10-Q 1 ipi-20240331.htm 10-Q ipi-20240331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________
FORM 10-Q
_______________________________________________________
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended
March 31, 2024
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ______ to ______
Commission File Number: 001-34025
ipilogoa04.jpg
INTREPID POTASH, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
26-1501877
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
707 17th Street, Suite 4200
Denver, Colorado80202
(Address of principal executive offices)
(Zip Code)
(303296-3006
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act
Title of each classTrading symbolName of each exchange on which registered
Common Stock, par value $0.001 per shareIPINew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☒No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer ☒
Non-accelerated filer
Smaller reporting companyEmerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YesNo

As of April 30, 2024, the registrant had outstanding 13,269,062 shares of common stock, par value $0.001 per share.


INTREPID POTASH, INC.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION    
ITEM 1. Condensed Consolidated Financial Statements (Unaudited)



i

PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
INTREPID POTASH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
March 31,December 31,
20242023
ASSETS
Cash and cash equivalents$34,067 $4,071 
Short-term investments2,971 2,970 
Accounts receivable:
Trade, net41,826 22,077 
Other receivables, net1,201 1,470 
Inventory, net102,549 114,252 
Prepaid expenses and other current assets5,530 7,200 
Total current assets188,144 152,040 
Property, plant, equipment, and mineral properties, net354,809 358,249 
Water rights19,184 19,184 
Long-term parts inventory, net30,543 30,231 
Long-term investments6,297 6,627 
Other assets, net8,609 8,016 
Non-current deferred tax asset, net195,012 194,223 
Total Assets$802,598 $768,570 
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable$11,029 $12,848 
Accrued liabilities13,374 14,061 
Accrued employee compensation and benefits6,299 7,254 
Other current liabilities8,748 12,401 
Total current liabilities39,450 46,564 
Advances on credit facility 4,000 
Asset retirement obligation, net of current portion30,699 30,077 
Operating lease liabilities518 741 
Finance lease liabilities1,608 1,451 
Deferred other income, long-term47,170  
Other non-current liabilities1,166 1,309 
Total Liabilities120,611 84,142 
Commitments and Contingencies
Common stock, 0.001 par value; 40,000,000 shares authorized;
12,875,520 and 12,807,316 shares outstanding
at March 31, 2024, and December 31, 2023, respectively13 13 
Additional paid-in capital666,326 665,637 
Retained earnings 37,660 40,790 
Less treasury stock, at cost(22,012)(22,012)
Total Stockholders' Equity681,987 684,428 
Total Liabilities and Stockholders' Equity$802,598 $768,570 
See accompanying notes to these condensed consolidated financial statements.
1

INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended
March 31,
20242023
Sales$79,287 $86,920 
Less:
Freight costs12,830 11,590 
Warehousing and handling costs3,089 2,733 
Cost of goods sold56,431 56,245 
Lower of cost or net realizable value inventory adjustments503  
Gross Margin 6,434 16,352 
Selling and administrative8,357 8,858 
Accretion of asset retirement obligation622 535 
Impairment of long-lived assets1,377  
Loss on sale of assets251 200 
Other operating income (1,132) 
Other operating expense 1,265 1,385 
Operating (Loss) Income(4,306)5,374 
Other Income
Equity in earnings of unconsolidated entities149 821 
Interest income244 85 
Other income8 13 
(Loss) Income Before Income Taxes(3,905)6,293 
Income Tax Benefit (Expense)775 (1,787)
Net (Loss) Income$(3,130)$4,506 
Weighted Average Shares Outstanding:
Basic12,817 12,694 
Diluted12,817 12,875 
(Loss) Earnings Per Share:
Basic$(0.24)$0.35 
Diluted$(0.24)$0.35 
See accompanying notes to these condensed consolidated financial statements.
2

INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
Three-Month Period Ended March 31, 2024
Common StockTreasury StockAdditional Paid-in CapitalRetained EarningsTotal Stockholders' Equity
SharesAmount
Balance, December 31, 202312,807,316 $13 $(22,012)$665,637 $40,790 $684,428 
Net loss— — — — (3,130)(3,130)
Stock-based compensation— — — 1,322 — 1,322 
Vesting of restricted common stock, net of common stock used to fund employee income tax withholding due upon vesting68,204 — — (633)— (633)
Balance, March 31, 202412,875,520 $13 $(22,012)$666,326 $37,660 $681,987 
Three-Month Period Ended March 31, 2023
Common StockTreasury StockAdditional Paid-in CapitalRetained EarningsTotal Stockholders' Equity
SharesAmount
Balance, December 31, 202212,687,822 $13 $(22,012)$660,614 $76,463 $715,078 
Net income— — — — 4,506 4,506 
Stock-based compensation— — — 1,746 — 1,746 
Vesting of restricted common stock, net of common stock used to fund employee income tax withholding due upon vesting72,168 — — (1,037)— (1,037)
Balance, March 31, 202312,759,990 $13 $(22,012)$661,323 $80,969 $720,293 
See accompanying notes to these condensed consolidated financial statements.
3

INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended March 31,
20242023
Cash Flows from Operating Activities:
Net (loss) income $(3,130)$4,506 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, depletion and amortization9,304 9,292 
Accretion of asset retirement obligation622 535 
Amortization of deferred financing costs75 75 
Amortization of intangible assets80 80 
Stock-based compensation1,322 1,746 
Lower of cost or net realizable value inventory adjustments503  
Impairment of long-lived assets1,377  
Loss on disposal of assets251 200 
Allowance for parts inventory obsolescence53  
Equity in earnings of unconsolidated entities(149)(821)
Distribution of earnings from unconsolidated entities 320 
Changes in operating assets and liabilities:
Trade accounts receivable, net(19,749)(12,474)
Other receivables, net247 (92)
Inventory, net10,835 7,645 
Prepaid expenses and other current assets922 250 
Deferred tax assets, net(789)1,661 
Accounts payable, accrued liabilities, and accrued employee
     compensation and benefits
(3,621)(5,305)
Operating lease liabilities(384)(401)
Deferred other income44,434  
Other liabilities(671)1,232 
Net cash provided by operating activities41,532 8,449 
Cash Flows from Investing Activities:
Additions to property, plant, equipment, mineral properties and other assets(11,673)(21,039)
Purchase of investments (956)
Proceeds from sale of assets4,596 65 
Proceeds from redemptions/maturities of investments500 1,500 
Net cash used in investing activities(6,577)(20,430)
Cash Flows from Financing Activities:
Proceeds from short-term borrowings on credit facility 5,000 
Repayments of short-term borrowings on credit facility(4,000) 
Payments of financing lease(324)(43)
Employee tax withholding paid for restricted stock upon vesting(633)(1,037)
Net cash (used in) provided by financing activities(4,957)3,920 
Net Change in Cash, Cash Equivalents and Restricted Cash29,998 (8,061)
Cash, Cash Equivalents and Restricted Cash, beginning of period4,651 19,084 
Cash, Cash Equivalents and Restricted Cash, end of period$34,649 $11,023 
4

INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended March 31,
20242023
Supplemental disclosure of cash flow information
Net cash paid (received) during the period for:
Interest$185 $59 
Income taxes$(3)$9 
Amounts included in the measurement of operating lease liabilities$412 $460 
Accrued purchases for property, plant, equipment, and mineral properties$4,739 $7,410 
Right-of-use assets exchanged for financing lease liabilities$495 $1,677 

See accompanying notes to these condensed consolidated financial statements.
5

INTREPID POTASH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1COMPANY BACKGROUND
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 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, salt, magnesium chloride, brine, and various oilfield products and services.
Our extraction and production operations are conducted entirely in the continental U.S. 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 the 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 permitted, licensed, declared, and partially adjudicated water rights in New Mexico that support our mining and industrial operations. Water that is not used to support our mining and industrial operations is primarily sold to support oil and gas development in the Permian Basin in New Mexico near our Carlsbad facilities. We continue to work to expand our water business. See Note 15—Commitments and Contingencies below for further information regarding our water rights.
We also operate certain land, water rights, grazing leases, and other related assets in southeast New Mexico. We refer to these assets and operations as "Intrepid South." Due to the strategic location of Intrepid South, part of our long-term operating strategy is selling small parcels of land, including restricted use agreements of surface or subsurface rights, to customers where such sales provide a solution to such customer's operations in the oil and gas industry.
We have three segments: potash, Trio®, and oilfield solutions. We account for sales of byproducts as revenue in the potash or Trio® segment based on which segment generates the byproduct. Intersegment sales prices are market based and are eliminated.
"Intrepid," "our," "we," or "us" means Intrepid Potash, Inc. and its consolidated subsidiaries.

Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Statement PresentationOur unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation of interim financial information, have been included. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023.
Pronouncements Issued But Not Yet AdoptedIn December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"). ASU 2023-09 requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold, certain disclosures of state versus federal income tax expenses and taxes paid. ASC 2023-09 is effective for fiscal years beginning after December 15, 2024. We are currently evaluating the guidance and expect it to only impact disclosures with no impact to results of operations, cash flows and financial condition.
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"). This new guidance: (i) introduces a requirement to disclose significant segment expenses regularly provided to the chief operating decision maker ("CODM"), (ii) extends certain annual disclosures to interim periods, (iii) clarifies disclosure requirements for single reportable segment entities, (iv) permits more than one measure of segment profit or loss to be reported under certain conditions, and (v) requires disclosure of the title and position of the CODM. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance applies retrospectively to all periods
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presented in the financial statements. We are currently evaluating the guidance and expect it to only impact disclosures with no impact to results of operations, cash flows, and financial condition.
Reclassifications of Prior Period PresentationCertain prior period amounts have been reclassified in order to conform to the current period presentation. These reclassifications had no effect on the reported results of operations.


Note 3EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. For purposes of determining diluted earnings per share, basic weighted-average common shares outstanding is adjusted to include potentially dilutive securities, including restricted stock, stock options, and performance units. The treasury-stock method is used to measure the dilutive impact of potentially dilutive shares. Potentially dilutive shares are excluded from the diluted weighted-average shares outstanding computation in periods in which they have an anti-dilutive effect. The following table shows the calculation of basic and diluted earnings per share (in thousands, except per share amounts):
Three Months Ended
March 31,
20242023
Net (loss) income$(3,130)$4,506 
Basic weighted-average common shares outstanding12,817 12,694 
Add: Dilutive effect of restricted stock 125 
Add: Dilutive effect of stock options 56 
Diluted weighted-average common shares outstanding12,817 12,875 
Basic$(0.24)$0.35 
Diluted$(0.24)$0.35 

The following table shows the shares that have an anti-dilutive effect and are excluded from the diluted weighted-average shares outstanding computations (in thousands):
Three Months Ended
March 31,
20242023
Anti-dilutive effect of restricted stock348 187 
Anti-dilutive effect of stock options outstanding273 156 
    
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Note 4CASH, CASH EQUIVALENTS AND RESTRICTED CASH
    We consider financial instruments with original maturities of three months or less to be cash equivalents. Total cash, cash equivalents and restricted cash, as shown on the condensed consolidated statements of cash flows are included in the following accounts at March 31, 2024, and 2023 (in thousands):
March 31, 2024March 31, 2023
Cash and cash equivalents$34,067 $10,451 
Restricted cash included in other current assets25 25 
Restricted cash included in other long-term assets557 547 
Total cash, cash equivalents, and restricted cash as shown in the statement of cash flows$34,649 $11,023 
    
Restricted cash included in other current and long-term assets on the condensed consolidated balance sheets represents amounts for which use is restricted by contractual agreements with various entities, principally the Bureau of Land Management or the State of Utah, as security to fund future reclamation obligations at our sites.

Note 5INVENTORY AND LONG-TERM PARTS INVENTORY
    The following summarizes our inventory, recorded at the lower of weighted-average cost or estimated net realizable value, as of March 31, 2024, and December 31, 2023 (in thousands):
March 31, 2024December 31, 2023
Finished goods product inventory$57,794 $66,033 
In-process inventory23,002 28,044 
Total product inventory80,796 94,077 
Current parts inventory, net21,753 20,175 
Total current inventory, net102,549 114,252 
Long-term parts inventory, net30,543 30,231 
Total inventory, net$133,092 $144,483 

Parts inventory is shown net of estimated allowances for obsolescence of $1.0 million and $0.9 million as of March 31, 2024, and December 31, 2023, respectively.

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Note 6PROPERTY, PLANT, EQUIPMENT, AND MINERAL PROPERTIES
    Property, plant, equipment, and mineral properties were comprised of the following (in thousands):
March 31, 2024December 31, 2023
Land$24,136 $24,136 
Ponds and land improvements91,984 91,333 
Mineral properties and development costs159,775 159,775 
Buildings and plant90,150 90,150 
Machinery and equipment299,403 297,494 
Vehicles7,435 7,332 
Office equipment and improvements10,159 10,150 
Operating lease ROU assets5,045 5,274 
Breeding stock293 315 
Construction in progress26,888 23,942 
Total property, plant, equipment, and mineral properties, gross$715,268 $709,901 
Less: accumulated depreciation, depletion, and amortization(360,459)(351,652)
Total property, plant, equipment, and mineral properties, net$354,809 $358,249 

During the year ended December 31, 2023, we recorded an impairment related to our Trio® segment assets because the estimated fair value of the assets exceeded the net book value of the assets. The fair value of the Trio® segment assets was primarily determined using the expected proceeds received in an orderly sale of the individual assets. For any Trio® segment capital spending during the first quarter of 2024, we also estimated the fair value of those assets using the expected proceeds received in an orderly sale of those new assets. As a result, we recorded an additional impairment of $1.4 million in the first quarter of 2024.
We incurred the following expenses for depreciation, depletion, and amortization, including expenses capitalized into inventory, for the following periods (in thousands):
Three Months Ended March 31,
20242023
Depreciation$7,465 $7,727 
Depletion1,472 1,177 
Amortization of right of use assets367 388 
Total incurred$9,304 $9,292 

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Note 7OTHER LONG-TERM DEFERRED INCOME
Cooperative Development Agreement—In December 2023, we entered into the Third Amendment of Cooperative Development Agreement (the "Amendment") with XTO Holdings, LLC ("XTO Holdings") and XTO Delaware Basin LLC, as successors in interest to BOPCO, L.P. ("XTO Delaware Basin," and together with XTO Holdings, "XTO"). The Amendment had an effective date of January 1, 2024 ("Amendment Date"). The Amendment further amends that certain Cooperative Development Agreement, by and between us, BOPCO, L.P. and the other parties thereto, effective as of February 28, 2011 (as amended, including by the Amendment, the "CDA"), which was executed for the purpose of pursuing the cooperative development of potassium and oil and gas on certain lands. The Cooperative Development Agreement restricts and limits the rights of us and XTO, as successors in interest to BOPCO, L.P., to explore and develop their respective interests, including limitations on the locations of wells. Intrepid and XTO entered into the Amendment in an effort to further the cooperation, remove the restrictions and limitations, and allow for the efficient co-development of resources within the Designated Potash Area ("DPA") consistent with the United States Secretary of the Interior Order 3324.
Pursuant to the Amendment, among other things, we agreed to provide support to XTO's for development and operation of XTO's oil and gas interests withing the DPA. As consideration under the Amendment, XTO agreed to pay us an initial fee of $50.0 million (the "Initial Fee"). We received a partial payment of $5.0 million of the Initial Fee in December 2023, and we received payment of the remaining $45.0 million from XTO in January 2024.
The Amendment further provides that we shall receive an additional one-time payment equal to $50.0 million (the "Access Fee")," which XTO will pay within 90 days upon the earlier occurrence of (i) the approval of the first new or expanded drilling island within a specific area to be used by XTO or (ii) within seven years of the anniversary of the Amendment Date. XTO is also required to pay additional amounts to Intrepid as an "Access Realization Fee," up to a maximum of $100.0 million, (the "Access Realization Fee") in the event of certain additional drilling activities by XTO.
Because the cooperative development support we are providing under the Amendment is not an output of our ordinary business activities, ASC Topic 606, Revenue from Contracts with Customers ("ASC 606") does not apply to the Amendment. However, we apply the principles in ASC 606 by analogy to determine amounts of other income to recognize.
Under ASC 606, we are required to identify the performance obligations in the Amendment and to determine the transaction price. The transaction price may include fixed consideration, variable consideration, or both. Variable consideration may only be included in the transaction price if it is probable that a significant reversal of amounts recognized will not occur (referred to as the variable consideration constraint). The Access Realization Fee is considered variable consideration.
Our performance obligation under the Amendment is to "stand-ready" to provide support to XTO, when and as needed, during the term of the Amendment. We estimate the transaction price to be $100.0 million, which is comprised of the $50.0 million Initial Fee and the $50.0 million Access Fee. We are not including any amounts of the Access Realization Fee in the transaction price because of the variable consideration constraint. Since our performance obligation is a "stand-ready" obligation, we are recognizing the transaction price on a straight-line basis over the term of the Amendment which ends on February 28, 2046.
For the three months ended March 31, 2024, we recorded other operating income of $1.1 million from the Amendment. Because we have not yet been paid the Access Fee included in the transaction price, we recorded a long-term receivable for the amount of the Access Fee we earned during the three months ended March 31, 2024 of $0.6 million, which is included in "Other Assets" on the Condensed Consolidated Balance Sheets. For the amount of the Initial Fee we earned during the three months ended March 31, 2024, we reduced the "Deferred other income, long-term" liability recorded on our Condensed Consolidated Balance Sheets.
As of March 31, 2024, we had $2.3 million recorded in "Other current liabilities," and $47.2 million recorded in "Deferred other income, long-term" on the Condensed Consolidated Balance Sheets for the unearned portion of the Initial Fee. As of December 31, 2023, we had $5.0 million recorded in "Other current liabilities," and zero recorded in "Deferred other income, long-term" on the Condensed Consolidated Balance Sheets.


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Note 8DEBT
    Revolving Credit Facility—We maintain a $150 million revolving credit facility with a syndicate of lenders with Bank of Montreal as administrative agent. The revolving credit facility has a maturity date to August 4, 2027. As of March 31, 2024, borrowings under the credit facility bear interest at the Secured Overnight Financing Rate ("SOFR") plus an applicable margin of 1.50% to 2.25% per annum, based on our leverage ratio as calculated in accordance with the amended agreement governing the revolving credit facility. Borrowings under the revolving credit facility are secured by substantially all of our current and non-current assets, and the obligations under the credit facility are unconditionally guaranteed by several of our subsidiaries.
    We occasionally borrow and repay amounts under the revolving credit facility for near-term working capital needs or other purposes and may do so in the future. During the three months ended March 31, 2024, we made no borrowings and made $4.0 million in repayments under the revolving credit facility. During the three months ended March 31, 2023, we made $5.0 million in borrowings, and we made no repayments under the revolving credit facility. As of March 31, 2024, we had no borrowings outstanding and no outstanding letters of credit under this facility. As of December 31, 2023, we had $4.0 million in borrowings outstanding and no outstanding letters of credit under this facility.
As of March 31, 2024, we were in compliance with all applicable covenants under the revolving credit facility.
Interest Expense—Interest expense is recorded net of any capitalized interest associated with investments in capital projects. We incurred gross interest expense of $0.2 million for the three months ended March 31, 2024 and 2023.
    Amounts included in interest expense, net for the three months ended March 31, 2024, and 2023 were as follows (in thousands):
Three Months Ended
March 31,
20242023
Interest expense on borrowings$39 $22 
Commitment fee on unused credit facility57 56 
Amortization of deferred financing costs75 75 
Gross interest expense171 153 
Less capitalized interest(171)(153)
Interest expense, net$ $ 
    
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Note 9INTANGIBLE ASSETS
    We have water rights, recorded at $19.2 million at March 31, 2024, and December 31, 2023. Our water rights have indefinite lives and are not amortized. We evaluate our water rights at least annually as of October 1 for impairment, or more frequently if circumstances require.
    We account for other intangible assets as finite-lived intangible assets and amortize those intangible assets over the period of estimated benefit, using the straight-line method. As of March 31, 2024, the weighted average amortization period for the other intangible assets was approximately 15.0 years. At March 31, 2024, and December 31, 2023, these intangible assets had a net book value of $4.8 million and $4.9 million, respectively, and are included in "Other assets, net" on the Condensed Consolidated Balance Sheets.
    
Note 10FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS OF POSSIBLE FUTURE
PUBLIC DEBT
Intrepid Potash, Inc., as the parent company, has no independent assets or operations, and operations are conducted solely through its subsidiaries. Cash generated from operations is held at the parent-company level as cash on hand and cash equivalents and totaled $34.1 million and $4.1 million at March 31, 2024, and December 31, 2023, respectively. If one or more of our wholly-owned operating subsidiaries guarantee public debt securities in the future, those guarantees will be full and unconditional and will constitute the joint and several obligations of the subsidiary guarantors. The assets and liabilities of our other subsidiaries are immaterial. There are no restrictions on our ability to obtain cash dividends or other distributions of funds from the subsidiary guarantors, except those imposed by applicable law.

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Note 11ASSET RETIREMENT OBLIGATION
We recognize an estimated liability for future costs associated with the abandonment and reclamation of our mining properties. A liability for the fair value of an asset retirement obligation and a corresponding increase to the carrying value of the related long-lived asset are recorded as the mining operations occur or the assets are acquired.
Our asset retirement obligation is based on the estimated cost to close and reclaim the mining operations, the economic life of the properties, and federal and state regulatory requirements. The liability is discounted using credit adjusted risk-free rate estimates at the time the liability is incurred or when there are upward revisions to estimated costs. The credit adjusted risk-free rates used to discount our reclamation liabilities range from 6.9% to 12.0%. Revisions to the liability occur due to construction of new or expanded facilities, changes in estimated closure costs or economic lives, or to reflect new federal or state rules, regulations, or requirements regarding the closure or reclamation of mines.
Following is a table of the changes to our asset retirement obligation for the following periods (in thousands):
Three Months Ended March 31,
20242023
Asset retirement obligation, at beginning of period$30,359 $26,864 
Liabilities settled  
Liabilities incurred  
Accretion of discount622 535 
Total asset retirement obligation, at end of period$30,981 $27,399 
Less current portion of asset retirement obligation$(282)$(300)
Long-term portion of asset retirement obligation$30,699 $27,099 
    
The current portion of the asset retirement obligation is included in "Other current liabilities" on the Condensed Consolidated Balance Sheet as of March 31, 2024.
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Note 12REVENUE
    Revenue RecognitionWe account for revenue in accordance with ASC 606. Under ASC 606, we recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration we expect in exchange for those goods or services. The timing of revenue recognition, billings, and cash collection may result in contract assets or contract liabilities.

Contract Balances: As of March 31, 2024, and December 31, 2023, we had a total of $2.6 million and $2.3 million of contract liabilities, respectively, of which $1.4 million and $1.0 million were current as of March 31, 2024, and December 31, 2023, respectively, and included in "Other current liabilities" on the Condensed Consolidated Balance Sheets. Customer advances received before we have satisfied our performance obligations are accounted for as a contract liability (sometimes referred to in practice as deferred revenue).
Our deferred revenue activity for the three months ended March 31, 2024, and 2023 is shown below (in thousands):
Three Months Ended March 31,
20242023
Beginning balance$2,303 $2,374 
Additions592 145 
Recognized as revenue during period(328)(245)
Ending Balance$2,567 $2,274 

Disaggregation of Revenue: The tables below show the disaggregation of revenue by product and reconciles disaggregated revenue to segment revenue for the three months ended March 31, 2024, and 2023. We believe the disaggregation of revenue by products best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic conditions (in thousands):
Three Months Ended March 31, 2024
ProductPotash Segment
Trio® Segment
Oilfield Solutions SegmentIntersegment EliminationsTotal
Potash$32,412 $ $ $(100)$32,312 
Trio®
 36,284   36,284 
Water  2,169  2,169 
Salt3,144 203   3,347 
Magnesium Chloride419    419 
Brine Water1,583  1,127  2,710 
Other18  2,028  2,046 
Total Revenue$37,576 $36,487 $5,324 $(100)$79,287 
Three Months Ended March 31, 2023
ProductPotash Segment
Trio® Segment
Oilfield Solutions SegmentIntersegment EliminationsTotal
Potash$47,155 $ $ $(101)$47,054 
Trio®
 29,053   29,053 
Water80 1,048 1,619  2,747 
Salt3,043 173   3,216 
Magnesium Chloride1,137    1,137 
Brine Water1,082  822  1,904 
Other  1,809  1,809 
Total Revenue$52,497 $30,274 $4,250 $(101)$86,920 

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Note 13COMPENSATION PLANS
Equity Incentive Compensation Plan—Our Board of Directors and stockholders adopted a long-term incentive compensation plan called the Intrepid Potash, Inc. Amended and Restated Equity Incentive Plan (the "Plan"). The Plan was most recently amended and restated in May 2022. We have issued common stock, restricted stock, performance units, and non-qualified stock option awards under the Plan. At March 31, 2024, approximately 0.9 million shares remained available for issuance under the Plan.
    In March 2024, the Compensation Committee granted an aggregate of 143,730 shares of restricted stock to executive officers and other key employees. These awards vest over three years, and in some cases, contain a market condition. In March 2023, the Compensation Committee granted an aggregate of 225,117 restricted shares to executive officers and other key employees. These awards vest over three years, and in some cases, contain a market condition.
As of March 31, 2024, the following awards were outstanding under the Plan (in thousands):
Outstanding as of
March 31, 2024
Restricted Shares377 
Non-qualified Stock Options273 

    Total share-based compensation expense was $1.3 million and $1.7 million for the three months ended March 31, 2024, and 2023, respectively. As of March 31, 2024, we had $6.8 million of total remaining unrecognized compensation expense related to awards that is expected to be recognized over a weighted-average period of 1.5 years.

Note 14INCOME TAXES
Our anticipated annual tax rate is impacted primarily by the amount of taxable income associated with each jurisdiction in which our income is subject to income tax, permanent differences between the financial statement carrying amounts and tax bases of assets and liabilities, and the benefit associated with the estimated effect of the percentage depletion deduction.
A summary of our provision for income taxes is as follows (in thousands):
Three Months Ended March 31,
20242023
Current portion of income tax expense$14 $126 
Deferred portion of income tax (benefit) expense(789)1,661 
Total income tax (benefit) expense$(775)$1,787 

    Our effective tax rate for the three months ended March 31, 2024 was 19.8%. Our effective tax rate differed from the statutory rate during this period primarily from the permanent difference between book and tax income for the first three months of 2024 for the deduction for stock compensation. Our effective tax rate for the three months ended March 31, 2023 was 28.4% which differed from the statutory rate primarily from the estimated permanent difference between book and tax income for the officers' compensation deduction.

Note 15COMMITMENTS AND CONTINGENCIES
Reclamation Deposits and Surety Bonds—As of March 31, 2024, and December 31, 2023, we had $26.9 million and $26.8 million, respectively, of security placed principally with the State of Utah and the Bureau of Land Management ("BLM") for eventual reclamation of our various facilities. As of March 31, 2024, $0.5 million consisted of long-term restricted cash deposits and $26.4 million was secured by surety bonds issued by an insurer. As of December 31, 2023, $0.5 million consisted of long-term restricted cash deposits and $26.3 million was secured by surety bonds issued by an insurer. The restricted cash deposits are included in "Other assets, net" on the condensed consolidated balance sheets and the surety bonds are held in place by an annual fee paid to the issuer.
15

We may be required to post additional security to fund future reclamation obligations as reclamation plans are updated or as statutory and regulatory requirements change.
    Legal—We are subject to claims and legal actions in the ordinary course of business. We expense legal costs as they are incurred. While there are uncertainties in predicting the outcome of any claim or legal action, except as noted below, we believe the ultimate resolution of these claims or actions is not reasonably likely to have a material adverse effect on our financial condition, results of operations, or cash flows.
Water Rights and Other Legal Contingencies
On March 17, 2022, following an expedited inter se proceeding, a court entered a subfile order and partial final judgment and decree ("Order") determining the validity of our claim to 20,000 acre feet of Pecos River surface water rights. The Order found that our predecessors in interest had forfeited all but approximately 5,800 acre feet of water per year, and that of the remaining 5,800 acre feet of water that had not been forfeited, all but 150 acre feet of water had been abandoned prior to 2017. The Order limited our right to 150 acre fee per annum of water for industrial-salt processing use. We appealed the Order to the New Mexico Court of Appeals ("NMCA"), which, on July 7, 2023, affirmed the Order. On November 17, 2023, we filed a request for the New Mexico Supreme Court ("NMSC") to reconsider and review the NMCA's decision to affirm the Order's abandonment determination. The NMSC agreed to review the NMCA's abandonment determination on February 7, 2024, where it is still currently being briefed for the court's determination.
    In 2017 and 2018 the New Mexico Office of the State Engineer ("OSE") granted us preliminary and emergency authorizations to sell approximately 5,700 acre-feet of water per year from our Pecos River Water rights. The preliminary and emergency authorizations allowed for water sales to begin immediately, subject to repayment if the underlying water rights were ultimately found to be invalid. If the New Mexico Court of Appeals' decision is ultimately affirmed, we may have to repay for the water we sold under the preliminary and emergency authorizations. Repayment of this water can be up to two times the amount of water removed from the river. Repayment is customarily made in-kind over a period of time but can take other forms including cash repayment. If we are not able to repay in-kind due to the lack of remaining water rights or logistical constraints, we may need to purchase water to meet this repayment or be subject to a cash repayment. We cannot reasonably estimate the potential volume, timing, or form of repayment, if any, and have not recorded a loss contingency in our Condensed Consolidated Statement of Operations related to this legal matter.
    We have estimated contingent liabilities recorded in "Other current liabilities" on the condensed consolidated balance sheets of $2.5 million as of March 31, 2024, mainly related to the potential underpayment of royalties from 2012 to 2016. As of December 31, 2023, we had $3.4 million in contingent liabilities mainly related to the potential underpayment of royalties from 2012 to 2016 and potential royalties on water revenues in 2019 to 2022. During the three months ended March 31, 2024, we paid $1.9 million to the New Mexico State Land Office to resolve the matter related to potential royalties on water revenues from 2019 to 2022.


Note 16FAIR VALUE
    We measure our financial assets and liabilities in accordance with ASC Topic 820, Fair Value Measurements and Disclosures. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation at the measurement date:
Level 1 - Quoted market prices in active markets for identical assets or liabilities.
Level 2 - Inputs, other than Level 1, that are either directly or indirectly observable.
Level 3 - Unobservable inputs developed using estimates and assumptions which reflect those that market participants would use.
The classification of fair value measurement within the hierarchy is based upon the lowest level of input that is significant to the measurement.
     Other financial instruments consist primarily of cash equivalents, accounts receivable, refundable income taxes, investment securities, accounts payable, accrued liabilities, and, if any, advances under our credit facility. With the exception of investment securities, we believe cost approximates fair value for our financial instruments because of the short-term nature of these instruments.
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Cash Equivalents—As of March 31, 2024, we had no cash equivalents. As of December 31, 2023, we had cash equivalents of $0.5 million.
Held-to-Maturity Investments—As of March 31, 2024, and December 31, 2023, we owned debt investment securities classified as held-to-maturity because we have the intent and ability to hold these investments to maturity. Our held-to-maturity debt investment securities consist of investment grade corporate bonds and U.S. government issued bonds. These debt securities are carried at amortized cost and consist of the following (amounts in thousands):
As of March 31, 2024
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term
Corporate bonds$994 $ $(6)$988 
Government bonds1,977  (13)1,964 
Total$2,971 $ $(19)$2,952 
Long-term
Corporate bonds$ $ $ $ 
Government bonds475  (2)473 
Total$475 $ $(2)$473 
As of December 31, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term
Corporate bonds$991 $ $(9)$982 
Government bonds1,979  (13)1,966 
Total$2,970 $ $(22)$2,948 
Long-term
Corporate bonds$ $ $ $ 
Government bonds954 1 (4)951 
Total$954 $1 $(4)$951 
Our long-term held to maturity investments are recorded in "Long-term investments" on the Condensed Consolidated Balance Sheets. As of March 31, 2024 and December 31, 2023, we had $3.4 million and $3.9 million in held-to-maturity debt investment securities, respectively. As of March 31, 2024, our long-term held-to-maturity investments mature in less than 2 years.
Equity Investments without a Readily Determinable Fair Value—In May 2020, we acquired a non-controlling equity investment in W.D. Von Gonten Laboratories ("WDVGL") for $3.5 million. We account for this investment as an equity investment without a readily determinable fair value and elected to measure our investment, as permitted by GAAP, at cost plus or minus any adjustments for observable changes in prices resulting from orderly transactions for the identical or a similar investment of the same issuer or impairment. As of March 31, 2024, and December 31, 2023, we had not recorded any adjustments to the carrying value of this investment since the purchase in May 2020. We include this investment in "Long-term investments" on the Condensed Consolidated Balance Sheets.
In July 2022, WDVGL entered into a purchase agreement with another company (“Acquiror”), a foreign issuer whose shares are traded on the Nasdaq Capital Market (“Nasdaq”). Under the terms of the purchase agreement, WDVGL would be combined with the consulting business owned by W.D. Von Gonten (“Consulting”) to form a new entity, W.D. Von Gonten Engineering, LLC (“Engineering”), and Acquiror would then purchase Engineering in a majority stock transaction at an agreed upon selling price. Stock received from the sale of Engineering would be distributed to investors in WDVGL and Consulting.
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Acquiror delivered equity shares and a nominal amount of cash to WDVGL for purchase of Engineering in July 2022, with the number of shares equal to the selling price divided by an assumed $10 share price. At the time the purchase agreement was signed, the Acquiror was working to file restated financial statements for the fiscal years ending December 31, 2018, 2019 and 2020. On April 27, 2023, Acquiror disclosed it had not been able to file its Annual Report on Form 20-F for the fiscal year ended December 31, 2021 with the SEC by April 25, 2023, which was the deadline set by the Nasdaq Hearings Panel in connection with a delisting proceeding, and Acquiror's shares were subsequently delisted from Nasdaq. Acquiror also disclosed on April 27, 2023 that it has shifted its focus to filing audited financial statements with the SEC for the fiscal years ended December 31, 2020, 2021 and 2022 to regain compliance with Nasdaq listing standards before the end of 2023.
Pursuant to the purchase agreement with Engineering, if the Acquiror did not file current financial statements with the SEC by June 30, 2023, Engineering had the option to terminate the purchase agreement, beginning on July 1, 2023. Although Acquiror did not file current financial statements by June 30, 2023, Engineering agreed to proceed with the purchase agreement to allow Acquiror additional time to file updated financial statements.
On December 29, 2023, Acquiror disclosed it had filed its audited financial statements for the years ended December 31, 2022, 2021, and 2020, with the SEC.
We have not impaired our investment in WDVGL because our share of the estimated selling price exceeds the carrying value of our investment in WDVGL.

Equity Method Investments—We are a limited partner with a 16% interest in PEP Ovation, LP ("Ovation") as of March 31, 2024, and December 31, 2023. This investment is accounted for under the equity method whereby we recognize our proportional share of the income or loss from our investment in Ovation on a one-quarter lag. This investment is included in "Long-term investments" on the Condensed Consolidated Balance Sheets. For the three months ended March 31, 2024, and March 31, 2023, our proportional share of Ovation's net income was $0.1 million and $0.8 million, respectively.
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Note 17BUSINESS SEGMENTS
    Our operations are organized into three segments: potash, Trio® and oilfield solutions. We determine reportable segments based on several factors including the types of products and services sold, production processes, markets served and the financial information available for our CODM. We evaluate performance based on the gross margins of the respective business segments and do not allocate corporate selling and administrative expenses, among others, to the respective segments.
Intersegment sales prices are market-based and are eliminated in the "Other" column. Information for each segment is provided in the tables that follow (in thousands).

Three Months Ended
March 31, 2024
Potash
Trio®
Oilfield SolutionsOtherConsolidated
Sales$37,576 $36,487 $5,324 $(100)$79,287 
Less: Freight costs3,956 8,974  (100)12,830 
         Warehousing and handling
         costs
1,727 1,362   3,089 
         Cost of goods sold25,816 27,291 3,324  56,431 
         Lower of cost or net
         realizable value inventory
         adjustments
503    503 
Gross Margin (Deficit)$5,574 $(1,140)$2,000 $ $6,434 
Depreciation, depletion, and amortization incurred1
$6,971 $884 $1,071 $458 $9,384 
Three Months Ended
March 31, 2023
Potash
Trio®
Oilfield SolutionsOtherConsolidated
Sales$52,497 $30,274 $4,250 $(101)$86,920 
Less: Freight costs5,005 6,686  (101)11,590 
         Warehousing and handling
         costs
1,480 1,253   2,733 
         Cost of goods sold31,584 20,883 3,778  56,245 
Gross Margin$14,428 $1,452 $472 $ $16,352 
Depreciation, depletion, and amortization incurred1
$7,051 $1,206 $907 $208 $9,372 
1 Depreciation, depletion, and amortization incurred for potash and Trio® excludes depreciation, depletion and amortization amounts absorbed in or relieved from inventory.

The following table shows the reconciliation of reportable segment sales to consolidated sales and the reconciliation of segment gross margins to consolidated income before taxes (in thousands):
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Three Months Ended March 31,
20242023
Total sales for reportable segments$79,387 $87,021 
Elimination of intersegment sales(100)(101)
Total consolidated sales$79,287 $86,920 
Total gross margin for reportable segments$6,434 $16,352 
Elimination of intersegment sales(100)(101)
Elimination of intersegment expenses100 101 
Unallocated amounts:
Selling and administrative8,357 8,858 
Impairment of long-lived assets1,377  
Loss on disposal of assets251 200 
Accretion of asset retirement obligation622 535 
Other operating income (1,132) 
Other operating expense1,265 1,385 
Equity in earnings of unconsolidated entities(149)(821)
Interest income(244)(85)
Other non-operating income(8)(13)
(Loss) income before income taxes$(3,905)$6,293 
Total assets are not presented for each reportable segment as they are not reviewed by, nor otherwise regularly provided to, the CODM.
20

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, among other things, our future results of operations and financial position, our business strategy and plans, our expected capital investments and our objectives for future operations. 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 and legal proceedings related 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;
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 revolving credit facility, including the underlying covenants;
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;
our reliance on key personnel, including our ability to identify, recruit, and retain key personnel;
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;
global inflationary pressures and supply chain challenges;
the impact of global health issues, such as the COVID-19 pandemic, and other global disruptions on our business, operations, liquidity, financial condition and results of operations; 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, 2023.
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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 obligation 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."
22

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 U.S. 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. Until mid-2016, we also produced potash from our East and West mines in Carlsbad, New Mexico.
    We have permitted, licensed, declared, and partially adjudicated 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. In May 2019, we acquired certain land, water rights, grazing leases, and other related assets from Dinwiddie Cattle Company. We refer to these assets and operations as "Intrepid South." Due to the strategic location of Intrepid South, part of our long-term operating strategy is selling small parcels of land, including restricted use agreements of surface or subsurface rights to customers, where such sales provide a solution to customers' operations in the oil and gas industry.
    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. Intersegment sales prices are market based and are eliminated.




23

Significant Business Trends and Activities
    Our financial results have been, or are expected to be, impacted by several significant trends and activities, which are described 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. Our potash average net realized sales price per ton(1) decreased to $395 for the three months ended March 31, 2024, compared to $485 for the same period in 2023. Sales volume declined 17% in the first quarter of 2024 compared to the same period in 2023 as we had less inventory to sell because of lower production at our HB and Wendover facilities. In January 2024, a winter-fill agricultural potash program was announced decreasing the list price to $385 per ton in January 2024 during a ten-day order window, before the list price increased by $30 per ton. We saw a good response to the program and captured a portion of the price increase as customers placed additional orders towards the end of the first quarter.
As a small producer, domestic 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, currency fluctuations, and crop commodity values and outlook, also influence pricing. Our price expectations could be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases and the price and availability of other potassium products.
    We experience seasonality in potash demand, with more purchases historically occurring in February through May and September through November when purchasers are looking to have product on hand for the spring and fall application seasons in the U.S. Various factors affect 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.
Trio® pricing and demand. Our Trio® average net realized sales price per ton(1) decreased to $300 for the three months ended March 31, 2024, compared to $344 in 2023. Sales volumes increased 40% in the first quarter of 2024 compared to the same period in 2023 as stable potash price levels and improving sulfate values led to strong demand from historical customers. In response to the strong demand during the first quarter, we increased our Trio® pricing $25 per ton and expect to capture the majority of that increase in the second quarter.
    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.
Water sales. In the first quarter of 2024, total water sales were $2.2 million compared to $2.7 million during the same period of 2023. Water sales decreased compared to the prior year due to less water sold from our Caprock water rights.
    See Note 14 of our unaudited condensed consolidated financial statements included in "Item 1. Condensed Consolidated Financial Statements (Unaudited)" of this Quarterly Report on Form 10-Q regarding legal proceedings related to our water rights.
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 $5.4 million during the first quarter of 2024, compared to $6.6 million for the same period of 2023 as increased brine sales were offset by decreased sales of magnesium chloride and water.
Strategic Focus on our Solar Solution Mining Facilities. Key current and future projects include:

We substantially completed the replacement extraction well at our HB Solar Solution Mine, IP30B, in April 2024 and expect the well will be commissioned in the second quarter of 2024. This new extraction well is designed to have a long-term operational life and will initially target approximately 330 million gallons of high-grade brine from the Eddy Cavern at HB, with this additional brine being at lower depths than the Eddy Shaft project can access.
Phase Two of the HB Injection Pipeline Project is the installation of an in-line pigging system to clean the pipeline and remove scaling to help ensure more consistent flow rates. We have received all permits and started construction in April 2024 with commissioning expected in the third quarter of 2024. Upon Phase Two commissioning, we expect our brine injection rates to be the highest in company history, which is key for maximizing brine availability and residence time.
We continue to progress on a new primary pond in Wendover to increase the brine evaporative area, which will result in two primary ponds when complete. Similar to our caverns at Moab and HB, the primary ponds at Wendover
24

serve as the brine storage area, and adding another primary pond will help us meet our goals of maximizing brine availability, increasing brine grade, and improving production. We expect this project to be commissioned in the second quarter of 2024.

Diversification of products and services. In addition to the products discussed above, Intrepid generates revenue from right-of-way agreements, surface damages and easements, caliche sales, a produced water royalty, and sales of cattle.
We continue to progress on a sand mine opportunity at Intrepid South and have received all necessary permits to begin construction and full operation. We are currently evaluating the market and our options, including the potential to add a strategic partner.
(1) Average 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."
25

Consolidated Results
(in thousands, except per ton amounts)Three Months Ended March 31,
20242023
Sales1
$79,287 $86,920 
Cost of goods sold$56,431 $56,245 
Gross Margin $6,434 $16,352 
Selling and administrative$8,357 $8,858 
Net (Loss) Income$(3,130)$4,506 
   Average net realized sales price per ton2
Potash$395 $485 
   Trio®
$300 $344 
1Sales include sales of byproducts which were $5.4 million and $6.6 million for the three months ended March 31, 2024, and 2023, 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 March 31, 2024, and 2023
Sales
Our total sales for the first quarter of 2024 decreased $7.6 million, or 9%, compared to the first quarter of 2023, as potash segment sales decreased $14.9 million, or 28%, partially offset by a $6.2 million, or 21%, increase in Trio® segment sales and a $1.1 million, or 25%, increase in oilfield solutions segment sales.
Our total potash segment sales decreased $14.9 million for the first quarter of 2024 compared to the first quarter of 2023, as potash sales decreased $14.7 million and potash segment byproduct revenues decreased $0.2 million. Our average net realized sales price per potash ton decreased 19%, and we sold 17% fewer tons. We saw good potash demand during the first quarter of 2024 as farmers look to maximize crop yields to capitalize on continued supportive crop commodity prices. However, potash tons sold decreased compared to the prior year because we had fewer tons of potash available to sell due to decreased potash production from our HB and Wendover facilities.
Our Trio® segment sales increased $6.2 million in the first quarter of 2024, compared to the first quarter of 2023, as Trio® sales increased $7.2 million, or 25%, partially offset by a $1.0 million decrease in Trio® segment byproduct water sales. We sold 40% more tons of Trio® in the first quarter of 2024, compared to the first quarter of 2023, partially offset by a 13% decrease in our Trio® average net realized sales price per ton. Our Trio® tons sold increased during the first quarter of 2024, compared to the first quarter of 2023, as we sold more Trio® tons domestically and internationally. We sold less Trio® segment byproduct water as we increased the volume of water used for injection at our HB plant and had fewer overall sales of water from our Caprock water rights.
Our oilfield solutions segment sales, which includes sales of water, brine water, and surface use agreements and easements, increased $1.1 million, or 25%, in the first quarter of 2024, compared to the first quarter of 2023, mainly driven by a $0.6 million increase in water sales, a $0.3 million increase in brine water sales, and a $0.2 million increase in other products and services. Continued robust oil and gas activity near Intrepid South has driven strong demand for products and services offered through our oilfield solutions segment.
Our total byproduct sales, which are recorded in either our potash segment or Trio® segment, decreased $1.2 million in the first quarter of 2024, compared to the first quarter of 2023, due to a decrease in byproduct water sales. We did not sell any byproduct water as we increased the volume of water used for injection at our HB plant and had fewer overall sales of water from our Caprock water rights.
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Cost of Goods Sold
Our total cost of goods sold increased $0.2 million during the first quarter of 2024, compared to the first quarter of 2023. Our Trio® cost of goods sold increased $6.4 million, partially offset by a decrease of $5.8 million in our potash cost of goods sold and a $0.5 million decrease in our oilfield solutions cost of goods sold.
Our potash segment cost of goods sold decreased $5.8 million, or 18%, mainly due to selling 17% fewer tons in the first quarter of 2024, compared to the first quarter of 2023. In addition, our beginning 2024 weighted average carrying cost per ton was reduced by the lower of cost or net realizable value inventory adjustment that was recorded during the fourth quarter of 2023.
Our Trio® segment cost of goods sold increased $6.4 million, or 31%, during the first quarter of 2024, compared to the first quarter of 2023, mainly due to selling 40% more tons of Trio®. Our cost of goods sold was positively impacted by decreases in certain production costs, such as production labor and benefits expense, as we stopped operating an additional underground shift in early 2024 at our East facility and restarted our fine langbeinite recovery process in March 2024. In addition, the beginning 2024 weighted average carrying cost per ton of our finished goods was reduced by the lower of cost or net realizable value inventory adjustment recorded in the fourth quarter of 2023. Finally, we produced more tons of Trio® in the first quarter of 2024, compared to the first quarter of 2023, which lowered our per ton production costs. A significant portion of our production costs are fixed and an increase in tons produced decreases our per ton production costs.
Our oilfield solutions cost of goods sold decreased $0.5 million, or 12%, during the first quarter of 2024, compared to the first quarter of 2023, mainly due to a decrease in contract labor expenses.
Lower of Cost or Net Realizable Value Inventory Adjustments
In the first quarter of 2024, we incurred $0.5 million of lower of cost or net realizable value inventory adjustments in our potash segment, as our weighted average carrying costs for certain potash products exceeded our expected selling price for those products. We did not incur any lower of cost or net realizable value inventory adjustments in the first quarter of 2023.
Gross Margin
During the first quarter of 2024, we generated gross margin of $6.4 million compared to gross margin of $16.4 million during the first quarter of 2023. As discussed above, our gross margin decreased due to the lower average net realized sales price per ton for potash and Trio® products. In addition, we sold fewer tons of potash in the first quarter of 2024, compared to the first quarter of 2023.
Selling and Administrative Expense
    During the first quarter of 2024, selling and administrative expenses decreased 6% compared to the first quarter of 2023, mainly due to a decrease in share-based compensation expense.
Income Tax Expense
    During the first quarter of 2024, we incurred income tax benefit of $0.8 million, compared to income tax expense of $1.8 million during the first quarter of 2023, as we incurred a net loss during the first quarter of 2024, compared to net income in the first quarter of 2023.
Net Income
    We generated a net loss of $3.1 million during the first quarter of 2024, compared to net income of $4.5 million for the first quarter of 2023, due to the factors discussed above.


27

Potash Segment
Three Months Ended March 31,
(in thousands, except per ton amounts)20242023
Sales1
$37,576 $52,497 
Less: Freight costs3,956 5,005 
         Warehousing and handling
         costs
1,727 1,480 
         Cost of goods sold25,816 31,584 
         Lower of cost or net
         realizable value inventory
         adjustments
503 — 
Gross Margin$5,574 $14,428 
Depreciation, depletion, and amortization incurred2
$6,971 $7,051 
Potash sales volumes (in tons)74 89 
Potash production volumes (in tons)87 90 
Average potash net realized sales price per ton3
$395 $485 
1 Sales include sales of byproducts which were $5.2 million and $5.3 million for the three months ended March 31, 2024, and 2023, respectively.
2 Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization amounts absorbed in or (relieved from) inventory.
3Average net realized 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 March 31, 2024, and 2023
Our total sales in the potash segment decreased $14.9 million in the first quarter of 2024, compared to the first quarter of 2023, as potash sales recorded in the potash segment decreased $14.7 million, or 31%, and potash segment byproduct sales decreased $0.2 million. Our potash sales decreased in the first quarter of 2024, compared to the first quarter of 2023, as our average net realized sales price per ton decreased 19%, and we sold 17% fewer tons. We sold fewer tons of potash in the first quarter of 2024, compared to the first quarter of 2023, as we had fewer tons of potash to sell due to lower potash production from our HB and Wendover facilities. Byproduct sales were similar to the prior year period as a $0.7 million decrease in magnesium chloride sales was mostly offset by a $0.5 million increase in brine sales. Magnesium chloride sales declined due to mild winter weather which decreased demand for our de-icing product. Brine sales increased as we sold more barrels at a higher average price compared to the prior year due to continued oilfield activity near our mines.
Potash segment freight expense decreased 21% in the first quarter of 2024, compared to the first quarter of 2023, as we sold 17% fewer tons of potash. Our potash freight expense is further 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 18% in the first quarter of 2024, compared to the first quarter of 2023, as we sold 17% fewer tons of potash. In addition, our beginning 2024 weighted average carrying cost per ton was reduced by the lower of cost or net realizable value inventory adjustment that was recorded during the fourth quarter of 2023.
During the first quarter of 2024, we recorded lower of cost or net realizable value inventory adjustments of $0.5 million as our weighted average carrying cost per ton for certain inventoried potash products was higher than our expected selling price per ton for those products. We did not record any lower of cost or net realized value inventory adjustments in the first quarter of 2023.
Our potash segment gross margin decreased $8.9 million in the first quarter of 2024, compared to the first quarter of 2023, due to the factors discussed above.
28

Additional Information Relating to Potash
The table below shows our potash sales mix for the three months ended March 31, 2024, and 2023:
Three Months Ended March 31,
20242023
Agricultural79%82%
Industrial3%2%
Feed18%16%
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Trio® Segment
Three Months Ended March 31,
(in thousands, except per ton amounts)20242023
Sales1
$36,487 $30,274 
Less: Freight costs8,974 6,686 
         Warehousing and handling
         costs
1,362 1,253 
         Cost of goods sold27,291 20,883 
Gross (Deficit) Margin$(1,140)$1,452 
Depreciation, depletion, and amortization incurred2
$884 $1,206 
Sales volumes (in tons)91 65 
Production volumes (in tons)54 49 
Average Trio® net realized sales price per ton3
$300 $344 
1 Sales include sales of byproducts which were $0.2 million and $1.2 million for the three months ended March 31, 2024, and 2023, respectively.
2 Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization amounts absorbed in or (relieved from) inventory.
3Average net realized 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 March 31, 2024, and 2023
Trio® segment sales increased 21% during the first quarter of 2024, compared to the first quarter of 2023. Trio® sales increased $7.2 million, partially offset by a decrease of $1.0 million in our Trio® segment byproduct sales. Trio® sales increased primarily due to a 40% increase in Trio® tons sold, partially offset by a 13% decrease in our average net realized sales price per ton. Sales volumes increased during the first quarter of 2024, compared to the first quarter of 2023 as customers saw good value for Trio® relative to current crop prices. Similar to potash prices discussed above, our Trio® average net realized sales price per ton has decreased since the peak prices realized during the second quarter of 2022, as potassium fertilizer supplies improved.
Our Trio® segment byproduct sales decreased $1.0 million in the first quarter of 2024, compared to the first quarter of 2023, due to a decrease in Trio® segment byproduct water sales. We sold less byproduct water as we increased the volume of water used for injection at our HB plant and had fewer overall sales of water from our Caprock water rights. Generally, we source our water sales closer to the location where the customer needs the water to minimize water transfer costs.
Trio® freight costs increased 34%, as we sold 40% more Trio® tons in the first quarter of 2024, compared to the first quarter of 2023. Our Trio® 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 31% in the first quarter of 2024, compared to the first quarter of 2023, mainly due to selling 40% more tons of Trio®. Our cost of goods sold was positively impacted by decreases in certain production costs, such as production labor and benefits expense, as we moved to a reduced operating schedule at our East facility and restarted our fine langbeinite recovery process in March 2024. In addition, the beginning 2024 weighted average carrying cost per ton of our finished goods was reduced by the lower of cost or net realizable value inventory adjustment recorded in the fourth quarter of 2023. Finally, we produced more tons of Trio® in the first quarter of 2024, compared to the first quarter of 2023, which lowered our per ton production costs. A significant portion of our production costs is fixed and an increase in tons produced decreases our per ton production costs.
Our Trio® segment experienced a gross deficit of $1.1 million in the first quarter of 2024, compared to gross margin of $1.5 million in the first quarter of 2023, mainly due to the decrease in average net realized sales price per Trio® ton.
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During the year ended December 31, 2023, we recorded an impairment related to our Trio® segment assets because the estimated fair value of the assets exceeded the net book value of the assets. The fair value of the Trio® segment assets was primarily determined using the expected proceeds received in an orderly sale of the individual assets. For any new Trio® segment capital spending during the first quarter, we also estimated the fair value of those assets using the expected proceeds received in an orderly sale of those new assets and we recorded an additional impairment of $1.4 million in the first quarter of 2024. Although we have reduced capital spending at our East facility compared to prior years, we expect to incur additional capital expenditures in the future periods for our Trio® segment assets that we will likely have to impair.
Additional Information Relating to Trio®
    The table below shows the percentage of Trio® tons sold into the domestic and export markets during the three months ended March 31, 2024, and 2023.
United StatesExport
For the Three Months Ended March 31, 202489%11%
For the Three Months Ended March 31, 202390%10%

Oilfield Solutions Segment
    
Three Months Ended March 31,
(in thousands)20242023
Sales$5,324 $4,250 
         Cost of goods sold3,324 3,778 
Gross Margin$2,000 $472 
Depreciation, depletion, and amortization incurred$1,071 $907 

Three Months Ended March 31, 2024, and 2023
    Our oilfield solutions segment sales increased $1.1 million in the first quarter of 2024, compared to the first quarter of 2023, due to a $0.6 million increase in water sales, a $0.3 million increase in brine water sales, and a $0.2 million increase in other oilfield solution products and services. Our water sales increased compared to the prior year period due to increased sales of water on our South ranch. Our brine water sales and sales of other oilfield solutions segments products and services increased due to continued strong demand from oil and gas operators in the Permian Basin near Intrepid South.
    Our cost of goods sold decreased $0.5 million, or 12%, in the first quarter of 2024, compared to the first quarter of 2023, due to using less contract labor. In the first quarter of 2023, we used contract labor to complete various projects at Intrepid South.
Gross margin for the first quarter of 2024 increased $1.5 million compared to the first quarter of 2023, due to the factors discussed above.
    
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 products 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. We incur freight costs 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
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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 products 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.
    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. Certain elements of our cost structure associated with contract labor, consumable operating supplies, reagents, and royalties are variable, but these variable elements make up a smaller component of our total cost structure. Our costs often vary from period to period based on the fluctuation of inventory, sales, and production levels at our facilities.