Intrepid Potash, Inc. (IPI) Q2 2018 Earnings Report, Transcript and Summary

Thank you for standing by. This is the conference operator. Welcome to the Intrepid Second Quarter 2018 Earnings Conference Call. As a reminder all participants are in listen-only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Matt Preston, Investor Relations. Please go ahead.

Thanks, Steve. Good morning, and welcome, everyone. I remind you that parts of our discussion today will include forward-looking statements as defined by the U.S. securities laws. These statements are not guarantees of future performance and based on a number of assumptions which we believe are reasonable. These statements are based on the information available to us today, and we assume no obligation to update them. You can find more information about risks and uncertainties to our future performance in our periodic reports filed with the SEC. During today's call, we will refer to certain non-GAAP financial and operational measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this morning's press release. Our SEC filings and press releases are available on our website at intrepidpotash.com. Presenting on the call today are Bob Jornayvaz, our Co-Founder, Executive Chairman, President and CEO; and Joseph Montoya, Vice President and Chief Accounting Officer. I'll now turn the call over to Bob.

Thank you, Matt, and good morning to everyone. Our second quarter results were highlighted by another quarter of higher potash prices and increased domestic demand for Trio, a great finish to the spring application season combined with another solid quarter from our water business to deliver cash flow from operations of over $24 million. This brings our first half cash flow from operations to $38.2 million, which is more than $30 million higher than the first half of 2017. Potash price increased 8% compared to the second quarter of last year. Strong global potash fundamentals led to another domestic price increase and we remain bullish on the overall potash market for the second half the year. For Trio, we saw strong demand during the quarter as favorable pricing against component nutrients drove an increase in the application of Trio to non-specialty crops. In June, we matched our competitor summer fill program, which reduced langbeinite pricing by $10 a ton for orders placed in late June, with shipments scheduled by the end of September. Following the order window pricing was increased $20 per-ton, and we expect to see the benefit of the higher pricing on Trio sales in the fourth quarter. While this net $10 increase compared to the second quarter continues to positive pricing momentum for Trio. We still view it as undervalued when compared to other fertilizers and its nutrient components. We saw another quarter of solid water demand and cash flow with $4.5 million in water deliveries and an additional $3.8 million in cash received from a long-term water commitment. We saw a slight decrease in deliveries compared to the first quarter and attribute this mostly to the variable timing of oil and gas completion activities and the lack of frac crews in the region as you've read in many Wall Street Journal reports. In the first half of 2018, we have received $13.4 million of cash for water and as of June 30, we had $5.4 million in accounts receivable related to water on our balance sheet. Moving forward and in response to numerous investor and analyst requests for cash clarity, we are modifying our water guidance calculation and language to focus on cash and expect to receive $25 million to $35 million in cash relating to water in 2018. This amount includes $15 million in cash that we expect to receive under a long-term water commitment, but a portion of that is accounted for as deferred revenue until the underlying water is delivered. When we first gave guidance on water sales, we didn't expect a significant timing difference between cash flow i.e. sales and water deliveries. As we started discussing last quarter and the investment community we're focused on cash received and believe this is a much more accurate reflection of how we track our water business. The Northern portion of the Delaware Basin continues to see growth in drilling activity and drilled, but uncompleted wells are what we call in the industry DUCs. During the second quarter as the rig count and DUCs around our mine increases we believe this underlies a long-term potential of our water cash flow stream. As a reminder we have a diverse set of surface and underground water rides, both of which operate under multiple permits, not unlike other natural resources the use of water in New Mexico can sometimes be a contagious issue and some of our rights have been protested by two irrigation groups and a stream group and some others. These protests cost nothing so far. We are working with the parties to resolve these issues and continue to believe that our legal position with respect to the validity of our water rides is solid based on supportive legal opinions, third party documents and permits and filings in the state of New Mexico. We’re able to deliver water during the protest period and the protest process has no impact on water sales during the first half of 2018, nor do we believe it will affect our guidance for the full year. Oil fuel services in trucking continue to develop as our team of geologists, engineers and operators have succeeded in expanding our footprint, through sales calls, educational seminars and industry conferences. We are taking more meetings than ever as we pivot to a company with a dedicated sales team that can educate operators on the value of KCL in certain formations, while also providing the product, trucking and mixing services. Our trucking fleet is now licensed to deliver brine, building on a byproduct market which has generated record sales of $450,000 during the second quarter, an 85% increase compared to the first quarter of 2018. Salt sales remain consistent with prior year as we continue to evaluate options to maximize the potential of our HB Salt. The majority of which currently goes to our tailing spot. During the last three months we continue to make significant progress in the organic certification of our products, with our Moab potash facility joining our East Trio facility in meeting the standards defined by the Organic Materials Review Institute or OMRI. Continued growth in the organic space as highlighted for example by Amazon’s acquisition of Whole Foods and its stated go of making organic food affordable for everyone has the potential to dramatically change the organic market. In the United States as one of the few OMRI listed potash fertilizers and the only OMRI listed langbeinite that fertilizer in the market today. We have built a dedicated sales staff to capitalize on this growing market. We recently conducted wind scale testing of lithium recovery process with a third party testing facility and the preliminary results were encouraging regarding the profitable extraction of lithium from our wind over brine. We expect a full report in the next few weeks as we began to evaluate larger scale testing and look forward to updating you on our progress next quarter. I’ll now turn the call over to Joseph, who will discuss our financial results and the outlook.

Thanks, Bob and good morning, everyone. Although we recorded a net loss of $1 million for the second quarter, our quarterly result show significant improvement compared to the prior year’s second quarter net loss of $6 million. We did see a decrease in earnings compared to first quarter of this year as a result of the lower water deliveries and an increase in SG&A. Our potash segment had another great quarter with $6.3 million in gross margin, an increase of $2.3 million compared to the second quarter of last year and $1.3 million compared to the first quarter of this year. Sales mirrored the first quarter with strong application in the ag markets, offset by reduced demand from industrial customers. Our solar facilities entered the summer evaporation season earlier in the second quarter, which reduced production volume when compared to last year. Improvements in potash processing allowed us to harvest our ponds at a quicker rate and assuming similar evaporation seasons, a longer summer season will yield more tons available for harvest during the 2018-19 solar production year. In addition to the benefit of a longer summer shut down, we are also experiencing above average evaporation rates across solar facilities and are on pace for the best evaporation season ever in Carlsbad, but more tons in our ponds at the end of July than in any previous years. Moving on to Trio, our Trio segment generated a gross deficit of $2.2 million in the second quarter compared to the second quarter of 2017 gross deficit of $300,000. As a result of lower pricing and increased costs to our production -- reduce production rate. In the domestic market, we saw year-over-year improvement in sales volumes, which more than offset the decline in international sales as we chose to continue with only select international sales to build a presence in certain specific markets that we believe have long-term potential. Water delivered another strong quarter with $3.9 million in sales and an additional $600,000 of water deliveries that were recorded as byproducts. This brings our full year water sales to-date and deliveries to $10 million, not including $7.3 million of cash received that is still recorded as deferred revenue on our balance sheet. We incurred higher SG&A expenses in the second quarter compared to the prior year due to reinstatement of a bonus program and an increase in stock comp expense. We expect our full year SG&A expense to be $20 million to $22 million. A good first half has left us in a favorable liquidity position entering the second half of 2018. We currently have cash on hand of approximately $30 million and have no borrowings outstanding on our $35 million credit facility. Given our cash balance, we are well positioned to pay the scheduled of $10 million prepayment on our debt by year-end. Although due to a prepayment penalty in the debt agreement, we are in no hurry to pay ahead of the yearend deadline, especially in an environment with rising rates. That concludes our prepared remarks. Operator we are ready to take questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Mark Connelly with Stephens.

This is actually Joan Tong for Mark Connelly. A few questions here. First off, I want to ask about the international business. It seems like you guys have been quite bullish about that business for some time and this quarter you talked about a little bit challenging -- sort of challenging environment. Can you just give us a little bit more color and that will be helpful? Thanks.

Well, I guess the first thing I would point to is freight has gone up substantially, freight costs. But as we continue to focus on certain markets, we have the opportunity to grow volumes and if we look back at 2013, 2014, 2015, when there were substantially more langbeinite being sold into the international market at significantly higher prices. We still believe that we have the opportunity because the significant difference in nutrient values as we've discussed many times before for pricing to continue to achieve higher results. I hope that answers your question. It's just part of a longer term strategy. And when we also look at the organic market and the opportunity to build out the organic market and given the fact that we’re Food Safe and Feed Safe, as well as OMRI-certified. We continue to believe after we see acquisitions like Amazon's acquisition of Whole Foods that that organic market is going to continue to grow. And as we have a focused sales team on that, we just believe that given the history if we go back decades and look at the variability and the strength in the langbeinite market, we continue to believe in it.

And I would add to that I guess still relatively new for us. We still believe that the demand is out there internationally pricing and freight is going up as Bob mentioned, and they're still competitor out there, who chooses not to go with market pricing, what we believe to be market pricing. So, as we’ve talked about in previous calls, we are still facing with that -- faced with that issue internationally.

Okay, got it. And then it appear to me that your running inventory for Trio has come down sequentially. Should I assume that because like the international mix is smaller and you have mentioned in the past that you need a little bit more inventory exploring the international market and the fact that it has come down, it’s probably due to the mix it’s gearing more towards the last (inaudible).

Yes, our domestic sales had increased quite a bit, while we are developing the international markets as we mentioned in the prepared remarks, our pricing domestically continues to be pretty strong. And so like any good business where we’re going where we can make more money and so, we’re building the domestic helping to fulfill the domestic demand and reshifting some of our product from international where we’re struggling with freight and competitive lower prices to domestically where we have lower freight and higher prices.

Okay. And then finally on the byproduct sales as a credit of costs. I think you have mentioned $4 million, can you sort of repeat that numbers and I assume that most of those credits are -- byproduct credit is in the potash segment.

So first let me say that we haven’t ever as far as I can recall disclosed a dollar amount of a byproduct, so what we generally disclose and have disclosed is our byproducts credit, relative to our costs of goods sold, so that still remains in the 9%. As to the second part of your question, I’d say no, not necessarily a lot of our salt is coming from our HB facility, but we also produce salt in some of our water from the East facility as well. So, it’s a bit of a mix, lot of the brine comes from the potash segment as well and the mag chloride. So a lot of the potash -- you are right, Juan a lot of the byproduct goes through the potash segment, but not all of it.

Okay, great. Thank you.

You bet.

The next question comes from Christopher Perella with Bloomberg Intelligence.

Good morning. Excellent work repairing the balance sheet over last couple of quarters, it’s looking strong. In terms of the recognition of the deferred revenue, is there amount of times for example for the deferred revenue collected in the first quarter to then be converted four quarters after six quarters after. And then with the boost in the water cash guidance to $25 million to $35 million, is that extra $5 million or so does that -- is that going to be recognized revenue or is that going to be deferred revenue?

Let me clarify first that it’s a modification of the unit of measure. So before we talked about revenue, now we’re talking about cash. So in answer to your first question, relative to how long the deferred revenue will sit there, there isn’t contractually a time limit. So, we believe that the water will be taken, it’s the function of what’s going on in the Permian Basin, as Bob alluded to in his comments. We believe that that is the bottleneck there is being elevated as we continue to start tracking some of those rigs and DUCs so that’ll be taken. So we don’t expect the deferred revenue to sit there for a long period of time, but little bit of a crystal ball question, but there is not limitation on it. As to the cash, we expect to get that $25 million to $35 million this year and maybe I am forgetting part of your question. So feel free to repeat.

Yes, Joseph, just the timing on the earnings hit really, because it sounds like there is deferred earnings so you can’t recognize it with the delay in the delivery of the water and I think that’s sort of a missing slog that’s traveling through the P&L here that maybe missing and then could be coming down the road. So when you guided to higher cash is that cash coming in on deferred revenue or is that cash coming in on revenue that’s going to be recognized in the third and fourth quarter here?

I would say it’s both, I mean, we really haven’t given any guidance in terms of that, but it’s an element of both.

After the first quarter we just had so many questions about how much cash can we generate on the water side of our business and most of the investment community that we’re talking to was much more interested in our ability to generate cash. And it was we felt like we could describe it easier than trying to focus on deferred revenues when certain water sales would hit and as we grow our water business and grow different types of water agreements whether they’re tolling agreements, storage agreements, leasing from third parties, using our infrastructure to transfer water, there’s a variety of sources where we may receive cash and owe a service. The accounting as we have described now for numerous quarters is more complicated. And so the easiest way to describe it is the amount of cash that we think we can generate on an annual basis.

We know that you and your colleagues, Chris had to do a lot of modeling on our numbers and our reports and we believe that cash is a better unit of measure to model because we have -- we believe there’s more consistency in the cash flow than there is in the revenue just because of the volatility of the oil and gas market in the Permian Basin.

I agree, I agree I'm just trying to bridge the sort of a disconnect between the two over the call. So I do appreciate the color on that, I’ll pass it along. Thank you, guys.

Yes, thanks.

The next question is from Joel Jackson with BMO Capital Markets.

Hi, this is Robin on for Joel. You talked about higher freight cost and competitor commentary assessing continuation of competitive environment, you asked for special deferreds and you mentioned how to I guess counteract obviously to grow volumes, but I guess from a Trio -- from a profitability standpoint for Trio I guess what is your thoughts on I guess maybe the timing of when we can return to profitability? And just that largely kind of hinge on pricing, which you don’t necessarily have complete control over given as you mentioned that competitor undervaluing the product? Thanks.

I think it’s a couple of things. I think it’s picking your markets right. And growing the right markets that have the highest net backs is developing the specific international markets where you have the opportunity to engage as far down as a farmer level so that you’re not dealing with just larger distributors. It’s once again delving deep into the history of langbeinite. So if we go back to the 70 year history of the sales of langbeinite and the many times that langbeinite has sold at a premium to potash we believe in the long-term story of langbeinite because we’ve looked at the history of langbeinite. And so we also understand the nutrient components and the disconnect between the value of the components and the current value of the price. So trying to predict when the market is going to turn or when that specifically going to happen we just been in the commodity market way too long to try to get into the prediction business. We’re just doing our best to focus on cost, focus on markets, focus on sales teams and focus on the proper diversification, to try to achieve the highest margins that we can as well as continue to operate the plant because we believe in the longer term future of langbeinite.

I was going to interject, but Bob picked up what I was going to say. It’s not necessarily all about factors beyond our control such as freight and pricing I think cost is a big element as Bob just mentioned and we continue to do things operationally within the plant that work to bring either our or production for a cost down which our terms that work having in hand. And so we continue to focus on that, it's simply not a -- throw our hands up and hope price goes up and hope freight goes down.

Alright thanks. And forgive me for going back to water here, but I mean the previous sales guidance for $20 million to $30 million. And I know we're switching to cash in the door now, but has that sales outlook changed for this year. So is there just more uncertain, because you -- now that we're getting more accustom to how the business works with timing we’re just more uncertain with actual sales.

It's not uncertainty as to what we're going to deliver. It's just uncertain as to when. And so again that's really why we're focusing more on the cash than on the revenue piece.

Okay. So maybe you can just talk about the outlook then for next year from a growth standpoint, I guess with cash earned?

Well, we're working on several transactions as we've said in many calls and specific calls with you, is that we have a dedicated water sales team, that's working on a variety of transactions to help us increase our ability to increase not only our volumes, but focus on pricing as well. So I think we have a lot of different levers to pull that we're very focused on pulling those. And I think we've done a good job of starting this business from zero to $25 million to $35 million in cash in 2018. And I think it's got a lot of room to grow. So I'm not going to get any more specific than that other than I think our track record speaks for itself.

I would just also add and remind you what we've talked about in previous quarters relative to our water rights. We've got a diverse set of water rights not only surface but ground water. And so to Bob's point, there we’re continuing to work on other projects that will have helped to maximize the rights that are available to us.

Right. And if I can just sneak one more last in, I may have missed this. What was the contribution in Q2 from the newer streams, the oilfield services and the trucking initiatives? And what's the outlook for Q3 and maybe the full year.

I guess we're reluctant to give any specific guidance there. We talked about our brine sales and that continues to be very, very strong $0.5 million I think in the quarter more or less. We're continuing to develop that build out that line of business. So we're getting a lot of traction. And as Bob mentioned in terms of sales calls and meetings and we've got our next mixing job lined up already. Just really still too soon to start talking about what that's going to look like in terms of guidance.

Fair enough. Okay, thanks.

Yes.

The next question is from Josh Spectra [ph] with UBS.

Hey, guys. Just a quick question on Potash and specifically the industrial market. So when you talked about that being down year-over-year. I'm just trying to think is that market more seasonal? So would 2Q be stronger or weaker than other quarters. And does that have any meaning as we think about the rest of the year. I know it's small in the grand scheme, but just trying to see if the size we should be looking at?

No, I think we're seeing the oilfield change in certain basins. So when we look at the Permian Basin, Permian Basin from the technological basis. While they've gotten extremely technically proficient at drilling longer laterals, what we're seeing them do is go to longer laterals more horsepower in their fracs. As if you follow the sand business at all, they're not going to 100 mesh sand, whereas they used to have resin coated sands and propenes [ph] and gels of a very complicated set of chemistry. And so we're seeing the oil business go to longer lateral, more horsepower in their fracs and not as much concerned in terms of the propene that's going in the frac. Now in the Rocky Mountain in certain areas, we're seeing because of cretaceous formations the need for KCL for clay inhibition. We continue to see that. So, but those basins aren’t as active as other basins that don’t have the same clay inhibition needs. So, it’s interesting to watch and be a part of seeing where the oil and gas business going technologically, I don’t think it’s as seasonal as it is. The oil and gas industry trying different things and coming back to things that work.

Okay, got it. So, it’s more the activity in the various basins versus the seasoned holiday. Alright, thanks guys.

[Operator Instructions] The next question is from Deforest Hinman of Walthausen & Company.

Hey, thanks for taking the questions. The commentary around solar production and the potash side was kind of interesting, it seems like there has been some ports real hot really, really dry out there, which is really good for us. For context, what’s the highest ever we’ve had production wise on that -- on the solar mines?

That’s a thought one to answer because we’ve been evolving our footprints. As you know, we started out just Wendover and in Moab and then brought Carlsbad palms online in 2013-2014. I’m dancing around, because I don’t know the number and I am going to get back to you on that, but it’s really evolving, I guess.

Okay. I look forward to get that information because it’s interesting and just thinking out loud, if we have record production, possibly do we have record low cash cost as well. I mean is it the right line of thinking?

Absolutely, because our cost is not increasing at all. We’re producing more tons with the same inputs.

Okay, I look forward to hear more on that.

Just in fairness that being said it’s still relatively early in the year and we will be watching as will you and the rest of the world as to what happens with the monsoon season, which happens here at the end of the month and the beginning of next. So, just that one caveat I will throw that out.

Okay, that’s fair. Different line of questioning. There is some step up in the SG&A, you talked about adding some people, you talked about maybe there is some legal cost in there, is that number -- can you help parse that out?

I would say, as we mentioned the biggest piece is the stock comp and the bonus program as we’re going through struggles with our going concern opinion in 2015 and there we did a lot to curtail our SG&A expenses. We cut out the bonus program, there was very stock comp. We cut personnel and a lot of us kept on salary reduction. So, I guess, I would say, it’s really more to do with that and returning to operation of a normal business environment. Bob I don’t know if you have anything to add there.

No, I think that covers in.

So, that’s $6 million range is that something we should be looking at on a go forward basis?

The $20 million to $22 million is probably the better way to look at it. The other thing, we’ve talked about in previous quarters, especially in light of entering the international market as well as oil and gas market, we are recording from some allowance for doubtful accounts, which we’ve not had in the past. We had a little more bit recorded of that this quarter. But, I would hesitate to give guidance on that because, obviously, you just don’t do that, you don’t expect any or want any. So, not necessarily, I guess, on a quarter-over-quarter basis, I don’t think we should start looking at it as a $24 million run rate, I guess, is the answer to your question.

Okay. And I don’t think anyone else asked about this, so I will. But on the lithium project, there is some interesting numbers, when you kind of, I guess, do some of the maps on the paper and depending on how you want to enter that market. But can you kind of just give us high level thoughts on what that opportunity could be if we do pursue this, how much capital would it entail? And then if we're selling it would we be doing any value add to the brine or we are just focusing on selling the brine that has some lithium in it?

I think we can give you a lot better color in the third and fourth quarter. The good news is that as you know, as a lithium businesses increased around the world, lithium -- there's been numerous lithium recovery technologies that have been improved upon. And so, we've had great results in our bench scale lab testing. And so I hate to say it, but I would just say stay tuned. We continue to have positive results. And we'll be able to give you a lot more color in the third and fourth quarters.

Okay, I'm going to ask a stupid question. What was the bench scale test? I don't know what that means. Did you guys make a mini pond and just see how you could get some concentrations in like a smaller gallon pool, like hypothetical pool like the (inaudible) environment?

No. We hired a reputable third-party lithium recovery expert company, if you will, to try a couple of different technologies to see what the potential operating recoveries would be, which would then give you a gauge of potential operating costs. And then we're doing our modeling of significantly lower prices than lithium prices are today to get to the conclusion that the bench scale testing or lab testing, if you will, is potentially profitable and keep moving forward. So, I don't know if I'm answering your question.

No, that's helpful.

You turn it over to an independent third-party that does this for a business. So that it's not just our work.

And just very high level, is it a e-vap process? Or is it some sort of capital equipment in front? And then it's an e-vap process. I mean, maybe I just don't understand what we're trying to do.

Well, as we've mentioned, there's several different forms of recovery and we don't want to go into this specific recovery methodology that we're looking at. So we would be building an add-on to our existing pond. We know we have lithium in our ponds. So we would be running that lithium through the new plant to recover that lithium from the brine that we know exists in that brine. I really don't want to go with the technology that we're looking at. And so I'm just going to leave it there.

Well, and to be clear, I don't think Bob is being evasive or try not to answer the question. We're in the very early stages and this third-party company that we hired is not only assessing what we have. But the next step would be how to monetize that asset. And as Bob mentioned, there are various ways to do that. And so certainly way too premature for us to start talking about how we would do it.

Okay, maybe it's something I can talk more offline with when we get the production numbers. So thank you.

Thank you for the questions.

The next question is from Jon Evans with SG Capital.

So just to reiterate on the SG&A, you said basically the range for the full year is 20 to 22. Is that right?

That's correct.

Okay. And then the question that I have for you relative to water, I guess. Did you see any of your customers pushing out water for delivery? Because of the takeaway problem in the Permian where they weren't fracking the wells?

Yes, I mean, there's clearly a takeaway problem. But the good news for us is that we're seeing a substantial increase in the DUCs that surround us. So those wells will get frac. And so anyone can look up the drilling activity in…

I got the DUCs numbers, I know what they are. Can I ask you one other question then, the DUCs that are around you that are -- that you've seen? Is that primarily from your customer where you have the contract with or…

There is wide variety of operators that have DUCs that we have the opportunity to serve. So, I mean, that’s the great part and we have a 3,600 square mile footprint in terms our ability to service water we’ve stated that a couple of times in our earnings calls. And so when you look at the magnitude of our water delivery footprint, there are numerous operators that we have the opportunity to serve. So it’s not just one operator.

I understand that. And then the other question the last question that I had just relative to the water. Have you gotten any new or big customers that you can talk about or are there any other contracts coming or just can you give us any kind of sense of the pipeline?

It’s extremely active market with a lot of the people chasing water, water deals. It’s very much in demand. And so, as we have said before, we have got a dedicated sales team that’s working on just a whole host of deals. And I am just going to leave it at that. I mean, if you just look at the activity and if you are aware of the DOCs then you are aware of the number of operator, then you are aware of how different each of those operators have a procurement process. So, you’re just aware. And so for us to tell you exactly who we’re talking to and what those might look like, I just don’t think is appropriate until we have those deals closed.

And then the last question just relative to water. Have you seen -- initially you are getting into this business in and you’re getting your foot hold. Some of the contractors coming up for renewal et cetera. Can you talk about the pricing dynamic and have you started to change pricing at all?

We have not, we’re having those discussions with various people that we’re talking to. That are -- where we have a water service delivery company. As to operators, we have not tried to raise the price significantly in our area. So, the answer is I think we’ve got pricing potential, but I think once we get more infrastructure in place you clearly are aware of the articles that have been in the Wall Street Journal about the takeaway issues, the infrastructure issues, the frac crew issues. And so I think when a lot of that gets settled out is when we’re going to see a steadier stream, if you will, for a more reliable frac schedule, that’s going to give us more pricing power. But right now when we see the variability and as confirmed by numerous Wall Street Journal articles and the economist in numerous magazines, I think that’s when you get the pricing power is that when the infrastructure is replaced that was there in 2014, because we are nowhere near the staffing where we were in 2014.

Okay, thank you.

The next question is from John Roberts with UBS.

Thank you, can you hear me.

Sounds okay.

I know Trio was used on a lot of niche crop so it’s sort of very hard to track the end market crops, but the tariffs that are going in like some of the U.S. crop exports or on some of the niche crops like almonds and we think there are some other things, is there anything in that [technical difficulty]

We just lost you. Could you repeat that?

After almonds we didn’t get much after that.

Hello.

Crew users that are affected in this tariff situation.

Right now we are not seeing any push back and so -- but let’s see what happens in the fall season. And so it’s a great question, it’s -- I really don’t have a good answer for you in terms of which markets we’re going to be impacted by. When I think about our larger markets, I don’t see any impact on some of the smaller markets like almond, I could see a few thousand tons being impacted.

Okay, thank you.

This concludes the question and answer session. I would like to turn the conference back over to Bob Jornayvaz for any closing remarks.

Thank you everyone for taking the time to dial-in today. We appreciate your interest in Intrepid and look forward to speaking with everybody in the near future. Thank you so much.

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.