Intrepid Potash, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Stockholders and the 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, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, 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, 2023 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 71 Table of Contents 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. 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 Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate 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 critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Realizability of deferred 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, 2023, the Company had gross deferred tax assets of $197.4 million and a related valuation allowance of $3.2 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. Impairment of long-lived assets As discussed in Note 2 to the consolidated financial statements, the Company evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable. As discussed in Note 6, during the fourth quarter of 2023, the gross margin of the Trio ® segment decreased and the Company determined that sufficient indicators of potential impairment of the Trio ® segment long-lived assets existed. The Company engaged a third-party valuation firm to determine the fair value of the Trio ® segment assets. The carrying value of the Trio ® segment asset group exceeded its fair value, and the Company recognized impairment charges of $31.9 million. Additionally, given the length of time since the West facility had been placed in care and maintenance, the Company engaged a third-party valuation firm to determine the fair value of the West assets. The carrying value of the West asset group exceeded its fair value, and the Company recognized impairment charges of $9.9 million. The fair value of the Trio ® segment assets and the West assets were determined primarily using the expected proceeds received in an orderly sale of individual assets. We identified the evaluation of the fair value of certain assets included in the impairment of the Trio ® segment and West assets as a critical audit matter. Challenging and subjective auditor judgment was required in assessing the liquidation factors used to develop the orderly liquidation values as there is not a liquid secondary market for certain specialized assets. The evaluation of the liquidation factors required specialized skills and knowledge. 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 long-lived asset impairment process. This included a control related to the Company’s determination of the liquidation factors used to develop the orderly 72 Table of Contents liquidation values for certain assets. We involved valuation professionals with specialized skills and knowledge, who assisted in: • evaluating whether the valuation techniques used by the Company to develop the fair value for certain assets were reasonable and consistent with common valuation practice given the nature of the assets • assessing the Company’s orderly liquidation values by developing independent estimates of the orderly liquidation values using third-party data and independently developed liquidation factors and comparing the amounts to the Company’s estimates. /s/ KPMG LLP We have served as the Company's auditor since 2007. Denver, Colorado March 7, 2024 73 Table of Contents INTREPID POTASH, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 31, 2023 2022 ASSETS Cash and cash equivalents $ 4,071 $ 18,514 Short-term investments 2,970 5,959 Accounts receivable: Trade, net 22,077 26,737 Other receivables, net 1,374 790 Inventory, net 114,252 114,816 Other current assets 7,200 4,863 Total current assets 151,944 171,679 Property, plant, equipment, and mineral properties, net 358,249 375,630 Water rights 19,184 19,184 Long-term parts inventory, net 30,231 24,823 Long-term investments 6,627 9,841 Other assets, net 8,016 7,294 Non-current deferred tax asset, net 194,223 185,752 Total Assets $ 768,474 $ 794,203 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 12,848 $ 18,645 Income taxes payable 40 8 Accrued liabilities 19,061 16,212 Accrued employee compensation and benefits 7,254 6,975 Other current liabilities 7,265 7,036 Total current liabilities 46,468 48,876 Advances on credit facility 4,000 — Asset retirement obligation 30,077 26,564 Operating lease liabilities 741 2,206 Finance lease liabilities 1,451 — Other non-current liabilities 1,309 1,479 Total Liabilities 84,046 79,125 Commitments and Contingencies Common stock, $ 0.001 par value; 40,000,000 shares authorized: and 12,807,316 and 12,687,822 shares outstanding at December 31, 2023 and 2022, respectively 13 13 Additional paid-in capital 665,637 660,614 Retained earnings 40,790 76,463 Less treasury stock, at cost ( 22,012 ) ( 22,012 ) Total Stockholders' Equity 684,428 715,078 Total Liabilities and Stockholders' Equity $ 768,474 $ 794,203 See accompanying notes to these consolidated financial statements. 74 Table of Contents INTREPID POTASH, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share amounts) Year Ended December 31, 2023 2022 2021 Sales $ 279,083 $ 337,568 $ 270,332 Less: Freight costs 37,635 34,137 37,892 Warehousing and handling costs 10,832 9,747 9,282 Cost of goods sold 187,278 152,276 161,421 Lower of cost or net realizable value inventory adjustments 6,492 — — Costs associated with abnormal production — — 5,973 Gross Margin 36,846 141,408 55,764 Selling and administrative 32,423 31,799 23,998 Accretion of asset retirement obligation 2,140 1,961 1,858 Impairment of long-lived assets 43,288 — — Loss (gain) on sale or disposal of assets 807 7,470 ( 2,542 ) Other operating expense 2,157 4,738 178 Operating (Loss) Income ( 43,969 ) 95,440 32,272 Other Income (Expense) Equity in earnings of unconsolidated entities ( 486 ) 689 — Interest expense, net — ( 101 ) ( 1,468 ) Interest income 298 176 — Other income 95 305 48 Gain on extinguishment of debt — — 10,113 (Loss) Income Before Income Taxes ( 44,062 ) 96,509 40,965 Income Tax Benefit (Expense) 8,389 ( 24,289 ) 208,869 Net (Loss) Income $ ( 35,673 ) $ 72,220 $ 249,834 Weighted Average Shares Outstanding: Basic 12,760,937 13,151,752 13,098,871 Diluted 12,760,937 13,452,233 13,391,362 (Loss) Income Per Share: Basic $ ( 2.80 ) $ 5.49 $ 19.07 Diluted $ ( 2.80 ) $ 5.37 $ 18.66 See accompanying notes to these consolidated financial statements. 75 Table of Contents INTREPID POTASH, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share amounts) Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings (Accumulated) Deficit Total Stockholders' Equity Shares Amount 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 Net loss — — — — ( 35,673 ) ( 35,673 ) Stock-based compensation — — — 6,534 — 6,534 Vesting of restricted shares, net of common stock used to fund employee income tax withholding due upon vesting 119,494 — — ( 1,511 ) — ( 1,511 ) Balance, December 31, 2023 12,807,316 $ 13 $ ( 22,012 ) $ 665,637 $ 40,790 $ 684,428 See accompanying notes to these consolidated financial statements. 76 Table of Contents INTREPID POTASH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS 77 Table of Contents (In thousands) Year Ended December 31, 2023 2022 2021 Cash Flows from Operating Activities: Adjustments to reconcile net (loss) income to net cash provided by operating activities: Net (loss) income $ ( 35,673 ) $ 72,220 $ 249,834 Depreciation, depletion, and amortization 39,078 34,711 35,635 Amortization of intangible assets 322 322 322 Accretion of asset retirement obligation 2,140 1,961 1,858 Amortization of deferred financing costs 301 265 314 Stock-based compensation 6,534 6,152 3,012 Reserve for obsolescence 509 1,750 2,108 Allowance for doubtful accounts 110 — — Impairment of long-lived assets 43,288 — — Loss (gain) on disposal of assets 807 7,470 ( 2,542 ) Equity in earnings of unconsolidated entities 486 ( 689 ) — Distribution of earnings from unconsolidated entities 452 — — Gain on extinguishment of debt — — ( 10,113 ) Lower of cost or net realizable value inventory adjustments 6,492 — — Changes in operating assets and liabilities: Trade accounts receivable, net 4,550 8,673 ( 12,615 ) Other receivables, net ( 701 ) 140 589 Inventory, net ( 11,861 ) ( 33,283 ) 7,358 Other current assets ( 3,857 ) 191 ( 1,974 ) Deferred tax assets, net ( 8,471 ) 23,323 ( 209,075 ) Accounts payable, accrued liabilities, and accrued employee compensation and benefits 1,284 ( 3,596 ) 13,456 Income tax payable 32 ( 33 ) 42 Operating lease liabilities ( 1,735 ) ( 2,025 ) ( 2,508 ) Other liabilities ( 858 ) ( 28,731 ) 3,366 Net cash provided by operating activities 43,229 88,821 79,067 Cash Flows from Investing Activities: Additions to property, plant, equipment, mineral properties and other assets ( 65,060 ) ( 68,696 ) ( 19,789 ) Proceeds from sale of property, plant, equipment, and mineral properties 125 58 6,042 Purchase of investments ( 1,415 ) ( 13,047 ) ( 1,076 ) Proceeds from redemptions/maturities of investments 6,000 2,506 — Other investing, net 796 — — Net cash used in investing activities ( 59,554 ) ( 79,179 ) ( 14,823 ) Cash Flows from Financing Activities: Repayment of long-term debt — — ( 15,000 ) Debt prepayment costs — — ( 505 ) Proceeds from borrowings on credit facility 9,000 — — Repayments of borrowings on credit facility ( 5,000 ) — ( 29,817 ) Payments of financing lease ( 597 ) — ( 1,258 ) Capitalized debt costs — ( 1,007 ) — Employee tax withholding paid for restricted shares upon vesting ( 1,511 ) ( 4,795 ) ( 791 ) Repurchases of common stock — ( 22,012 ) — Proceeds from exercise of stock options — 110 89 Net cash provided by (used in) financing activities 1,892 ( 27,704 ) ( 47,282 ) Net Change in Cash, Cash Equivalents, and Restricted Cash ( 14,433 ) ( 18,062 ) 16,962 Cash, Cash Equivalents, and Restricted Cash, beginning of period 19,084 37,146 20,184 Cash, Cash Equivalents, and Restricted Cash, end of period $ 4,651 $ 19,084 $ 37,146 Supplemental disclosure of cash flow information Net cash paid during the period for: Interest $ 411 $ 113 $ 875 Income taxes $ 179 $ 1,015 $ 193 Accrued purchases for property, plant, equipment, and mineral properties $ 4,578 $ 8,532 $ 2,192 See accompanying notes to these consolidated financial statements. 78 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. We sell a portion of water from these water rights to support oil and gas development in the Permian Basin. We continually work to expand water sales. 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, 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, 2023, 2022, and 2021, 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 79 Table of Contents future operating costs. The estimate of proven and probable mineral reserves, the related present value of estimated future 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 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 products 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 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 80 Table of Contents classified as construction in progress until the asset is placed into service. Gains and losses are recorded upon retirement, sale, 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 asset 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. 81 Table of Contents 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 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. 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 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. 82 Table of Contents 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 —In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"). ASU 2023-09 requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold, certain disclosures of state versus federal income tax expenses and taxes paid. ASC 2023-09 is effective for fiscal years beginning after December 15, 2024. We are currently evaluating the guidance and expect it to only impact disclosures with no impact to results of operations, cash flows and financial condition. In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"). This new guidance: (i) introduces a requirement to disclose significant segment expenses regularly provided to the chief operating decision maker ("CODM"), (ii) extends certain annual disclosures to interim periods, (iii) clarifies disclosure requirements for single reportable segment entities, (iv) permits more than one measure of segment profit or loss to be reported under certain conditions, and (v) requires disclosure of the title and position of the CODM. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance applies retrospectively to all periods presented in the financial statements. We are currently evaluating the guidance and expect it to only impact disclosures with no impact to results of operations, cash flows and financial condition. 83 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, 2023 2022 2021 Net (loss) income $ ( 35,673 ) $ 72,220 $ 249,834 Basic weighted average common shares outstanding 12,761 13,152 13,099 Add: Dilutive effect restricted common stock — 191 221 Add: Dilutive effect of stock options outstanding — 109 71 Diluted weighted average common shares outstanding 12,761 13,452 13,391 (Loss) earnings per share: Basic $ ( 2.80 ) $ 5.49 $ 19.07 Diluted $ ( 2.80 ) $ 5.37 $ 18.66 The following table shows anti-dilutive shares excluded from the calculation of diluted earnings (loss) per share (in thousands): Year Ended December 31, 2023 2022 2021 Anti-dilutive effect of restricted shares 348 63 57 Anti-dilutive effect of stock options outstanding 273 — 156 84 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, 2023, 2022, and 2021 (in thousands): Year Ended December 31, 2023 2022 2021 Cash and cash equivalents $ 4,071 $ 18,514 $ 36,452 Restricted cash included in "Other current assets" 25 25 175 Restricted cash included in "Other assets, net" 555 545 519 Total cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 4,651 $ 19,084 $ 37,146 Restricted cash included in "Other assets, net" on the balance sheet at December 31, 2023, 2022, and 2021 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, 2023 and 2022 represents cash deposits with supply vendors. 85 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, 2023, and 2022, respectively (in thousands): December 31, 2023 2022 Finished goods product inventory $ 66,033 $ 74,777 In-process inventory 28,044 24,767 Total product inventory 94,077 99,544 Current parts inventory, net 20,175 15,272 Total current inventory, net 114,252 114,816 Long-term parts inventory, net 30,231 24,823 Total inventory, net $ 144,483 $ 139,639 During the year ended December 31, 2023, we recorded $ 6.5 million in charges for lower of weighted average cost or estimated net realizable value on our finished goods product inventory. During the years ended December 31, 2022 and 2021, we recorded no charges for 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, 2023, 2022, and 2021, we recorded reserves for obsolete parts inventory of $ 0.5 million, $ 1.8 million and $ 2.1 million, respectively. 86 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, 2023 2022 Land $ 24,136 $ 24,136 Ponds and land improvements 91,333 73,501 Mineral properties and development costs 159,775 146,333 Buildings and plant 90,150 89,014 Machinery and equipment 297,494 288,345 Vehicles 7,332 7,399 Office equipment and leasehold improvements 10,150 10,436 Operating lease ROU assets 5,274 5,908 Breeding stock 315 329 Construction in progress 23,942 47,188 Total property, plant, equipment, and mineral properties, gross $ 709,901 $ 692,589 Less: accumulated depreciation, depletion, and amortization ( 351,652 ) ( 316,959 ) Total property, plant, equipment, and mineral properties, net $ 358,249 $ 375,630 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, 2023 2022 2021 Depreciation $ 34,307 $ 29,805 $ 29,447 Depletion 3,190 3,168 3,979 Amortization of ROU assets 1,581 1,738 2,209 Total incurred $ 39,078 $ 34,711 $ 35,635 During the year ended December 31, 2023, we recorded total impairment charges of $ 43.3 million, as discussed in more detail below. 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 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. 87 Table of Contents 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 four years. Our finance leases have remaining 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, 2023 Balance, December 31, 2022 Assets Operating lease ROU assets, net Property, plant, equipment, and mineral properties, net $ 2,031 $ 3,663 Finance lease ROU assets, net Property, plant, equipment, and mineral properties, net $ 2,609 $ — Liabilities Current operating lease liabilities Other current liabilities $ 1,387 $ 1,608 Current finance lease liability Other current liabilities $ 961 $ — Non-current operating lease liabilities Operating lease liabilities $ 741 $ 2,206 Non-current finance lease liabilities Finance lease liabilities $ 1,451 $ — Other information related to lease term and discount rate is as follows: December 31, 2023 December 31, 2022 Weighted average remaining lease term - operating leases 1.7 years 2.5 years Weighted average remaining lease term - finance leases 2.3 years 0.0 years Weighted average discount rate - operating leases 5.7 % 5.4 % Weighted average discount rate - finance leases 8.5 % — % The components of lease expense are as follows (amounts in thousands): For the Year Ended December 31, 2023 For the Year Ended December 31, 2022 For the Year Ended December 31, 2021 Operating lease expense $ 1,667 $ 1,904 $ 2,370 Short-term lease expense 122 150 122 Total lease expense $ 1,789 $ 2,054 $ 2,492 Supplemental cash flow information related to leases was as follows (amounts in thousands): 88 Table of Contents For the Year Ended December 31, 2023 For the Year Ended December 31, 2022 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 1,724 $ 1,889 Operating cash flows from finance leases 139 — Financing cash flows from finance leases 597 — Right-of-Use Assets exchanged for new operating lease liabilities 48 2,305 Right-of-Use Assets exchanged for new finance lease liabilities 3,009 — As of December 31, 2023, maturities of lease liabilities are summarized as follows (amounts in thousands): Years Ending December 31, Operating Leases Finance Leases Total 2024 $ 1,471 $ 1,104 $ 2,575 2025 618 810 1,428 2026 114 644 758 2027 40 67 107 2028 — 39 39 Total future minimum lease payments $ 2,243 2,664 4,907 Less - amount representing interest 115 252 367 Present value of future minimum lease payments $ 2,128 2,412 4,540 Less - current lease obligations 1,387 961 2,348 Long-term lease obligations $ 741 $ 1,451 $ 2,192 89 Table of Contents Note 8 — INTANGIBLE ASSETS We have water rights, recorded at $ 19.2 million at December 31, 2023, and 2022. Our water rights have indefinite lives and are not amortized. We evaluate our water rights at least annually as of October 1 for impairment, or more frequently if circumstances require. We have other intangible assets recorded at $ 6.4 million as of December 31, 2023 and 2022. We account for the other intangible assets as finite-lived intangible assets and amortize those intangible assets over the period of estimated benefit, using the straight-line method. As of December 31, 2023, the weighted-average remaining amortization period for the other intangible assets was 15.3 years. These intangible assets are included in "Other assets, net" on the consolidated balance sheets. As of December 31, 2023, and December 31, 2022, we have the following amounts recorded for intangible assets (amounts in thousands): December 31, 2023 December 31, 2022 Finite-lived intangible assets: Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Produced water disposal royalty agreements $ 2,694 $ ( 630 ) $ 2,694 $ ( 495 ) Surface damage and easement agreements 3,723 ( 871 ) 3,723 ( 685 ) Total $ 6,417 $ ( 1,501 ) $ 6,417 $ ( 1,180 ) Indefinite-lived intangible assets: Water rights $ 19,184 $ 19,184 Total amortization of intangible assets for the years ended December 31, 2023, 2022, and 2021 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. 90 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, 2023, we made $ 9.0 million in borrowings and made $ 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. For the year ended December 31, 2021, we made no borrowings and made $ 29.8 million in 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, and 2021, 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. We were in compliance with the applicable covenants under the facility as of December 31, 2023. 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 $ 0.8 million, $ 0.4 million, and $ 1.5 million for the years ended December 31, 2023, 2022, and 2021, respectively. Amounts included in interest expense for the years ended December 31, 2023, 2022, and 2021 (in thousands) are as follows: Year ended December 31, 2023 2022 2021 Interest expense on borrowings $ 275 $ — $ 654 Commitment fee on unused credit facility 226 155 70 Make-whole payments — — 505 Amortization of deferred financing costs 301 265 314 Gross interest expense 802 420 1,543 Less capitalized interest 802 319 75 Interest expense, net $ — $ 101 $ 1,468 91 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 12.0 %. 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, 2023 2022 2021 Asset retirement obligation, at beginning of period $ 26,864 $ 27,024 $ 23,872 Liabilities settled ( 197 ) ( 1,533 ) — Liabilities incurred — 297 — Changes in estimated obligations 1,552 ( 885 ) 1,294 Accretion of discount 2,140 1,961 1,858 Total asset retirement obligation, at end of period $ 30,359 $ 26,864 $ 27,024 Less current portion of asset retirement obligation $ ( 282 ) $ ( 300 ) $ — Long-term portion of asset retirement obligation $ 30,077 $ 26,564 $ 27,024 We estimate approximately $ 7.8 million in asset retirement payments may occur in the next five years . 92 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, 2023, and 2022, we had $ 2.3 million and $ 2.4 million of contract liabilities, respectively, of which $ 1.0 million and $ 0.9 million were current as of December 31, 2023 and 2022, 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, 2023, 2022, and 2021 is shown below (in thousands): Year Ended December 31, 2023 2022 2021 Beginning balance $ 2,374 $ 33,788 $ 30,419 Additions 1,030 1,823 4,310 Refund of prepayments — ( 32,579 ) — Recognized as revenue during period from the beginning balance ( 1,101 ) ( 658 ) ( 941 ) Ending balance $ 2,303 $ 2,374 $ 33,788 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, 2023, 2022, and 2021. 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, 2023 Product Potash Segment Trio ® Segment Oilfield Solutions Segment Intersegment Eliminations Total Potash $ 131,206 $ — $ — $ ( 329 ) $ 130,877 Trio ® — 96,344 — — 96,344 Water 297 5,316 9,569 — 15,182 Salt 11,973 522 — — 12,495 Magnesium Chloride 8,161 — — — 8,161 Brines 4,283 — 4,056 — 8,339 Other — — 7,685 — 7,685 Total Revenue $ 155,920 $ 102,182 $ 21,310 $ ( 329 ) $ 279,083 93 Table of Contents 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 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 94 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 2024 a cash bonus to our employees under our 2023 bonus program. We met our performance metrics related to our 2022 cash bonus program and paid a cash bonus in March 2023. We met our performance metrics related to our 2021 cash bonus program and paid a cash bonus in March 2022. 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, 2023, 340,924 restricted shares and options to purchase 273,206 shares of common stock were outstanding. As of December 31, 2023, approximately 1.0 million shares of common stock remained available for issuance under the Plan. Total compensation expense related to the Plan was $ 6.5 million, $ 6.2 million, and $ 3.0 million, for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, there was $ 5.6 million of total remaining unrecognized compensation expense that is expected to be recognized over a weighted-average period of 1.3 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 2023, the Compensation Committee granted 130,975 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 2023, the Compensation Committee granted 22,226 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 2023, 2022, and 2021 was $ 25.11 , $ 66.07 , and $ 37.49 , respectively. • Restricted Shares with Service and Market Conditions — Under the Plan in March 2023, 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, 2026. The share price achievement goals of these awards have not been met as of December 31, 2023. Under the Plan in March 2023, 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, 2027. The share price achievement goal for this award has not been met as of December 31, 2023. 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 95 Table of Contents 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 17, 2025. The share price achievement goals of these awards were met in 2022, and 1,737 shares vested in 2023. Under the Plan in March 2022, 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 March 17, 2026. The share price achievement goals of these awards were met in 2022, and 14,512 shares vested in 2023. 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 on the grant date anniversary; 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 11, 2024. The share price achievement goals of these awards were met in 2021, and 886 shares vested in 2023. Under the plan in 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. The 2021 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, 2026. The market conditions for this award were met in 2022, and 24,152 shares vested during 2023. During 2023, share price achievement targets were met for shares granted to a member of the executive team in 2020 and 47,259 shares vested in 2023. 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 2023, 2022, and 2021, was $ 24.96 , $ 62.32 and $ 23.76 , 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 2023, 2022, and 2021: 2023 2022 2021 Closing stock price on grant date $ 26.05 $ 66.33 $ 42.03 Risk free interest rate 3.6 % 2.2 % 1.1 % Dividend yield — % — % — % Estimated volatility 82.9 % 79.8 % 89.0 % Expected life 3.8 years 6.0 years 5.5 years 96 Table of Contents A summary of all activity relating to our restricted shares for the year ended December 31, 2023, is presented below: Weighted Average Grant-Date Fair Value Shares Restricted shares of common stock, beginning of period 300,268 $ 40.25 Granted with service only condition 153,201 $ 25.11 Granted with service and market conditions 94,142 $ 24.96 Vested, service only condition ( 89,225 ) $ 20.30 Vested, service and market conditions ( 88,546 ) $ 29.70 Forfeited, service only condition ( 21,828 ) $ 38.14 Forfeited, service and market conditions ( 7,088 ) $ 56.45 Restricted shares of common stock, end of period 340,924 $ 36.98 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, 2023, 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 273,206 $ 29.04 Granted — $ — Exercised — $ — Forfeited — $ — Expired — $ — Outstanding non-qualified stock options, end of period 273,206 $ 29.04 $ 948,054 3.7 Vested or expected to vest, end of period 273,206 $ 29.04 $ 948,054 3.7 Exercisable non-qualified stock options, end of period 273,206 $ 29.04 $ 948,054 3.7 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. No stock options were exercised during 2023. 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 was immaterial. 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. 97 Table of Contents A summary of the provision for income taxes is as follows (in thousands): Year Ended December 31, 2023 2022 2021 Current portion of income tax expense (benefit): Federal $ — $ — $ — State 82 966 206 Deferred portion of income tax expense (benefit): Federal ( 8,538 ) 19,430 ( 157,348 ) State 67 3,893 ( 51,727 ) Total income tax (benefit) expense $ ( 8,389 ) $ 24,289 $ ( 208,869 ) 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, 2023 2022 2021 Federal taxes at statutory rate $ ( 9,253 ) $ 20,267 $ 8,603 Add: State taxes, net of federal benefit ( 1,274 ) 5,406 1,278 Change in valuation allowance 1,121 — ( 215,910 ) PPP loan forgiveness — — ( 2,115 ) Change in federal and state tax rates 238 ( 125 ) 138 Officers' Compensation 848 546 195 Percentage depletion ( 282 ) ( 827 ) ( 463 ) Other 213 ( 978 ) ( 595 ) Net (benefit) expense as calculated $ ( 8,389 ) $ 24,289 $ ( 208,869 ) Effective tax rate 19.0 % 25.2 % ( 509.9 ) % Our effective tax rate for the years ended December 31, 2023, differs from the U.S. federal statutory rate due to the change in our valuation allowance. Our effective tax rates 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 our valuation allowance, respectively. As of December 31, 2023, and 2022, we had gross deferred tax assets of $ 197.4 million and $ 187.8 million, respectively. During the year ended December 31, 2023, our deferred tax assets increased primarily from impairments booked against our property, plant, equipment, and mineral properties. Included in gross deferred tax assets as of December 31, 2023, were approximately $ 201.4 million of federal net operating loss carryforwards, which expire beginning in 2034, and approximately $ 271.9 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. 98 Table of Contents Significant components of our deferred tax assets and liabilities were as follows (in thousands): December 31, 2023 2022 Deferred tax assets (liabilities): Property, plant, equipment and mineral properties, net $ 127,368 $ 119,919 Federal and state net operating loss carryforwards 55,486 53,440 Asset retirement obligation 7,768 7,409 Deferred revenue 1,869 607 Other 3,017 4,540 Federal R&D credits 1,870 1,870 Total deferred tax assets 197,378 187,785 Valuation allowance ( 3,155 ) ( 2,033 ) Deferred tax asset, net $ 194,223 $ 185,752 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, 2023, 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 $ 197.4 million of deferred tax assets will be realized. During 2023, our valuation allowance increased as our forecast changed regarding the amount of state net operating losses that will be used before expiration. Our deferred tax assets, net of the valuation allowance at December 31, 2023, and 2022, were $ 194.2 million and $ 185.8 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, 2023, and 2022, we had no items that required disclosure in accordance with FASB guidance on accounting for uncertainty in income taxes. 99 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 2020. Note 14 — COMMITMENTS AND CONTINGENCIES Reclamation Deposits and Surety Bonds —As of December 31, 2023, and 2022, we had $ 26.8 million and $ 24.6 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, 2023, and 2022, $ 0.5 million consisted of long-term restricted cash deposits reflected in "Other" long-term assets on the balance sheet, and $ 26.3 million and $ 24.1 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 March 17, 2022, following an expedited inter se proceeding, a court entered a subfile order and partial final judgment and decree ("Order") determining the validity of our claim to 20,000 acre feet of Pecos River surface water rights. The Order found that our predecessors in interest had forfeited all but approximately 5,800 acre feet of water per year, and that of the remaining 5,800 acre feet of water that had not been forfeited, all but 150 acre feet of water had been abandoned prior to 2017. The Order limited our right to 150 acre fee per annum of water for industrial-salt processing use. We appealed the Order to the New Mexico Court of Appeals ("NMCA"), which, on July 7, 2023, affirmed the Order. On November 17, 2023, we filed a request for the New Mexico Supreme Court ("NMSC") to reconsider and review the NMCA's decision to affirm the Order's abandonment determination. The NMSC agreed to review the NMCA's abandonment determination on February 7, 2024. 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. 100 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, 2023, we have estimated contingent liabilities recorded in "Other current liabilities" on the consolidated balance sheets of $ 3.4 million, mainly related to the potential underpayment of royalties in 2012 to 2016 and potential royalties on water revenues in 2019 to 2022. As of December 31, 2022 we had 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. 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, 2023, and December 31, 2022, we had cash equivalents of $ 0.5 million and $ 1.7 million, respectively. Held-to-Maturity Investments —As of December 31, 2023 and 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. Our held-to-maturity investments at December 31, 2023 and 2022, are carried at amortized cost and consist of the following (amounts in thousands): 101 Table of Contents As of December 31, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Short-term Corporate bonds $ 991 $ — $ ( 9 ) $ 982 Government bonds 1,979 — ( 13 ) 1,966 Total $ 2,970 $ — $ ( 22 ) $ 2,948 Long-term Corporate bonds $ — $ — $ — $ — Government bonds 954 1 ( 4 ) 951 Total $ 954 $ 1 $ ( 4 ) $ 951 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, 2023, 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 2023, 2022 or 2021. 102 Table of Contents In July 2022, WDVGL entered into a purchase agreement with another company (“Acquiror”), a foreign issuer whose shares are traded on the Nasdaq Capital Market (“Nasdaq”). Under the terms of the purchase agreement, WDVGL would be combined with the consulting business owned by W.D. Von Gonten (“Consulting”) to form a new entity, W.D. Von Gonten Engineering, LLC (“Engineering”), and Acquiror would then purchase Engineering in a majority stock transaction at an agreed upon selling price. Stock received from the sale of Engineering would be distributed to investors in WDVGL and Consulting. Acquiror delivered equity shares and a nominal amount of cash to WDVGL for purchase of Engineering in July 2022, with the number of shares equal to the selling price divided by an assumed $ 10 share price. At the time the purchase agreement was signed, the Acquiror was working to file restated financial statements for the fiscal years ending December 31, 2018, 2019 and 2020. On A pril 27, 2023, Acquiror disclosed it had not been able to file its Annual Report on Form 20-F for the fiscal year ended December 31, 2021 with the SEC by April 25, 2023, which was the deadline set by the Nasdaq Hearings Panel in connection with a delisting proceeding, and Acquiror's shares were subsequently delisted from Nasdaq. Acquiror also disclosed on April 27, 2023 that it has shifted its focus to filing audited financial statements with the SEC for the fiscal years ended December 31, 2020, 2021 and 2022 to regain compliance with Nasdaq listing standards before the end of 2023. Pursuant to the purchase agreement with Engineering, if the Acquiror did not file current financial statements with the SEC by June 30, 2023, Engineering had the option to terminate the purchase agreement, beginning on July 1, 2023. Although Acquiror did not file current financial statements by June 30, 2023, Engineering agreed to proceed with the purchase agreement to allow Acquiror additional time to file updated financial statements. On December 29, 2023, Acquiror disclosed it had filed its audited financial statements for the years ended December 31, 2022, 2021, and 2020, with the SEC. We have not impaired our investment in WDVGL because our share of the estimated selling price of Engineering exceeds the carrying value of our investment in WDVGL. We continue to monitor the investment for impairment. If the purchase transaction is not finalized, we may need to impair our investment in WDVGL. 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 $ 2.0 million, $ 3.2 million and $ 1.1 million of cash as of December 31, 2023, 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, 2023, our proportional share of Ovation's net loss was $ 0.5 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, 2023 $ 2,057 Year Ended December 31, 2022 $ 1,760 Year Ended December 31, 2021 $ 1,633 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 103 Table of Contents 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). Year Ended December 31, 2023 Potash Trio ® Oilfield Solutions Other Consolidated Sales 1 $ 155,920 $ 102,182 $ 21,310 $ ( 329 ) $ 279,083 Less: Freight costs 14,753 23,211 — ( 329 ) 37,635 Warehousing and handling costs 5,957 4,875 — — 10,832 Cost of goods sold 97,452 74,308 15,518 — 187,278 Lower of cost or NRV inventory adjustments 2,709 3,783 — — 6,492 Gross Margin (Deficit) $ 35,049 $ ( 3,995 ) $ 5,792 $ — $ 36,846 Depreciation, depletion, and amortization incurred 2 $ 28,378 $ 6,288 $ 3,849 $ 885 $ 39,400 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 (Deficit) $ 35,845 $ 16,442 $ 3,477 $ — $ 55,764 Depreciation, depletion, and amortization incurred 2 $ 26,828 $ 5,477 $ 2,996 $ 656 $ 35,957 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. The following table shows the reconciliation of reportable segment sales to consolidated sales and the reconciliation of segment gross margins to consolidated income before taxes (in thousands): 104 Table of Contents Year Ended December 31, 2023 2022 2021 Total sales for reportable segments $ 279,412 $ 337,872 $ 270,579 Elimination of intersegment sales ( 329 ) ( 304 ) ( 247 ) Total consolidated sales $ 279,083 $ 337,568 $ 270,332 Total gross margin for reportable segments $ 36,846 $ 141,408 $ 55,764 Elimination of intersegment sales ( 329 ) ( 304 ) ( 247 ) Elimination of intersegment expenses 329 304 247 Unallocated amounts: Selling and administrative 32,423 31,799 23,998 Impairment of long-lived assets 43,288 — — Loss (gain) on disposal of assets 807 7,470 ( 2,542 ) Accretion of asset retirement obligation 2,140 1,961 1,858 Other operating expense 2,157 4,738 178 Equity in loss/(earnings) of unconsolidated entities 486 ( 689 ) — Interest expense, net — 101 1,468 Gain on extinguishment of debt — — ( 10,113 ) Interest income ( 298 ) ( 176 ) — Other non-operating income ( 95 ) ( 305 ) ( 48 ) (Loss) income before income taxes $ ( 44,062 ) $ 96,509 $ 40,965 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 factors on our customers. Our customers are distributors and end-users whose creditworthiness 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 2023 and 2022, we had one customer in our potash and Trio ® segments that accounted for approximately $ 33.4 million and $ 35.0 million of our total consolidated revenues, respectively. 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, no customer accounted for more than 10% of our sales. In each of the last three years ended December 31, 2023, 2022, and 2021, 95 %, 94 %, 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. 105 Table of Contents 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 $ 4.1 million and $ 18.5 million at December 31, 2023, and 2022, 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. We made no repurchases of shares of our common stock for the twelve months ended December 31, 2023. In 2022, we repurchased 608,657 shares of our common stock and paid $ 22.0 million under the share repurchase program. As of December 31, 2023, we have approximately $ 13.0 million of remaining availability under the share repurchase program. 106 Table of Contents Note 21. — SUBSEQUENT EVENT On December 12, 2023, we entered into the Third Amendment of Cooperative Development Agreement (the “Amendment”) with XTO Holdings, LLC (“XTO Holdings”) and XTO Delaware Basin, LLC, as successors in interest to BOPCO, L.P. (“XTO Delaware Basin,” and together with XTO Holdings, “XTO”). The Amendment had an effective date of January 1, 2024 (“Amendment Date”). The Amendment further amends that certain Cooperative Development Agreement, by and between us, BOPCO, L.P. and the other parties thereto, effective as of February 28, 2011 (as amended, including by the Amendment, the “CDA”), which was executed for the purpose of cooperative development of certain lands for potassium and oil and gas. The Cooperative Development Agreement restricts and limits the rights of us and XTO, as successors in interest to BOPCO, L.P. to explore and develop their respective interests, including limitations on the location of wells. We and XTO entered into the Amendment in an effort to further the cooperation, remove the restrictions and limitations, and allow for the efficient co-development of resources within the Designated Potash Area (“DPA”) consistent with the United States Secretary of the Interior Order 3324. Pursuant to the Amendment, among other things, we agree to support and not oppose XTO’s development and operation of XTO’s oil and gas interests within the DPA. As consideration under the Amendment, on December 12, 2023 we received an initial payment of $ 5.0 million, which is included in "Accrued liabilities" on the December 31, 2023 Consolidated Balance Sheet. On January 2, 2024, we received an additional $ 45.0 million initial payment from XTO. The Amendment also provides that we shall receive an additional one-time payment equal to $ 50.0 million as an “Access Fee,” which XTO will pay within 90 days upon the earlier occurrence of (i) the approval of the first new or expanded drilling island within a specific area to be used by XTO or (ii) within seven ( 7 ) years of the anniversary of the Amendment Date. XTO is also required to pay additional amounts to Intrepid as an “Access Realization Fee,” up to a maximum amount of $ 100.0 million, in the event of certain additional drilling activities by XTO. The CDA also contains other customary representations, warranties, covenants, and dispute resolution provisions. For the twelve months ended December 31, 2023, we have recorded no revenue associated with the Amendment. 107 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, 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 For the Year Ended December 31, 2023 Allowances deducted from assets Deferred tax assets - valuation allowance 2,033 1,121 — 3,154 Reserve for parts inventory obsolescence 1,262 509 ( 856 ) 915 Allowance for doubtful accounts and other receivables 555 110 — 665 Total allowances deducted from assets $ 3,850 $ 1,740 $ ( 856 ) $ 4,734 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.