What changed in this filing

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Item 1A. Risk Factors

2021-03-02 compared with 2020-03-03 · 74 added, 68 removed, 450 unchanged (24% of the section changed)

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Risks Related to Our Business

The outbreak of the novel coronavirus (“COVID-19”) has, and may continue to, disrupt our business, including, among other things, demand for our products, our personnel and production processes, each of which has and could continue to materially affect our operations, liquidity, financial condition and results of operations.

The COVID-19 pandemic has, and could continue to, negatively affect our operations, liquidity, financial condition and results of operations.

During 2020, measures designed to contain the spread of COVID-19 had a negative impact on the global economy.

Oil demand decreased and, as a result, we saw a significant decline in oil and gas activity near our Carlsbad, New Mexico operations.

We experienced a significant decrease in the sale of water and other oilfield related products and services, which negatively impacted our overall results.

The situation remains dynamic and subject to rapid and possibly material change, including, but not limited to, changes that may materially affect the demand for our products, our mining operations, and the operations of our customers and supply chain partners.

These changes could result in material negative effects on our business, results of operations, financial condition, liquidity position and ability to maintain compliance with our debt covenants.

While certain COVID-19 containment measures implemented by governmental authorities have been eased or lifted, we have not seen oil and gas activity return to pre-pandemic levels.

If expanded containment measures are deemed necessary to mitigate the public health effects of the COVID-19 pandemic, we may continue to experience reduced demand for water and other oilfield related products and services.

Our efforts to manage and mitigate the risks may be unsuccessful, and the effectiveness of these efforts depends on factors beyond our control, including the duration and severity of the pandemic, as well as third party actions taken to contain its spread and mitigate public health effects.

Our potash sales are subject to price and demand volatility resulting from periodic imbalances of supply and demand, which could negatively affect our results of operations.

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We are working to expand our sales of Trio ® , and our sales and results of operations could be negatively impacted if we are unsuccessful in our plans.

One of our strategies is to continue to expand our sales of Trio ® both domestically and internationally.

One of our strategies is to continue to expand our sales of Trio ® in domestic and select international markets.

Our expansion efforts may not be successful, which would temper any Trio ® sales growth.

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We continue to work to expand sales of water, especially to support oil and gas development in the Permian Basin near our New Mexico facilities.

In May 2019, we acquired certain land, water rights, and other related assets from Dinwiddie Cattle Company.

The land is comprised of fee, federal, and state acreage.

If there are changes in state or federal regulations regarding oil and gas production or water usage, this could materially impact our ability to monetize our water rights.

If there are changes in state or federal regulations regarding oil and gas production or

water usage, this could materially impact our ability to monetize our water rights.

Third parties regularly challenge our applications for permits to sell water under our water rights.

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Once protested, the OSE is required to hold a hearing to determine if the preliminary authorization was appropriate.

A significant portion our water sales are being made under preliminary authorizations issued by the OSE.

In February 2019, certain protestants filed an expedited inter se proceeding in New Mexico District Court as the adjudication court for the Pecos Stream System challenging the validity of our water rights relating to the Pecos River.

August 2019, the parties stipulated to the jurisdiction of the adjudication court.

To promote settlement, the adjudication court established a settlement schedule and ordered a trial date in August 2020 if the parties have not reached a settlement by that time.

In the adjudication proceeding, the court is expected to make a determination as to the size of our Pecos River water rights.

In addition, the Protestants are asking for unspecified monetary and injunctive relief, as well as attorneys' fees and costs, relating to our sale of water under these water rights and breach of contract claims.

The OSE has temporarily stayed the hearing process until the adjudication process is complete.

We continue to operate under the preliminary authorizations until the adjudication and hearing processes are complete.

A significant portion of our water sales are being made under preliminary authorizations issued by the OSE.

Please see Note 14 of the Notes to Consolidated Financial Statements for an update on challenges to our water rights.

We may face political and regulatory issues relating to the potential use of the maximum amount of our rights.

However, we believe that our legal position with respect to the validity of our water rights is solid and that we will be able to meet our water commitments.

A decline in oil and gas drilling or a reduction in the use of potash in drilling fluids could increase our operating costs and decrease our revenue.

A decline in oil and gas drilling or a reduction in the use of potash in drilling fluids could decrease our revenue.

A portion of our revenue comes from the sale of water and potassium chloride for use in oil and gas development.

A decline in oil and gas drilling, especially in the Permian Basin, could reduce our sales of water and potassium chloride.

For example, the decline in oil and gas drilling in 2020 due to restrictions implemented by local, state and federal authorities in response to the COVID-19 pandemic and the resulting impacts of these restrictions on the global economy as a whole, reduced our sales of water and potassium chloride into industrial markets.

In addition, oil and gas developers are regularly looking for ways to use more produced, or recycled, water instead of fresh water in oil and gas development.

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These alternative products could temporarily or permanently replace some of our sales of water or potassium chloride.

We also have other oilfield product and service offerings, such as trucking services and brine products, the sales of which could be negatively impacted if oil and gas development declined.

We also have other oilfield product and service offerings, such as caliche and brine products, the sales of which were negatively impacted by the decline in oil and gas development in 2020, and may be further impacted in the future by declines in oil and gas development.

We may alter or expand our operations or continue to pursue acquisitions, which could adversely affect our business if we are unable to manage any expansion or acquisition effectively.

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For example, in 2019 we purchased water and real property assets in southeastern New Mexico, which we refer to as Intrepid South, in an effort to expand our water sales and other revenue from the oil and gas industry.

We are also exploring ways to potentially monetize the known but small lithium resource in our Wendover ponds .

In addition, we may enter into new or complementary businesses that expand our product offerings beyond our existing assets.

For example, we may expand into oil and natural gas exploration and production or into new products or services in our current industry or other industries.

We may not be able to successfully implement any alteration or expansion initiatives.

In addition, we may enter into new or complementary businesses that expand our product offerings beyond our existing assets, which may include leveraging our existing oil and gas businesses in southeast New Mexico and expand into additional oil and gas midstream and upstream activities.

For instance, as part of this strategy, in May 2020, we acquired an 11% equity stake in the W.D.

Von Gonten Laboratories, a global industry leader in drilling and completion chemistry and a strong supporter of the use of potassium chloride in oil and gas drilling and completion activities.

We may also expand into new products or services in our current industry or other industries.

However, we may not ultimately be successful in implementing any alteration or expansion initiatives.

Further, we may not be able to fully realize any anticipated benefits of these initiatives.

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We may not realize the synergies that we expect to achieve.

Additionally, while we execute these acquisitions and related integration activities, our attention may be diverted from our ongoing operations, which could have a negative impact on our business.

Additionally, while we

execute these acquisitions and related integration activities, our attention may be diverted from our ongoing operations, which could have a negative impact on our business.

Any of these items could negatively impact our financial condition and results of operations.

See “- Our acquisition of Intrepid South may not achieve the intended results or anticipated cost and operational synergies, which could negatively impact us.

Our acquisition of Intrepid South may not achieve the intended results or anticipated cost and operational synergies, which could negatively impact us.

In 2019, we purchased water and real property assets from Dinwiddie Cattle Company in southeastern New Mexico in an effort to expand our water sales and other revenue from the oil and gas industry.

The success of the acquisition of Intrepid South will depend, in part, on our ability to realize anticipated cost and operational synergies.

However, the acquisition may not produce the expected benefits, or we may not realize the synergies that we expect to achieve.

Our success in realizing these cost synergies, and the timing of this realization, depends on our ability to expand our water sales and other revenue from the oil and gas industry.

Even if we are able to integrate the acquired assets and operations successfully, this integration may not result in the realization of the full benefits of the cost and operational synergies that we currently expect within the anticipated time frame, or at all.

Current and future indebtedness could adversely affect our financial condition and impair our ability to operate our business.

As of December 31, 2020, we had outstanding $15 million aggregate principal amount of senior notes.

We also have $19.8 million outstanding under a revolving credit facility that allows us to borrow up to $75 million, as of December 31, 2019.

We also have $29.8 million outstanding under a revolving credit facility that allows us to borrow up to $75 million, and $10 million borrowed under the CARES Act Paycheck Protection Program as of December 31, 2020.

We may incur additional indebtedness in the future.

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As such, an event of default could also result in our lenders foreclosing on some or all of our assets.

The credit facility expires in 2024 and the senior notes are due in 2020, 2023, and 2025.

The credit facility expires in 2024 and the senior notes are due in 2023.

In the future, we may be unable to obtain new financing or refinancing on acceptable terms.

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In July 2017, the United Kingdom's Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to phase out LIBOR by the end of 2021.

The Alternative Reference Rates Committee (“ARRC”) has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR.

On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the FCA, announced plans to consult on ceasing publication of LIBOR on December 31, 2021 for only the one week and two month LIBOR tenors, and on June 30, 2023 for all other LIBOR tenors.

While this announcement extends the transition period to June 2023, the United States Federal Reserve concurrently issued a statement advising banks to stop new LIBOR issuances by the end of 2021.

In light of these recent announcements, the

future of LIBOR at this time is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cease to exist.

Additionally, the Alternative Reference Rates Committee (“ARRC”) has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR.

ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR.

Whether or not SOFR attain market traction as a LIBOR replacement tool remains in question and the future of LIBOR at this time is uncertain.

The agreement governing our revolving credit facility is indexed to USD-LIBOR and we are monitoring this activity and evaluating the related risks.

In September 2019, the FASB proposed guidance that would help facilitate the market transition from existing reference rates to alternative rates.

However, at this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be enacted in the United Kingdom or elsewhere.

Uncertainty as to the nature of such potential changes, alternative reference rates or other reforms may adversely affect the trading market for LIBOR-based

securities, including certain of our debt that is indexed to USD-LIBOR.

At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be enacted in the United Kingdom or elsewhere.

Uncertainty as to the nature of such potential changes, alternative reference rates or other reforms may adversely affect the trading market for LIBOR-based securities, including certain of our debt that is indexed to USD-LIBOR.

Furthermore, we may need to renegotiate any debt agreements extending beyond 2021 that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established.

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If we are unable to accurately predict the timing of demand for our products due to variations in seasonality from year to year, our results of operations and working capital could be adversely affected.

Similarly, if we do not have adequate storage capacity to manage varying inventory needs, we may need to reduce production or lower the price at which we sell product, either of which would adversely affect our results of operations.

Similarly, if we do not have adequate storage capacity to manage varying inventory needs, we may

need to reduce production or lower the price at which we sell product, either of which would adversely affect our results of operations.

In mid-2016, we transitioned our East mine to Trio ® -only, resulting in an increased supply of Trio ® .

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Our failure to manage any of these risks successfully could harm our future international operations and our overall business.

If potash or Trio ® prices decline, we could be required to record write-downs of our long-lived assets, which could adversely affect our results of operations and financial condition.

If potash or Trio ® prices decline, or oil and gas activity declines, we could be required to record write-downs of our long-lived and indefinite-lived assets, which could adversely affect our results of operations and financial condition.

We evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable.

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An impairment loss is measured and recorded based on the discounted estimated future cash flows.

Although we believe the carrying values of our long-lived assets were realizable as of the balance sheet dates, future events could cause us to conclude otherwise.

These future events could include further significant and sustained declines in potash or Trio ® prices or higher production and operating costs.

We also have certain indefinite-lived intangible assets that we evaluate for impairment at least annually or more frequently when events or changes in circumstances indicate the fair value may have changed.

An impairment loss is measured and recorded based on the current fair value of the asset.

Although we believe the carrying values of our long-lived and indefinite-lived assets were realizable as of the balance sheet dates, future events could cause us to conclude otherwise.

These future events could include further significant and sustained declines in potash or Trio ® prices, further significant or sustained declines in water prices and demand, or higher production and operating costs.

Further, based on our analysis of the profitability of any of our facilities, we may decide to terminate or suspend operations at additional facilities.

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dollar, foreign suppliers may lower prices to increase sales volume while again maintaining a margin in their local currency.

Currently, the U.S.

dollar is still relatively strong in comparison to many foreign currencies, which has led to increased imports into the U.S.

These activities could cause our sales prices and results of operations to decrease or fluctuate significantly.

While the U.S.

dollar remains attractive to many foreign producers, the U.S.

dollar has weakened compared to the Canadian dollar since early 2020, a change which supports higher potash prices.

Future changes in the strength of the U.S.

dollar compared to other currencies could cause our sales prices and results of operations to decrease or fluctuate significantly.

Adverse conditions in the global economy and disruptions in the financial markets could negatively affect our results of operations and financial condition.

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At times, we may not be able to find or retain qualified workers.

In particular, the labor market around Carlsbad, New Mexico, is competitive and employee turnover is generally high.

In particular, the labor market around Carlsbad, New Mexico,

is competitive and employee turnover is generally high.

In that market, we compete for experienced workers with several other employers, including natural resource and hazardous waste facilities, oil and gas producers, and another producer of langbeinite.

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Any increase in fixed costs or decrease in production generally increases our per-ton costs and correspondingly decreases our per-ton operating margin.

Beginning in December 2016, we curtailed our Trio ® production to match expected demand and manage inventory levels.

We operate our East Plant at less than full capacity in order to curtail our Trio ® production to match expected demand and manage inventory levels.

A significant increase in costs at any of our facilities could have an adverse effect on our profitability and cash flows, particularly during periods of lower potash and Trio ® prices.

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It is possible that oil and gas drilling in this area could limit our ability to mine valuable potash and langbeinite reserves or mineralized deposits because of setbacks from oil and gas wells and the establishment of unminable buffer areas around oil or gas wells.

It is also possible that the BLM could determine that the size of these unminable buffer areas should be larger than they are currently, which could impact our ability to mine our reserves.

It is also possible that the BLM could determine that the size of these unminable buffer areas should be

larger than they are currently, which could impact our ability to mine our reserves.

We review applications for permits to drill oil and gas wells as they are publicly disclosed by the BLM and the State of New Mexico.

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In addition, the federal government must consider and study a project's likely environmental impacts.

Based on the federal government's conclusion, it

could require an environmental assessment or an environmental impact statement as a condition of approving a project or permit, which could result in significant time delays and costs.

Based on the federal government's conclusion, it could require an environmental assessment or an environmental impact statement as a condition of approving a project or permit, which could result in significant time delays and costs.

Furthermore, many of our operations take place on land that is leased from federal and state governmental authorities.

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Reporting of royalties is subject to periodic audits by federal and state officials.

The Office of Natural Resources Revenue ("ONRR") completed their draft audit report of our New Mexico royalty reporting in September 2019 and we are in the process of responding to their initial report.

The Office of Natural Resources Revenue ("ONRR") completed their draft audit report of our New Mexico royalty reporting in September 2019.

As of January 2021, we are still in discussions with the ONRR regarding their draft audit report and our responses.

We have less product diversification than nearly all of our competitors, which could have an adverse effect on our financial condition and results of operations.

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Similarly, lower‑than‑average temperatures or higher-than-average seasonal rainfall would reduce evaporation rates and therefore impact production.

If we experience heavy rainfall or low evaporation rates at any of our solar solution mines, we would have less potash available for sale, and our sales and results of operations would be adversely affected.

We experienced significant rainfall in the summer of 2019 at our Wendover facility which reduced the product available for sale in 2020.

If we experience heavy rainfall or low evaporation rates at any of our solar solution mines, we would

have less potash available for sale, and our sales and results of operations would be adversely affected.

Reduced potash available for sale could also affect our ability to produce and sell byproducts such as salt and magnesium chloride.

Physical effects of climate change, and climate change legislation, could have a negative effect on us and our customers, and, in turn, our results of operations.

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Furthermore, weather conditions have historically caused volatility in the agricultural industry and, as a result, in our results of operations, by causing crop failures or significantly reduced harvests, which can adversely affect application rates, demand for our products and our customers’ creditworthiness.

planting season, which could result in lower demand for our products and negatively impact the prices of our products.

Weather conditions can also lead to drought or wild fires, which could adversely impact growers’ crop yields and the uptake of our products, which would reduce the need for application of our products for the following planting season, which could result in lower demand for our products and negatively impact the prices of our products.

Finally, salt and magnesium chloride sales into the deicing market and our ability to utilize certain water rights for sale into oil and gas markets may be adversely affected by weather conditions in our markets.

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Depending on the particular program, we and our customers could be required to control GHG emissions or to purchase and surrender allowances for GHG emissions resulting from our operations.

Independent of Congress, the environmental protection agency has adopted regulations controlling GHG emissions under its existing authority under the Clean Air Act (the “CAA”).

Independent of Congress, the Environmental Protection Agency ("EPA") has adopted regulations controlling GHG emissions under its existing authority under the Clean Air Act (the “CAA”).

For example, following its findings that emissions of GHGs present an endangerment to human health and the environment because such emissions contributed to warming of the earth’s atmosphere and other climate changes, the EPA has adopted regulations under existing provisions of the CAA that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources that are already potential major sources for conventional pollutants.

In addition, the EPA has adopted rules requiring the monitoring and reporting of GHG emissions from specified production, processing, transmission and storage facilities in the United States on an annual basis.

Further, in December 2015, over 190 countries, including the United States, reached an agreement to reduce global greenhouse gas emissions, also known as the Paris Agreement.

Further, in December 2015, over 190 countries, including the United States, reached an agreement to reduce global GHG emissions, also known as the Paris Agreement.

The Paris Agreement entered into force in November 2016 after more than 170 nations, including the United States, ratified or otherwise indicated their intent to be bound by the agreement.

However, in June 2017, President Trump announced that the United States intended to withdraw from the Paris Agreement and to seek negotiations either to re-enter the Paris Agreement on different terms or enter into a separate agreement.

In August 2017, the U.S.

Department of State officially informed the United Nations of the United States’ intent to withdraw from the Paris Agreement.

The Paris Agreement provides for a four-year exit process beginning when it took effect in November 2016, which would result in an effective exit date of November 2020.

The United States’ adherence to the exit process and/or the terms on which the United States may re-enter the Paris Agreement or a separately negotiated agreement are unclear at this time.

To the extent that the United States and other countries implement this agreement or impose other climate change regulations on our industry or our customers’ industries, it could have an adverse effect on our business because substantial limitations on GHG emissions could adversely affect demand for our products or the products produced by our customers.

After previously withdrawing, the United States rejoined the Paris Agreement in January 2021.

Actions taken by the United States and other countries to implement the Paris Agreement or otherwise impose regulations on our industry or our customers’ industries aimed at reducing GHG emissions could have an adverse effect on our business.

It is also possible that future legislation or regulation addressing climate change, including in response to the Paris Agreement or any new international agreements, could adversely affect our operations, energy, raw material and transportation costs, results of operations, liquidity or capital resources, and these effects could be material or adversely impact us.

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We are also subject to federal and state environmental laws that regulate discharges of pollutants and contaminants into the environment, such as the U.S.

Clean Water Act and the U.S.

Clean Air Act.

Clean Water Act and the CAA.

For example, our water disposal processes rely on dikes and reclamation ponds that could breach or leak, resulting in a possible prohibited release into the environment.

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Foreign Corrupt Practices Act (the "FCPA") and other laws that prohibit improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business.

Our international activities create the risk of unauthorized payments or offers of payments in violation of the FCPA or other anti-corruption laws by one of our employees, consultants, sales agents, or distributors even though these persons are not always subject to our control.

Our international activities create the risk of unauthorized payments or offers of payments in

violation of the FCPA or other anti-corruption laws by one of our employees, consultants, sales agents, or distributors even though these persons are not always subject to our control.

Although we have implemented policies and training designed to promote compliance with these laws, these persons may take actions in violation of our policies.

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Increased costs for capital expenditures could also have an adverse effect on the profitability of our existing operations and returns from our most recent strategic projects.

Market upheavals due to global pandemics, military actions, terrorist attacks, or economic repercussions from those events could reduce our sales or increase our costs.

Global pandemics, actual or threatened armed conflicts, terrorist attacks, or military or trade disruptions affecting the areas where we or our competitors do business could disrupt the global market for potassium-based products.

Market upheavals due to military actions, terrorist attacks, other catastrophic events, or economic repercussions from those events could reduce our sales or increase our costs.

Actual or threatened armed conflicts, terrorist attacks, military or trade disruptions, or other catastrophic events affecting the areas where we or our competitors do business could disrupt the global market for potassium-based products.

As a result, our competitors may increase their sales efforts in our geographic markets and pricing of our products could suffer.

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The proper functioning of these systems and the security of this data is critical to the efficient operation and management of our business.

In addition, these systems could require modifications or upgrades as of a result of technological changes or growth in our business.

In addition, these systems could require modifications or upgrades as a result of technological changes or growth in our business.

These changes could be costly and disruptive to our operations and could impose substantial demands on management time.

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▪ changes in commodity prices or foreign currency exchange rates

substantial sales of common stock by us under our at-the-market offering program or in connection with future acquisitions or capital raising activities

▪ substantial sales of common stock by us in connection with future acquisitions or capital raising activities

▪ actions of our current stockholders, including sales of common stock by our directors and executive officers

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Volatility of our common stock may make it difficult for you to resell shares of our common stock when you want or at attractive prices.

The market price of our common stock may be adversely affected by the future issuance and sale of additional shares of our common stock, including pursuant to our at-the-market offering program, or by our announcement that the issuances and sales may occur.

We cannot predict the size of future issuances or sales of shares of our common stock, including those made pursuant to our at-the-market offering program or in connection with future acquisitions or capital raising activities, or the effect, if any, that the issuances or sales may have on the market price of our common stock.

In addition, the sales agent for our at-the-market offering program will not engage in any transactions that stabilize the price of our common stock.

The issuance and sale of substantial amounts of shares of our common stock, including issuances and sales pursuant to our at-the-market offering program, or announcement that the issuances and sales may occur, could adversely affect the market price of our common stock.

The market price of our common stock may be adversely affected by the future issuance and sale of additional shares of our common stock, or by our announcement that the issuances and sales may occur.

We cannot predict the size of future issuances or sales of shares of our common stock in connection with future acquisitions or capital raising activities, or the effect, if any, that the issuances or sales may have on the market price of our common stock.

The issuance and sale of substantial amounts of shares of our common stock or announcement that the issuances and sales may occur, could adversely affect the market price of our common stock.

We do not anticipate paying cash dividends on our common stock.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors