Intrepid Potash, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Intrepid Potash, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Intrepid Potash, Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 69 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Realizability of de ferred tax assets As discussed in Notes 2 and 13 to the consolidated financial statements, the Company records a valuation allowance if it is deemed more likely than not deferred tax assets will not be realized in full. The ultimate realization of deferred tax assets is dependent upon the generation of certain types of future taxable income during the periods in which those temporary differences become deductible. In making this assessment, the Company considers the scheduled reversal of deferred tax liabilities, their ability to carry back the deferred tax assets, projected future taxable income, and tax planning strategies. The Company analyzes its valuation allowance using historical and projected future operating results. As of December 31, 2022, the Company had gross deferred tax assets of $187.8 million and a related valuation allowance of $2.03 million. We identified the evaluation of the realizability of the Company’s deferred tax assets as a critical audit matter. This evaluation required especially challenging auditor judgment to assess the Company’s estimated future taxable income over the period in which the deferred tax assets will generally reverse. Specifically, the Company’s assumptions of projected future taxable income were based primarily on prices for products subject to market volatility and forecasted sales volumes. Changes in these assumptions could have a significant impact on the realization of the Company’s deferred tax assets and the amount of the valuation allowance. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s income tax process. This included controls related to the development of assumptions in determining the projected future taxable income, including the development of prices for products and forecasted sales volumes. We assessed the data used in the pricing assumptions used by the Company by comparing them to publicly available pricing data and existing contractual arrangements. We compared the forecasted sales volumes to historical sales volumes, and we compared the Company’s historical forecasted sales volumes to actual sales volumes to assess the Company’s ability to accurately forecast. /s/ KPMG LLP We have served as the Company's auditor since 2007. Denver, Colorado March 7, 2023 70 Table of Contents INTREPID POTASH, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 31, 2022 2021 ASSETS Cash and cash equivalents $ 18,514 $ 36,452 Short-term investments 5,959 — Accounts receivable: Trade, net 26,737 35,409 Other receivables, net 790 989 Inventory, net 114,816 78,856 Other current assets 4,863 5,144 Total current assets 171,679 156,850 Property, plant, equipment, and mineral properties, net 375,630 341,117 Water rights 19,184 19,184 Long-term parts inventory, net 24,823 29,251 Long-term investments 9,841 4,576 Other assets, net 7,294 6,842 Non-current deferred tax asset, net 185,752 209,075 Total Assets $ 794,203 $ 766,895 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 18,645 $ 9,068 Income taxes payable 8 41 Accrued liabilities 16,212 22,938 Accrued employee compensation and benefits 6,975 6,805 Other current liabilities 7,036 34,571 Total current liabilities 48,876 73,423 Asset retirement obligation 26,564 27,024 Operating lease liabilities 2,206 1,879 Other non-current liabilities 1,479 1,166 Total Liabilities 79,125 103,492 Commitments and Contingencies Common stock, $ 0.001 par value; 40,000,000 shares authorized: and 12,687,822 and 13,149,315 shares outstanding at December 31, 2022 and 2021, respectively 13 13 Additional paid-in capital 660,614 659,147 Retained earnings 76,463 4,243 Less treasury stock, at cost ( 22,012 ) — Total Stockholders' Equity 715,078 663,403 Total Liabilities and Stockholders' Equity $ 794,203 $ 766,895 See accompanying notes to these consolidated financial statements. 71 Table of Contents INTREPID POTASH, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share amounts) Year Ended December 31, 2022 2021 2020 Sales $ 337,568 $ 270,332 $ 196,954 Less: Freight costs 34,137 37,892 37,135 Warehousing and handling costs 9,747 9,282 9,431 Cost of goods sold 152,276 161,421 135,843 Lower of cost or net realizable value inventory adjustments — — 4,015 Costs associated with abnormal production — 5,973 — Gross Margin 141,408 55,764 10,530 Selling and administrative 31,799 23,998 25,476 Accretion of asset retirement obligation 1,961 1,858 1,738 Litigation settlement — — 10,075 Loss (gain) on sale or disposal of assets 7,470 ( 2,542 ) ( 4,250 ) Other operating expense 4,738 178 735 Operating Income (Loss) 95,440 32,272 ( 23,244 ) Other Income (Expense) Equity in earnings of unconsolidated entities 689 — — Interest expense, net ( 101 ) ( 1,468 ) ( 4,289 ) Interest income 176 — — Other income 305 48 384 Gain on extinguishment of debt — 10,113 — Income (Loss) Before Income Taxes 96,509 40,965 ( 27,149 ) Income Tax (Expense) Benefit ( 24,289 ) 208,869 ( 5 ) Net Income (Loss) $ 72,220 $ 249,834 $ ( 27,154 ) Weighted Average Shares Outstanding: Basic 13,151,752 13,098,871 12,993,225 Diluted 13,452,233 13,391,362 12,993,225 Income (Loss) Per Share: Basic $ 5.49 $ 19.07 $ ( 2.09 ) Diluted $ 5.37 $ 18.66 $ ( 2.09 ) See accompanying notes to these consolidated financial statements. 72 Table of Contents INTREPID POTASH, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share amounts) Common Stock Treasury Stock Additional Paid-in Capital (1) Retained Earnings (Accumulated) Deficit Total Stockholders' Equity Shares Amount (1) Balance, December 31, 2019 12,955,351 $ 13 $ — $ 653,080 $ ( 218,437 ) $ 434,656 Net loss — — — — ( 27,154 ) ( 27,154 ) Stock-based compensation — — — 3,821 — 3,821 Vesting of restricted shares, net of common stock used to fund employee income tax withholding due upon vesting 83,969 — — ( 172 ) — ( 172 ) Exercise of stock options 10,500 — — 108 — 108 Balance, December 31, 2020 13,049,820 13 — 656,837 ( 245,591 ) 411,259 Net income — — — — 249,834 249,834 Stock-based compensation — — — 3,012 — 3,012 Vesting of restricted shares, net of common stock used to fund employee income tax withholding due upon vesting 90,844 — — ( 791 ) — ( 791 ) Exercise of stock options 8,651 — — 89 — 89 Balance, December 31, 2021 13,149,315 13 — 659,147 4,243 663,403 Net income — — — — 72,220 72,220 Stock-based compensation — — — 6,152 — 6,152 Purchase of treasury stock ( 608,657 ) — ( 22,012 ) — — ( 22,012 ) Vesting of restricted shares, net of common stock used to fund employee income tax withholding due upon vesting 136,446 — — ( 4,795 ) — ( 4,795 ) Exercise of stock options 10,718 — — 110 — 110 Balance, December 31, 2022 12,687,822 $ 13 $ ( 22,012 ) $ 660,614 $ 76,463 $ 715,078 (1) - Amounts have been retroactively restated for all prior periods to reflect the one-for-ten reverse split of our common stock effected on August 14, 2020 . See accompanying notes to these consolidated financial statements. 73 Table of Contents INTREPID POTASH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS 74 Table of Contents (In thousands) Year Ended December 31, 2022 2021 2020 Cash Flows from Operating Activities: Adjustments to reconcile net income (loss) to net cash provided by operating activities: Net income (loss) $ 72,220 $ 249,834 $ ( 27,154 ) Depreciation, depletion, and amortization 34,711 35,635 35,788 Amortization of intangible assets 322 322 322 Accretion of asset retirement obligation 1,961 1,858 1,738 Amortization of deferred financing costs 265 314 425 Stock-based compensation 6,152 3,012 3,821 Reserve for obsolescence 1,750 2,108 492 Allowance for doubtful accounts — — 75 Loss (gain) on disposal of assets 7,470 ( 2,542 ) ( 4,250 ) Equity in earnings of unconsolidated entities ( 689 ) — — Gain on extinguishment of debt — ( 10,113 ) — Lower of cost or net realizable value inventory adjustments — — 4,015 Other — — ( 116 ) Changes in operating assets and liabilities: Trade accounts receivable, net 8,673 ( 12,615 ) 1,158 Other receivables, net 140 589 ( 609 ) Inventory, net ( 33,283 ) 7,358 ( 291 ) Other current assets 191 ( 1,974 ) 2,305 Deferred tax assets, net 23,323 ( 209,075 ) — Accounts payable, accrued liabilities, and accrued employee compensation and benefits ( 3,596 ) 13,456 2,331 Income tax payable ( 33 ) 42 ( 50 ) Operating lease liabilities ( 2,025 ) ( 2,508 ) ( 2,234 ) Other liabilities ( 28,731 ) 3,366 13,379 Net cash provided by operating activities 88,821 79,067 31,145 Cash Flows from Investing Activities: Additions to property, plant, equipment, mineral properties and other assets ( 68,696 ) ( 19,789 ) ( 16,443 ) Proceeds from sale of property, plant, equipment, and mineral properties 58 6,042 4,786 Purchase of investments ( 13,047 ) ( 1,076 ) ( 3,500 ) Proceeds from redemptions/maturities of investments 2,506 — — Net cash used in investing activities ( 79,179 ) ( 14,823 ) ( 15,157 ) Cash Flows from Financing Activities: Repayment of long-term debt — ( 15,000 ) ( 35,000 ) Debt prepayment costs — ( 505 ) ( 1,869 ) Proceeds from loan under CARES Act — — 10,000 Proceeds from borrowings on credit facility — — 10,000 Repayments of borrowings on credit facility — ( 29,817 ) — Payments of financing lease — ( 1,258 ) ( 74 ) Capitalized debt costs ( 1,007 ) — ( 36 ) Employee tax withholding paid for restricted shares upon vesting ( 4,795 ) ( 791 ) ( 172 ) Repurchases of common stock ( 22,012 ) — — Proceeds from exercise of stock options 110 89 108 Net cash used in financing activities ( 27,704 ) ( 47,282 ) ( 17,043 ) Net Change in Cash, Cash Equivalents, and Restricted Cash ( 18,062 ) 16,962 ( 1,055 ) Cash, Cash Equivalents, and Restricted Cash, beginning of period 37,146 20,184 21,239 Cash, Cash Equivalents, and Restricted Cash, end of period $ 19,084 $ 37,146 $ 20,184 Supplemental disclosure of cash flow information Net cash paid during the period for: Interest, net of $ 0.3 million of capitalized interest in 2022, $ 0.1 million in 2021, and $ 0.1 million in 2020 $ 113 $ 875 $ 2,467 Income taxes $ 1,015 $ 193 $ 97 Accrued purchases for property, plant, equipment, and mineral properties $ 8,532 $ 2,192 $ 344 See accompanying notes to these consolidated financial statements. 75 Table of Contents INTREPID POTASH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS "Intrepid," "our," "we," or "us" means Intrepid Potash, Inc. and its consolidated subsidiaries. Note 1 — COMPANY 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, 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. 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. We continue to work to expand our sales of water. In May 2019, we acquired certain land, water rights, state grazing leases for cattle, 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 a customer's operations in the oil and gas industry. We have three segments: potash, Trio ® , and oilfield solutions. We account for the sales of byproducts as revenue in the potash or Trio ® segment, based on which segment generates the byproduct. For each of the years ended December 31, 2022, 2021, and 2020, a majority of our byproduct sales were accounted for in the potash segment. We manage sales and marketing operations centrally. This allows us to evaluate the product needs of our customers and then centrally determine which of our production facilities to use to fill customer orders in a manner designed to realize the highest average net realized sales price per ton. Average net realized sales price per ton is a non-GAAP measure that we calculate for each of potash and Trio ® as segment sales less segment byproduct sales and segment freight costs, divided by the number of tons of product sold in the period. We also monitor product inventory levels and overall production costs centrally. Note 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation — Our consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates — The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions. Significant estimates include, but are not limited to, those for proven and probable mineral reserves, the related present value of estimated future net cash flows, useful lives of plant assets, asset retirement obligations, normal inventory production levels, inventory valuations, the valuation of equity awards, revenue from products we sell to customers where the price is variable, the valuation of receivables, estimated future net cash flows used in long-lived assets impairment analysis, the related valuation of our long-lived assets, valuation of our deferred tax assets and estimated blended income tax rates utilized in the current and deferred income tax calculations. There are numerous uncertainties inherent in estimating quantities of proven and probable reserves, projecting future rates of production, and the timing of development expenditures. Future mineral prices may vary significantly from the prices in effect at the time the estimates are made, as may estimates of future operating costs. The estimate of proven and probable mineral reserves, the related present value of estimated future 76 Table of Contents cash flows, and useful lives of plant assets can affect various other items including depletion, the net carrying value of our mineral properties, the useful lives of related property, plant, and equipment, depreciation expense, and estimates associated with recoverability of long-lived assets and asset retirement obligations. Specific to income tax items, we experience fluctuations in the valuation of the deferred tax assets and liabilities due to changing income tax rates and the blend of state tax rates. Revenue Recognition — We account for revenue in accordance with Accounting Standards Codification ("ASC") Topic 606 Revenue from Contracts with Customers ("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 to be entitled in exchange for those goods or services. Performance Obligations: A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. The contract's transaction price is allocated to the performance obligations and recognized as revenue when the performance obligations are satisfied. Substantially all of our contracts are of a short-term nature and contain a single performance obligation because the sale is for one type of product and shipping and handling charges are accounted for as a fulfillment cost and are not considered to be a separate performance obligation. The performance obligation is satisfied when control of the product is transferred to the customer, which typically occurs when we ship mineral products or deliver water from our facility to the customer. We account for substantially all of our revenue from sales to customers at a single point in time. Contract Estimates: In certain circumstances, we may sell product to customers where the sales price is variable. For variable consideration sales, we estimate the sales price we expect to realize at contract inception based on the facts and circumstances for each sale, including historical experience, and recognize revenue to the extent it is probable that a subsequent change in estimate will not result in a significant revenue reversal compared to the cumulative revenue recognized once the uncertainty is resolved. We update variable consideration estimates at each reporting date for any changes in facts and circumstances, and adjust financial information as necessary in the period the change is identified. Contract Balances: The timing of revenue recognition, billings, and cash collection may result in contract assets or contract liabilities. For certain contracts, the customer has agreed to pay us before we have satisfied our performance obligations. Customer payments received before we have satisfied our performance obligations are accounted for as a contract liability. Disaggregation of Revenue: We present disaggregation of revenue by products which we believe best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic conditions. Inventory and Long-Term Parts Inventory — Inventory consists of product and byproduct stocks that are ready for sale; mined ore; potash in evaporation ponds, which is considered work-in-process; and parts and supplies inventory. Product and byproduct inventory cost is determined using the lower of weighted average cost or estimated net realizable value and includes direct costs, maintenance, operational overhead, depreciation, depletion, and equipment lease costs applicable to the production process. Direct costs, maintenance, and operational overhead include labor and associated benefits. We evaluate our production levels and costs to determine if any should be deemed abnormal and therefore excluded from inventory costs and expensed directly during the applicable period. The assessment of normal production levels is judgmental and unique to each period. We model normal production levels and evaluate historical ranges of production by operating plant in assessing what is deemed to be normal. Each production operation typically shuts down periodically for planned maintenance activities. The costs of maintenance turnarounds at our facilities are considered part of production costs and are absorbed into inventory in the period incurred. Parts inventory, including critical spares, that is not expected to be used within a period of one year is classified as non-current. Parts and supply inventory cost is determined using the lower of average acquisition cost or estimated replacement cost. Detailed reviews are performed related to the net realizable value of parts inventory, giving consideration to quality, slow-moving items, obsolescence, excessive levels, and other factors. Parts inventories that have not turned over in more than a year, excluding parts classified as critical spares, are reviewed for obsolescence and, if deemed appropriate, are included in the determination of an allowance for obsolescence. Property, Plant, Equipment, Mineral Properties, and Development Costs — Property, plant, and equipment are stated at historical cost. Expenditures for property, plant, and equipment relating to new assets or improvements are capitalized, provided the expenditure extends the useful life of an asset or extends the asset's functionality. Property, plant, and equipment are depreciated under the straight-line method using estimated useful lives. The estimated useful lives of property, plant, and equipment are evaluated periodically as changes in estimates occur. No depreciation is taken on assets classified as construction in progress until the asset is placed into service. Gains and losses are recorded upon retirement, sale, 77 Table of Contents or disposal of assets. Maintenance and repair costs are recognized as period costs when incurred. Capitalized interest, to the extent of debt outstanding, is calculated and capitalized on assets that are being constructed, drilled, or built or that are otherwise classified as construction in progress. Mineral properties and development costs, which are referred to collectively as mineral properties, include acquisition costs, the cost of drilling production wells, and the cost of other development work, all of which are capitalized. Exploration costs include geological and geophysical work performed on areas that do not yet have proven and probable reserves declared. These costs are expensed as incurred. Depletion of mineral properties is calculated using the units-of-production method over the estimated life of the relevant ore body. The lives of reserves used for accounting purposes are shorter than current reserve life determinations due to uncertainties inherent in long-term estimates. These reserve life estimates have been prepared by us and reviewed and independently determined by mine consultants. Tons of potash and langbeinite in the proven and probable reserves are expressed in terms of expected finished tons of product to be realized, net of estimated losses. Market price fluctuations of potash or Trio ® , as well as increased production costs or reduced recovery rates, could render proven and probable reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of reserves. In addition, the provisions of our mineral leases, including royalty provisions, are subject to periodic readjustment by the state and federal government, which could affect the economics of our reserve estimates. Significant changes in the estimated reserves could have a material impact on our results of operations and financial position. Recoverability of Long-Lived Assets — We evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable. An impairment is potentially considered to exist if an asset group's total estimated net future cash flows on an undiscounted basis are less than the carrying amount of the related asset. An impairment loss is measured and recorded based on the excess of the carrying amount of long-lived assets over its estimated fair value. Changes in significant assumptions underlying future cash flow estimates or fair values of asset groups may have a material effect on our financial position and results of operations. Sales price is a significant element of any cash flow estimate, particularly for higher cost operations. Other assumptions we estimate include, among other things, the economic life of the asset, sales volume, inflation, raw materials costs, cost of capital, tax rates, and capital spending. Factors we generally will consider important and which could trigger an impairment review of the carrying value of long-lived assets include the following: • significant underperformance relative to expected operating results or operating losses • significant changes in the manner of use of assets or the strategy for our overall business • the denial or delay of necessary permits or approvals that would affect the utilization of our tangible assets • underutilization of our tangible assets • discontinuance of certain products by us or our customers • a decrease in estimated mineral reserves • significant negative industry or economic trends Intangible Assets — Water rights are accounted for as indefinite-lived intangible assets. We test indefinite-lived intangible assets for impairment at least annually on October 1, and more frequently if circumstances require. We use a qualitative assessment to determine whether it is more likely than not that the fair value of the unamortized intangible is less than its carrying value. If our qualitative assessment indicates it is more likely than not that the fair value of the unamortized assets is less than its carrying value, we estimate the fair value of the unamortized asset and record an impairment loss based on the excess of the carrying amount of the unamortized intangible asset over its estimated fair value. Fair value is estimated using quoted market prices, if available. If quoted market prices are not available, the estimated fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. Changes in significant assumptions underlying fair value estimates may have a material effect on our financial position and results of operations. We also have finite-lived intangible assets consisting of contractual agreements. These intangible assets are amortized over the period of estimated benefit using the straight-line method. No significant residual value is estimated for our finite-lived intangible assets. We estimate the useful life of intangible assets considering various factors, including but not limited to, the expected use of the asset, the expected life of other assets the intangible asset may relate, any legal, regulatory, contractual provisions, or relevant economic factors that may limit the use of the intangible asset. We evaluate the remaining useful lives of intangible assets each reporting period to determine if a revision to the asset's remaining life is necessary. Changes in significant assumptions underlying useful lives may have a material effect on our financial position and results of operations. We evaluate our finite-lived intangible assets for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable. Such circumstances may include but are not limited to (1) significant 78 Table of Contents adverse changes in the manner the asset is used, or (2) significant adverse changes in legal factors or economic conditions, including adverse actions by regulatory authorities. We did no t record any impairments to our intangible assets in 2022 and 2021. Asset Retirement Obligations — Reclamation costs are initially recorded as a liability associated with the asset to be reclaimed or abandoned, based on applicable inflation assumptions and discount rates. The accretion of this discounted liability is recognized as expense over the life of the related assets, and the liability is periodically adjusted to reflect changes in the estimates of either the timing or amount of the reclamation and abandonment costs. Leases — We determine if an arrangement is a lease or contains a lease at inception. Operating and finance lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. If readily determinable, we use the implicit rate in the lease to determine the present value of future lease payments. If the implicit rate is not readily determinable, we use an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating right-of-use ("ROU") assets and finance lease assets are generally recognized based on the amount of the initial measurement of the lease liability. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. For finance leases, interest expense is recognized on the lease liability and the ROU asset is amortized over the lease term. We account for lease and non-lease components as a single lease component, and we do not apply the requirements of ASC Topic 842 to short-term leases with a term of one year or less at inception. Income Taxes — We are a subchapter C corporation and, therefore, are subject to U.S. federal and state income taxes. We recognize income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. We record a valuation allowance if it is deemed more likely than not that our deferred income tax assets will not be realized in full. These determinations are subject to ongoing assessment. Cash and Cash Equivalents and Investments — Cash and cash equivalents consist of cash and liquid investments with an original maturity of three months or less. We classify our investments in debt securities, which include U.S treasury and government agency obligations, and corporate bonds and notes, as held-to-maturity investments because we have the intent and ability to hold these investments to maturity. Our held to maturity investments are carried at amortized cost. We use the equity method of accounting for investments in limited partnerships where we own more than 3% of the limited partnership, as required by the Securities and Exchange Commission. Under this method of accounting, we record our share of the net earnings or losses of the investee in the "Other Operating Income (Expense)" section of our Consolidated Statements of Operations. We record equity investments without a readily determinable fair value using the measurement alternative of cost, with adjustments for observable changes in prices resulting from orderly transactions for the identical or similar investments of the same issuer, or impairment. Fair Value of Financial Instruments — Our financial instruments include cash and cash equivalents, restricted cash, accounts receivable, refundable income taxes, accounts payable and current accrued liabilities. These instruments are carried at cost, which approximates fair value due to the short-term maturities of the instruments. Allowances for doubtful accounts are recorded against the accounts receivable balance to estimate net realizable value. Amounts outstanding under our secured credit facility are carried at cost, which approximates fair value, due to the short-term nature of the borrowings. Earnings per Share — Basic net income or loss per common share of stock is calculated by dividing net income or loss available to common stockholders by the weighted average basic common shares outstanding for the respective period. Diluted net income per common share of stock is calculated by dividing net income by the weighted average diluted common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive securities for the diluted earnings or loss per share calculation consist of awards of restricted shares, performance units, and non‑qualified stock options. The dilutive effect of stock-based compensation arrangements is computed using the treasury‑stock method. Following the lapse of the vesting period of restricted shares, the shares are considered issued and therefore are included in the number of issued and outstanding shares for purposes of these calculations. When we report a net loss, all potentially dilutive securities are considered anti-dilutive and are excluded from the dilutive loss per share calculation. 79 Table of Contents Reverse Stock Split — On August 10, 2020, after receiving stockholder approval, the Board of Directors approved an amendment to our Certificate of Incorporation to effect a reverse stock split of our common stock, par value $ 0.001 per share, by a ratio of one-for- ten . The reverse stock split was effected on August 14, 2020. Additionally, the total number of authorized shares of our common stock was reduced to 40,000,000 shares. Unless otherwise indicated, all share amounts, per share data, share prices, exercise prices and conversion rates set forth in these notes and the accompanying consolidated financial statements have, where applicable, been adjusted retroactively to reflect this reverse stock split. Treasury Stock — Repurchases of our common stock are accounted for at cost and are recorded as treasury stock. Stock‑Based Compensation — We account for stock-based compensation by recording expense using the fair value of the awards at the time of grant. We have recorded compensation expense associated with the issuance of restricted shares, performance units, and non-qualified stock options, all of which are subject to service conditions and in some cases subject to operational performance or market-based conditions. We recognize expense associated with such awards over the service period associated with each grant. For awards with service only conditions we recognize expense using the straight-line recognition method over the requisite service period of the award, which is generally the vesting period of the award. We recognize expense for awards with service and operational performance conditions using the accelerated recognition method over the requisite service period of the award, which is generally the vesting period of the award. We recognize expense associated with awards that contain both a service condition and a market condition using the accelerated recognition method over the requisite service period of the award, which is generally the longer of the explicit service period or the derived service period (expected date the market condition is estimated to be achieved). Recently Adopted Accounting Standards — In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, as amended by ASU No. 2019-04 and ASU No. 2019-10, Financial Instruments - (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASC Topic 326"), which we adopted on January 1, 2020. ASC Topic 326 changed the way entities recognized impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life. Because our trade receivables are short-term in nature, the adoption of this new standard did not have a material impact on our consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amending existing guidance to improve consistent application. The adoption of this standard did not have a material impact on our consolidated financial statements. Pronouncements Issued But Not Yet Adopted —We believe that all recently issued accounting pronouncements from the FASB either do not apply to us or will not have a material impact on our Consolidated Financial Statements. 80 Table of Contents Note 3 — EARNINGS PER SHARE Basic earnings per share is computed by dividing net income or loss 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 (loss) per share (in thousands, except per share amounts): Year Ended December 31, 2022 2021 2020 Net income (loss) $ 72,220 $ 249,834 $ ( 27,154 ) Basic weighted average common shares outstanding 13,152 13,099 12,993 Add: Dilutive effect restricted common stock 191 221 — Add: Dilutive effect of stock options outstanding 109 71 — Diluted weighted average common shares outstanding 13,452 13,391 12,993 Earnings (loss) per share: Basic $ 5.49 $ 19.07 $ ( 2.09 ) Diluted $ 5.37 $ 18.66 $ ( 2.09 ) The following table shows anti-dilutive shares excluded from the calculation of diluted earnings (loss) per share (in thousands): Year Ended December 31, 2022 2021 2020 Anti-dilutive effect of restricted shares 63 57 246 Anti-dilutive effect of stock options outstanding — 156 309 81 Table of Contents Note 4 — CASH, CASH EQUIVALENTS AND RESTRICTED CASH Total cash, cash equivalents and restricted cash, as shown on the consolidated statements of cash flows are included in the following accounts at December 31, 2022, 2021, and 2020 (in thousands): Year Ended December 31, 2022 2021 2020 Cash and cash equivalents $ 18,514 $ 36,452 $ 19,515 Restricted cash included in "Other current assets" 25 175 150 Restricted cash included in "Other assets, net" 545 519 519 Total cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 19,084 $ 37,146 $ 20,184 Restricted cash included in "Other assets, net" on the balance sheet at December 31, 2022, 2021, and 2020 represents amounts whose use is restricted by contractual agreements with the BLM or the State of Utah as security to fund future reclamation obligations at our sites. Restricted cash included in "Other current assets" on the balance sheet at December 31, 2022 represents cash deposits with supply vendors. 82 Table of Contents Note 5 — INVENTORY 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 December 31, 2022, and 2021, respectively (in thousands): December 31, 2022 2021 Finished goods product inventory $ 74,777 $ 42,492 In-process inventory 24,767 27,211 Total product inventory 99,544 69,703 Current parts inventory, net 15,272 9,153 Total current inventory, net 114,816 78,856 Long-term parts inventory, net 24,823 29,251 Total inventory, net $ 139,639 $ 108,107 During the years ended December 31, 2022, and December 31, 2021, we recorded no charges for lower of weighted average cost or estimated net realizable value on our finished goods product inventory. During the year ended December 31, 2020, we recorded charges of approximately $ 4.0 million, as a result of routine assessments of the lower of weighted average cost or estimated net realizable value on our finished goods product inventory. Parts inventories are shown net of any required allowances. During the years ended December 31, 2022, 2021, and 2020, we recorded reserves for obsolete parts inventory of $ 1.8 million, $ 2.1 million and $ 0.5 million, respectively. 83 Table of Contents Note 6 — PROPERTY, PLANT, EQUIPMENT, AND MINERAL PROPERTIES " Property, plant, equipment, and mineral properties, net" were comprised of the following (in thousands): December 31, 2022 2021 Land $ 24,136 $ 24,136 Ponds and land improvements 73,501 69,261 Mineral properties and development costs 146,333 144,255 Buildings and plant 89,014 84,268 Machinery and equipment 288,345 272,323 Vehicles 7,399 6,855 Office equipment and leasehold improvements 10,436 8,956 Operating lease ROU assets 5,908 7,763 Breeding stock 329 308 Construction in progress 47,188 11,469 Total property, plant, equipment, and mineral properties, gross $ 692,589 $ 629,594 Less: accumulated depreciation, depletion, and amortization ( 316,959 ) ( 288,477 ) Total property, plant, equipment, and mineral properties, net $ 375,630 $ 341,117 We incurred the following expenses for depreciation, depletion, and amortization of ROU assets, including expenses capitalized into inventory, for the following periods (in thousands): Year Ended December 31, 2022 2021 2020 Depreciation $ 29,805 $ 29,447 $ 29,697 Depletion 3,168 3,979 3,952 Amortization of ROU assets 1,738 2,209 2,139 Total incurred $ 34,711 $ 35,635 $ 35,788 Note 7 — LEASES We determine if an arrangement is a lease or contains a lease at inception. We have operating leases for mining equipment, trucks, rail cars, and office space. Our operating leases have remaining leases terms ranging from less than one year to five years. Leases recorded on the balance sheet consist of the following (amounts in thousands): Leases Classification on the Balance Sheet Balance, December 31, 2022 Balance, December 31, 2021 Assets Operating lease ROU assets, net Property, plant, equipment, and mineral properties, net $ 3,663 $ 3,398 Liabilities Current operating lease liabilities Other current liabilities $ 1,608 $ 1,655 Non-current operating lease liabilities Operating lease liabilities $ 2,206 $ 1,879 Other information related to lease term and discount rate is as follows: 84 Table of Contents December 31, 2022 December 31, 2021 Weighted average remaining lease term - operating leases 2.5 years 2.5 years Weighted average discount rate - operating leases 5.4 % 4.6 % The components of lease expense are as follows (amounts in thousands): For the Year Ended December 31, 2022 For the Year Ended December 31, 2021 For the Year Ended December 31, 2020 Operating lease expense $ 1,904 $ 2,370 $ 2,434 Short-term lease expense 150 122 117 Total lease expense $ 2,054 $ 2,492 $ 2,551 Supplemental cash flow information related to leases was as follows (amounts in thousands): For the Year Ended December 31, 2022 For the Year Ended December 31, 2021 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 1,889 $ 2,336 Finance cash flows from finance leases — 1,258 Right-of-Use Assets exchanged for new operating lease liabilities 2,305 1,849 As of December 31, 2022, maturities of lease liabilities are summarized as follows (amounts in thousands): Years Ending December 31, Operating Leases 2023 $ 1,737 2024 1,437 2025 633 2026 123 2027 33 Thereafter — Total future minimum lease payments $ 3,963 Less - amount representing interest 149 Present value of future minimum lease payments $ 3,814 Less - current lease obligations 1,608 Long-term lease obligations $ 2,206 85 Table of Contents Note 8 — INTANGIBLE ASSETS We acquired certain water rights, recorded at $ 16.9 million, and other intangible assets, recorded at $ 6.4 million, in the Intrepid South asset acquisition that we completed in May 2019. We account for our water rights as indefinite-lived intangible assets. We account for the other intangible assets acquired in the Intrepid South asset acquisition as finite-lived intangible assets and amortize those intangible assets over the period of estimated benefit, using the straight-line method. The weighted-average amortization period for the other intangible assets acquired in the Intrepid South asset acquisition was 20 years. These intangible assets are included in "Other assets, net" on the consolidated balance sheets. As of December 31, 2022, and December 31, 2021, we have the following amounts recorded for intangible assets (amounts in thousands): December 31, 2022 December 31, 2021 Finite-lived intangible assets: Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Produced water disposal royalty agreements $ 2,694 $ ( 495 ) $ 2,694 $ ( 360 ) Surface damage and easement agreements 3,723 ( 685 ) 3,723 ( 498 ) Total $ 6,417 $ ( 1,180 ) $ 6,417 $ ( 858 ) Indefinite-lived intangible assets: Water rights $ 19,184 $ 19,184 Total amortization of intangible assets for the years ended December 31, 2022, 2021, and 2020 was $ 0.3 million. We estimate the annual amortization expense of intangible assets will be $ 0.3 million for each of the next five years. 86 Table of Contents Note 9 — DEBT Credit Facility —In August 2022, we and certain of our subsidiaries entered into the Second Amended and Restated Credit Agreement with a syndicate of lenders with the Bank of Montreal, as administrative agent, which provides for a revolving credit facility. The agreement amended our existing revolving credit facility to, among other things, increase the amount available under the facility from $ 75 million to $ 150 million, extend the maturity date to August 4, 2027, and transition from LIBOR (London Interbank Offered Rate) to SOFR (Secured Overnight Financing Rate) as a reference rate for borrowings under the credit agreement. Borrowings under the amended credit facility bear interest at 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 facility for near-term working capital needs or other purposes and may do so in the future. For the year ended December 31, 2022, we made no borrowings and made no repayments under the facility. For the year ended December 31, 2021, we made no borrowings and made $ 29.8 million repayments, under the facility. For the year ended December 31, 2020, we borrowed $ 10.0 million and made no repayments under the facility. As of December 31, 2022, and 2021, we had no borrowings outstanding and $ 1.0 million in an outstanding letter of credit under the facility. We had $ 149.0 million available under the facility as of December 31, 2022. We were in compliance with the applicable covenants under the facility as of December 31, 2022. PPP Loan —In April 2020, we received a $ 10 million loan under the CARES Act Paycheck Protection Program (the "PPP"). We submitted our application for forgiveness of the full amount of the loan in November 2020. In June 2021, we received notice that the SBA had remitted funds to our bank to fully repay our PPP loan and accrued interest. Accordingly, we recognized a gain of $ 10.1 million related to the forgiveness of the PPP loan and the associated accrued interest on the loan. Senior Notes —In June 2021 we repaid the remaining $ 15.0 million of principal outstanding on our Series B Senior Notes and satisfied all obligations under the related Note Purchase Agreement. In connection with this repayment, the Company paid in aggregate approximately $ 15.6 million, which consisted of (i) $ 15.0 million of remaining aggregate principal amount of Series B Senior Notes, (ii) approximately $ 0.1 million of accrued interest and (iii) a "make-whole" premium of $ 0.5 million. As a result of the repayment, the Note Purchase Agreement was terminated. Interest Expense —Interest expense is recorded net of any capitalized interest associated with investments in capital projects. We incurred gross interest expense of $ 0.4 million, $ 1.5 million, and $ 4.4 million for the years ended December 31, 2022, 2021, and 2020, respectively. Amounts included in interest expense for the years ended December 31, 2022, 2021, and 2020 (in thousands) are as follows: Year ended December 31, 2022 2021 2020 Interest expense on borrowings $ — $ 654 $ 2,033 Commitment fee on unused credit facility 155 70 74 Make-whole payments — 505 1,868 Amortization of deferred financing costs 265 314 425 Gross interest expense 420 1,543 4,400 Less capitalized interest 319 75 111 Interest expense, net $ 101 $ 1,468 $ 4,289 87 Table of Contents Note 10 — ASSET RETIREMENT OBLIGATION We recognize an estimated liability for future costs associated with the closure 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 abandonment liabilities range from 6.9 % to 9.7 %. Revisions to the liability occur due to construction of new or expanded facilities, changes in estimated abandonment costs or economic lives, changes in the estimated timing of the reclamation activities or if federal or state regulators enact new requirements regarding the abandonment or reclamation of mines. Following is a table of the changes to our asset retirement obligations for the following periods (in thousands): Year Ended December 31, 2022 2021 2020 Asset retirement obligation, at beginning of period $ 27,024 $ 23,872 $ 22,250 Liabilities settled ( 1,533 ) — ( 116 ) Liabilities incurred 297 — — Changes in estimated obligations ( 885 ) 1,294 — Accretion of discount 1,961 1,858 1,738 Total asset retirement obligation, at end of period $ 26,864 $ 27,024 $ 23,872 Less current portion of asset retirement obligation $ ( 300 ) $ — $ — Long-term portion of asset retirement obligation $ 26,564 $ 27,024 $ 23,872 We estimate approximately $ 6.4 million in asset retirement payments may occur in the next five years . 88 Table of Contents Note 11 — REVENUE Revenue Recognition —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 to be entitled in exchange for those goods or services. Contract Balances — As of December 31, 2022, and 2021, we had $ 2.4 million and $ 33.8 million of contract liabilities, respectively, of which $ 0.9 million and $ 32.9 million were current as of December 31, 2022 and 2021, respectively, and included in "Other current liabilities" on the 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). As of December 31, 2021, our contract liability balance primarily consisted of prepayments from a customer for future water deliveries under the terms of a water sales agreement. In August 2022, our customer notified us that they were terminating the water sales agreement and in September 2022 we refunded the customer's prepayment balance of $ 32.6 million. See Note 14 — Commitments and Contingencies below for additional information regarding our water rights and repayment of the customer's prepayment balance. Our contract liability activity for the years ended December 31, 2022, 2021, and 2020 is shown below (in thousands): Year Ended December 31, 2022 2021 2020 Beginning balance $ 33,788 $ 30,419 $ 16,612 Additions 1,823 4,310 17,657 Refund of prepayments ( 32,579 ) — — Recognized as revenue during period from the beginning balance ( 658 ) ( 941 ) ( 3,850 ) Ending balance $ 2,374 $ 33,788 $ 30,419 Disaggregation of Revenue — The table below shows the disaggregation of revenue by product and reconciles disaggregated revenue to segment revenue for the years ended December 31, 2022, 2021, and 2020. 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): Year Ended December 31, 2022 Product Potash Segment Trio ® Segment Oilfield Solutions Segment Intersegment Eliminations Total Potash $ 168,571 $ — $ — $ ( 304 ) $ 168,267 Trio ® — 113,962 — — 113,962 Water 1,637 3,302 17,510 — 22,449 Salt 11,270 562 — — 11,832 Magnesium Chloride 6,472 — — — 6,472 Brines 3,428 — 2,670 — 6,098 Other — — 8,488 — 8,488 Total Revenue $ 191,378 $ 117,826 $ 28,668 $ ( 304 ) $ 337,568 89 Table of Contents Year Ended December 31, 2021 Product Potash Segment Trio ® Segment Oilfield Solutions Segment Intersegment Eliminations Total Potash $ 130,460 $ — $ — $ ( 247 ) $ 130,213 Trio ® — 91,125 — — 91,125 Water 2,050 4,355 15,594 — 21,999 Salt 9,592 578 — — 10,170 Magnesium Chloride 7,847 — — — 7,847 Brines 1,802 — 1,129 — 2,931 Other — — 6,047 — 6,047 Total Revenue $ 151,751 $ 96,058 $ 22,770 $ ( 247 ) $ 270,332 Year Ended December 31, 2020 Product Potash Segment Trio ® Segment Oilfield Solutions Segment Intersegment Eliminations Total Potash $ 92,500 $ — $ — $ ( 322 ) $ 92,178 Trio ® — 65,344 — — 65,344 Water 1,253 4,444 14,701 — 20,398 Salt 8,103 499 — — 8,602 Magnesium Chloride 4,855 — — — 4,855 Brines 1,349 — 438 — 1,787 Other — — 3,790 — 3,790 Total Revenue $ 108,060 $ 70,287 $ 18,929 $ ( 322 ) $ 196,954 90 Table of Contents Note 12 — COMPENSATION PLANS Cash Bonus Programs —We use cash bonus programs under which our employees may be eligible to receive cash bonuses based on corporate, department, location, or individual performance or other events or accomplishments. We accrue cash bonus expense related to the current year's performance and we expect to pay in March 2023 a cash bonus to our employees under our 2022 bonus program. We met our performance metrics related to our 2021 cash bonus program and paid a cash bonus in March 2022. While we did meet certain performance metrics related to our 2020 cash bonus program, we did not pay a cash bonus under our 2020 cash bonus program. 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"). We have issued restricted shares, common stock, performance units, and non-qualified stock option awards under the Plan. As of December 31, 2022, 300,268 restricted shares and options to purchase 273,206 shares of common stock were outstanding. As of December 31, 2022, approximately 1.1 million shares of common stock remained available for issuance under the Plan. Total compensation expense related to the Plan was $ 6.2 million, $ 3.0 million, and $ 3.8 million, for the years ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022, there was $ 7.2 million of total remaining unrecognized compensation expense that is expected to be recognized over a weighted-average period of 1.2 years. When restricted shares and performance units vest and when stock options are exercised, new shares are issued and considered outstanding for financial statement purposes. Restricted Shares • Restricted Shares with Service Conditions —Under the Plan, the Compensation Committee of the Board of Directors (the "Compensation Committee") has granted restricted shares of common stock to members of the Board of Directors, executive officers, and other key employees. The restricted shares contain service conditions associated with continued employment or service. The restricted shares provide voting and regular dividend rights to the holders of the awards. In 2022, the Compensation Committee granted 53,202 restricted shares to executives and key employees under the Plan as part of our annual equity award program. The awards vest over three years , subject to continued employment or service. In 2022, the Compensation Committee granted 6,635 restricted shares to non-employee members of the Board of Directors. The restricted shares vest one year after the date of grant, subject to continued service. We use the closing price of our common stock on the grant date as the grant date fair value for these awards. We record compensation expense monthly using the straight-line recognition method over the vesting period of the award. The weighted-average grant date fair value per share for restricted shares with service conditions issued in 2022, 2021, and 2020 was $ 66.07 , $ 37.49 , and $ 14.49 , respectively. • Restricted Shares with Service and Market Conditions — Under the Plan in March 2022, the Compensation Committee granted restricted shares of common stock with service and market conditions to certain members of our executive team as part of their annual compensation package. The grants vest over three years from the grant date if the volume-weighted average share closing price for 20 consecutive days has met one of the applicable price achievement targets; provided, however, that no vesting would occur if the volume-weighted average closing price for 20 consecutive days has not met one or more applicable price achievement goals on or before March 17, 2025. The share price achievement goals of these awards have been met as of December 31, 2022, and will vest over three years subject to continued employment. Under the Plan in March 2022, the Compensation Committee also granted restricted shares of common stock with service and market conditions to another member of our executive team as part of his annual compensation package. This grant vests over two years from the quarter ended in which the volume-weighted average share closing price for 20 consecutive trading days has met one of the applicable price achievement targets; provided, however, that no vesting would occur if the volume-weighted average closing price for 20 consecutive trading days has not met one or more applicable price achievement goals on or before March 17, 2026. The share price achievement goal for this award has been met as of December 31, 2022, and will vest on June 30, 2023, and June 30, 2024. 91 Table of Contents Under the Plan in March 2021, the Compensation Committee granted restricted shares of common stock with service and market conditions to certain members of our executive team as part of their annual compensation package. The grants vest over three years from the quarter ended in which the volume-weighted average share closing price for 20 consecutive days has met one of the applicable price achievement targets; provided, however, that no vesting would occur if the volume-weighted average closing price for 20 consecutive days has not met one or more applicable price achievement goals on or before March 11, 2024. The share price achievement goals of these awards were met in 2021, and the awards vest over three years from the grant date subject to continued employment. Under the Plan in December 2021, the Compensation Committee granted restricted shares of common stock with service and market conditions to a member of our executive team as part of his annual compensation package. This grant vests over two years from the quarter ended in which the volume-weighted average share closing price for 20 consecutive trading days has met one of the applicable price achievement targets; provided, however, that no vesting would occur if the volume-weighted average closing price for 20 consecutive trading days has not met one or more applicable price achievement goals on or before December 23, 2025. As of December 31, 2022, share price achievement goals have been met and one-half of the shares will vest in 2023, and one-half will vest in 2024. Under the plan in 2020, the Compensation Committee granted restricted shares of common stock with service and market conditions to a member of our executive team as part of his annual compensation package. The 2020 grant vests over two years from the quarter ended in which the volume weighted average share closing price for 20 consecutive trading days has met one of the applicable price achievement targets; provided, however, that no vesting would occur if the volume-weighted average closing price for 20 consecutive trading days has not met one or more applicable price achievement goals on or before June 8, 2024. The market conditions for this award were met in 2021, and 47,259 shares vested during 2022 and 47,259 shares will vest in 2023. During 2022, share price achievement targets were met for shares granted to a member of the executive team in 2019 and 54,570 shares vested in 2022. We used a Monte Carlo simulation valuation model to estimate the fair value of these awards on the grant date. We record compensation expense monthly using the accelerated recognition method over the longer of the explicit or derived service period of the award. The weighted-average grant date fair value per share of restricted shares with service and market conditions issued in 2022, 2021, and 2020, was $ 62.32 , $ 23.76 and $ 19.22 , respectively. Valuation models require the input of highly subjective assumptions, including the expected volatility of the price of the underlying stock. We used the following assumptions to compute the weighted-average grant date fair market value of restricted stock with service and market conditions granted in 2021, 2020, and 2019: 2022 2021 2020 Closing stock price on grant date $ 66.33 $ 42.03 $ 13.80 Risk free interest rate 2.2 % 1.1 % 0.6 % Dividend yield — % — % — % Estimated volatility 79.8 % 89.0 % 83.9 % Expected life 6.0 years 5.5 years 6.0 years 92 Table of Contents A summary of all activity relating to our restricted shares for the year ended December 31, 2022, is presented below: Weighted Average Grant-Date Fair Value Shares Restricted shares of common stock, beginning of period 407,597 $ 24.95 Granted with service only condition 59,837 $ 66.07 Granted with service and market conditions 50,837 $ 62.32 Vested, service only condition ( 97,831 ) $ 24.84 Vested, service and market conditions ( 103,677 ) $ 21.47 Forfeited, service only condition ( 13,561 ) $ 32.17 Forfeited, service and market conditions ( 2,934 ) $ 51.06 Restricted shares of common stock, end of period 300,268 $ 46.36 Non-Qualified Stock Option Activity We have not granted any non-qualified stock options to our employees since 2018. A summary of all stock option activity for the year ended December 31, 2022, is as follows: Shares Weighted Average Exercise Price Aggregate Intrinsic Value 1 Weighted Average Remaining Contractual Life Outstanding non-qualified stock options, beginning of period 283,924 $ 28.33 Granted — $ — Exercised ( 10,718 ) $ 10.30 Forfeited — $ — Expired — $ — Outstanding non-qualified stock options, end of period 273,206 $ 29.04 $ 1,532,646 4.7 Vested or expected to vest, end of period 273,206 $ 29.04 $ 1,532,646 4.7 Exercisable non-qualified stock options, end of period 273,206 $ 29.04 $ 1,532,646 4.7 1 The intrinsic value of a stock option is the amount by which the market value exceeds the exercise price as of the end of the period presented. The total intrinsic value of exercised options to purchase stock during 2022 was $ 0.6 million. The total intrinsic value of exercised options to purchase stock during 2021 and 2020 was immaterial for each year. Note 13 — INCOME TAXES We account for income taxes in accordance with ASC Topic 740, Income Taxes . This standard requires the recognition of deferred tax assets and liabilities for the tax effect of temporary differences between the financial statement and tax basis of recorded assets and liabilities at enacted tax rates in effect when the related taxes are expected to be settled or realized. We recognize income taxes in each of the tax jurisdictions where we conduct business. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 93 Table of Contents A summary of the provision for income taxes is as follows (in thousands): Year Ended December 31, 2022 2021 2020 Current portion of income tax expense (benefit): Federal $ — $ — $ ( 42 ) State 966 206 47 Deferred portion of income tax expense: Federal 19,430 ( 157,348 ) — State 3,893 ( 51,727 ) — Total income tax expense (benefit) $ 24,289 $ ( 208,869 ) $ 5 A reconciliation of the federal statutory income tax rate of 21 % to our effective rate is as follows (in thousands, except percentages): Year Ended December 31, 2022 2021 2020 Federal taxes at statutory rate $ 20,267 $ 8,603 $ ( 5,701 ) Add: State taxes, net of federal benefit 5,406 1,278 ( 1,316 ) Change in valuation allowance — ( 215,910 ) 6,320 PPP loan forgiveness — ( 2,115 ) — Change in federal and state tax rates ( 125 ) 138 3 Percentage depletion ( 827 ) ( 463 ) — Other ( 432 ) ( 400 ) 699 Net expense (benefit) as calculated $ 24,289 $ ( 208,869 ) $ 5 Effective tax rate 25.2 % ( 509.9 ) % — % Our effective tax rate for the years ended December 31, 2022, differs from the U.S. federal statutory rate due to state income taxes, while our effective tax rates for the years ended December 31, 2021, and 2020, differs from the U.S. federal statutory rate due to the change in valuation allowance. As of December 31, 2022, and 2021, we had gross deferred tax assets of $ 187.8 million and $ 211.1 million, respectively. During the year ended December 31, 2022, our deferred tax assets decreased primarily from our usage of prior year net operating losses to offset current year income. Included in gross deferred tax assets as of December 31, 2022 were approximately $ 186.0 million of federal net operating loss carryforwards, which expire beginning in 2034, and approximately $ 261.0 million of state net operating loss carryforwards, the majority of which begin to expire in 2033. Also included are $ 1.9 million of federal research and development credits which begin to expire in 2031. The federal loss carryforward could be subject to examination by the tax authorities within three years after the carryforward is utilized, while the state net operating loss carryforwards could be subject to examination by the tax authorities generally within three and four years after the carryforward is utilized, depending on jurisdiction. 94 Table of Contents Significant components of our deferred tax assets and liabilities were as follows (in thousands): December 31, 2022 2021 Deferred tax assets (liabilities): Property, plant, equipment and mineral properties, net $ 119,919 $ 131,496 Federal and state net operating loss carryforwards 53,440 59,331 Asset retirement obligation 7,409 6,900 Deferred revenue 607 8,628 Other 4,540 2,883 Federal R&D credits 1,870 1,870 Total deferred tax assets 187,785 211,108 Valuation allowance ( 2,033 ) ( 2,033 ) Deferred tax asset, net $ 185,752 $ 209,075 In assessing the need for a valuation allowance, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. We evaluate our ability to realize the tax benefits associated with deferred tax assets by analyzing the relative impact of all the available positive and negative evidence regarding our forecasted taxable income using both historical and projected future operating results, the reversal of existing taxable temporary differences, taxable income in prior carryback years, as permitted by regulation, and the availability of tax planning strategies. In determining how much of a valuation allowance to recognize we primarily consider our projections of future taxable income. All available evidence, both positive and negative, that may affect the realizability of deferred tax assets is identified and considered in determining the appropriate amount of the valuation allowance. The ultimate realization of deferred tax assets is dependent upon the generation of certain types of future taxable income during the periods in which those temporary differences become deductible. Assumptions of expected future taxable income are based primarily on prices and forecasted sales volumes which are subject to market volatility. In making this assessment, we consider the scheduled reversal of deferred tax liabilities, our ability to carry back the deferred tax asset, projected future taxable income, and tax planning strategies. As of December 31, 2022, we were in a cumulative three-year income position. The cumulative three-year income position is significant positive evidence when evaluating the realizability of our deferred tax assets. Additionally, industry trends and forecasts as well as internal forecasts of future business show sustained amounts of taxable income. Thus, we have concluded that it is more likely than not that most of our $ 187.8 million of deferred tax assets will be realized. During 2022, our valuation allowance did not change as we continue to maintain a valuation allowance of $ 2.0 million against our deferred tax assets related to federal and state research and development credits as we forecast these will expire before being used. Our deferred tax assets, net of the valuation allowance at December 31, 2022, and 2021, was $ 185.8 million and $ 209.1 million, respectively The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted most significantly by the tax jurisdictions in which we conduct business. Changing business conditions for normal business transactions and operations, as well as changes to state tax rates and apportionment laws, potentially alter the apportionment of income among the states for income tax purposes. These changes to apportionment laws result in changes in the calculation of our current and deferred income taxes, including the valuation of our deferred tax assets and liabilities. The effects of any such changes are recorded in the period of the adjustment. Such adjustments can increase or decrease the net deferred tax asset on the balance sheet and impact the corresponding deferred tax benefit or deferred tax expense on the statement of operations. A decrease of our state tax rate decreases the value of its deferred tax asset, resulting in additional deferred tax expense being recorded on the income statement. Conversely, an increase in our state income tax rate would increase the value of the deferred tax asset, resulting in an increase in our deferred tax benefit. Because of the magnitude of the temporary differences between our book and tax basis in the assets, relatively small changes in the state tax rate may have a pronounced impact on the value of our net deferred tax asset. Each quarter we evaluate the need for a liability for uncertain tax positions. At December 31, 2022, and 2021, we had no items that required disclosure in accordance with FASB guidance on accounting for uncertainty in income taxes. 95 Table of Contents We operate, and accordingly file income tax returns, in the U.S. federal jurisdiction and various U.S. state jurisdictions. With few exceptions, we are no longer subject to income tax audits that could result in an assessment for years prior to 2019. Note 14 — COMMITMENTS AND CONTINGENCIES Reclamation Deposits and Surety Bonds —As of December 31, 2022, and 2021, we had $ 24.6 million and $ 23.0 million, respectively, of security placed principally with the State of Utah and the Bureau of Land Management for eventual reclamation of its various facilities. Of this total requirement, as of December 31, 2022, and 2021, $ 0.5 million consisted of long-term restricted cash deposits reflected in "Other" long-term assets on the balance sheet, and $ 24.1 million and $ 22.5 million, respectively, was secured by surety bonds issued by an insurer. The surety bonds are held in place by an annual fee paid to the issuer. We may be required to post additional security to fund future reclamation obligations as reclamation plans are updated or as governmental entities change requirements. Legal —We are subject to claims and legal actions in the ordinary course of business. We expense legal costs as 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 In February 2019, an expedited inter se proceeding commenced to determine the validity of our Pecos River water rights, representing approximately 20,000 acre feet per year. On December 17, 2021, the adjudication court entered its findings of fact and conclusions of law, which held that our predecessors in interest had forfeited all but approximately 5,800 feet of water per year, and further ruled 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. On March 17, 2022, the adjudication court entered the subfile order and partial final judgment and decree, which adopted the court's December 17, 2021 findings of fact and conclusion of law and specifies our right to 150 acre feet per annum of water for industrial-salt processing use. On April 15, 2022, we filed a notice of appeal of the adjudication court's ruling on the validity of our water rights. The appeal is currently before the New Mexico Court of Appeals and the matter has been fully briefed. In 2017 and 2018 the New Mexico Office of the State Engineer (“OSE”) had granted us preliminary authorizations to sell approximately 5,700 acre feet of water per year from our Pecos River water rights. The preliminary authorizations allowed for water sales to begin immediately, subject to repayment if the underlying water rights are ultimately found to be invalid. If our appeal of the adjudication court's ruling is unsuccessful, we may have to repay for the water we sold under the preliminary 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 statement of operations related to this legal matter. In March 2021, we received notice from a customer of a default under the terms of a long-term sales contract because we have not been able to deliver water to diversion points specified in the contract. We had relied primarily upon our Pecos River water rights to deliver water under this contract, the majority of which are currently unavailable due to the factors discussed above. Under this contract we have received quarterly installments of approximately $ 3.9 million for the future delivery of water to the customer. In April 2021, we agreed to suspend the second quarter and future quarterly installments due from the customer as we continued to work to resolve the issue. In December 2021, we amended our long-term sales agreement with the customer due to our inability to deliver water. In the amendment, we agreed to suspend all rights and obligations of both parties under the agreement until July 1, 2022. During the suspension period, we had no obligation to deliver water and our customer has no obligation to take water, if available, or make quarterly payments to us. In August 2022, the customer notified us that they were terminating the long-term sales contract and in September 2022, we refunded the $ 32.6 million outstanding contract liability we had with this customer. See Note 11—Revenue above for additional information. In August 2021, NGL Energy Partners (NGL), our partner in the Joint Marketing Agreement (“JMA”) that was entered into in May 2019, filed suit against us alleging, amongst other items, we overcharged the JMA for various operating costs and that we used third party water to service certain fracs when JMA water should have been used in those fracs. On June 22, 2022, the parties entered into a settlement agreement and the lawsuit was dismissed with prejudice on June 29, 2022. 96 Table of Contents The settlement did not have a material impact on our results of operations and the JMA was terminated effective May 1, 2022. As of December 31, 2022 we have estimated contingent liabilities recorded in "Other current liabilities" on the consolidated balance sheets of $ 4.2 million, mainly related to a trespass issue at Intrepid South and the potential underpayment of royalties in 2012 to 2016. At December 31, 2021, our estimated contingent liabilities was immaterial. We are subject to other claims and legal actions in the ordinary course of business. Legal costs are expensed as incurred. While there are uncertainties in predicting the outcome of any claim or legal action, we believe that the ultimate resolution of these other claims or actions is not reasonably likely to have a material adverse effect on our financial condition, results of operations, or cash flows. Note 15 — FAIR VALUE MEASUREMENTS We measure our financial assets and liabilities in accordance with Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The topic establishes market or observable inputs as the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The topic also establishes a hierarchy for grouping these assets and liabilities based upon the lowest level of input that is significant to the fair value measurement. The definition of each input is described below: • Level 1—Quoted prices in active markets for identical assets and liabilities. • Level 2—Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active, and model‑derived valuations whose inputs are observable or whose significant value drivers are observable. • Level 3—Significant inputs to the valuation model that are unobservable. 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, 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. Cash Equivalents —As of December 31, 2022, and December 31, 2021, we had cash equivalents of $ 1.7 million and zero , respectively. Held-to-Maturity Investments —As of December 31, 2022, 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. We had no held-to-maturity investments at December 31, 2021. Our held-to-maturity investments at December 31, 2022, are carried at amortized cost and consist of the following (amounts in thousands): 97 Table of Contents As of December 31, 2022 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Short-term Corporate bonds $ 3,992 $ — $ ( 24 ) $ 3,968 Government bonds 1,967 — ( 18 ) 1,949 Total $ 5,959 $ — $ ( 42 ) $ 5,917 Long-term Corporate bonds $ 499 $ — $ ( 10 ) $ 489 Government bonds 1,935 — ( 26 ) 1,909 Total $ 2,434 $ — $ ( 36 ) $ 2,398 Equity Investments without a Readily Determinable Fair Value —As of December 31, 2022, and 2021, we had a $ 3.5 million non-controlling interest in W.D. Von Gonten Laboratories ("WDVGL"). This investment is an equity investment without a readily determinable fair value and is recorded at cost with adjustments for observable changes in prices resulting from orderly transactions for the identical or a similar investment of the same issuer, or impairment (a Level 3 input), and is included in "Other assets, net" on the Consolidated Balance Sheets. We did not record any adjustments to the $ 3.5 million carrying value of the investment during 2022 or 2021. Equity Method Investments —We have committed to invest $ 4.0 million in cash as a limited partner for a 16 % interest in PEP Ovation, LP ("Ovation"), of which we had invested $ 3.2 million and $ 1.1 million of cash as of December 31, 2022, and 2021, respectively. 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 and is included in "Long-term investments" on the Condensed Consolidated Balance Sheets. For the year ended December 31, 2022, our proportional share of Ovation's net income was $ 0.7 million. Note 16 — EMPLOYEE BENEFITS 401(k) Plan We maintain a savings plan qualified under Internal Revenue Code Sections 401(a) and 401(k). The 401(k) Plan is available to eligible employees of our consolidated entities. Employees may contribute amounts as allowed by the U.S. Internal Revenue Service to the 401(k) Plan (subject to certain restrictions) in before-tax contributions. In January 2018, we increased the matching contributions on a dollar-for-dollar basis up to a maximum of 5 % of the employee's base compensation. Our contributions to the 401(k) Plan in the following periods were (in thousands): Contributions Year Ended December 31, 2022 $ 1,760 Year Ended December 31, 2021 $ 1,633 Year Ended December 31, 2020 $ 1,569 Note 17 — BUSINESS SEGMENTS Our operations are organized into three segments: potash, Trio ® , and oilfield solutions. The reportable segments are determined by management based on several factors including the types of products and services sold, production processes, markets served and the financial information available for our chief operating decision maker. 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). 98 Table of Contents Year Ended December 31, 2022 Potash Trio ® Oilfield Solutions Other Consolidated Sales 1 $ 191,378 $ 117,826 $ 28,668 $ ( 304 ) $ 337,568 Less: Freight costs 14,780 19,661 — ( 304 ) 34,137 Warehousing and handling costs 5,305 4,442 — — 9,747 Cost of goods sold 76,524 54,600 21,152 — 152,276 Gross Margin $ 94,769 $ 39,123 $ 7,516 $ — $ 141,408 Depreciation, depletion, and amortization incurred 2 $ 26,572 $ 4,370 $ 3,298 $ 793 $ 35,033 Year Ended December 31, 2021 Potash Trio ® Oilfield Solutions Other Consolidated Sales 1 $ 151,751 $ 96,058 $ 22,770 $ ( 247 ) $ 270,332 Less: Freight costs 17,483 20,656 — ( 247 ) 37,892 Warehousing and handling costs 5,169 4,113 — — 9,282 Cost of goods sold 87,281 54,847 19,293 — 161,421 Costs associated with abnormal production and other 5,973 — — — 5,973 Gross Margin $ 35,845 $ 16,442 $ 3,477 $ — $ 55,764 Depreciation, depletion, and amortization incurred 2 $ 26,828 $ 5,477 $ 2,996 $ 656 $ 35,957 Year Ended December 31, 2020 Potash Trio ® Oilfield Solutions Other Consolidated Sales 1 $ 108,060 $ 70,287 $ 18,929 $ ( 322 ) $ 196,954 Less: Freight costs 17,026 20,431 — ( 322 ) 37,135 Warehousing and handling costs 4,857 4,574 — — 9,431 Cost of goods sold 73,496 50,902 11,445 — 135,843 Lower of cost or NRV inventory adjustments 1,130 2,885 — — 4,015 Gross Margin (Deficit) $ 11,551 $ ( 8,505 ) $ 7,484 $ — $ 10,530 Depreciation, depletion, and amortization incurred 2 $ 26,536 $ 6,068 $ 2,663 $ 843 $ 36,110 1 Segment sales include the sales of byproducts generated during the production of potash and Trio ® . 2 Depreciation, depletion, and amortization incurred for potash and Trio ® excludes depreciation, depletion, and amortization absorbed in or (relieved from) inventory. Total assets are not presented for each reportable segment as they are not reviewed by, nor otherwise regularly provided to, the chief operating decision maker. Note 18 — CONCENTRATION OF CREDIT RISK Credit risk represents the loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. Concentrations of credit risk, whether on- or off-balance sheet, that arise from financial instruments exist for counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Our products are marketed for sale into three primary markets. These markets are the agricultural market as a fertilizer, the industrial market as a component in drilling fluids for oil and gas exploration, and the animal feed market as a nutrient. Credit risks associated with the collection of accounts receivable are primarily related to the impact of external 99 Table of Contents factors on our customers. Our customers are distributors and end-users whose credit worthiness and ability to meet their payment obligations will be affected by factors in their industries and markets. Those factors include soil nutrient levels, crop prices, weather, the type of crops planted, changes in diets, growth in population, the amount of land under cultivation, fuel prices and consumption, oil and gas drilling and completion activity, the demand for biofuels, government policy, and the relative value of currencies. Our industrial sales are significantly influenced by oil and gas drilling activity. In 2022, we had one customer in our potash and Trio ® segments that accounted for approximately $ 35.0 million of our total consolidated revenues. See Item 1A. "Risks Related to Financial Position, Indebtedness and Additional Capital Needs - The loss or substantial decline in revenue from larger customers or certain industries could have a material adverse effect on our revenues, profitability, and liquidity." In 2021, and 2020, no customer accounted for more than 10% of our sales. In each of the last three years ended December 31, 2022, 2021, and 2020, 94 %, 97 %, and 97 %, respectively, of our total sales were sold to customers located in the U.S. All of our long-lived assets are located in the U.S. We maintain cash accounts with several financial institutions. At times, the balances in the accounts may exceed the $250,000 balance insured by the Federal Deposit Insurance Corporation. Note 19 — FINANCIAL 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 short- and long-term investments. Cash and cash equivalents totaled $ 18.5 million and $ 36.5 million at December 31, 2022, and 2021, respectively. In the event that 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. Our other subsidiaries are minor. 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. Note 20 — SHARE REPURCHASE PROGRAM In February of 2022, our Board of Directors approved a $ 35 million share repurchase program. Under the share repurchase program, we may repurchase shares from time to time in the open market or in privately negotiated transactions. The timing, volume and nature of share repurchases, if any, will be at our sole discretion and will be dependent on market conditions, liquidity, applicable securities laws, and other factors. We may suspend or discontinue the share repurchase program at any time. In 2022, we repurchased 608,657 shares of our common stock and paid $ 22.0 million under the share repurchase program. We repurchased no shares of our common stock in 2021 or 2020. As of December 31, 2022, we have approximately $ 13.0 million of remaining availability under the share repurchase program. 100 Table of Contents SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (In thousands) Description Balance at Beginning of Year Charged to Costs and Expenses Deductions Balance at End of Year For the Year Ended December 31, 2020 Allowances deducted from assets Deferred tax assets - valuation allowance $ 211,623 $ 6,320 $ — $ 217,943 Reserve for parts inventory obsolescence 616 492 ( 58 ) 1,050 Allowance for doubtful accounts and other receivables 480 275 ( 200 ) 555 Total allowances deducted from assets $ 212,719 $ 7,087 $ ( 258 ) $ 219,548 For the Year Ended December 31, 2021 Allowances deducted from assets Deferred tax assets - valuation allowance 217,943 — ( 215,910 ) 2,033 Reserve for parts inventory obsolescence 1,050 2,108 — 3,158 Allowance for doubtful accounts and other receivables 555 — — 555 Total allowances deducted from assets $ 219,548 $ 2,108 $ ( 215,910 ) $ 5,746 For the Year Ended December 31, 2022 Allowances deducted from assets Deferred tax assets - valuation allowance 2,033 — — 2,033 Reserve for parts inventory obsolescence 3,158 1,750 ( 3,646 ) 1,262 Allowance for doubtful accounts and other receivables 555 — — 555 Total allowances deducted from assets $ 5,746 $ 1,750 $ ( 3,646 ) $ 3,850 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.