What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-03-07 compared with 2023-03-07 · 206 added, 171 removed, 266 unchanged (59% of the section changed)

11 unchanged sentences

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.

In addition, we produce a specialty fertilizer, Trio ® , which delivers three key nutrients, potassium, magnesium, and sulfur, in a single particle.

We also provide water, magnesium chloride, brine and various oilfield products and services.

5 unchanged sentences

Until mid-2016, we also produced potash from our East and West mines in Carlsbad, New Mexico.

We have permitted, licensed, declared and partially adjudicated water rights in New Mexico under which we sell water primarily to support oil and gas operations and 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 have permitted, licensed, declared and partially adjudicated water rights in New Mexico.

We sell a portion of water from these water rights to support oil and gas operations and development in the Permian Basin.

We continually work to expand our sales of water.

In May 2019, we acquired certain land, water rights, federal and 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 to other companies, where such sales provide a solution to a company's need.

11 unchanged sentences

• Potash pricing and demand.

Potash remained a significant driver of our profitability, comprising 50% of our total sales in 2022.

Our average net realized sales price for potash increased in 2022 to $713 per ton compared to $353 per ton for 2021.

Throughout 2021, strong commodity pricing led to good application rates and multiple price increases during 2021 and the first half of 2022.

Agricultural potash pricing started 2022 at $725 per ton and increased to $800 per ton in April 2022 as Belarusian sanctions and increasing concerns about global potash supply due to Russia's invasion of Ukraine drove further price appreciation.

As a result of the higher pricing and good application rates for potash over the prior year, our customers were reluctant to carry over inventory after the spring season and demand slowed down

considerably in second half of 2022 compared to 2021.

Global demand for potash followed a similar trend in the second half of 2022 leading to ample supply of potash in most markets to end 2022 despite continued strong commodity pricing and favorable farmer economics.

Agricultural potash pricing declined to $480 per ton in January 2023, a price level that has spurred an initial round of orders to start the spring season, although most customers remain cautious to purchase potash for their full spring needs immediately as sufficient supply continues to pressure spot pricing.

Despite the near-term inventory levels, global potash production remains below normal levels due to sanctions on Belarusian potash and reduced production rates.

Canadian producers responded with production increases at existing operations, but we still expect total potash production in 2023 to be below 2021 levels.

In 2023, potash remained a significant driver of our profitability, comprising 47% of our total sales.

Our average net realized sales price for potash decreased in 2023 to $466 per ton compared to $713 per ton for 2022.

Agricultural pricing peaked at $800 per ton in April 2022 as a result of sanctions on Belarusian potash and concerns about global potash supply due to Russia's invasion of Ukraine.

Prices started to decrease in the fall of 2022 as global potash production rates improved.

Agricultural potash pricing was $480 per ton at the beginning of 2023 and decreased from there.

Despite the declining potash price, demand remained strong throughout 2023 with two good

application seasons in the spring and fall supported by above average commodity prices.

In January 2024, a winter-fill agricultural potash program was announced decreasing the list price to $385 per ton in January 2024 during a ten-day order window, before the list price increased by $30 per ton.

We saw a good response to the program and expect distributors will continue to layer in tons as the 2024 spring season continues, with most distributors targeting minimal carryover inventory to end the spring.

We expect to realize the increased price after the order window on certain spot sales in the first quarter of 2024.

Our price expectations could be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases and the price and availability of other potassium products.

2 unchanged sentences

• Trio ® pricing and demand.

Our average net realized sales price for Trio ® increased to $479 per ton in 2022, compared to $295 per ton in 2021, as Trio ® price followed price increases in potash.

Similar to potash trends, buyers were reluctant to hold carryover inventory after the spring season and as potash supply increased in the second half of the year and pricing began to decrease, buyers were reluctant to purchase Trio ® during the fourth quarter of 2022.

In January 2023, we announced an updated Trio ® price of $405 per ton for premium Trio ® , $395 per ton for granular and $365 per ton for standard Trio ® , but supply remains sufficient in most regions and pressure on potash spot prices continues to limit our customers' desire to hold significant inventory that is not committed for immediate application.

Our ability to realize the increased prices may be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases as a result of the COVID-19 pandemic, and the price and availability of other potassium products.

Our average net realized sales price for Trio ® decreased to $321 per ton in 2023, compared to $479 per ton in 2022, as Trio ® price generally followed price decreases in potash.

After the January 2024 price announcement for potash, we maintained our posted Trio ® price of $330 per ton for premium Trio ® , $320 per ton for granular and $290 per ton for standard Trio ® , which is approximately $75 per ton below the price levels in January 2023.

We've seen good subscription for the 2024 spring season and similar to past years we expect distributors to target minimal carryover inventory into summer.

Our ability to realize the increased prices may be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases, and the price and availability of other potassium products.

Overall average net realized sales price per ton for Trio ® will continue to be impacted by the percentage of international sales, particularly to offshore markets.

5 unchanged sentences

• Water sales.

Water sales increased in 2022 to $22.4 million, compared to $22.0 million in 2021 as oilfield activity in the Delaware Basin continued to be supported by strong oil prices.

Although water sales have improved compared to previous years, some operators have switched to using exclusively recycled water or a combination of fresh water and recycled water when completing wells.

We believe this change is due to the growing focus on environmentally responsible operations and a response to the large amounts of produced water that is present in certain basins and formations, such as the Delaware Basin in southeast New Mexico.

Water sales decreased in 2023 to $15.2 million, compared to $22.4 million in 2022.

The decrease is attributable to fewer fracs on our South Ranch and more fresh water used at our HB facility to improve injection rates while we complete the second phase of our new HB injection pipeline.

In addition to fewer fracs on our South Ranch in 2023, we purchased less water for resale resulting in fewer sales but also a corresponding decrease in costs.

In 2023, we purchased $1.4 million of water for resale compared to $6.4 million in 2022.

We continue to see certain operators switch to using exclusively recycled water or a combination of fresh water and recycled water when completing wells.

We believe this change is due to the growing focus on water conservation efforts, environmentally responsible operations and the large amounts of produced water that is present in certain basins and formations, such as the Delaware Basin in southeast New Mexico.

By recycling and reusing produced water, operators are able to reduce freshwater purchases and decrease the cost of transporting and disposing of produced water into disposal wells.

We believe operators are also more focused on reducing the initial capital investment for each well and are switching to lower-cost recycled water despite the potential long-term production advantages of fresh water.

An update to legal proceedings concerning our water rights is contained in Note 14 to our audited consolidated financial statements included in "Item 8.

1 unchanged sentence

• Byproduct sales.

Byproduct sales increased to $26.7 million in 2022 compared to $26.2 million in 2021, as improved brine and salt sales in our potash segment were mostly offset by reduced byproduct magnesium chloride and byproduct water sales.

• Weather impact.

Evaporation rates in 2021 were below average across our facilities which led to decreased potash production in the second half of 2021 and in the spring of 2022 when compared to the prior year.

We received a significant amount of rainfall at our HB facility in Carlsbad, New Mexico late in the summer of 2021, which limited the amount of solids available in our ponds.

As a result of the reduced potash production, we recorded abnormal production costs of $3.6 million and $2.4 million in the third and fourth quarters of 2021, respectively.

Byproduct sales increased to $30.6 million in 2023 compared to $26.7 million in 2022, driven primarily by a $1.7 million increase in magnesium chloride sales at our Wendover facility due to increased pricing.

Byproduct brine sales into oil and gas markets in southeast New Mexico increased $0.9 million during 2023 as we successfully implemented multiple per-barrel price increases in 2023 while continuing to grow sales volumes.

Byproduct water and salt sales both increased $0.7 million compared to the prior year.

• Strategic Focus on our Solar Solution Mining Facilities.

Key current and future projects include:

◦ We successfully commissioned the Eddy Shaft Brine Extraction Project in October 2023 at our HB Solar Solution Mine.

This project targets a significant, high-grade brine pool in the Eddy Cavern that is estimated to contain approximately 270 million gallons of brine at an expected grade of over 9% potassium chloride (“KCl”).

Access to this brine pool immediately increases the brine available to our pond system and we expect to see incremental production contributions starting in the second half of 2024.

◦ We continue to work through the permitting and contracting processes for the replacement extraction well at our HB Solar Solution Mine and expect the well will be commissioned in the second quarter of 2024.

This new extraction well is designed to have a long-term operational life and will initially target approximately

330 million gallons of high-grade brine from the Eddy Cavern at HB, with this additional brine being at lower depths than the Eddy Shaft project can access.

◦ Phase Two of the HB Injection Pipeline Project is the installation of an in-line pigging system to clean the pipeline and remove scaling to help ensure more consistent flow rates.

We continue to work through the permitting requirements with commissioning expected in the first half of 2024, assuming we have no further delays in permitting.

Upon Phase 2 commissioning, we expect our brine injection rates to be the highest in company history, which is key for maximizing brine availability and residence time.

◦ We started construction on a new primary pond in Wendover to increase the brine evaporative area, which will result in two primary ponds when complete.

Similar to our caverns at Moab and HB, the primary ponds at Wendover serve as the brine storage area, and adding another primary pond will help us meet our goals of maximizing brine availability, increasing our brine grade, and improving our production.

We expect this project to be commissioned in the third quarter of 2024.

• Diversification of products and services.

We increased our revenue from other oilfield products and services in 2022, compared to 2021.

As oilfield activity increased in the Delaware Basin throughout 2022, we saw a corresponding

increase in revenue from right-of-way agreements, caliche sales, brine sales, and a produced water royalty.

These sales generated revenue of $11.2 million in 2022, compared to $7.2 million in 2021, and with the exception of our brine sales, incur either minimal or no operating expense.

Our revenue from brine and other oilfield products and services recorded in our oilfield solutions segment increased by $0.6 million in 2023, compared to 2022, mainly driven by an increase in brine sales at Intrepid South.

Brine sales from our HB facility are recorded as byproduct revenue in our potash segment.

Our total brine sales and byproduct brine sales were $8.3 million during 2023, compared to $6.1 million during 2022.

We continue to progress on a sand mine opportunity at Intrepid South and have received all necessary permits to begin construction and full operation.

We are currently evaluating the market and our options, including the potential to add a strategic partner.

Consolidated Results

3 unchanged sentences

Gross Margin $ 36,846 $ 141,408

Income Before Income Taxes 96,509 40,965

Income Tax (Expense) Benefit (24,289) 208,869

Net Income $ 72,220 $ 249,834

(Loss) Income Before Income Taxes (44,062) 96,509

Income Tax Benefit (Expense) 8,389 (24,289)

Net (Loss) Income $ (35,673) $ 72,220

Average Net Realized Sales Price per Ton 2

4 unchanged sentences

Consolidated Results for the Years Ended December 31, 2023, and 2022

Our total sales increased $67.2 million, or 25% in 2022, compared to 2021, as potash segment sales increased $39.6 million, Trio ® segment sales increased $21.8 million, and our oilfield solutions segment sales increased $5.9 million.

Our potash sales increased $38.1 million in 2022, compared to 2021, primarily as our potash average net realized sales price per ton increased 102%, partially offset by a 33% decrease in tons of potash sold.

Generally strong crop prices supported good potash demand and combined with global potash supply concerns due to the uncertainty of potash supplied from Eastern Europe, drove the increase in our average net realized sales price per ton.

Potash tons sold declined in 2022 compared to 2021, as we had fewer tons of potash available to sell during the first half of 2022, and we sold fewer tons during the second half of 2022 as customers were reluctant to purchase tons for the upcoming spring application season due to anticipated price declines.

Our potash segment byproduct sales increased $1.5 million in 2022, due mainly to an increase in byproduct salt and brine water sales, partially offset by a decrease in byproduct magnesium chloride sales.

Our Trio ® sales increased $22.8 million in 2022, compared to 2021, as our Trio ® average net realized sales price per ton increased 62%, partially offset by a 18% decrease in tons of Trio ® sold.

Generally strong crop prices and the relative value of Trio ® compared to potash drove good demand for Trio ® .

Our Trio ® tons sold decreased as we sold fewer tons during the second half of 2022 as, like potash customers, Trio ® customers were reluctant to purchase tons for the upcoming spring application season due to anticipated price declines.

Our Trio ® byproduct sales decreased $1.1 million in 2022, due to a decrease in byproduct water sales.

Our Trio ® byproduct water sales decreased as a larger portion of our total water sales were sourced from our oilfield solution segment.

Our oilfield solutions segment sales increased by $5.9 million in 2022, compared to 2021, as continued robust oil and gas activities near our facilities in New Mexico drove increased demand for our oilfield segment products and services.

Our total sales decreased $58.5 million, or 17% in 2023, compared to 2022, as potash segment sales decreased $35.5 million, Trio ® segment sales decreased $15.6 million, and our oilfield solutions segment sales decreased $7.4 million.

Our total potash segment sales decreased $35.5 million during 2023, compared to 2022, driven by a decrease of $37.4 million in potash sales.

Our potash sales decreased as our potash average net realized sales price per ton decreased 35%, partially offset by a 16% increase in tons of potash sold.

Generally strong crop prices supported good potash demand during 2023.

Potash prices peaked during the second quarter of 2022 and have steadily declined in each succeeding quarter as global production rates and product availability improved.

The decrease in potash sales during 2023 was partially offset by an increase of $1.9 million in potash segment byproduct sales.

The increase in potash segment byproduct sales was due to increased byproduct magnesium chloride sales and increased byproduct brine sales.

Our byproduct magnesium chloride sales increased as we realized higher prices during 2023, compared to 2022.

Our byproduct brine sales increased due to continuing strong oil and gas activities near our facilities in New Mexico during 2023.

Our total Trio ® segment sales decreased by $15.6 million during 2023, compared to 2022, driven by a decrease of $17.6 million in Trio ® sales.

Our Trio ® average net realized sales price per ton decreased 33% during 2023, partially offset by a 16% increase in tons of Trio ® sold.

Similar to potash, Trio ® prices have declined in each succeeding quarter after peaking during the second quarter of 2022.

Generally strong crop prices and lower Trio ® prices drove good demand for Trio ® .

The decrease in Trio ® sales was partially offset by an increase of $2.0 million in Trio ® segment byproduct sales during 2023, as our Trio ® byproduct water sales increased as a larger portion of our total water sales was byproduct water used in our Trio ® production process.

Our oilfield solutions segment sales decreased by $7.4 million in 2023, compared to 2022, mainly driven by a decrease of $7.9 million in water sales during 2023.

Water sales decreased as we purchased $5.0 million less in third-party water for resale in 2023, compared to 2022, and we used more water at our HB facility to improve injection rates while we complete the second phase of our new HB injection pipeline.

Cost of Goods Sold

Our total cost of goods sold decreased $9.1 million, or 6%, in 2022, as compared to 2021.

Our potash segment cost of goods decreased $10.8 million, or 12%, and our Trio ® segment cost of goods sold decreased $0.2 million, partially offset by an increase $1.9 million in our oilfield solutions segment cost of goods sold.

Our potash cost of goods sold mainly decreased due to selling 33% fewer tons of potash in 2022 compared to 2021.

While we sold fewer tons in 2022, our weighted average carrying cost per ton increased as various production costs increased

due to inflationary pressures.

In addition, we produced fewer tons of potash and, because most of our production costs are fixed, a decrease in tons produced causes our weighted average price per ton to increase.

We also incurred increased royalty expense as our potash sales revenue increased during 2022.

Our Trio ® segment cost of goods sold decreased slightly in 2022 compared to 2021.

While we sold 18% fewer tons of Trio ® in 2022, our weighted average carrying costs increased due to operating an additional shift during 2022 and increases in various production costs due to inflationary pressures.

We also incurred increased royalty expense as our Trio ® revenues increased.

Our oilfield solutions segment cost of goods sold increased in 2022, as we incurred increased utility costs due to inflationary pressures, increased depreciation expense related to new infrastructure placed in service in 2022, and increased royalty expense due to an increase in water revenue.

Abnormal Production Costs

During the third quarter of 2021, the Carlsbad, New Mexico area where our HB solar solution mining facility is located, received significant rainfall, well above the historical rainfall average during this period, along with higher than normal humidity and cooler than average temperatures, all of which reduced our pond production and our ability to extract brine.

Because of the wet, humid weather and cooler temperatures, we had fewer harvestable tons of potash from our HB solution ponds.

Accordingly, we recorded abnormal production costs of $6.0 million in 2021.

We did not incur any abnormal production costs in 2022.

Our gross margin percentage increased to 42% in 2022, compared to 21% in 2021.

The increase was driven primarily by an increase in sales revenue due to an increase in our average net realized sales price per ton for both potash and Trio ® , and not incurring any abnormal production costs during 2022.

Our total cost of goods sold increased $35.0 million, or 23%, in 2023, compared to 2022.

Our potash segment cost of goods increased $20.9 million, or 27%, and our Trio ® segment cost of goods sold increased $19.7 million, or 36%, partially offset by a decrease of $5.6 million, or 27%, in our oilfield solutions segment cost of goods sold.

Our potash segment cost of goods sold mainly increased due to selling 16% more tons of potash in 2023, compared to 2022.

In addition to selling more tons of potash in 2023, our weighted average carrying cost per ton increased as production labor costs, including contract labor and benefits, increased in 2023.

We also produced fewer tons of potash during 2023 compared to 2022 and, because most of our production costs are fixed, a decrease in tons produced causes our weighted average price per ton to increase.

Our Trio ® segment cost of goods sold increased in 2023 compared to 2022 as we sold 16% more tons of Trio ® in 2023, and our weighted average carrying costs increased as we incurred more production labor expenses and produced fewer tons compared to the prior year.

Our oilfield solutions segment cost of goods sold decreased in 2023, as we purchased $5.0 million less in third-party water for resale in 2023, compared to 2022.

Lower of Cost or Net Realizable Value Inventory Adjustments

During 2023, we recorded lower of cost or net realizable value inventory adjustments of $6.5 million as our weighted average carrying costs for certain potash and Trio ® products exceeded our expected selling price for those products.

As discussed above, our average net realized sales price per ton for potash and Trio ® declined during 2023, and our weighted average carrying costs for potash and Trio ® increased during 2023.

We did not record any lower of cost or net realizable value inventory adjustments during 2022.

Our gross margin percentage decreased to 13% in 2023, compared to 42% in 2022.

The decrease was driven primarily by a decrease in sales revenue due to decreases in our average net realized sales price per ton for both potash and Trio ® , increases in both potash and Trio ® cost of goods sold, and recording lower of cost or net realizable value inventory adjustments during 2023.

Selling and Administrative Expense

In 2023, selling and administrative expenses increased $0.6 million or 2% from 2023.

The increase in 2022 was due several factors including a $3.1

million increase in equity compensation expense primarily related to certain market-condition awards that had accelerated expense recognition in 2022 because the market-condition for those awards was met sooner than originally estimated.

We incurred increased wages and benefits expense due to generally a company-wide salary increase in early 2022, and we hired additional employees in 2022.

We incurred increased legal expenses primarily relating to continuing legal issues concerning our water rights and other legal issues.

We also saw increased travel and related expenses because our 2021 travel expenses were lower than average due to the continued COVID-19 concerns.

Finally, we incurred an increase in lease expense, as we leased additional office space in 2022.

Gain (Loss) on Sale or Disposal of Assets

During 2022, we recorded a $7.5 million loss on the sale or disposal of assets compared to a gain of $2.5 million during 2021.

The increase in 2023 was due mainly to increases in labor and benefits expense as a result of salary increases given to employees in April 2023.

Impairment of Long-Lived Assets

During the year ended December 31, 2023, we recorded total impairment charges of $43.3 million.

During the year ended December 31, 2022, we recorded no impairment charges.

In the fourth quarter of 2023, given the decrease in our gross margin for our Trio ® segment we determined that sufficient indicators of potential impairment of our Trio ® segment long-lived assets existed.

We performed a recoverability test and determined that the carrying value of our Trio ® segment long-lived assets was not recoverable.

We engaged a third-party valuation firm to determine the fair value of our Trio ® segment assets.

The fair value of our Trio ® segment assets was primarily determined using the expected proceeds received in an orderly sale of the individual assets.

The carrying value of our Trio ® segment asset group exceeded its fair value, and we recorded an impairment charge of $31.9 million.

Our long-lived assets at our West facility have been in care and maintenance since July 2016.

Given the length of time since the assets were placed in care and maintenance, we engaged a third-party valuation firm to determine if the fair value of the West assets supports the carrying value of those assets.

The fair value of the West assets was determined using the expected proceeds received in an orderly sale of the individual assets.

The carrying value of the West assets exceeded the fair value of those assets, and we recorded an impairment charge of $9.9 million during the fourth quarter of 2023.

Finally, during 2023, we recorded impairment charges of $1.5 million related to certain assets in our Oilfield Solutions Segment, specifically certain water recycling equipment and an investment in a non-operating interest in an oil and gas investment.

Loss on Sale or Disposal of Assets

During 2023, we recorded a $0.8 million loss on the sale or disposal of assets in the normal course of business, compared to a loss of $7.5 million during 2022.

During the fourth quarter of 2022, we worked on drilling a new extraction well for our HB solar solution mine.

During the drilling process, the planned well failed and we expensed approximately $6.2 million of costs related to the project.

During the drilling process, the planned well failed and we expensed approximately $6.2

million of costs related to the project.

In addition, we also incurred approximately $1.2 million in losses related to the disposal of various other assets in the normal course of business.

In May 2021, we sold 326 acres of land in Texas for $6.0 million and recognized a gain on the sale of the land of $2.8 million.

We purchased this land in May 2019 for the development of a produced water disposal facility and had permitted two disposal wells on the property.

Other Operating Expense

In 2023, we recognized other operating expense of $2.2 million compared to $4.7 million in 2022.

During 2022, we recorded $1.8 million of additions in our allowance for obsolete inventory, accrued $1.7 million for fines and penalties related to an encroachment of surface minerals at Intrepid South, $1.6 million related to potential underpayment of royalties found during an ongoing royalty audit by the Department of the Interior's Office of Natural Resources Revenue ("ONRR") and care and maintenance expenses of $0.6 million.

During 2021, we recorded care and maintenance expenses of $0.6 million that were partially offset by other operating income of $0.4 million related to earning certain contractual bonuses on a project to modify the tailings pond at our West facility.

We modified our West tailings pond to allow for the construction of an underground natural gas pipeline near our West facility.

Interest Expense

Interest expense decreased $1.4 million in 2022, compared to 2021, as we repaid the outstanding balance of our Series B Senior Notes in June 2021, and we repaid the outstanding balance on our credit facility in early August 2021.

We had no outstanding long-term debt or an outstanding balance on our credit facility during 2022.

Gain on Extinguishment of Debt

In April 2020, we received a $10 million loan under the CARES Act Paycheck Protection Program (the "PPP").

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.

During 2022 we recorded income tax expense of $24.3 million compared to an income tax benefit of $208.9 million in 2021.

During 2021, our valuation allowance for deferred tax assets decreased as we released $215.9 million from the valuation allowance during the fourth quarter.

We released the valuation allowance because our long-term projection of future taxable income indicated that we will be able to realize the value of most of our deferred tax assets in the future.

Our 2022 net income decreased $177.6 million to $72.2 million.

The decrease was primarily due to the income tax benefit recorded in 2021 of $208.9 million related to releasing $215.9 million of our valuation allowance for deferred taxes, and recording a $10.1 million gain related to the forgiveness of the PPP loan, partially offset by the improvement in our 2022 gross margin, as discussed above.

Excluding the release of our valuation allowance for deferred taxes and the gain related to the forgiveness of our PPP loan, our net income would have been approximately $30.9

million in 2021.

During 2023, we recorded an additional $1.0 million for fines and penalties related to a trespass on federal surface minerals at Intrepid South.

We settled this trespass issue with the BLM during 2023, and the matter is now closed.

We also recorded $0.5 million of additions in our allowance for obsolete inventory, $0.5 million in care and maintenance expenses and we accrued $0.4 million related to a potential violation of one of our environmental permits.

During 2022, we recorded $1.8 million of additions in our allowance for obsolete inventory, accrued $1.7 million for fines and penalties related to a trespass on federal surface minerals at Intrepid South, $1.6 million related to potential underpayment of royalties found during an ongoing royalty audit by the Department of the Interior's Office of Natural Resources Revenue ("ONRR") and care and maintenance expenses of $0.6 million.

During 2023 we recorded income tax benefit of $8.4 million compared to an income tax expense of $24.3 million in 2022.

During 2023, we recorded a $1.1 million valuation allowance against certain state net operating loss carryforwards due to a change in the forecast of the amount of the loss carryforwards that may be used before expiration.

Our 2023 net income decreased $107.9 million to a net loss of $35.7 million.

The decrease was primarily due to the decreased gross margins in our potash and Trio ® segments and the impairment expense recorded in 2023.

Potash Segment Results

5 unchanged sentences

Cost of goods sold 97,452 76,524

Costs associated with abnormal production and other — 5,973

Lower of cost or NRV inventory adjustments 2,709 —

Gross Margin $ 35,049 $ 94,769

9 unchanged sentences

Potash Segment Results for the Years Ended December 31, 2023, and 2022

Our total potash segment sales in 2022 increased $39.6 million, or 26%, as compared to 2021, as potash sales recorded in the potash segment increased 29% and potash segment byproduct sales increased 7%.

Potash sales recorded in the potash segment increased $38.1 million, or 29%, in 2022 compared to 2021, as the average potash net realized sales price per ton increased 102%, partially offset by a 33% decrease in potash tons sold.

Generally strong crop commodity prices combined with global potash supply concerns due to the uncertainty of potash supplied from Eastern Europe drove the increase in our average potash net realized sales price per ton.

We sold 33% fewer tons of potash in

2022 as our agricultural customers were reluctant to purchase potash during the second half of 2022 that was not committed for immediate application.

Potash segment byproduct sales increased $1.5 million, or 7%, in 2022 compared to 2021, due to a $3.4 million increase in byproduct salt sales, a $1.6 million increase in byproduct brine water sales, partially offset by a $3.1 million decrease in byproduct magnesium chloride sales and a $0.4 million decrease in byproduct water sales.

Our salt sales increased as we increased sales in the industrial salt market in 2022.

Our byproduct brine water sales increased due to increased oil and gas activities near our facilities in New Mexico during 2022.

Our magnesium chloride sales decreased as mild winter weather in various parts of the U.S.

in the early part of 2022, followed by wet spring weather reduced demand for magnesium chloride used as a deicing agent in the winter months and as a dedusting agent in the spring and summer months.

Our potash byproduct water sales decreased as a larger percentage of our water sales were from our Intrepid South property.

Water that is used in the production of potash is recorded as byproduct revenue in our potash segment and water sold from our Intrepid South property is recorded as revenue in our oilfield solutions segment.

Generally, the source from where we sell water is based on the location that is nearest to the location where a customer needs the water.

Potash cost of goods sold decreased $10.8 million, or 12%, in 2022, compared to 2021, mainly due to a 33% decrease in potash tons sold.

While our potash tons sold decreased 33% in 2022, our weighted average carrying cost per ton increased due to increased royalties as our sales revenue increased, an increase in labor and benefits expense due to a company-wide salary increase in early 2022, and increased utility expenses due to inflationary pressures and we incurred increased property taxes, and insurance expenses.

Additionally, reduced production at our HB facility also increased our per ton of cost of goods sold because most of our production costs are fixed.

Potash segment freight expense decreased 15%, in 2022, compared to 2021, mainly related to selling 33% fewer tons of potash, partially offset by increased freight rates.

Our freight expense is also impacted by the rates charged by carriers, geographic distribution of our products and by the proportion of customers arranging for and paying their own freight costs.

We produced 6% fewer tons of potash during 2022 compared to 2021, as our potash production declined during the first half of 2022, because we had fewer harvestable tons of potash in our HB solution ponds after the abnormally wet weather in the Carlsbad, New Mexico area during the summer of 2021.

Because of the abnormally wet weather during the summer of 2021, we recorded $6.0 million of abnormal production costs in 2021.

We did not record any abnormal production costs in 2022.

Our potash segment gross margin increased $58.9 million in 2022, compared to 2021, due to the $39.6 million increase in potash segment sales, decreases in our cost of goods sold and freight expenses, and not incurring abnormal production costs.

Our total potash segment sales in 2023 decreased $35.5 million, or 19%, compared to 2022, as potash sales recorded in the potash segment decreased 22%, partially offset by an 8% increase in potash segment byproduct sales.

Potash sales recorded in the potash segment decreased $37.4 million, or 22%, in 2023 compared to 2022, as our potash average net realized sales price per ton decreased 35%, partially offset by a 16% increase in potash tons sold.

Potash prices peaked during the second quarter of 2022 and steadily declined in each succeeding quarter as global production rates and

product availability improved.

Our potash tons sold increased in 2023, as supporting farm commodity prices and lower potash prices continued to drive solid demand.

Potash segment byproduct sales increased $1.9 million, or 8%, in 2023 compared to 2022, due to a $1.7 million increase in byproduct magnesium chloride sales, a $0.9 million increase in byproduct brine sales, a $0.7 million increase in potash byproduct salt sales, partially offset by a decrease of $1.3 million in potash byproduct water sales.

Our byproduct magnesium chloride sales increased as we realized higher prices during 2023, compared to 2022.

Our byproduct brine sales increased due to continuing strong oil and gas activities near our facilities in New Mexico during 2023.

Our byproduct salt sales increased due to strong demand from feed and industrial salt customers and higher realized pricing during 2023.

Our potash byproduct water sales decreased as we had less byproduct water to sell because we used more water at our HB facility to improve injection rates as we work to complete the second phase of our new HB injection pipeline.

Potash cost of goods sold increased $20.9 million, or 27%, in 2023, compared to 2022, mainly due to a 16% increase in potash tons sold.

In addition, our weighted average carrying cost per ton increased mainly due to a 15%, or $3.8 million increase in production labor, contract labor, and benefits expenses in 2023.

Our total tons of potash produced decreased 17% in 2023, compared to 2022, which also increased our per ton production costs.

Because most of our production costs are fixed, decreases in tons produced result in higher per ton costs.

Potash segment freight expenses were virtually unchanged in 2023, compared to 2022, even though we sold 16% more tons of potash.

Increases in potash freight expense from selling more tons of potash in 2023 were offset by a decrease in freight expense associated with our potash byproduct salt sales.

Our freight expense is impacted by the rates charged by carriers, geographic distribution of our products and by the proportion of customers arranging for and paying their own freight costs.

We produced 17% fewer tons of potash during 2023 compared to 2022, due to reduced brine grades at our HB and Wendover facilities.

During 2023, we recorded $2.7 million in lower of cost or net realizable value inventory adjustments as our weighted average carry cost per ton exceeded our expected net realizable value per potash ton.

As discussed above, our potash average net realized sales price per ton decreased during 2023 while our weighted average carrying cost per ton increased in 2023.

We did not record any lower of cost or net realizable value inventory adjustments during 2022.

Our potash segment gross margin decreased $59.7 million in 2023, compared to 2022, due to the $35.5 million decrease in potash segment sales, increased cost of goods sold expense, and recording lower of cost or net realizable value inventory adjustments, as discussed above.

Our long-lived assets at our West facility have been in care and maintenance since July 2016.

The fair value of the West assets was determined using the expected proceeds received in an orderly sale of the individual assets.

The carrying value of the West assets exceeded the fair value of those assets, and we recorded an impairment charge of $9.9 million during the fourth quarter of 2023.

Potash Segment - Additional Information

12 unchanged sentences

74,308 54,600

Gross Margin $ 39,123 $ 16,442

Lower of cost or NRV inventory adjustments

Gross (Deficit) Margin $ (3,995) $ 39,123

Depreciation, Depletion, and Amortization incurred 2

8 unchanged sentences

Trio ® Segment Results for the Years Ended December 31, 2023, and 2022

Our total Trio ® segment sales increased $21.8 million, or 23%, in 2022, as compared to 2021, as Trio ® sales increased 25%, partially offset by a 22% decrease in Trio ® segment byproduct sales.

Our 2022 Trio ® sales increased $22.8 million, or 25%, in 2022, as compared to 2021, as our average net realized sales price per ton increased 62%, partially offset by an 18% decrease in Trio ® tons sold.

Our Trio ® average net realized sales price per ton increased as generally strong crop prices and the relative value of Trio ® compared to potash drove good demand for Trio ® .

Our Trio ® byproduct sales decreased $1.1 million in 2022, due to a decrease in byproduct water sales.

Our Trio ® byproduct water sales decreased as a larger portion of our total water sales were sourced from our Intrepid South property and recorded in our oilfield solution segment.

Trio ® freight costs decreased 5% in 2022, compared to 2021, mainly related to selling 18% fewer tons of Trio ® , partially offset by increased international sales and increased freight rates.

We incur more freight expense on our international Trio ® sales compared to our domestic Trio ® sales.

Our total Trio ® segment sales decreased $15.6 million, or 13%, in 2023, as compared to 2022, as Trio ® sales decreased $17.6 million, or 15%, partially offset by a $2.0 million increase, or 51%, in Trio ® segment byproduct sales.

Our 2023 Trio ® sales decreased $17.6 million, or 15%, in 2023, as compared to 2022, as our average net realized sales price per ton decreased 33%, partially offset by a 16% increase in Trio ® tons sold.

Similar to potash, Trio ® prices peaked during the second quarter of 2022, and steadily declined in each succeeding quarter as global production rates and product availability of potassium fertilizers improved.

Our increase in tons sold in 2023 benefited from the reduced sales volumes we experienced in the second half of 2022, as customers delayed purchases in anticipation of lower price levels combined with overall strong commodity prices throughout 2023.

Our Trio ® byproduct sales increased $2.0 million in 2023 due to an increase in byproduct water sales.

Trio ® freight costs increased 18% in 2023, compared to 2022, mainly related to a 16% increase in Trio ® tons sold.

Our freight expense is impacted by the geographic distribution of our Trio ® sales and by the proportion of customers arranging for and paying their own freight costs.

Generally, our Trio ® freight expense is higher than our potash freight expense because we generally sell potash to regional customers located closer to our production facilities.

Our Trio ® cost of goods sold decreased slightly in 2022, as compared to 2021.

While we sold 18% fewer Trio ® tons in 2022, our weighted average carrying cost per ton of Trio ® increased as we incurred increased contract labor expenses to operate an additional shift in 2022.

We also incurred higher labor and benefits expenses due to a company-wide salary increase in early 2022, increased royalty expense due to increased sales revenues, increased utility expenses due to inflationary pressures, and we incurred increased property taxes and insurance expenses.

Our Trio ® segment gross margin increased $22.7 million in 2022, compared 2021, mainly due to the increase in our Trio ® average net realized sales price as discussed above.

Generally, our Trio ® freight expense is higher than our potash freight expense because we sell potash to regional customers located closer to our production facilities.

Our Trio ® segment cost of goods sold increased 36% in 2023, compared to 2022, driven by a 16% increase in Trio ® tons sold combined with an increase in our per-ton production costs.

We also began 2023 with a higher average cost per ton of inventory compared to 2022.

Our Trio ® production costs increased in 2023, compared to the prior year, due to a 6%, or $1.8 million, increase in labor and benefits, a 12%, or $1.8 million, increase in operating and maintenance supplies, a 49%, or $1.8 million increase in depreciation due to increased capital investments, and a 61%, or $1.0 million increase in property taxes and insurance, partially offset by a 22%, or $1.0 million decrease in royalty expense due to decreased sales revenue.

We recorded $3.8 million in lower of cost or net realizable value inventory adjustments in 2023, due to increased carrying costs of our Trio ® inventory and lower realized prices compared to 2022.

Our Trio ® segment gross margin decreased $43.1 million in 2023, compared 2022, due to the factors discussed above.

We performed a recoverability test and determined that the carrying value of our Trio ® segment long-lived assets was not recoverable.

We engaged a third-party valuation firm to determine the fair value of our Trio ® segment assets.

The fair value of our Trio ® segment assets was primarily determined using the expected proceeds received in an orderly sale of the individual assets.

The carrying value of our Trio ® segment asset group exceeded its fair value of those assets, and we recorded an impairment charge of $31.9 million.

Trio ® Segment - Additional Information

12 unchanged sentences

Oilfield Solutions Segment Results for the Years Ended December 31, 2023, and 2022

Our oilfield solutions segment sales increased 26% in 2022, compared to 2021.

Water sales increased $1.9 million in 2022 to $17.5 million.

Sales from right-of-way agreements, surface damages and easements increased $1.9 million, brine water sales increased $1.5 million, and produced water disposal royalties increased $0.5 million.

Our oilfield solutions sales are highly correlated to oil and gas activities near our facilities in New Mexico.

Overall sales increased due to increased oil and gas activities in 2022, compared to 2021, as oil prices continued to support oil and gas exploration activities in the Permian Basin near our Intrepid South property in southeast New Mexico.

Cost of goods sold increased 10% in 2022, compared to 2021, as we incurred increased contract labor expenses to meet the additional demand for our oilfield solution segment products and services.

We also incurred increased utility costs due to inflationary pressures, increased depreciation related to new infrastructure placed in service in 2022, and increased royalty expense due to increased water revenue.

Gross margin increased $4.0 million, or 116%, in 2022 compared to 2021, due to the factors described above.

Our oilfield solutions segment sales decreased 26% in 2023, compared to 2022.

Water sales decreased $7.9 million in 2023 to $9.6 million, and revenue from right-of-way agreements, surface damages and easements decreased $0.7 million.

Brine sales increased $1.4 million, and produced water disposal royalties increased $0.1 million during 2023, compared to 2022.

Water sales decreased as we purchased $5.0 million less in third-party water for resale in 2023, compared to 2022 and we used more water at our HB facility to improve injection rates while we complete the second phase of our new HB injection pipeline.

Brine sales increased $1.4 million as we sold increased volumes of brine at a higher per-barrel price in 2023, compared to 2022.

Oilfield solutions sales are highly correlated to oil and gas activities near our facilities in New Mexico and oil prices continued to support oil and gas exploration activities in the Permian Basin near our Intrepid South property in southeast New Mexico during 2023.

Cost of goods sold decreased 27% in 2023, compared to 2022, primarily due to a $5.0 million decrease in third-party water purchased for resale.

We incurred $0.6 million in increased labor and benefits expenses and a $0.6 million increase in depreciation related to new infrastructure placed in service in 2023, compared to 2022.

These increased costs were partially offset by a $0.5 million decrease in royalty expense in 2023, compared to 2022, due to reduced water sales.

Gross margin decreased $1.7 million, or 23%, in 2023 compared to 2022, due to the factors described above.

Specific Factors Affecting Our Results

9 unchanged sentences

The volume of product we sell is determined by demand for our products and by our production capabilities.

We operate our potash and Trio ® facilities at production levels that approximate expected demand and take into account current inventory levels and expect to continue to do so for the foreseeable future.

We operate our potash and Trio ® facilities at production levels that approximate expected demand and consider current inventory levels and expect to continue to do so for the foreseeable future.

Our water sales and other products and services offered through our oilfield solutions segment are driven by demand from oil and gas exploration companies drilling in the Permian Basin.

5 unchanged sentences

Our principal production costs include labor and employee benefits, maintenance materials, contract labor, and materials for operating or maintenance projects, natural gas, electricity, operating supplies, chemicals, depreciation and depletion, royalties, and leasing costs.

Some elements of our cost structure associated with contract labor, consumable operating supplies, reagents, and royalties are variable, but such elements make up a smaller

component of our cost base.

Some elements of our cost structure associated with contract labor, consumable operating supplies, reagents, and royalties are variable, but such elements make up a smaller component of our cost base.

Our costs often vary from period to period based on the fluctuation of inventory, sales, and production levels at our facilities.

3 unchanged sentences

These payments typically equal a percentage of sales (less freight) of minerals extracted and sold under the applicable lease.

In some cases, federal royalties for potash are paid on a sliding scale that vary with the grade of ore extracted.

In some cases, federal royalties for potash are paid on a sliding scale that varies with the grade of ore extracted.

Our average royalty rate was 4.9%, 4.8%, and 4.7% in 2023, 2022, and 2021, respectively.

12 unchanged sentences

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.

We have concluded a valuation allowance of $2.0 million was required as of December 31, 2022, and December 31, 2021.

The amount of valuation allowance was the same in 2022 as compared to 2021.

We have concluded a valuation allowance of $3.2 million was required as of December 31, 2023, and $2.0 million as of December 31, 2022.

The amount of valuation allowance increased in 2023 as compared to 2022, due to a change in the forecast of the amount of state net operating losses that may be used before expiration.

Our effective tax rate for the years ended December 31, 2023, 2022, and 2021 was 19.0%, 25.2%, and (509.9)%, respectively.

Our effective income tax rates are impacted primarily by changes in the underlying tax rates in jurisdictions in which we are subject to income tax, the need for a valuation allowance or release, and permanent differences between book and tax income for the period, including the benefit associated with the estimated effect of the percentage depletion deduction.

The effective tax rate for the year ended December 31, 2023, differs from the U.S.

federal statutory rate primarily due to state income taxes, while the effective tax rate for the years ended December 31, 2021, and 2020, differs from the U.S.

federal statutory rate due to the change in valuation allowance.

federal statutory rate primarily due to the change in the valuation allowance.

The effective tax rate for the years ended December 31, 2022, and 2021, differs from the U.S.

federal statutory rate due to state income taxes, and the change in valuation allowance, respectively.

During the year ended December 31, 2023, we recognized $8.5 million of deferred federal tax benefit, $0.1 million of deferred state tax expense, and $0.1 million of current state income tax expense.

During the year ended December 31, 2022, we recognized $19.4 million of deferred federal tax expense, $3.9 million of deferred state tax expense and $1.0 million of current state income tax expense.

During the year ended December 31, 2021, we recognized $157.3 million of deferred federal tax benefit, $51.7 million of deferred state tax benefit and $0.2 million of current state income tax expense.

For the year ended December 31, 2020, we recognized an immaterial amount of income tax expense.

For the year ended December 31, 2021, we recognized $157.3 million deferred federal tax benefit, $51.7 million of deferred state tax benefit and $0.2 million of current state income tax expense.

The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted most significantly by the states in which we conduct business.

4 unchanged sentences

A valuation allowance is recognized for deferred tax assets if it is more likely than not that a portion or all of the net deferred tax assets will not be realized.

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning

strategies, and results of recent operations.

As of December 31, 2023, we were in a cumulative three-year income position.

4 unchanged sentences

Our operations have primarily been funded from cash on hand, cash generated by operations, and proceeds from debt and equity offerings.

During 2022, we generated $88.8 million in cash flows from operating activities and we ended the year with $18.5 million of cash and cash equivalents, compared with cash on hand of $36.5 million at December 31, 2021.

As of December 31, 2022, we had $149.0 million available to borrow under our credit facility, no outstanding borrowings, and $1.0 million outstanding in a lette r of credit.

During 2023, we generated $43.2 million in cash flows from operating activities and we ended the year with $4.1 million of cash and cash equivalents, compared with $18.5 million at December 31, 2022.

As of December 31, 2023, we had $146.0 million available to borrow under our credit facility, $4.0 million in outstanding borrowings, and no outstanding lette rs of credit.

With the remaining availability under our credit facility and expected cash generated from operations, we believe we have sufficient liquidity to meet our obligations for the next twelve months.

1 unchanged sentence

We may, at any time we deem conditions favorable, attempt to improve our liquidity position by accessing debt or equity markets in accordance with our existing revolving credit agreement.

We also may raise capital in the future through the issuance of additional equity or debt securities, subject to prevailing market conditions.

We may also raise capital in the future through the issuance of additional equity or debt securities, subject to prevailing market conditions.

However, there is no assurance that we will be able to successfully raise additional capital on acceptable terms or at all.

4 unchanged sentences

Cash flows used in investing activities $ (59,554) $ (79,179)

Cash flows used in financing activities $ (27,704) $ (47,282)

Cash flows provided by (used in) financing activities $ 1,892 $ (27,704)

Our revolving credit agreement contains restrictions on our ability to declare and pay dividends.

1 unchanged sentence

Operating Activities

Total cash provided by operating activities for the year ended December 31, 2022, was $88.8 million, an increase of $9.8 million compared with the year ended December 31, 2021.

The increase was mainly driven by an increased potash and Trio ® net realized sales price partially offset by reduced sales volumes of both potash and Trio ® .

Operating cash flows included a $32.6 million refund paid in September 2022 of a customer's prepayment for future water deliveries.

Total cash provided by operating activities for the year ended December 31, 2023, was $43.2 million, a decrease of $45.6 million compared with the year ended December 31, 2022.

The decrease was mainly driven by decreased potash and Trio ® net realized sales prices.

Prior year operating cash flows included a $32.6 million refund paid in September 2022 of a customer's prepayment for future water deliveries.

Investing Activities

Total cash used in investing activities increased $64.4 million in 2022, compared to 2021, primarily related to a $48.9 million increase in additions to property, plant, equipment, and mineral properties.

Purchases of investments increased $12.0 million compared to the prior year primarily due to investments in investment grade, short-term debt instruments.

In May 2021, we sold 326 acres of land in Texas that was adjacent to our South ranch for $6.0 million.

This land was originally purchased in May 2019 for the potential development of a produced water disposal facility.

Proceeds from the sale of property, plant, equipment, and mineral properties totaled $4.8 million during 2020 due primarily to a strategic sale of land on our Intrepid South property.

Total cash used in investing activities decreased $19.6 million in 2023, compared to 2022, primarily a result of an $11.6 million decrease in purchases of investments compared to the prior year.

In 2022, we invested $13.0 million of cash in investment grade, short-term debt instruments.

Additions to property, plant, equipment, and mineral properties also decreased $3.5 million in 2023, compared to the prior year.

Proceeds from the redemption/maturity of investments increased $3.5 million in 2023, compared to 2022.

Financing Activities

Total cash flows used in financing activities decreased $19.6 million in 2022, as compared to 2021.

Total cash flows provided by financing activities increased $29.6 million in 2023, as compared to 2022.

During 2022, we paid $22.0 million under a share repurchase program.

We did not repurchase any shares in 2023.

During 2021, we made payments under our credit facility of $29.8 million and in June 2021, we paid $15.6 million, including the make-whole payment, to retire our Series B Senior Notes.

Proceeds from borrowings on the credit facility (net of repayments) increased $4.0 million and employee tax withholding paid for restricted shares upon vesting decreased $3.3 million in 2023, compared to the prior year.

We did not have any outstanding borrowings under our credit facility in 2022.

4 unchanged sentences

We may suspend or discontinue the share repurchase program at any time.

We made no repurchases of shares for the twelve months ended December 31, 2023.

For the twelve months ended December 31, 2022, we repurchased 608,657 shares with a total cost of $22.0 million, or a weighted average price per share of $36.17.

As of December 31, 2023, we have approximately $13.0 million of remaining availability under the share repurchase program.

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.

Credit Facility

4 unchanged sentences

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 or repayments under the facility.

For the year ended December 31, 2021, we made no borrowings and made $29.8 million 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.

For the year ended December 31, 2023, we made $9.0 million in borrowings and $5.0 million in repayments under the facility.

For the year ended December 31, 2022, we made no borrowings and made no repayments under the facility.

As of December 31, 2023, we had $4.0 million in borrowings outstanding and no outstanding letters of credit under the facility.

As of December 31, 2022, we had no borrowings outstanding and $1.0 million in an outstanding letter of credit under the facility.

We had $146.0 million available under the facility as of December 31, 2023.

3 unchanged sentences

We expect to make capital investments in 2024 of $40 million to $50 million.

We anticipate spending approximately $25 million to $35 million on sustaining capital projects in 2023, with the remainder of our estimated spending on opportunity projects.

We have significant discretion over our opportunity capital investments in 2023 and we may adjust our investment plans as our expectations for 2023 change.

We anticipate spending approximately $20 million to $25 million on sustaining capital projects in 2024, with the remainder of our estimated spending on opportunity projects, which include the completion of phase two of our new HB injection pipeline project, a new extraction well at our HB mine, and a new primary pond at our Wendover facility.

We may adjust our investment plans as our expectations for 2024 change.

We anticipate our 2024 operating plans and capital programs will be funded out of operating cash flows and existing cash.

7 unchanged sentences

We believe the following accounting policies include a higher degree of subjective and complex judgments in their application and are most critical to aid in fully understanding and evaluating our reported financial condition and results of operations.

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.

In 2023, we recorded an impairment charge for long-lived assets and mineral properties at two of our facilities in New Mexico.

The impairment charge equals the difference between the carrying value of the assets or asset group and the estimated fair value of the assets or asset group.

We estimated the fair value of mineral properties using a discounted cash flow technique and we used the estimated fair value of the other assets using estimated proceeds received in an orderly sale of these assets.

Significant estimates used in the estimated fair values include inputs to arrive at estimated net cash flows, such as product selling prices, volumes of product sold, and production costs.

Estimated proceeds received in an orderly sale of an asset have a high degree of subjectivity and actual proceeds received in an orderly sale of assets may vary from the estimates used, which may result in further impairment charges.

Reserves and Resources

3 unchanged sentences

Market price fluctuations of potash or Trio ® , as well as increased production costs or reduced recovery rates, could render resources and reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of resources and reserves.

We updated our mineral reserves and resources as of December 31, 2023, and we determined we do not have any mineral reserves at our East facility because the mineral deposit could not be economically extracted.

All mineral deposits at our East facility are categorized as a mineral resource.

A mineral reserve is defined as that part of a mineral deposit which can be economically and legally extracted.

A mineral resource refers to a concentration or occurrence of material deposits of economic interest.

We deplete our mineral properties using the units-of-production method.

41 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis