costs to produce our products. Many of our production costs are largely fixed and, consequently, our cost of sales per ton on a facility-by-facility basis tends to move inversely with the number of tons we produce, within the context of normal production levels. Our principal production costs include labor and employee benefits, maintenance materials, contract labor, and materials for operating or maintenance projects, natural gas, electricity, operating supplies, chemicals, depreciation and depletion, royalties, and leasing costs. There are elements of our cost structure associated with contract labor, consumable operating supplies, reagents, and royalties that are variable, which make up a smaller component of our cost base. Our costs often vary from period to period based on the fluctuation of inventory, sales, and production levels at our facilities.
Our production costs per ton are also impacted when our production levels change, due to factors such as changes in the grade of ore delivered to the plant, levels of mine development, plant operating performance, and downtime. We expect that our labor and contract labor costs in Carlsbad, New Mexico, will continue to be influenced most directly by the demand for labor in the local region where we compete for labor with another fertilizer company, companies in the oil and gas industry, and a nuclear waste processing and storage facility.
We pay royalties to federal, state, and private lessors under our mineral leases. These payments typically equal a percentage of sales (less freight) of minerals extracted and sold under the applicable lease. In some cases, federal royalties for potash are paid on a sliding scale that vary with the grade of ore extracted. For the three and six months ended June 30, 2020, our average royalty rate was 4.4%. For the three and six months ended June 30, 2019, our average royalty rate was 4.3% and 4.4%, respectively.
Income Taxes
We are subject to federal and state income taxes on our taxable income. Our effective tax rate for the six months ended June 30, 2020 and 2019, was 0%. Our effective tax rate differed from the statutory rate during each period primarily due to the valuation allowance established to offset our deferred tax assets.
Our federal and state income tax returns are subject to examination by federal and state tax authorities.
For the three and six months ended June 30, 2020 we incurred no income tax expense. For the three months ended June 30, 2019, we incurred no income tax expense and for the six months ended June 30, 2019, we recognized an immaterial amount of income tax benefit.
We evaluate our deferred tax assets and liabilities each reporting period using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted most significantly by the states in which we conduct business. Changing business conditions for normal business transactions and operations, as well as changes to state tax rate and apportionment laws, potentially alter our apportionment of income among the states for income tax purposes. These changes in apportionment laws result in changes in the calculation of our current and deferred income taxes, including the valuation of our deferred tax assets and liabilities. The effects of any such changes are recorded in the period of the adjustment. These adjustments can increase or decrease the net deferred tax asset on our condensed consolidated balance sheet. However, any resulting impact to the deferred tax benefit or deferred tax expense would be offset by a corresponding adjustment to the valuation allowance and would have no income statement effect
As of June 30, 2020, we were in a near break-even cumulative three-year income position. Additionally, general uncertainty in the business markets we operate makes it difficult to forecast sustained amounts of future income. These circumstances are significant negative evidence when evaluating the realizability of our deferred tax assets. This negative evidence continues to outweigh the positive evidence of profitability in 2018, and 2019, thereby requiring us to maintain the full valuation allowance as of June 30, 2020. However, we continue to evaluate the need to maintain the valuation allowance against the deferred tax assets and to the extent positive evidence trends continue and our future long-term forecasts show sustained profitability, our conclusion regarding the need to maintain a full valuation allowance could change.
Capital Investments
During the first six months of 2020, cash paid for property, plant, equipment, mineral properties, intangible and other assets was $10.6 million. In the second quarter of 2020, we invested $3.5 million for an 11% equity stake in W.D. Von Gonten Laboratories ("WDVGL"). WDVGL is an industry leader in drilling and completion chemistry and a strong supporter of the use of potassium chloride in oil and gas drilling and completion activity.
Given recent economic uncertainty as a result of the COVID-19 pandemic, particularly in oil and gas markets near our operations, we continue to limit our 2020 capital program and expect to spend between $15 million and $20 million on capital investments in 2020, excluding the equity investment discussed above. We anticipate our remaining 2020 operating plans and capital programs will be funded out of operating cash flows and existing cash. We may also use our revolving credit facility, to the extent available, to fund capital investments.
Liquidity and Capital Resources
As of June 30, 2020, we had cash of $34.6 million, compared with cash of $20.6 million at December 31, 2019. In April 2020, we made a $20 million principal payment due on our Series A Notes. In July 2020, we reached an agreement with our noteholders to repay our Series C on July 17, 2020. As part of the agreement, we repaid the full $15 million of principal along with a reduced make-whole payment of $1.9 million. Also, in April 2020, we applied for and received a $10 million loan under the CARES Act Paycheck Protection Program (the "PPP"). The loan matures on April 18, 2022 and bears interest at a rate of 1% per annum. Beginning November 2020, we are required to make monthly payments of principal and interest in the amount of $0.6 million. We may prepay the loan at any time prior to maturity with no prepayment penalties. We plan to use the funds exclusively for allowed payroll and benefits expenses and expect the majority of the loan, if not all, will be forgiven. During the second quarter of 2020, the program was amended to allow borrowers to choose either an eight-week or 24-week period to use the funds. We elected to use the 24-week period, which will end in early October. The amount eligible for forgiveness is based on the amount of loan proceeds used by us (during the 24-week period after the lender makes the first disbursement of loan proceeds) for the payment of certain covered costs, including payroll costs (including benefits), subject to certain limitations and reductions in accordance with the CARES Act. No assurance can be given that we will obtain forgiveness of the loan in whole or in part. In addition, as a borrower that received over $2.0 million, we expect to be subject to an audit to review our eligibility under the PPP. The timing and scope of the audit remains unclear and as a result we are not able to forecast when we can expect a decision on loan forgiveness. We do not expect the audit will impact our eligibility for forgiveness under the PPP. The loan contains customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the lender or breaching the terms of the loan documents.
During the second quarter, we paid $10 million to Mosaic to settle its lawsuit against us. The settlement dismisses all current and any future claims by Mosaic related to this matter against us. This matter is now closed.
Our operations have primarily been funded from cash on hand, cash generated by operations, borrowing under our revolving credit facility, and proceeds from debt and equity offerings. We continue to monitor our future sources and uses of cash and anticipate that we will adjust our capital allocation strategies when, and if, determined by our Board of Directors. We may, at any time we deem conditions favorable, attempt to improve our liquidity position by accessing debt or equity markets in accordance with our existing debt agreements. We also may raise capital in the future through the issuance of additional equity or debt securities, subject to prevailing market conditions. However, there is no assurance that we will be able to successfully raise additional capital on acceptable terms or at all. With the remaining availability under our credit facility, the proceeds of our loan pursuant of the Paycheck Protection Program under the CARES Act and with expected cash generated from operations, we believe we have sufficient liquidity to meet our obligations for the next twelve months.
The following summarizes our cash flow activity for the six months ended June 30, 2020, and 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
2020
|
|
2019
|
|
Cash flows provided by operating activities
|
|
$
|
23,548
|
|
|
$
|
31,738
|
|
|
Cash flows used in investing activities
|
|
$
|
(9,359)
|
|
|
$
|
(69,030)
|
|
|
Cash flows (used in) provided by financing activities
|
|
$
|
(210)
|
|
|
$
|
19,731
|
|
Operating Activities
Total cash provided by operating activities through June 30, 2020, was $23.5 million, a decrease of $8.2 million compared with the first six months of 2019. The decrease was mainly driven by the litigation settlement paid in May 2020.
Investing Activities
Total cash used in investing activities decreased by $59.7 million in the first six months of 2020, compared with the same period in 2019 due to the Intrepid South acquisition in 2019. Other additions to property, plant, equipment, and mineral properties increased $0.9 million compared to the first six months in 2019.
Financing Activities
Total cash used in financing activities increased by $19.9 million in the first six months of 2020, compared with the same period in 2019 primarily due to $20.0 million paid to retire our Series A senior notes at maturity. During the six months ended June 30, 2020, we borrowed an additional $10 million under our credit facility and received $10 million under the CARES Act Paycheck Protection Program. During the six months ended June 30, 2019, we made net borrowings under our credit facility of $20 million.
We routinely review the creditworthiness of our customers and make decisions to limit our exposure whenever possible. During the quarter we saw an increase in delinquency from our smaller customers that purchase water and brine at our truck stations as the COVID-19 pandemic has dramatically decreased opportunities for those customers near our operations. Our larger customers, who take delivery of water via pipeline or directly from our storage ponds or points of diversion are generally well-capitalized and we have not seen a change in the timing of those receivables. The COVID-19 pandemic has not resulted in any change to the timing of receivables from our potash and Trio® customers. While we continue to monitor the creditworthiness of our customers and have made adjustments to reflect the increased uncertainty in specific markets, we don't believe this will have a material effect on our business.
Senior Notes
As of June 30, 2020, we had outstanding $30 million of senior notes (the "Notes") consisting of the following series:
•$15 million of Senior Notes, Series B, due April 14, 2023
•$15 million of Senior Notes, Series C, due April 16, 2025
On April 16, 2020, we repaid our Series A Senior Notes ($20 million) at maturity. In July 2020, we reached an agreement with our noteholders to repay our Series C notes on July 17, 2020. As part of the agreement, we repaid the full $15 million of principal along with a reduced make-whole payment of $1.9 million.
The agreement governing the Notes contains certain financial covenants, including the following:
•We are required to maintain a minimum fixed charge coverage ratio of 1.3 to 1.0 as of the last day of each quarter, measured based on the previous four quarters. Our fixed charge coverage ratio as of June 30, 2020, was 3.5 to 1.0, therefore we were in compliance with this covenant.
•We are allowed a maximum leverage ratio of 3.5 to 1.0 as of the last day of each quarter, measured based on the previous four quarters. Our leverage ratio as of June 30, 2020, was 2.0 to 1.0, therefore we were in compliance with this covenant.
Fixed charge coverage ratio and leverage ratio are calculated in accordance with the agreement governing the Notes.
For both the six-month period ended June 30, 2020, and the six-month period ended June 30, 2019, the interest rates on the Notes were 3.73% for the Series A Notes, 4.63% for the Series B Notes and 4.78% for the Series C Notes. These rates represent the lowest interest rates available under the Notes. The interest rates may adjust upward if we do not continue to meet certain financial covenants.
We have granted to the collateral agent for the noteholders a first lien on substantially all of our non-current assets and a second lien on substantially all of our current assets. We are required to offer to prepay the Notes with the proceeds of dispositions of certain specified property and with the proceeds of certain equity issuances, as set forth in the agreement governing the Notes. The obligations under the Notes are unconditionally guaranteed by several of our subsidiaries.
In April 2020, we amended the agreement governing the Notes to allow for a $10 million loan under the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), as described further below.
We were in compliance with the applicable covenants under the agreement governing the Notes as of June 30, 2020.
Our outstanding long-term debt, net, as of June 30, 2020, and December 31, 2019, was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
December 31, 2019
|
|
Notes and Payroll Protection Loan
|
$
|
40,000
|
|
|
$
|
50,000
|
|
|
Less current portion of long-term debt
|
(24,872)
|
|
|
(20,000)
|
|
|
Less deferred financing costs
|
(219)
|
|
|
(247)
|
|
|
Long-term debt, net
|
$
|
14,909
|
|
|
$
|
29,753
|
|
Credit Facility—We maintain a revolving credit facility with Bank of Montreal. In August 2019, we amended the credit facility to change it from an asset-backed facility to a cash-flow facility, to increase the amount available under the facility from $50 million to $75 million plus an additional $75 million accordion, and to extend the maturity date to August 1, 2024.
Borrowings under the amended credit facility bear interest at LIBOR (London Interbank Offered Rate) plus an applicable margin of 1.25% to 2.00% per annum, based on average availability under the credit facility. We have granted to Bank of Montreal a first lien on substantially all of our current assets and a second lien on substantially all of our non-current assets. The obligations under the credit facility are unconditionally guaranteed by several of our subsidiaries.
In April 2020, we amended the credit facility to add a debt basket to allow for a $10 million loan under the Paycheck Protection Program under the CARES Act. We plan to fund payroll, benefits, or other allowed expenses under the program and expect the majority of the loan will be forgiven pursuant to current guidelines under the CARES Act.
We occasionally borrow and repay amounts under the facility for near-term working capital needs or other purposes and may do so in the future. As of June 30, 2020, we had $29.8 million of borrowings and $1.0 million in outstanding letters of credit under the facility. Including the outstanding letters of credit, we had $44.2 million available to be borrowed under the facility as of June 30, 2020. As of July 31, 2020, we had $29.8 million of borrowings, $1.0 million in outstanding letters of credit under the facility, and approximately $12.2 million in cash. Including the outstanding letters of credit, we had $44.2 million available to be borrowed under the facility.
We were in compliance with the applicable covenants under the facility as of June 30, 2020.
PPP Loan—In April 2020, we applied for and received a $10 million loan under the Paycheck Protection Program (the "PPP") under the CARES Act. The loan matures on April 18, 2022 and bears interest at a rate of 1% per annum. Beginning November 18, 2020, we are required to make monthly payments of principal and interest in the amount of $0.6 million. We may prepay the loan at any time prior to maturity with no prepayment penalties. We plan to use the funds exclusively for allowed payroll and benefits expenses and expect the majority of the loan, if not all, will be forgiven. The loan contains customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the lender or breaching the terms of the loan documents.
During the second quarter of 2020, the PPP was amended to allow borrowers to choose either an eight-week or 24-week period to use the funds. We elected to use the 24-week period, which will end in early October. The amount eligible for forgiveness is based on the amount of loan proceeds used by us (during the 24-week period after the lender makes the first disbursement of loan proceeds) for the payment of certain covered costs, including payroll costs (including benefits), subject to certain limitations and reductions in accordance with the CARES Act. No assurance can be given that we will obtain forgiveness of the loan in whole or in part. In addition, as a borrower that received over $2.0 million, we expect to be subject to an audit to review our eligibility under the PPP. The timing and scope of the audit remains unclear and as a result we are not able to forecast when we can expect a decision on loan forgiveness. We do not expect the audit will impact our eligibility for forgiveness under the PPP.
Off-Balance Sheet Arrangements
As of June 30, 2020, we had no material off-balance sheet arrangements aside from the bonding obligations described in Note 14 to the condensed consolidated financial statements.
Critical Accounting Policies and Estimates
Our Annual Report on Form 10-K for the year ended December 31, 2019, describes the critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Except for the accounting policy for the measurement of credit losses for financial instruments that was updated as a result of
adopting ASC 326 on January 1, 2020, as discussed in Note 2 to the condensed consolidated financial statements, there have been no significant changes to our critical accounting policies since December 31, 2019.
Non-GAAP Financial Measure
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, from time to time we use "average net realized sales price per ton," which is a non-GAAP financial measure. This non-GAAP financial measure should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, because the presentation of this non-GAAP financial measure varies among companies, our presentation of this non-GAAP financial measure may not be comparable to similarly titled measures used by other companies.
We believe average net realized sales price per ton, when used in conjunction with GAAP financial measures, provides useful information to investors for analysis of our business and operating results, enhances the overall understanding of past financial performance and future prospects, and allows for greater transparency with respect to the key metric we use in our financial and operational decision making. We use this non-GAAP financial measure as one of our tools in comparing period-over-period performance on a consistent basis and when planning, forecasting, and analyzing future periods. We believe this non-GAAP financial measure is used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the potash mining industry. Many investors use the published research reports of these professional research analysts and others in making investment decisions.
Average Net Realized Sales Price per Ton
We calculate average net realized sales price per ton for each of potash and Trio®. Average net realized sales price per ton for potash is calculated as potash segment sales less potash segment byproduct sales and potash freight costs and then dividing that difference by the number of tons of potash sold in the period. Likewise, average net realized sales price per ton for Trio® is calculated as Trio® segment sales less Trio® segment byproduct sales and Trio® freight costs and then dividing that difference by Trio® tons sold. We consider average net realized sales price per ton to be useful, and believe it to be useful for investors, because it shows our potash and Trio® average per-ton pricing without the effect of certain transportation and delivery costs. When we arrange transportation and delivery for a customer, we include in revenue and in freight costs the costs associated with transportation and delivery. However, some of our customers arrange for and pay their own transportation and delivery costs, in which case these costs are not included in our revenue and freight costs. We use average net realized sales price per ton as a key performance indicator to analyze potash and Trio® sales and price trends.
Below is a reconciliation of average net realized sales price per ton to the most directly comparable GAAP financial measure for the three and six months ended June 30, 2020, and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
(in thousands, except per ton amounts)
|
|
Potash
|
|
Trio®
|
|
Potash
|
|
Trio®
|
|
Total Segment Sales
|
|
$
|
24,526
|
|
|
$
|
19,251
|
|
|
$
|
35,547
|
|
|
$
|
21,435
|
|
|
Less: Segment byproduct sales
|
|
2,977
|
|
|
419
|
|
|
3,527
|
|
|
1,073
|
|
|
Freight costs
|
|
2,600
|
|
|
5,523
|
|
|
3,604
|
|
|
6,471
|
|
|
Subtotal
|
|
$
|
18,949
|
|
|
$
|
13,309
|
|
|
$
|
28,416
|
|
|
$
|
13,891
|
|
|
|
|
|
|
|
|
|
|
|
|
Divided by:
|
|
|
|
|
|
|
|
|
|
Tons sold
|
|
74
|
|
|
64
|
|
|
95
|
|
|
71
|
|
|
Average net realized sales price per ton
|
|
$
|
256
|
|
|
$
|
208
|
|
|
$
|
299
|
|
|
$
|
196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
(in thousands, except per ton amounts)
|
|
Potash
|
|
Trio®
|
|
Potash
|
|
Trio®
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Sales
|
|
58,317
|
|
|
41,832
|
|
|
$
|
69,877
|
|
|
$
|
39,245
|
|
|
Less: Segment byproduct sales
|
|
6,950
|
|
|
1,799
|
|
|
9,312
|
|
|
2,332
|
|
|
Freight costs
|
|
7,140
|
|
|
12,057
|
|
|
6,847
|
|
|
11,507
|
|
|
Subtotal
|
|
$
|
44,227
|
|
|
$
|
27,976
|
|
|
$
|
53,718
|
|
|
$
|
25,406
|
|
|
|
|
|
|
|
|
|
|
|
|
Divided by:
|
|
|
|
|
|
|
|
|
|
Tons sold
|
|
173
|
|
|
140
|
|
|
183
|
|
|
127
|
|
|
Average net realized sales price per ton
|
|
$
|
256
|
|
|
$
|
200
|
|
|
$
|
294
|
|
|
$
|
200
|
|