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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the Quarterly Period Ended March 31, 2013
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Delaware
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26-1501877
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(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
707 17th Street, Suite 4200, Denver, Colorado
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80202
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
x
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Accelerated filer
¨
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Non
-
accelerated filer
¨
(Do not check if a smaller reporting company) |
Smaller reporting company
¨
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Page
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March 31,
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December 31,
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2013
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2012
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ASSETS
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Cash and cash equivalents
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$
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5,111
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$
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33,619
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Short-term investments
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2,501
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24,128
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Accounts receivable:
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Trade, net
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44,224
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31,508
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Other receivables
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9,468
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9,122
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Refundable income taxes
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3,303
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3,306
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Inventory, net
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61,204
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53,275
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Prepaid expenses and other current assets
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4,679
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5,393
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Current deferred tax asset
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3,900
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2,005
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Total current assets
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134,390
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162,356
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Property, plant, and equipment, net of accumulated depreciation
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of $154,543 and $142,137, respectively
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573,323
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543,169
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Mineral properties and development costs, net of accumulated
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depletion of $11,638 and $11,060, respectively
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114,382
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94,096
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Long-term parts inventory, net
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11,060
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10,208
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Other assets
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4,155
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4,246
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Non-current deferred tax asset
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169,995
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180,548
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Total Assets
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$
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1,007,305
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$
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994,623
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Accounts payable:
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Trade
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$
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21,818
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$
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19,431
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Related parties
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247
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203
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Accrued liabilities
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29,488
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32,496
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Accrued employee compensation and benefits
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11,032
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11,680
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Other current liabilities
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1,646
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3,578
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Total current liabilities
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64,231
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67,388
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Asset retirement obligation
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19,903
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19,344
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Other non-current liabilities
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2,112
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2,155
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Total Liabilities
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86,246
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88,887
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Commitments and Contingencies
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Common stock, $0.001 par value; 100,000,000 shares
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authorized; and 75,376,697 and 75,312,805 shares
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outstanding at March 31, 2013, and December 31, 2012, respectively
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75
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75
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Additional paid-in capital
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568,707
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568,375
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Accumulated other comprehensive loss
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(1,657
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)
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(1,729
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)
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Retained earnings
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353,934
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339,015
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Total Stockholders' Equity
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921,059
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905,736
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Total Liabilities and Stockholders' Equity
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$
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1,007,305
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$
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994,623
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Three Months Ended March 31,
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2013
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2012
|
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Sales
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$
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99,257
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$
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112,243
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Less:
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Freight costs
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8,097
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6,762
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Warehousing and handling costs
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3,579
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3,364
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Cost of goods sold
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53,773
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60,581
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Other
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8
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330
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Gross Margin
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33,800
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41,206
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Selling and administrative
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9,492
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8,257
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Accretion of asset retirement obligation
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375
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181
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Other expense (income)
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171
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(28
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)
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Operating Income
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23,762
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32,796
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Other Income (Expense)
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Interest expense, including realized and
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unrealized derivative gains and losses
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(213
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)
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(253
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)
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Interest income
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52
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513
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Other income
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16
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183
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Income Before Income Taxes
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23,617
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33,239
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Income Tax Expense
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(8,698
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)
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(12,613
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)
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Net Income
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$
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14,919
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$
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20,626
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Weighted Average Shares Outstanding:
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Basic
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75,340,559
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75,227,387
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Diluted
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75,392,527
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75,317,073
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Earnings Per Share:
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Basic
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$
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0.20
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$
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0.27
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Diluted
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$
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0.20
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$
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0.27
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Three Months Ended March 31,
|
||||||
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2013
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2012
|
||||
Net Income
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$
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14,919
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$
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20,626
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Other Comprehensive Income:
|
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Pension liability adjustment (net of tax effect of $28 and $26, respectively
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43
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39
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Unrealized gain on investments available for sale (net of tax effect of $18)
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29
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—
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Other Comprehensive Income
|
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72
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|
|
39
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Comprehensive Income
|
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$
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14,991
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$
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20,665
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Common Stock
|
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Additional Paid-in Capital
|
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Accumulated Other Comprehensive Loss
|
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Retained Earnings
|
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Total Stockholders' Equity
|
|||||||||||||
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Shares
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Amount
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Balance, December 31, 2012
|
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75,312,805
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$
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75
|
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$
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568,375
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$
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(1,729
|
)
|
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$
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339,015
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|
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$
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905,736
|
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Pension liability adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43
|
|
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—
|
|
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43
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|
|||||
Unrealized gain on investments held for sale
|
|
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|
|
|
|
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29
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|
|
|
|
29
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Net income
|
|
—
|
|
|
—
|
|
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—
|
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—
|
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14,919
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|
|
14,919
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|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
1,140
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|
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—
|
|
|
—
|
|
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1,140
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|
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Change in excess income tax benefit from stock-
based compensation |
|
—
|
|
|
—
|
|
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(231
|
)
|
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—
|
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—
|
|
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(231
|
)
|
|||||
Vesting of restricted common stock, net
of restricted common stock used to fund employee income tax withholding due upon vesting |
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63,892
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|
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—
|
|
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(577
|
)
|
|
—
|
|
|
—
|
|
|
(577
|
)
|
|||||
Balance, March 31, 2013
|
|
75,376,697
|
|
|
$
|
75
|
|
|
$
|
568,707
|
|
|
$
|
(1,657
|
)
|
|
$
|
353,934
|
|
|
$
|
921,059
|
|
|
|
Three Months Ended March 31,
|
||||||
|
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2013
|
|
2012
|
||||
Cash Flows from Operating Activities:
|
|
|
|
|
||||
Reconciliation of net income to net cash provided by operating activities:
|
|
|
|
|
||||
Net income
|
|
$
|
14,919
|
|
|
$
|
20,626
|
|
Deferred income taxes
|
|
8,381
|
|
|
10,042
|
|
||
Items not affecting cash:
|
|
|
|
|
||||
Depreciation, depletion, and accretion
|
|
14,141
|
|
|
11,256
|
|
||
Stock-based compensation
|
|
1,140
|
|
|
1,319
|
|
||
Unrealized derivative gain
|
|
—
|
|
|
(224
|
)
|
||
Other
|
|
433
|
|
|
963
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
||||
Trade accounts receivable
|
|
(12,715
|
)
|
|
(14,387
|
)
|
||
Other receivables
|
|
(344
|
)
|
|
(1,018
|
)
|
||
Refundable income taxes
|
|
3
|
|
|
2,011
|
|
||
Inventory
|
|
(8,781
|
)
|
|
4,247
|
|
||
Prepaid expenses and other assets
|
|
714
|
|
|
1,099
|
|
||
Accounts payable, accrued liabilities, and accrued employee
compensation and benefits |
|
(4,295
|
)
|
|
1,738
|
|
||
Other liabilities
|
|
(1,975
|
)
|
|
(8
|
)
|
||
Net cash provided by operating activities
|
|
11,621
|
|
|
37,664
|
|
||
|
|
|
|
|
||||
Cash Flows from Investing Activities:
|
|
|
|
|
||||
Additions to property, plant, and equipment
|
|
(39,512
|
)
|
|
(32,409
|
)
|
||
Additions to mineral properties and development costs
|
|
(21,636
|
)
|
|
(6,068
|
)
|
||
Purchases of investments
|
|
—
|
|
|
(30,727
|
)
|
||
Proceeds from investments
|
|
21,586
|
|
|
18,722
|
|
||
Other
|
|
10
|
|
|
2
|
|
||
Net cash used in investing activities
|
|
(39,552
|
)
|
|
(50,480
|
)
|
||
|
|
|
|
|
||||
Cash Flows from Financing Activities:
|
|
|
|
|
||||
Employee tax withholding paid for restricted stock upon vesting
|
|
(577
|
)
|
|
(424
|
)
|
||
Excess income tax benefit from stock-based compensation
|
|
—
|
|
|
(25
|
)
|
||
Net cash used in financing activities
|
|
(577
|
)
|
|
(449
|
)
|
||
|
|
|
|
|
||||
Net Change in Cash and Cash Equivalents
|
|
(28,508
|
)
|
|
(13,265
|
)
|
||
Cash and Cash Equivalents, beginning of period
|
|
33,619
|
|
|
73,372
|
|
||
Cash and Cash Equivalents, end of period
|
|
$
|
5,111
|
|
|
$
|
60,107
|
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information
|
|
|
|
|
||||
Net cash paid (received) during the period for:
|
|
|
|
|
||||
Interest, including settlements on derivatives
|
|
$
|
128
|
|
|
$
|
428
|
|
Income taxes
|
|
$
|
2,194
|
|
|
$
|
595
|
|
Accrued purchases for property, plant, and equipment, and mineral properties and development costs
|
|
$
|
27,012
|
|
|
$
|
9,689
|
|
Note 1
|
— COMPANY BACKGROUND
|
Note 2
|
— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Note 3
|
— EARNINGS PER SHARE
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2013
|
|
2012
|
||||
Net income
|
|
$
|
14,919
|
|
|
$
|
20,626
|
|
|
|
|
|
|
||||
Basic weighted average common shares outstanding
|
|
75,341
|
|
|
75,227
|
|
||
Add: Dilutive effect of non-vested restricted common stock
|
|
38
|
|
|
65
|
|
||
Add: Dilutive effect of stock options outstanding
|
|
9
|
|
|
25
|
|
||
Add: Dilutive effect of performance units
|
|
5
|
|
|
—
|
|
||
Diluted weighted average common shares outstanding
|
|
75,393
|
|
|
75,317
|
|
||
Earnings per share:
|
|
|
|
|
||||
Basic
|
|
$
|
0.20
|
|
|
$
|
0.27
|
|
Diluted
|
|
$
|
0.20
|
|
|
$
|
0.27
|
|
Note 4
|
— CASH, CASH EQUIVALENTS, AND INVESTMENTS
|
|
March 31, 2013
|
|
December 31, 2012
|
||||
Cash
|
$
|
4,136
|
|
|
$
|
6,063
|
|
Money market accounts
|
975
|
|
|
27,556
|
|
||
Total cash and cash equivalents
|
$
|
5,111
|
|
|
$
|
33,619
|
|
|
|
|
|
||||
Corporate bonds
|
$
|
—
|
|
|
$
|
17,462
|
|
Certificates of deposit and time deposits
|
2,501
|
|
|
6,666
|
|
||
Total short-term investments
|
$
|
2,501
|
|
|
$
|
24,128
|
|
|
|
|
|
||||
Total cash, cash equivalents, and investments
|
$
|
7,612
|
|
|
$
|
57,747
|
|
|
|
March 31, 2013
|
|
December 31, 2012
|
||||
Finished goods product inventory
|
|
$
|
35,084
|
|
|
$
|
26,856
|
|
In-process mineral inventory
|
|
8,386
|
|
|
9,110
|
|
||
Total product inventory
|
|
43,470
|
|
|
35,966
|
|
||
Current parts inventory
|
|
17,734
|
|
|
17,309
|
|
||
Total current inventory
|
|
61,204
|
|
|
53,275
|
|
||
Long-term parts inventory
|
|
11,060
|
|
|
10,208
|
|
||
Total inventory
|
|
$
|
72,264
|
|
|
$
|
63,483
|
|
|
|
March 31, 2013
|
|
December 31, 2012
|
||||
Buildings and plant
|
|
$
|
157,786
|
|
|
$
|
148,989
|
|
Machinery and equipment
|
|
342,168
|
|
|
334,128
|
|
||
Vehicles
|
|
12,017
|
|
|
11,868
|
|
||
Office equipment and improvements
|
|
16,312
|
|
|
15,766
|
|
||
Ponds and land improvements
|
|
32,025
|
|
|
15,835
|
|
||
Construction in progress
|
|
167,260
|
|
|
158,422
|
|
||
Land
|
|
298
|
|
|
298
|
|
||
Accumulated depreciation
|
|
(154,543
|
)
|
|
(142,137
|
)
|
||
|
|
$
|
573,323
|
|
|
$
|
543,169
|
|
|
|
|
|
|
||||
Mineral properties and development costs
|
|
$
|
118,606
|
|
|
$
|
74,712
|
|
Construction in progress
|
|
7,414
|
|
|
30,444
|
|
||
Accumulated depletion
|
|
(11,638
|
)
|
|
(11,060
|
)
|
||
|
|
$
|
114,382
|
|
|
$
|
94,096
|
|
Note 7
|
— DEBT
|
•
|
$60 million
of
3.23%
Senior Notes, Series A, due April 16, 2020
|
•
|
$45 million
of
4.13%
Senior Notes, Series B, due April 14, 2023
|
•
|
$45 million
of
4.28%
Senior Notes, Series C, due April 16, 2025
|
Note 8
|
— ASSET RETIREMENT OBLIGATION
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2013
|
|
2012
|
||||
Asset retirement obligation, at beginning of period
|
|
$
|
20,579
|
|
|
$
|
9,708
|
|
Liabilities settled
|
|
(24
|
)
|
|
(273
|
)
|
||
Liabilities incurred
|
|
184
|
|
|
—
|
|
||
Accretion of discount
|
|
375
|
|
|
181
|
|
||
Total asset retirement obligation, at end of period
|
|
$
|
21,114
|
|
|
$
|
9,616
|
|
Note 9
|
— COMPENSATION PLANS
|
|
|
|
|
Weighted Average
Grant-Date Fair Value |
|||
|
|
Shares
|
|
||||
Non-vested restricted shares of common stock, beginning of period
|
|
240,757
|
|
|
$
|
26.04
|
|
Granted
|
|
232,336
|
|
|
$
|
19.26
|
|
Vested
|
|
(88,186
|
)
|
|
$
|
27.12
|
|
Forfeited
|
|
(5,286
|
)
|
|
$
|
21.60
|
|
Non-vested restricted shares of common stock, end of period
|
|
379,621
|
|
|
$
|
21.70
|
|
|
|
Shares
|
|
Weighted Average Exercise Price
|
|
Aggregate Intrinsic Value (1)
|
|
Weighted Average Remaining Contractual Life
|
|
Weighted Average Grant-Date Fair Value
|
|
Outstanding non-qualified stock
|
|
|
|
|
|
|
|
|
|
|
|
options, end of period
|
|
344,563
|
|
|
$26.25
|
|
$—
|
|
6.6
|
|
$13.13
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested or expected to vest, end
|
|
|
|
|
|
|
|
|
|
|
|
of period
|
|
341,514
|
|
|
$26.17
|
|
$—
|
|
6.6
|
|
$13.07
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable non-qualified
|
|
|
|
|
|
|
|
|
|
|
|
stock options, end of period
|
|
313,294
|
|
|
$25.31
|
|
$—
|
|
6.6
|
|
$12.49
|
(1)
|
The intrinsic value of a stock option is the amount by which the market value exceeds the exercise price as of the end of the period presented.
|
Note 10
|
— INCOME TAXES
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2013
|
|
2012
|
||||
Current portion of income tax expense
|
|
317
|
|
|
2,622
|
|
||
Deferred portion of income tax expense
|
|
8,381
|
|
|
9,991
|
|
||
Total income tax expense
|
|
$
|
8,698
|
|
|
$
|
12,613
|
|
Note 11
|
— COMMITMENTS AND CONTINGENCIES
|
For the three months ended March 31, 2013
|
|
$909
|
For the three months ended March 31, 2012
|
|
$836
|
Note 12
|
— DERIVATIVE FINANCIAL INSTRUMENTS
|
|
|
Location of gain (loss) recognized in income on derivative
|
|
Three Months Ended March 31,
|
||
Derivatives not designated as hedging instruments
|
|
|
2012
|
|||
Interest rate contracts:
|
|
|
|
|
||
Realized loss
|
|
Interest expense
|
|
$
|
(266
|
)
|
Unrealized gain
|
|
Interest expense
|
|
224
|
|
|
Total loss
|
|
Interest expense
|
|
$
|
(42
|
)
|
|
|
|
|
|
Note 13
|
— FAIR VALUE MEASUREMENTS
|
•
|
Level 1—Quoted prices in active markets for identical assets and liabilities.
|
•
|
Level 2—Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active, and model‑derived valuations whose inputs are observable or whose significant value drivers are observable.
|
•
|
Level 3—Significant inputs to the valuation model are unobservable.
|
|
|
|
|
Fair Value at Reporting Date Using
|
||||||||||||
|
|
December 31, 2012
|
|
Quoted Prices in Active Markets for Identical Assets or Liabilities
(Level 1) |
|
Significant Observable Inputs
(Level 2) |
|
Significant Unobservable Inputs
(Level 3) |
||||||||
Investments
|
|
|
|
|
|
|
|
|
||||||||
Corporate bonds
|
|
$
|
17,462
|
|
|
$
|
—
|
|
|
$
|
17,462
|
|
|
$
|
—
|
|
Certificate of deposit
|
|
$
|
166
|
|
|
$
|
—
|
|
|
$
|
166
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Note 14
|
— EMPLOYEE BENEFITS
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2013
|
|
2012
|
||||
Components of net periodic benefit cost:
|
|
|
|
|
|
|
||
Interest cost
|
|
$
|
21
|
|
|
$
|
23
|
|
Amortization of prior service cost
|
|
(4
|
)
|
|
(4
|
)
|
||
Amortization of actuarial loss
|
|
75
|
|
|
61
|
|
||
Net period benefit cost
|
|
$
|
92
|
|
|
$
|
80
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
changes in the price, demand, or supply of potash or Trio
®
/langbeinite
|
•
|
circumstances that disrupt or limit our production, including operational difficulties or operational variances due to geological or geotechnical variances
|
•
|
interruptions in rail or truck transportation services, or fluctuations in the costs of these services
|
•
|
increased labor costs or difficulties in hiring and retaining qualified employees and contractors, including workers with mining, mineral processing, or construction expertise
|
•
|
the costs of, and our ability to successfully construct, commission and execute, our strategic projects, including the development of our HB Solar Solution mine, the further development of our langbeinite recovery and granulation assets, our North granulation plant, and our Moab cavern systems
|
•
|
adverse weather events, including events affecting precipitation and evaporation rates at our solar solution mines
|
•
|
changes in the prices of raw materials, including chemicals, natural gas, and electricity
|
•
|
the impact of federal, state, or local government regulations, including environmental and mining regulations, the enforcement of those regulations, and government policy changes
|
•
|
our ability to obtain any necessary government permits relating to the construction and operation of assets
|
•
|
changes in our reserve estimates
|
•
|
competition in the fertilizer industry
|
•
|
declines in U.S. or world agricultural production
|
•
|
declines in the use of potash products by oil and gas companies in their drilling operations
|
•
|
changes in economic conditions
|
•
|
our ability to comply with covenants in our debt-related agreements to avoid a default under those agreements
|
•
|
disruption in the credit markets
|
•
|
our ability to secure additional federal and state potash leases to expand our existing mining operations
|
•
|
the other risks and uncertainties described in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2012, and elsewhere in this Quarterly Report on Form 10-Q.
|
|
|||||||||||||||
|
|
|
|
|
|
Change
|
|
|
|||||||
|
|
Three Months Ended March 31,
|
|
Between
|
|
|
|||||||||
|
|
2013
|
|
2012
|
|
Periods
|
|
% Change
|
|||||||
Production volume (in thousands of tons):
|
|
|
|
|
|
|
|
|
|||||||
Potash
|
|
222
|
|
|
218
|
|
|
4
|
|
|
2
|
%
|
|||
Langbeinite
|
|
46
|
|
|
30
|
|
|
16
|
|
|
53
|
%
|
|||
Sales volume (in thousands of tons):
|
|
|
|
|
|
|
|
|
|||||||
Potash
|
|
185
|
|
|
203
|
|
|
(18
|
)
|
|
(9
|
)%
|
|||
Trio
®
|
|
39
|
|
|
28
|
|
|
11
|
|
|
39
|
%
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Gross sales (in thousands):
|
|
|
|
|
|
|
|
|
|||||||
Potash
|
|
$
|
82,778
|
|
|
$
|
101,758
|
|
|
$
|
(18,980
|
)
|
|
(19
|
)%
|
Trio
®
|
|
16,479
|
|
|
10,485
|
|
|
5,994
|
|
|
57
|
%
|
|||
Total
|
|
99,257
|
|
|
112,243
|
|
|
(12,986
|
)
|
|
(12
|
)%
|
|||
Freight costs (in thousands):
|
|
|
|
|
|
|
|
|
|||||||
Potash
|
|
5,466
|
|
|
4,795
|
|
|
671
|
|
|
14
|
%
|
|||
Trio
®
|
|
2,631
|
|
|
1,967
|
|
|
664
|
|
|
34
|
%
|
|||
Total
|
|
8,097
|
|
|
6,762
|
|
|
1,335
|
|
|
20
|
%
|
|||
Net sales (in thousands):
|
|
|
|
|
|
|
|
|
|||||||
Potash
|
|
77,312
|
|
|
96,963
|
|
|
(19,651
|
)
|
|
(20
|
)%
|
|||
Trio
®
|
|
13,848
|
|
|
8,518
|
|
|
5,330
|
|
|
63
|
%
|
|||
Total
|
|
$
|
91,160
|
|
|
$
|
105,481
|
|
|
$
|
(14,321
|
)
|
|
(14
|
)%
|
|
|
|
|
|
|
|
|
|
|||||||
Potash statistics (per ton):
|
|
|
|
|
|
|
|
|
|||||||
Average net realized sales price
|
|
$
|
417
|
|
|
$
|
477
|
|
|
$
|
(60
|
)
|
|
(13
|
)%
|
Cash operating cost of goods sold, net of
by-product credits* (exclusive of items shown separately below) |
|
174
|
|
|
195
|
|
|
(21
|
)
|
|
(11
|
)%
|
|||
Depreciation and depletion
|
|
46
|
|
|
44
|
|
|
2
|
|
|
5
|
%
|
|||
Royalties
|
|
16
|
|
|
17
|
|
|
(1
|
)
|
|
(6
|
)%
|
|||
Total potash cost of goods sold
|
|
$
|
236
|
|
|
$
|
256
|
|
|
$
|
(20
|
)
|
|
(8
|
)%
|
Warehousing and handling costs
|
|
16
|
|
|
15
|
|
|
1
|
|
|
7
|
%
|
|||
Average potash gross margin
|
|
$
|
165
|
|
|
$
|
206
|
|
|
$
|
(41
|
)
|
|
(20
|
)%
|
|
|
|
|
|
|
|
|
|
|||||||
Trio
®
statistics (per ton):
|
|
|
|
|
|
|
|
|
|||||||
Average net realized sales price
|
|
$
|
351
|
|
|
$
|
302
|
|
|
$
|
49
|
|
|
16
|
%
|
Cash operating cost of goods sold (exclusive
of items shown separately below) |
|
180
|
|
|
221
|
|
|
(41
|
)
|
|
(19
|
)%
|
|||
Depreciation and depletion
|
|
54
|
|
|
61
|
|
|
(7
|
)
|
|
(11
|
)%
|
|||
Royalties
|
|
18
|
|
|
15
|
|
|
3
|
|
|
20
|
%
|
|||
Total Trio
®
cost of goods sold
|
|
$
|
252
|
|
|
$
|
297
|
|
|
$
|
(45
|
)
|
|
(15
|
)%
|
Warehousing and handling costs
|
|
14
|
|
|
14
|
|
|
—
|
|
|
—
|
%
|
|||
Average Trio
®
gross margin
|
|
$
|
85
|
|
|
$
|
(9
|
)
|
|
$
|
94
|
|
|
(1,044
|
)%
|
*
|
On a per ton basis, by-product credits were
$10
and
$9
for the three months ended March 31, 2013, and 2012, respectively. By-product credits were
$1.9 million
and
$1.8 million
for the three months ended March 31, 2013, and 2012, respectively.
|
|
|
United States
|
|
Export
|
||
Trio
®
only
|
|
|
|
|
||
Three months ended March 31, 2013
|
|
68
|
%
|
|
32
|
%
|
Three months ended March 31, 2012
|
|
76
|
%
|
|
24
|
%
|
Average net realized sales price for the three months ended:
|
|
Potash
|
|
Trio
®
|
|
|
(Per ton)
|
||
March 31, 2013
|
|
$417
|
|
$351
|
December 31, 2012
|
|
$434
|
|
$347
|
September 30, 2012
|
|
$444
|
|
$336
|
June 30, 2012
|
|
$465
|
|
$322
|
March 31, 2012
|
|
$477
|
|
$302
|
•
|
We are making significant progress on the HB Solar Solution mine, as discussed previously. The total expected investment for the project is between $225 million and $245 million, of which $151.2 million had been invested as of March 31, 2013. We currently expect first production of finished product from the HB Solar Solution mine to occur late in the fourth quarter of 2013 following completion of the production plant. We expect to see a ramp up of production in 2014, with production levels increasing into 2015, assuming the benefit of an average annual evaporation cycle applied to full evaporation ponds. The anticipated production schedule may be impacted by any construction delays, the timing of critical equipment deliveries and the impact of weather events or patterns on evaporation seasons.
|
•
|
The North compaction project is expected to be completed in phases to coincide with the production increases from the HB Solar Solution mine and the expansion of mining and milling capacity at the West mine. The first two compactor lines are scheduled to be completed in phases in mid-2013, with the third compaction line completed in early 2014. This project will provide adequate capacity for the increased throughput expected at the West facility and the anticipated production from the HB Solar Solution mine. Total capital investment for the project is expected to be approximately $95 million to $100 million, of which approximately $72.6 million had been invested as of March 31, 2013.
|
•
|
We are developing additional solution mining opportunities at our Moab facility. We completed the development of our second horizontal cavern systems in the fourth quarter of 2012 and are now actively engaged in developing a third horizontal cavern system. This represents a capital investment of approximately $20 million to $30 million, of which $4.9 million had been invested as of March 31, 2013. The addition of the new horizontal cavern systems is expected to provide higher extracted brine grades. In addition, we expect that the production from the new cavern systems will not only offset the typical decreasing production profile as other cavern systems are depleted, but allow for incremental production opportunities.
|
•
|
$4.1 million
in cash;
|
•
|
$1.0 million
in cash equivalent investments, consisting of money market accounts with banking institutions that we believe are financially sound;
|
•
|
$2.5 million
invested in short-term investments, comprised of certificates of deposit investments.
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2013
|
|
2012
|
||||
|
|
(In thousands)
|
||||||
Cash Flows from Operating Activities
|
|
$
|
11,621
|
|
|
$
|
37,664
|
|
Cash Flows from Investing Activities
|
|
$
|
(39,552
|
)
|
|
$
|
(50,480
|
)
|
Cash Flows from Financing Activities
|
|
$
|
(577
|
)
|
|
$
|
(449
|
)
|
•
|
$60 million of 3.23% Senior Notes, Series A, due April 16, 2020
|
•
|
$45 million of 4.13% Senior Notes, Series B, due April 14, 2023
|
•
|
$45 million of 4.28% Senior Notes, Series C, due April 16, 2025
|
|
|
Payments Due By Period
|
||||||||||||||||||||||||||
|
|
Total
|
|
Q2-Q4 2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
More Than 5 Years
|
||||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||||||
Operating lease obligations(1)
|
|
$
|
11,740
|
|
|
$
|
1,828
|
|
|
$
|
2,261
|
|
|
$
|
1,889
|
|
|
$
|
1,773
|
|
|
$
|
1,722
|
|
|
$
|
2,267
|
|
Purchase commitments(2)
|
|
18,365
|
|
|
18,365
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Natural gas purchase commitments(3)
|
|
3,798
|
|
|
3,798
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Pension obligations(4)
|
|
2,036
|
|
|
2,036
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Asset retirement obligation(5)
|
|
53,016
|
|
|
1,187
|
|
|
4,523
|
|
|
3,122
|
|
|
—
|
|
|
—
|
|
|
44,184
|
|
|||||||
Minimum royalty payments(6)
|
|
9,408
|
|
|
294
|
|
|
392
|
|
|
392
|
|
|
392
|
|
|
392
|
|
|
7,546
|
|
|||||||
Total
|
|
$
|
98,363
|
|
|
$
|
27,508
|
|
|
$
|
7,176
|
|
|
$
|
5,403
|
|
|
$
|
2,165
|
|
|
$
|
2,114
|
|
|
$
|
53,997
|
|
(1)
|
Includes all operating lease payments, inclusive of sales tax, for leases for office space, an airplane, railcars and other equipment.
|
(2)
|
Purchase contractual commitments include the approximate amount due vendors for non-cancelable purchase commitments for materials and services.
|
(3)
|
We have committed to purchase a minimum quantity of natural gas, which is priced at floating index‑dependent rates plus $0.02 to $0.13, estimated based on forward rates. Amounts are based on spot rates inclusive of estimated transportation costs and sales tax.
|
(4)
|
We terminated our obligations under the Pension Plan, and our remaining liability was funded in April 2013. In the second quarter of 2013, we will recognize additional expense of approximately $1.9 million on termination of the Pension Plan in an amount equal to the difference between the final amount funded and the sum of the recorded pension liability and the unrecognized actuarial loss included in accumulated other comprehensive income.
|
(5)
|
We are obligated to reclaim and remediate lands that our operations have disturbed, but, because of the long-term nature of our reserves and facilities, we estimate that the majority of those expenditures will not be required until after 2017. Although our reclamation obligation activities are not required to begin until after we cease operations, we anticipate certain activities to occur prior to then related to reclamation of facilities that have been replaced with
|
(6)
|
Estimated annual minimum royalties due under mineral leases, assuming approximately a 25-year life, consistent with estimated useful lives of plant assets.
|
|
|
Three Months Ended March 31,
|
|
Change Between
|
|
|
|||||||||
|
|
2013
|
|
2012
|
|
Periods
|
|
% Change
|
|||||||
Cost of goods sold (in millions)
|
|
$
|
53.8
|
|
|
$
|
60.6
|
|
|
$
|
(6.8
|
)
|
|
(11
|
)%
|
Cost per ton of potash sold(1)
|
|
$
|
236
|
|
|
$
|
256
|
|
|
$
|
(20
|
)
|
|
(8
|
)%
|
Cost per ton of Trio
®
sold(2)
|
|
$
|
252
|
|
|
$
|
297
|
|
|
$
|
(45
|
)
|
|
(15
|
)%
|
(1)
|
Depreciation and depletion expense for potash was $8.5 million and $9.0 million in the first quarter of 2013 and 2012, respectively, which equates to
$46
and
$44
on a per ton basis.
|
(2)
|
Depreciation and depletion expense for Trio
®
was $2.1 million and $1.7 million in the first quarter of 2013 and 2012, respectively, which equates to
$54
and
$61
on a per ton basis.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
|
(a)
Total Number of Shares Purchased (1) |
|
(b)
Average Price Paid Per Share |
|
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
(d)
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Programs |
|||
January 1, 2013, through January 31, 2013
|
|
–
|
|
|
–
|
|
|
–
|
|
N/A
|
|
February 1, 2013, through February 28, 2013
|
|
28,738
|
|
|
$
|
20.07
|
|
|
–
|
|
N/A
|
March 1, 2013, through March 31, 2013
|
|
–
|
|
|
–
|
|
|
–
|
|
N/A
|
(1)
|
Represents shares of common stock delivered to us as payment of withholding taxes due upon the vesting of restricted stock held by our employees.
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
|
|
INTREPID POTASH, INC.
(Registrant) |
|
|
|
Dated: May 1, 2013
|
|
/s/
Robert P. Jornayvaz III
|
|
|
Robert P. Jornayvaz III -
Executive Chairman of the Board
(Principal Executive Officer) |
|
|
|
Dated: May 1, 2013
|
|
/s/
David W. Honeyfield
|
|
|
David W. Honeyfield -
President and Chief Financial Officer
(Principal Financial Officer) |
|
|
|
Dated: May 1, 2013
|
|
/s/
Brian D. Frantz
|
|
|
Brian D. Frantz -
Vice President-Finance, Controller, and Chief Accounting Officer
(Principal Accounting Officer) |
Exhibit No.
|
|
Description
|
10.1
|
|
Second Amendment to Employment Agreement dated as of February 14, 2013, by and between Intrepid Potash, Inc. and Robert P. Jornayvaz III. (1)+
|
|
|
|
31.1
|
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.*
|
|
|
|
31.2
|
|
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.*
|
|
|
|
32.1
|
|
Certification of Executive Chairman of the Board pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
|
|
|
95.1
|
|
Mine Safety Disclosure Exhibit.*
|
|
|
|
99.1
|
|
Sixth Amendment to Transition Services Agreement dated April 3, 2013, between Intrepid Potash, Inc. and Intrepid Oil & Gas, LLC.*
|
|
|
|
101.INS
|
|
XBRL Instance Document.*
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema.*
|
|
|
|
101.CAL
|
|
XBRL Extension Calculation Linkbase.*
|
|
|
|
101.LAB
|
|
XBRL Extension Label Linkbase.*
|
|
|
|
101.PRE
|
|
XBRL Extension Presentation Linkbase.*
|
|
|
|
101.DEF
|
|
XBRL Extension Definition Linkbase.*
|
(1)
|
Incorporated by reference to Intrepid's Current Report on Form 8-K (File No. 001-34025) filed on February 19, 2013.
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
+
|
Management contract.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Intrepid Potash, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Dated: May 1, 2013
|
|
/s/ ROBERT P. JORNAYVAZ III
|
|
|
Robert P. Jornayvaz III
Executive Chairman of the Board
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Intrepid Potash, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Dated: May 1, 2013
|
|
/s/ DAVID W. HONEYFIELD
|
|
|
David W. Honeyfield
President and Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
Dated: May 1, 2013
|
|
/s/ ROBERT P. JORNAYVAZ III
|
|
|
Robert P. Jornayvaz III
Executive Chairman of the Board
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
Dated: May 1, 2013
|
|
/s/ DAVID W. HONEYFIELD
|
|
|
David W. Honeyfield
President and Chief Financial Officer
|
Mine Name and MSHA Identification Number
|
Section 104 S&S Citations
|
Section 104(b) Orders
|
Section 104(d) Citations and Orders
|
Section 110(b)(2) Violations
|
Section 107(a) Orders
|
Total Dollar Value of MSHA Assessments Proposed
|
Total Number of Mining-Related Fatalities
|
Received Notice of Pattern of Violations Under Section 104(e)
|
Received Notice of Potential to Have Pattern under Section 104(e)
|
Legal Actions Pending as of the End of the Period
|
Legal Actions Initiated During the Period
|
Legal Actions Resolved During the Period
|
Intrepid Potash East
(29-00170)
|
—
|
—
|
—
|
—
|
—
|
$43,943
|
—
|
—
|
—
|
5
|
3
|
1
|
Intrepid Potash West
(29-00175)
|
3
|
—
|
—
|
—
|
—
|
$2,535
|
—
|
—
|
—
|
3
|
—
|
—
|
Intrepid Potash North
(29-02028)
|
—
|
—
|
—
|
—
|
—
|
$—
|
—
|
—
|
—
|
1
|
—
|
—
|
HB Potash
(29-00173) (idled underground mine)
|
—
|
—
|
—
|
—
|
—
|
$—
|
—
|
—
|
—
|
—
|
—
|
—
|
•
|
General -
In general, the number of citations and orders will vary depending on the size of the mine, the individual inspector assigned to the mine, and the specific mine characteristics. Citations and orders can be contested and appealed and, in that process, are often reduced in severity and amount and are sometimes vacated.
|
•
|
MSHA Identification Numbers -
MSHA assigns an identification number to each mine and may or may not assign separate identification numbers to related facilities. We provide the information in the table by MSHA identification number.
|
•
|
Section 104 Significant and Substantial (“S&S”) Citations
- These citations are issued for alleged violations of a mining safety standard or regulation where there exists a reasonable likelihood that the hazard contributed to or will result in an injury or illness of a reasonably serious nature.
|
•
|
Section 104(b) Orders
- These orders are issued for alleged failure to totally abate the subject matter of a Section 104(a) citation within the period specified in the citation.
|
•
|
Section 104(d) Citations and Orders
- These citations and orders are issued for an alleged unwarrantable failure (i.e. aggravated conduct constituting more than ordinary negligence) to comply with a mining safety standard or regulation.
|
•
|
Section 110(b)(2) Violations
- These violations are issued, and penalties are assessed, for flagrant violations (i.e., a reckless or repeated failure to make reasonable efforts to eliminate a known violation that substantially and proximately caused, or reasonably could have been expected to cause, death or serious bodily injury).
|
•
|
Section 107(a) Orders -
These orders are issued for an imminent danger to immediately remove miners.
|
•
|
Total Dollar Value of MSHA Assessments Proposed
- Proposed assessments issued during the period do not necessarily relate to the citations or orders issued by MSHA during that period or to the pending legal actions reported in the table.
|
•
|
Notice of Pattern of Violations Under Section 104(e); Notice of Potential to Have Pattern under Section 104(e) -
These notices are issued for a pattern of violation of mandatory health or safety standards or for the potential to have such a pattern.
|
•
|
Legal Actions Pending, Initiated, and Resolved -
The Federal Mine Safety and Health Review Commission (the “Commission”) is an independent adjudicative agency that provides administrative trial and appellate review of legal disputes arising under the Mine Act. Each legal action is assigned a docket number by the Commission and may have as its subject matter one or more citations, orders, penalties, or complaints.
|
Mine Name and MSHA Identification Number
|
Contests of Citations and Orders
|
Contests of Proposed Penalties
|
Complaints for Compensation
|
Complaints of Discharge, Discrimination or Interference
|
Applications for Temporary Relief
|
Appeals of Judges' Decisions or Orders
|
Total
|
Intrepid Potash East
(29-00170)
|
5
|
—
|
—
|
—
|
—
|
—
|
5
|
Intrepid Potash West
(29-00175)
|
3
|
—
|
—
|
—
|
—
|
—
|
3
|
Intrepid Potash North
(29-02028)
|
1
|
—
|
—
|
—
|
—
|
—
|
1
|
HB Potash
(29-00173) (idled underground mine)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
•
|
Contests of Citations and Orders
relate to challenges by operators, miners or miners' representatives to the issuance of a citation or order issued by MSHA.
|
•
|
Contests of Proposed Penalties (Petitions for Assessment of Penalties)
are administrative proceedings challenging a civil penalty that MSHA has proposed for the violation contained in a citation or order.
|
•
|
Complaints for Compensation
are filed by miners entitled to compensation when a mine is closed by certain withdrawal orders issued by MSHA for the purpose of determining the amount of compensation, if any, due miners idled by the orders.
|
•
|
Complaints of Discharge, Discrimination or Interference
involve a miner's allegation that he or she has suffered a wrong by the operator because he or she engaged in some type of activity protected under the Mine Act, such as making a safety complaint, or that he or she has suffered discrimination and lost his or her position.
|
Employee
|
Position
|
Initial Employee Cost Per Hour
1
|
1. Katie Keller
|
Landperson
|
$116.49
|
2. Heather Bader
|
Engineer
|
$104.19
|
3. Lee Jirik
|
Geologist
|
$146.56
|
|
|
|
|
|