Intrepid Potash, Inc. - Quarter Report: 2021 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________

FORM 10-Q

_______________________________________________________

☒

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended

September 30, 2021

☐

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to ______

Commission File Number: 001-34025

INTREPID POTASH, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware			26-1501877
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
1001 17th Street, Suite 1050
Denver,
Colorado			80202
(Address of principal executive offices)			(Zip Code)

(303) 296-3006

(Registrant’s telephone number, including area code)


N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

IPI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☒No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

As of October 25, 2021, the registrant had outstanding 13,443,080 shares of common stock, par value $0.001 per share.

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INTREPID POTASH, INC.

TABLE OF CONTENTS


						Page
			PART I - FINANCIAL INFORMATION			1
			ITEM 1. Condensed Consolidated Financial Statements (Unaudited)			1
			Condensed Consolidated Balance Sheets			1
			Condensed Consolidated Statements of Operations			2
			Condensed Consolidated Statements of Stockholders' Equity			3
			Condensed Consolidated Statements of Cash Flows			4
			Notes to Condensed Consolidated Financial Statements			6
			ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			20
			ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			42
			ITEM 4. Controls and Procedures			42
			PART II - OTHER INFORMATION			43
			ITEM 1. Legal Proceedings			43
			ITEM 1A. Risk Factors			44
			ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			45
			ITEM 3. Defaults Upon Senior Securities			45
			ITEM 4. Mine Safety Disclosures			45
			ITEM 5. Other Information			45
			ITEM 6. Exhibits			46
			Signatures			47

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PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

INTREPID POTASH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	September 30,		December 31,
	2021		2020
ASSETS
Cash and cash equivalents	$	25,637	$	19,515

Accounts receivable:
Trade, net	32,731		22,795
Other receivables, net	3,449		1,577

Inventory, net	76,828		88,673
Prepaid expenses and other current assets	4,539		3,228
Total current assets	143,184		135,788

Property, plant, equipment, and mineral properties, net	339,986		355,497

Water rights	19,184		19,184
Long-term parts inventory, net	29,067		28,900


Other assets, net	10,403		10,819

Total Assets	$	541,824	$	550,188
LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable	$	9,593	$	7,278


Accrued liabilities	22,202		12,701
Accrued employee compensation and benefits	8,466		4,422

Current portion of long-term debt, net	—		10,000
Other current liabilities	34,830		32,816
Total current liabilities	75,091		67,217

Advances on credit facility	—		29,817
Long-term debt, net	—		14,926
Asset retirement obligation	25,221		23,872
Operating lease liabilities	1,163		2,136
Other non-current liabilities	1,129		961
Total Liabilities	102,604		138,929
Commitments and Contingencies
Common stock, 0.001 par value; 40,000,000 shares authorized;
13,124,110 and 13,049,820 shares outstanding
at September 30, 2021, and December 31, 2020, respectively	13		13
Additional paid-in capital	658,825		656,837

Accumulated deficit	(219,618)		(245,591)
Total Stockholders' Equity	439,220		411,259
Total Liabilities and Stockholders' Equity	$	541,824	$	550,188

See accompanying notes to these condensed consolidated financial statements.

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INTREPID POTASH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Sales	$	59,153	$	38,078	$	198,504	$	148,512
Less:
Freight costs	7,911		7,802		30,104		28,397
Warehousing and handling costs	2,066		2,315		7,076		7,284
Cost of goods sold	34,974		27,045		123,815		104,100
Lower of cost or net realizable value inventory adjustments	—		1,224		—		4,015
Costs associated with abnormal production	3,594		—		3,594		—
Gross Margin (Deficit)	10,608		(308)		33,915		4,716

Selling and administrative	5,890		6,750		18,293		20,022
Accretion of asset retirement obligation	441		434		1,323		1,303


Litigation settlement	—		—		—		10,075
Loss (gain) on sale of assets	5		21		(2,560)		(4,441)
Other operating income (expense)	192		237		(385)		495
Operating Income (Loss)	4,080		(7,750)		17,244		(22,738)

Other Income (Expense)
Interest expense, net	(82)		(2,450)		(1,426)		(3,877)

Other income	25		25		42		129
Gain on extinguishment of debt	—		—		10,113		—

Income (Loss) Before Income Taxes	4,023		(10,175)		25,973		(26,486)

Income Tax Benefit	—		—		—		42
Net Income (Loss)	$	4,023	$	(10,175)	$	25,973	$	(26,444)

Weighted Average Shares Outstanding:
Basic	13,123		13,006		13,089		12,981
Diluted	13,367		13,006		13,352		12,981
Earnings Per Share:
Basic	$	0.31	$	(0.78)	$	1.98	$	(2.04)
Diluted	$	0.30	$	(0.78)	$	1.95	$	(2.04)

See accompanying notes to these condensed consolidated financial statements.

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INTREPID POTASH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except share amounts)


	Nine-Month Period Ended September 30, 2021
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2020	13,049,820	$	13	$	656,837	$	(245,591)	$	411,259



Net income	—	—		—		25,973		25,973
Stock-based compensation	—	—		2,289		—		2,289
Exercise of stock options	7,826	—		81		—		81
Vesting of restricted common stock, net of common stock used to fund employee income tax withholding due upon vesting	66,464	—		(382)		—		(382)
Balance, September 30, 2021	13,124,110	$	13	$	658,825	$	(219,618)	$	439,220

	Three-Month Period Ended September 30, 2021
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance, June 30, 2021	13,121,087	$	13	$	658,163	$	(223,641)	$	434,535



Net income	—	—		—		4,023		4,023
Stock-based compensation	—	—		634		—		634
Exercise of stock options	2,913	—		30		—		30
Vesting of restricted common stock, net of common stock used to fund employee income tax withholding due upon vesting	110	—		(2)		—		(2)
Balance, September 30, 2021	13,124,110	$	13	$	658,825	$	(219,618)	$	439,220

	Nine-Month Period Ended September 30, 2020
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2019	12,955,351	$	13	$	653,080	$	(218,437)	$	434,656



Net loss	—	—		—		(26,444)		(26,444)
Stock-based compensation	—	—		2,981		—		2,981
Vesting of restricted common stock, net of common stock used to fund employee income tax withholding due upon vesting	51,076	—		(97)		—		(97)

Balance, September 30, 2020	13,006,427	$	13	$	655,964	$	(244,881)	$	411,096

	Three-Month Period Ended September 30, 2020
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance, June 30, 2020	13,006,124	$	13	$	654,901	$	(234,706)	$	420,208



Net loss	—	—		—		(10,175)		(10,175)
Stock-based compensation	—	—		985		—		985

Vesting of restricted common stock, net of common stock used to fund employee income tax withholding due upon vesting	303	—		78		—		78
Balance, September 30, 2020	13,006,427	$	13	$	655,964	$	(244,881)	$	411,096

See accompanying notes to these condensed consolidated financial statements.

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INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
	Nine Months Ended September 30,
	2021		2020
Cash Flows from Operating Activities:
Net income (loss)	$	25,973	$	(26,444)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation, depletion and amortization	26,509		26,377
Accretion of asset retirement obligation	1,323		1,303
Amortization of deferred financing costs	254		357
Amortization of intangible assets	241		241
Stock-based compensation	2,289		2,981
Lower of cost or net realizable value inventory adjustments	—		4,015

Gain on disposal of assets	(2,560)		(4,441)

Gain on extinguishment of debt	(10,113)		—
Allowance for doubtful accounts	—		275
Allowance for parts inventory obsolescence	—		492
Other	—		(116)
Changes in operating assets and liabilities:
Trade accounts receivable, net	(9,936)		203
Other receivables, net	(1,872)		(1,328)

Inventory, net	11,678		3,100
Prepaid expenses and other current assets	(1,148)		(313)
Accounts payable, accrued liabilities, and accrued employee compensation and benefits	15,254		4,071

Operating lease liabilities	(1,616)		(1,695)
Other liabilities	3,147		9,409
Net cash provided by operating activities	59,423		18,487

Cash Flows from Investing Activities:
Additions to property, plant, equipment, mineral properties and other assets	(12,437)		(14,087)

Long-term investment	—		(3,500)
Proceeds from sale of assets	6,042		4,786


Net cash used in investing activities	(6,395)		(12,801)

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INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
	Nine Months Ended September 30,
	2021		2020
Cash Flows from Financing Activities:
Debt prepayment costs	(505)		(1,869)
Repayments of long-term debt	(15,000)		(35,000)
Proceeds from short-term borrowings on credit facility	—		10,000
Repayments of short-term borrowings on credit facility	(29,817)		—
Payments of financing lease	(1,258)		—
Capitalized debt fees	—		(36)
Employee tax withholding paid for restricted stock upon vesting	(382)		(96)
Proceeds from loan under CARES Act	—		10,000
Proceeds from exercise of stock options	81		—
Net cash used in financing activities	(46,881)		(17,001)

Net Change in Cash, Cash Equivalents and Restricted Cash	6,147		(11,315)
Cash, Cash Equivalents and Restricted Cash, beginning of period	20,184		21,239
Cash, Cash Equivalents and Restricted Cash, end of period	$	26,331	$	9,924

Supplemental disclosure of cash flow information
Net cash paid during the period for:
Interest	$	851	$	1,974
Income taxes	$	131	$	92
Amounts included in the measurement of operating lease liabilities	$	1,769	$	1,878
Accrued purchases for property, plant, equipment, and mineral properties	$	1,842	$	1,050
Right-of-use assets exchanged for operating lease liabilities	$	546	$	216

See accompanying notes to these condensed consolidated financial statements.

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INTREPID POTASH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 United States. We produce potash from three solution mining facilities: our HB solution mine in Carlsbad, New Mexico, our solution mine in Moab, Utah, and our brine recovery mine in Wendover, Utah. We also operate the North compaction facility in Carlsbad, New Mexico, which compacts and granulates product from the HB mine. We produce Trio® from our conventional underground East mine in Carlsbad, New Mexico.

We have water rights in New Mexico to support our mining and industrial operations. Water we do not use to support our mining and industrial operations we sell primarily to support oil and gas development in the Permian Basin near our Carlsbad facilities. We continue to work to expand our sales of water. In May 2019, we acquired certain land, water rights, state grazing leases for cattle, and other related assets from Dinwiddie Cattle Company. We refer to these assets and operations as "Intrepid South." Due to the strategic location of Intrepid South, part of our long-term operating strategy is selling small parcels of land, including restricted use agreements of surface or subsurface rights, to customers, where such sales provide a solution to such customer's operations in the oil and gas industry. See Note 14—Commitments and Contingencies below for further information regarding our water rights.

We have three segments: potash, Trio®, and oilfield solutions. We account for sales of byproducts as revenue in the potash or Trio® segment based on which segment generates the byproduct. Intersegment sales prices are market based and are eliminated.

"Intrepid," "our," "we," or "us," means Intrepid Potash, Inc. and its consolidated subsidiaries.

Note 2— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Statement Presentation—Our unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation of interim financial information, have been included. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020.

Reverse Stock Split—On August 10, 2020, after receipt of stockholder approval, the Board of Directors approved an amendment to our Certificate of Incorporation to effect a reverse stock split of our common stock, par value $0.001 per share, by a ratio of one-for-ten. The reverse stock split became effective August 14, 2020. Additionally, the total number of authorized shares of our common stock was reduced to 40,000,000 shares. Unless otherwise indicated, all share amounts, per share data, share prices, exercise prices and conversion rates set forth in these notes and the accompanying condensed consolidated financial statements have, where applicable, been adjusted retroactively to reflect this reverse stock split.

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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. Most amendments within this standard were required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We adopted this standard on January 1, 2021. The effect of the adoption of this standard was immaterial on our condensed consolidated financial statements.

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In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - (Topic 326): Measurement of Credit Losses on Financial Instruments, which we adopted on January 1, 2020. ASU No. 2016-13 changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life and required a cumulative-effect adjustment to the statement of financial position on January 1, 2020. The effect of the adoption of this standard was immaterial on our condensed consolidated financial statements.

Reclassifications of Prior Period Presentation—Certain prior period amounts have been reclassified in order to conform to the current period presentation. These reclassifications had no effect on the reported results of operations.

Note 3— EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. For purposes of determining diluted earnings per share, basic weighted-average common shares outstanding is adjusted to include potentially dilutive securities, including restricted stock, stock options, and performance units. The treasury-stock method is used to measure the dilutive impact of potentially dilutive shares. Potentially dilutive shares are excluded from the diluted weighted-average shares outstanding computation in periods in which they have an anti-dilutive effect. The following table shows the calculation of basic and diluted earnings per share (in thousands, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	4,023	$	(10,175)	$	25,973	$	(26,444)

Basic weighted-average common shares outstanding	13,123		13,006		13,089		12,981
Add: Dilutive effect of restricted stock	177		—		197		—
Add: Dilutive effect of stock options	67		—		66		—

Diluted weighted-average common shares outstanding	13,367		13,006		13,352		12,981


Basic	$	0.31	$	(0.78)	$	1.98	$	(2.04)
Diluted	$	0.30	$	(0.78)	$	1.95	$	(2.04)

The following table shows the shares that have an anti-dilutive effect and are excluded from the diluted weighted-average shares outstanding computations (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Anti-dilutive effect of restricted stock	54	289	85	233

Anti-dilutive effect of stock options outstanding	224	310	180	310

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Note 4— CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Total cash, cash equivalents and restricted cash, as shown on the condensed consolidated statements of cash flows are included in the following accounts at September 30, 2021, and 2020 (in thousands):


	September 30, 2021		September 30, 2020
Cash and cash equivalents	$	25,637	$	9,258
Restricted cash included in other current assets	175		150
Restricted cash included in other long-term assets	519		516
Total cash, cash equivalents, and restricted cash as shown in the statement of cash flows	$	26,331	$	9,924

Restricted cash included in other current and long-term assets on the condensed consolidated balance sheets represents amounts whose use is restricted by contractual agreements with various entities, principally the Bureau of Land Management or the State of Utah, as security to fund future reclamation obligations at our sites.

Note 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 September 30, 2021, and December 31, 2020 (in thousands):


	September 30, 2021		December 31, 2020
Finished goods product inventory	$	32,156	$	48,961
In-process inventory	32,974		28,833
Total product inventory	65,130		77,794
Current parts inventory, net	11,698		10,879
Total current inventory, net	76,828		88,673
Long-term parts inventory, net	29,067		28,900
Total inventory, net	$	105,895	$	117,573

Parts inventory is shown net of estimated allowances for obsolescence of $1.1 million as of September 30, 2021, and December 31, 2020.

Production was well below normal at our HB solar solution facility due to significant rainfall and lower evaporation rates, resulting in fewer harvestable tons of potash from our solar solution ponds. Accordingly, we recorded abnormal production costs of $3.6 million for the three and nine months ended September 30, 2021, and we may incur additional abnormal production costs in future periods. We did not incur any abnormal production costs during the three and nine months ended September 30, 2020.

As a result of routine assessments of the lower of weighted-average cost or estimated net realizable value of our finished goods product inventory, we recorded inventory charges of $1.2 million and $4.0 million for the three and nine months ended September 30, 2020, respectively. We recorded no such inventory charges during the three and nine months ended September 30, 2021.

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Note 6 — PROPERTY, PLANT, EQUIPMENT, AND MINERAL PROPERTIES

Property, plant, equipment, and mineral properties were comprised of the following (in thousands):


	September 30, 2021		December 31, 2020
Land	$	24,136	$	27,263
Ponds and land improvements	68,247		67,843
Mineral properties and development costs	144,449		143,955
Buildings and plant	82,923		81,692
Machinery and equipment	270,556		265,121
Vehicles	6,691		5,919
Office equipment and improvements	9,147		9,083
Operating lease ROU assets	8,835		9,622
Breeding stock	278		260
Construction in progress	6,778		1,710
Total property, plant, equipment, and mineral properties, gross	$	622,040	$	612,468
Less: accumulated depreciation, depletion, and amortization	(282,054)		(256,971)
Total property, plant, equipment, and mineral properties, net	$	339,986	$	355,497

In May 2021, we sold approximately 330 acres of land we owned in Texas for $6.0 million and recorded a gain of $2.8 million. In March 2020, we sold approximately 320 acres of land for $4.8 million and recorded a gain of $4.7 million.

We incurred the following expenses for depreciation, depletion, and amortization, including expenses capitalized into inventory, for the following periods (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Depreciation	$	7,294	$	7,511	$	22,145	$	22,164
Depletion	600		710		2,796		2,599
Amortization of right of use assets	536		527		1,568		1,614
Total incurred	$	8,430	$	8,748	$	26,509	$	26,377

Note 7 — DEBT

Credit Facility—We maintain a revolving credit facility with Bank of Montreal. As of September 30, 2021, borrowings under the credit facility bear interest at LIBOR (London Interbank Offered Rate) plus an applicable margin of 1.25% to 2.00% per annum, based on our leverage ratio as calculated in accordance with the agreement governing the credit facility. We have granted to Bank of Montreal a first lien on substantially all of our current and non-current assets. 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. During the three and nine months ended September 30, 2021, we made no borrowings under the facility. During the three and nine months ended September 30, 2021, we made repayments of $29.8 million under the facility. As of September 30, 2021, we had no borrowings outstanding and $1 million in outstanding letters of credit under the facility.

As of September 30, 2021, we were in compliance with all applicable covenants under the revolving credit facility.

PPP Loan—In April 2020, we received a $10 million loan under the Paycheck Protection Program (the "PPP") under the CARES Act. We submitted our application for forgiveness of the full amount of the loan in November 2020. In June 2021, we received notice that the Small Business Administration 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.

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Senior Notes—In June 2021 we repaid the remaining $15.0 million of principal outstanding on our Series B Senior Notes due April 14, 2023 (the "Series B Senior Notes") and satisfied all obligations under the Amended and Restated Note Purchase Agreement, dated as of October 31, 2016, by and among the Company and each of the purchasers named therein (as amended, the "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 $0.1 million and $2.5 million for the three months ended September 30, 2021, and 2020, respectively, and $1.5 million and $4.0 million for the nine months ended September 30, 2021, and 2020, respectively.

Amounts included in interest expense, net for the three months ended September 30, 2021, and 2020, were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Interest on debt borrowings	$	50	$	386	$	717	$	1,748
Make-whole payments	—		1,868		505		1,868
Amortization of deferred financing costs	60		196		254		357
Gross interest expense	110		2,450		1,476		3,973
Less capitalized interest	(28)		—		(50)		(96)
Interest expense, net	$	82	$	2,450	$	1,426	$	3,877

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Note 8 — INTANGIBLE ASSETS

We have water rights, recorded at $19.2 million at September 30, 2021, and December 31, 2020. Our water rights have indefinite lives and are not amortized. We evaluate our water rights at least annually on October 1 for impairment, or more frequently if circumstances require.

We account for other intangible assets as finite-lived intangible assets and amortize those intangible assets over the period of estimated benefit, using the straight-line method. The weighted average amortization period for the other intangible assets is approximately 18 years. At September 30, 2021, and December 31, 2020, these intangible assets had a net book value of $5.6 million and $5.9 million, respectively, and are included in "Other assets, net" on the Condensed Consolidated Balance Sheets.

Note 9— 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 totaled $25.6 million and $19.5 million at September 30, 2021, and December 31, 2020, respectively. If one or more of our wholly-owned operating subsidiaries guarantee public debt securities in the future, those guarantees will be full and unconditional and will constitute the joint and several obligations of the subsidiary guarantors. The assets and liabilities of our other subsidiaries are immaterial. There are no restrictions on our ability to obtain cash dividends or other distributions of funds from the subsidiary guarantors, except those imposed by applicable law.

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Note 10 — ASSET RETIREMENT OBLIGATION

We recognize an estimated liability for future costs associated with the abandonment and reclamation of our mining properties. A liability for the fair value of an asset retirement obligation and a corresponding increase to the carrying value of the related long-lived asset are recorded as the mining operations occur or the assets are acquired.

Our asset retirement obligation is based on the estimated cost to abandon and reclaim the mining operations, the economic life of the properties, and federal and state regulatory requirements. The liability is discounted using credit adjusted risk-free rate estimates at the time the liability is incurred or when there are upward revisions to estimated costs. The credit adjusted risk-free rates used to discount our abandonment liabilities range from 6.9% to 9.7%. Revisions to the liability occur due to construction of new or expanded facilities, changes in estimated abandonment costs or economic lives, 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 obligation for the following periods (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Asset retirement obligation, at beginning of period	$	24,780	$	23,003	$	23,872	$	22,250
Liabilities settled	—		—		—		(116)

Changes in estimated obligations	—		—		26		—
Accretion of discount	441		434		1,323		1,303
Total asset retirement obligation, at end of period	$	25,221	$	23,437	$	25,221	$	23,437

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Note 11 — REVENUE

Revenue Recognition—We account for revenue in accordance with 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. The timing of revenue recognition, billings, and cash collection may result in contract assets or contract liabilities.

Contract Balances: As of September 30, 2021, and September 30, 2020, we had $33.7 million and $26.5 million of contract liabilities, respectively, which are included in "Other current liabilities" on the Condensed Consolidated Balance Sheets, primarily related to cash advances received from a customer for water purchases. 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). We will recognize the deferred revenue at the time the customer calls for water delivery. See Note 14—Commitments and Contingencies below for additional information regarding our water rights. Our deferred revenue activity for the three and nine months ended September 30, 2021, and 2020 is shown below (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Beginning balance	$	33,631	$	22,690	$	30,418	$	16,612
Additions	146		3,883		4,119		13,529
Recognized as revenue during period	(71)		(71)		(831)		(3,639)
Ending balance	$	33,706	$	26,502	$	33,706	$	26,502

Disaggregation of Revenue: The tables below show the disaggregation of revenue by product and reconciles disaggregated revenue to segment revenue for the three and nine months ended September 30, 2021, and 2020. We believe the disaggregation of revenue by products best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic conditions (in thousands):


	Three Months Ended September 30, 2021
Product	Potash Segment		Trio® Segment		Oilfield Solutions Segment		Intersegment Eliminations		Total
Potash	$	26,573	$	—	$	—	$	(55)	$	26,518
Trio®	—		19,495		—		—		19,495
Water	263		1,310		4,382		—		5,955
Salt	2,540		22		—		—		2,562
Magnesium Chloride	1,921		—		—		—		1,921
Brine Water	376		—		301		—		677
Other	—		—		2,025		—		2,025
Total Revenue	$	31,673	$	20,827	$	6,708	$	(55)	$	59,153

	Nine Months Ended September 30, 2021
Product	Potash Segment		Trio® Segment		Oilfield Solutions Segment		Intersegment Eliminations		Total
Potash	$	97,248	$	—	$	—	$	(177)	$	97,071
Trio®	—		68,348		—		—		68,348
Water	1,942		2,808		9,507		—		14,257
Salt	6,587		288		—		—		6,875
Magnesium Chloride	5,829		—		—		—		5,829
Brine Water	1,338		—		735		—		2,073
Other	—		—		4,051		—		4,051
Total Revenue	$	112,944	$	71,444	$	14,293	$	(177)	$	198,504

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	Three Months Ended September 30, 2020
Product	Potash Segment		Trio® Segment		Oilfield Solutions Segment		Intersegment Eliminations		Total
Potash	$	18,575	$	—	$	—	$	(49)	$	18,526
Trio®	—		11,441		—		—		11,441
Water	262		1,312		2,037		—		3,611
Salt	1,995		137		—		—		2,132
Magnesium Chloride	1,127		—		—		—		1,127
Brine Water	228		—		105		—		333
Other	—		—		908		—		908
Total Revenue	$	22,187	$	12,890	$	3,050	$	(49)	$	38,078

	Nine Months Ended September 30, 2020
Product	Potash Segment		Trio® Segment		Oilfield Solutions Segment		Intersegment Eliminations		Total
Potash	$	69,942	$	—	$	—	$	(253)	$	69,689
Trio®	—		51,474		—		—		51,474
Water	957		2,963		10,727		—		14,647
Salt	5,792		285		—		—		6,077
Magnesium Chloride	2,838		—		—		—		2,838
Brine Water	975		—		297		—		1,272
Other	—		—		2,515		—		2,515
Total Revenue	$	80,504	$	54,722	$	13,539	$	(253)	$	148,512

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Note 12 — COMPENSATION PLANS

Equity Incentive Compensation Plan—Our Board of Directors and stockholders adopted a long-term incentive compensation plan called the Intrepid Potash, Inc. Amended and Restated Equity Incentive Plan (the "Plan"). The Plan was most recently amended and restated in May 2019. We have issued common stock, restricted stock, performance units, and non-qualified stock option awards under the Plan. At September 30, 2021, approximately 0.6 million shares remained available for issuance under the Plan.

In May 2021, the Compensation Committee granted 16,535 shares of restricted stock to non-employee directors. The restricted shares vest one year after the date of grant, subject to continued employment. In March 2021, the Compensation Committee granted 42,445 shares of restricted stock to executive officers and other key employees. These awards vest over three years, and in some cases, contain a market condition. As of September 30, 2021, the following awards were outstanding under the Plan (in thousands):



						Outstanding as of September 30, 2021
Restricted Shares						321

Non-qualified Stock Options						285

Total share-based compensation expense was $0.6 million and $1.0 million for the three months ended September 30, 2021, and 2020, respectively, and $2.3 million and $3.0 million for the nine months ended September 30, 2021, and 2020, respectively. As of September 30, 2021, we had $3.6 million of total remaining unrecognized compensation expense related to awards that is expected to be recognized over a weighted-average period of 1.4 years.

Note 13 — INCOME TAXES

Our anticipated annual tax rate is impacted primarily by the amount of taxable income associated with each jurisdiction in which our income is subject to income tax, permanent differences between the financial statement carrying amounts and tax bases of assets and liabilities.

During the three months ended September 30, 2021, and 2020, we incurred no income tax expense. During the nine months ended September 30, 2021, we incurred no income tax expense. During the nine months ended September 30, 2020, we recognized an immaterial amount of income tax benefit. Our effective tax rate for the three months ended September 30, 2021, and 2020, and the nine months ended September 30, 2021, and 2020, was 0%. Our effective tax rates differed from the statutory rate during each period primarily due to changes in the valuation allowance established to offset our deferred tax assets.

We evaluate our deferred tax assets and liabilities each reporting period 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. The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted most significantly by the states in which we conduct business. Changing business conditions for normal business transactions and operations, as well as changes to state tax rates and apportionment laws, potentially alter our apportionment of income among the states for income tax purposes. These changes in 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. These adjustments can increase or decrease the net deferred tax asset on our condensed consolidated balance sheet. However, any resulting impact to the deferred tax benefit or deferred tax expense would be offset by a corresponding adjustment to the valuation allowance and would have no income statement effect.

As of September 30, 2021, we were in a near break-even cumulative three-year income position. Additionally, weather issues that have negatively affected potash production (see Note 5—Inventory for further information), outstanding legal issues which may have a material adverse effect on our future results of operations (see Note 14—Commitments for further information), supply chain issues that have driven near term supply shortages that have increased fertilizer prices along with the continued uncertainty from the ongoing COVID-19 pandemic make it difficult to accurately forecast sustained amounts of future income. These circumstances are significant negative evidence when evaluating the realizability of our deferred tax assets. This negative evidence continues to outweigh the positive evidence of profitability in 2018, and 2019, thereby requiring us to maintain the full valuation allowance as of September 30, 2021. However, we believe that if positive pricing and sales evidence trends continue and our future long-term forecasts show sustained profitability, it is possible that

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there may be sufficient positive evidence to release all or a portion of our valuation allowance within the next 12 months. The timing and amount of any valuation allowance release is subject to significant judgment that is considered with the timing and amounts of actual and future earnings. Release of any valuation allowance would result in a benefit to income tax expense in the period the release is recorded, which could have a material effect on net earnings.

Note 14 — COMMITMENTS AND CONTINGENCIES

Reclamation Deposits and Surety Bonds—As of September 30, 2021, and December 31, 2020, we had $23.0 million of security placed principally with the State of Utah and the Bureau of Land Management for eventual reclamation of our various facilities. Of this total requirement, $0.5 million consisted of long-term restricted cash deposits reflected in "Other assets, net" on the condensed consolidated balance sheets and $22.5 million was secured by surety bonds issued by an insurer. The surety bonds are held in place by an annual fee paid to the issuer and a letter of credit.

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. Legal costs are expensed 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.

Mosaic Settlement

In March 2020, we entered into a definitive settlement agreement with Mosaic Potash Carlsbad Inc. ("Mosaic") related to a complaint originally brought against us and Steve Gamble in February 2015. Mr. Gamble is a former employee of Intrepid and Mosaic. Under the terms of the settlement agreement, we paid Mosaic an aggregate of $10 million in May 2020 to dismiss all current and future claims arising from this matter against us and the matter is now closed.

Water Rights

In February 2019, Pecos Valley Artesian Conservancy District, Carlsbad Irrigation District, and Otis Mutual Domestic Water Consumers & Sewage Works Association (together, the "Protestants") filed an expedited inter se proceeding against us, Henry McDonald, Select Energy Services, LLC d/b/a Gregory Rockhouse Ranch, and Vision Resources, Inc. in the Fifth Judicial District Court for the County of Chaves in the State of New Mexico ("adjudication court"), which serves as the adjudication court for the Pecos Stream System, including the Pecos River. The Protestants challenged the validity of our Pecos River water rights, representing approximately 20,000 acre feet per year. A virtual trial began on December 8, 2020 and concluded on December 18, 2020.

In August 2021, the adjudication court issued its rulings on the validity of our Pecos River water rights. The adjudication court entered findings of fact and conclusions of law deciding that our predecessors had forfeited all but approximately 5,800 feet of water per year. The court further ruled that, of the remaining 5,800 acre feet of water that had not been forfeited, all but 150 acre feet of water had been abandoned prior to 2017. The order based on these findings of fact and conclusions of law has not been entered and the adjudication court has requested and received further briefing on the impact of a decision by the New Mexico Court of Appeals which may have an impact on the current analysis in the findings of fact and conclusions of law. Once the adjudication court has determined this impact and made revisions and modifications (if any), we will determine whether to appeal the adjudication court’s ruling on the validity of our water rights.

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 annually. The preliminary authorizations allowed for water sales to begin immediately, subject to repayment if the underlying water rights are ultimately found to be invalid. 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 the adjudication court's initial findings of fact and conclusions of law do not change and forms the basis of the adjudication court's order, the required volume and timing of repayment is unknown at this time. If we are not able to repay in-kind due to the lack of remaining water rights or logistical constraints, we would 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 have relied primarily upon our Pecos River water rights to deliver water under this contract, the majority of which are currently unavailable due to the

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factors discussed above. We are continuing to work with the customer to resolve this issue. 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 continue to work to resolve the issue. If we are not able to resolve the issue, we may have to repay the $32.5 million outstanding contract liability we have with this customer as of September 30, 2021. 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. NGL is seeking to immediately terminate the JMA as well as compensatory damages. We are vigorously defending against the lawsuit. Because this matter is at an early stage, we are unable to reasonably estimate the potential amount of loss, if any.

Note 15 — FAIR VALUE

We measure our financial assets and liabilities in accordance with ASC Topic 820, Fair Value Measurements and Disclosures.

As of September 30, 2021, and December 31, 2020, our cash consisted of bank deposits. Other financial assets and liabilities including accounts receivable, refundable income taxes, accounts payable, accrued liabilities, and advances under our credit facility, and are carried at cost which approximates fair value because of the short-term nature of these instruments.

In May of 2020, we acquired a non-controlling interest in W.D. Von Gonten Laboratories ("WDVGL") for $3.5 million. 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 Condensed Consolidated Balance Sheets. We did not record any adjustments to the $3.5 million carrying value of the investment during the first nine months of 2021.

As of December 31, 2020, the estimated fair value of our outstanding Series B Senior Notes was $15 million. The fair value of our Notes was estimated using a discounted cash flow analysis based on current borrowing rates for debt with similar remaining maturities and ratings (a Level 2 input) and is designed to approximate the amount at which the instruments could be exchanged in an arm's-length transaction between knowledgeable willing parties. In June 2021, we repaid the remaining $15.0 million of principal outstanding under the Series B Senior Notes.

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Note 16 — BUSINESS SEGMENTS

Our operations are organized into three segments: potash, Trio® and oilfield solutions. The reportable segments are determined by management based on several factors including the types of products and services sold, production processes, markets served and the financial information available for our chief operating decision maker. We evaluate performance based on the gross margins of the respective business segments and do not allocate corporate selling and administrative expenses, among others, to the respective segments. Intersegment sales prices are market-based and are eliminated in the "Other" column. Information for each segment is provided in the tables that follow (in thousands).


Three Months Ended September 30, 2021	Potash		Trio®		Oilfield Solutions		Other		Consolidated
Sales	$	31,673	$	20,827	$	6,708	$	(55)	$	59,153
Less: Freight costs	3,928		4,038		—		(55)		7,911
Warehousing and handling costs	1,241		825		—		—		2,066
Cost of goods sold	18,385		10,528		6,061		—		34,974

Costs associated with abnormal production	3,594		—				—		3,594
Gross Margin	$	4,525	$	5,436	$	647	$	—	$	10,608
Depreciation, depletion, and amortization incurred1	$	6,257	$	1,321	$	818	$	114	$	8,510

Nine Months Ended September 30, 2021	Potash		Trio®		Oilfield Solutions		Other		Consolidated
Sales	$	112,944	$	71,444	$	14,293	$	(177)	$	198,504
Less: Freight costs	13,766		16,515		—		(177)		30,104
Warehousing and handling costs	4,004		3,072		—		—		7,076
Cost of goods sold	68,251		43,329		12,235		—		123,815

Costs associated with abnormal production	3,594		—		—		—		3,594
Gross Margin	$	23,329	$	8,528	$	2,058	$	—	$	33,915
Depreciation, depletion, and amortization incurred1	$	19,895	$	4,204	$	2,206	$	445	$	26,750

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Three Months Ended September 30, 2020	Potash		Trio®		Oilfield Solutions		Other		Consolidated
Sales	$	22,187	$	12,890	$	3,050	$	(49)	$	38,078
Less: Freight costs	3,973		3,878		—		(49)		7,802
Warehousing and handling costs	1,173		1,142		—		—		2,315
Cost of goods sold	14,928		8,754		3,363		—		27,045
Lower of cost or net realizable value inventory adjustments	760		464		—		—		1,224

Gross Margin (Deficit)	$	1,353	$	(1,348)	$	(313)	$	—	$	(308)
Depreciation, depletion, and amortization incurred1	$	6,430	$	1,531	$	657	$	210	$	8,828

Nine Months Ended September 30, 2020	Potash		Trio®		Oilfield Solutions		Other		Consolidated
Sales	$	80,504	$	54,722	$	13,539	$	(253)	$	148,512
Less: Freight costs	12,700		15,950		—		(253)		28,397
Warehousing and handling costs	3,673		3,611		—		—		7,284
Cost of goods sold	55,298		40,405		8,397		—		104,100
Lower of cost or net realizable value inventory adjustments	1,130		2,885		—		—		4,015

Gross Margin (Deficit)	$	7,703	$	(8,129)	$	5,142	$	—	$	4,716
Depreciation, depletion and amortization incurred1	$	19,485	$	4,556	$	1,945	$	632	$	26,618

1 Depreciation, depletion, and amortization incurred for potash and Trio® excludes depreciation, depletion and amortization amounts absorbed in or relieved from inventory.

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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q (this "Quarterly Report") contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Securities Act of 1933, as amended. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements in this Quarterly Report other than statements of historical fact are forward-looking statements. Forward-looking statements include statements about, among other things, our future results of operations and financial position, our business strategy and plans, our ESG (as defined below) initiatives and our objectives for future operations. In some cases, you can identify these statements by forward-looking words, such as "estimate," "expect," "anticipate," "project," "plan," "intend," "believe," "forecast," "foresee," "likely," "may," "should," "goal," "target," "might," "will," "could," "predict," and "continue." Forward-looking statements are only predictions based on our current knowledge, expectations, and projections about future events.

These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including the following:

•changes in the price, demand, or supply of our products and services;

•challenges and legal proceedings related to our water rights;

•our ability to successfully identify and implement any opportunities to grow our business whether through expanded sales of water, Trio®, byproducts, and other non-potassium related products or other revenue diversification activities;

•the costs of, and our ability to successfully execute, any strategic projects;

•declines or changes in agricultural production or fertilizer application rates;

•declines in the use of potassium-related products or water by oil and gas companies in their drilling operations;

•our ability to prevail in outstanding legal proceedings against us;

•our ability to comply with the terms of our revolving credit facility, including the underlying covenants, to avoid a default under that agreement;

•further write-downs of the carrying value of assets, including inventories;

•circumstances that disrupt or limit production, including operational difficulties or variances, geological or geotechnical variances, equipment failures, environmental hazards, and other unexpected events or problems;

•changes in reserve estimates;

•currency fluctuations;

•adverse changes in economic conditions or credit markets;

•the impact of governmental regulations, including environmental and mining regulations, the enforcement of those regulations, and governmental policy changes;

•adverse weather events, including events affecting precipitation and evaporation rates at our solar solution mines;

•increased labor costs or difficulties in hiring and retaining qualified employees and contractors, including workers with mining, mineral processing, or construction expertise;

•changes in the prices of raw materials, including chemicals, natural gas, and power;

•our ability to obtain and maintain any necessary governmental permits or leases relating to current or future operations;

•interruptions in rail or truck transportation services, or fluctuations in the costs of these services;

•our inability to fund necessary capital investments;

•the impact of the COVID-19 pandemic on our business, operations, liquidity, financial condition and results of operations; and

•the other risks, uncertainties, and assumptions described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2020, as updated by our subsequent Quarterly Reports on Form 10-Q.

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In addition, new risks emerge from time to time. It is not possible for our management to predict all risks that may cause actual results to differ materially from those contained in any forward-looking statements we may make.

In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in these forward-looking statements. As a result, you should not place undue reliance on these forward-looking statements. We undertake no duty to update or revise publicly any forward-looking statements to conform those statements to actual results or to reflect new information or future events.

Throughout this Quarterly Report, we refer to average net realized sales price per ton, which is a non-GAAP financial measure. More information about this measure, including a reconciliation of this measure to the most directly comparable GAAP financial measure, is below under the heading "Non-GAAP Financial Measure."

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Company Overview

We are a diversified mineral company that delivers potassium, magnesium, sulfur, salt, and water products essential for customer success in agriculture, animal feed and the oil and gas industry. We are the only U.S. producer of muriate of potash (sometimes referred to as potassium chloride, KCl or potash), which is applied as an essential nutrient for healthy crop development, utilized in several industrial applications, and used as an ingredient in animal feed. In addition, we produce a specialty fertilizer, Trio®, which delivers three key nutrients, potassium, magnesium, and sulfate, in a single particle. We also provide water, magnesium chloride, brine and various oilfield products and services.

Our extraction and production operations are conducted entirely in the continental United States. 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 three segments: potash, Trio®, and oilfield solutions. We account for the sale of byproducts as revenue in the potash or Trio® segment based on which segment generated the byproduct.

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ENVIRONMENTAL, SOCIAL, AND GOVERNANCE

We are committed to a goal of providing consistent returns to our shareholders while maintaining a strong sense of good corporate citizenship that places a high value on the welfare of our employees, the communities in which we operate, the customers we serve, and the world as a whole. We believe that prioritizing, improving, and managing our Environmental, Social, and Governance (“ESG”) goals will allow us to better create long-term value for our investors. We have made our ESG program a key initiative for our management team and we are committed to a plan to provide focused reporting on those ESG issues that we believe are the most relevant to our business and important to our stakeholders. We understand that clearly disclosing the goals and metrics related to our ESG programs will allow our stakeholders to be informed about our progress and we look forward to expanding our disclosures in future periods. A summary of our ESG goals under the United Nations Sustainable Development Goals framework is available on our website at intrepidpotash.com. An update on recent ESG highlights and initiatives is shown below.

Commitment to the Environment

We rely on the environments, resources and ecosystems surrounding our locations in all segments of our business. We work closely with our communities and make it a priority to protect the natural resources surrounding our operations.

–Full-Cycle Water Management - We are actively developing water treatment and recycling operations in the Delaware Basin. Recycled water will help reduce the produced water traditionally used in oil and gas operations and reduce the amount of produced water that is injected into produced water disposal wells.

–Solar solution mining potash - All of our potash is currently produced at solar solution mines, one of the most environmentally friendly and energy efficient mining techniques. We inject a naturally occurring, salt saturated brine solution into underground caverns or previously shuttered mine workings. This brine selectively dissolves the remaining potash, which is then pumped back to the surface and into evaporation ponds. During the spring and summer months, the brine naturally evaporates, leaving only the salt and potash solids in the ponds, which we then process into the products we sell. By using solar energy, we do not need to burn natural gas or coal to evaporate our brine ponds.

–Salt laydown at the Bonneville Salt Flats - We are committed to helping maintain the environments in which we operate, one of which is the Bonneville Salt Flats near our Wendover, UT mine. Since 2005, we have donated free of cost to the BLM nearly 7 million tons of salt that has been deposited on the racetrack to help preserve this unique attraction in northwest Utah.

–We are the only OMRI-listed potash and langbeinite producer in the United States. We became OMRI-listed in 2007 for our langbeinite, or Trio®, product, and in 2018 for our potash products at our Moab and Wendover operating facilities. We are also registered in the Organic Input Material Program through the California Department of Food and Agriculture, a program which registers fertilizers that can be used in organic crop and food production.

–We work closely with the Bureau of Land Management and other government and regulatory agencies to preserve historical sites near our operations such as the Maroon Cliffs in Carlsbad, New Mexico and petroglyphs near our Utah operations. We also work with and have supported agencies dedicated to studying and protecting endangered species near our operations such as the sand dune lizards in New Mexico.

Our Social Impact and Supporting our Communities

Our employees live and work in small, tight-knit communities and we are deeply involved in volunteering and being active community members.

Our New Mexico operations have partnered with the United Way of Carlsbad and South Eddy County since 2004, participating in a variety of community-focused events and activities such as United Way's annual Day of Caring event. We encourage all our employees to volunteer in their communities and we offer all our full-time employees three paid volunteer days each year to support either a charitable organization of their choosing or participate in an Intrepid sponsored volunteer project.

We recently partnered with the Dead Horse Point State Park which overlooks our Moab, Utah facility to update information regarding our facilities and how we utilize the natural environment and climate in Moab to produce potash. In previous years, we proudly funded the construction of numerous bike trails in the park, known as the Intrepid Trail System.

Our Commitment to a Diverse Workforce

We are committed to a recruitment and hiring process that emphasizes and embraces diversity. We believe a diverse workforce leads to greater collaboration, innovation, and improves shareholder returns and we celebrate the great value the differences in our people bring to our organization. We support a variety of organizations within our communities including the

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Women's Leadership Foundation, a Colorado based organization with the goal of opening more board of director positions to women leaders in Colorado and beyond.

Our Commitment to Safety

Safety audits are conducted across all our locations to ensure a thoughtful approach can be taken that increases the safe execution of all tasks. Through our audits and dialogue, we educate ourselves and understand the potential hazards present, create best practices that can be shared, and address areas where improvements can be made. Prior to each task, employees are required to: assemble the proper personal protection equipment, tools, permits, etc., ensure the area is safe for employees and contractors, discuss the task with all stakeholders, and understand how the task is related to the overall business.

We conduct safety audits of our operations on a monthly basis. The data from these safety audits is collected to analyze where, what, and why gaps exist, and to provide meaningful information that results in safer work for our employees.

In August 2021, our East Mine operation in Carlsbad, New Mexico received the National 2020 Sentinels of Safety Award in the large underground nonmetal category. The Sentinels of Safety Award is presented by the National Mining Association each year to recognize the outstanding safety achievements of mining operations across a variety of categories.

Business Ethics

Since inception, Intrepid has placed the highest emphasis on conducting its business with honesty and integrity. These standards are expected of management and employees alike, and we continuously strive to create a corporate culture of honesty, integrity, and trust.

The policies we have developed are intended to:

–Maintain and communicate our core value of integrity and disseminate our core values and the legal requirements applicable to good business conduct and ethical behavior.

–Annual refresher training on company policies, values, interpreting laws, and handling a variety of potential company-related issues and situations.

–Resources for employees to report any suspected violations of our company policies, including an anonymous employee hotline via phone and internet.

–Provide clear and well-defined procedures by which employees can easily obtain information, ask questions, and, if necessary, report any suspected violations of any of our Business Ethics policies.

–Maintain and communicate a Code of Business Conduct and Ethics which clearly articulates the company’s values, culture, and practices.

COVID-19 Response

We took quick and decisive action in early 2020 to limit the impacts of COVID-19 on our employees and operations. We instituted a work-from-home policy for employees when possible, providing additional resources to ensure our employees could be successful and supported in their new work environment. When work-from-home was not possible, we implemented strict social distancing measures at our operation facilities along with staggered schedules where possible.

Other actions included:

–Consistent review of staffing to ensure meeting state and federal guidelines

–Provided additional resources to employees for their continued physical, mental, and financial well-being

–Implemented strict visitor restrictions at our sites and limited corporate travel

–Additional cleaning protocols at all our sites

–Held on-site vaccination clinics at no cost to our employees

As vaccinations become readily available across the country we have begun to relax certain restrictions on our social distancing and work-from-home policies for vaccinated employees. We will continue to monitor state and federal guidelines and recommendations, issued by the Centers for Disease Control, World Health Organization and local governments and will revise our company policies accordingly.

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Significant Business Trends and Activities

As an essential business we continue to operate through-out the COVID-19 pandemic to produce potash and Trio® and serve oil and gas markets through our oilfield solutions business. The safety and protection of our workforce is our first and foremost priority. We continue to follow various procedures we implemented to help minimize the risks to our employees, including changes in our operating procedures to accommodate social distancing guidelines, additional cleaning and disinfection procedures and requiring those employees who can work from home to do so.

We continue to monitor the guidance from various authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. There may be developments outside our control that would require us to adjust our operating plans.

Our 2020 results were materially impacted by the COVID-19 pandemic, particularly our oilfield solutions segment as many of the actions taken to help prevent the spread of COVID-19 decreased demand for oil. Economic activity has improved in 2021 with most cities and states reducing restrictions when compared to the summer of 2020. Given the dynamic nature of the COVID-19 pandemic, we cannot reasonably estimate the impacts of COVID-19, if any, on our financial condition, results of operations, liquidity or cash flows in the future. We expect that if governmental authorities increase other restrictive orders, such actions may have a material effect on revenue growth, financial condition, liquidity, and overall profitability in future reporting periods. In addition to restrictive orders, we are monitoring the potential of a vaccine mandate on private employers. Recent announcements by the Biden administration have suggested private employers with over 100 employees may be forced to require vaccinations for most employees, implement weekly testing for unvaccinated employees, or be subject to substantial fines. While we encourage all our employees to be vaccinated, we believe our vaccination rates approximate those of the counties in and around our various operations and a portion of our employees remain unvaccinated. At this time there are no guidelines for when or how a vaccine mandate or weekly testing would be implemented and we are unable to determine the effect, if any, on our operations. If we were unable to implement weekly testing of unvaccinated employees and are forced to require vaccinations, there could be a material negative effect on our operations and results such as increased overtime and hiring expenses, reduced shifts, or temporary shutdowns of our operating facilities.

Our financial results have been, or are expected to be, impacted by several significant trends and activities, including impacts from the COVID-19 pandemic, as discussed below. We expect that the trends described below may continue to impact our results of operations, cash flows, and financial position.

• Potash pricing and demand. Sales volume increased 13% in first nine months of 2021 when compared to the prior year period. Fertilizer demand remains strong across the country as higher commodity prices support robust application rates in most of our markets. Our sales volumes into industrial markets continued to improve in the third quarter of 2021 compared to the prior year, as oilfield activity continues to recover from COVID-19 related impacts. The majority of our industrial potash sales are into oil and gas markets and correlate to drilling and completion activity, which slowed significantly during 2020 due to the containment actions taken to help reduce the spread of COVID-19, and activity remains below pre-pandemic levels. We have been successful in shifting sales towards our growing animal feed and organic markets and also continuing to expand our sales into high-margin agricultural areas near our operations. Additional or renewed restrictions enacted in response to the COVID-19 pandemic may impact our sales if such actions affect available labor, transportation logistics, or cause supply disruptions.

Global effective capacity continues to exceed demand and larger producers have worked to balance the market through production curtailments. Domestic pricing of our potash is influenced principally by the price established by our competitors. The interaction of global potash supply and demand, ocean, land, and barge freight rates, currency fluctuations, and crop commodity values and outlook, also influence pricing. With potash sales comprising 49% of our total sales in the first nine months of 2021, potash prices continue to be a significant driver of our profitability.

Our potash average net realized sales price per ton increased to $381 for the three months ended September 30, 2021, compared to $238 for the same period in 2020 as price increases announced in recent quarters continued to improve our realized pricing compared to the prior year. We announced further potash price increases in August 2021, increasing agricultural pricing $80 per ton. After the price increase, we took orders for historical volumes for fourth quarter delivery. Potash price continued to increase during the third quarter as the market remains extremely tight due to limited supply and strong demand. Our price expectations could be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases as a result of the COVID-19 pandemic, and the price and availability of other potassium products.

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We experience seasonality in potash demand, with more purchases historically occurring in March through May and September through November when purchasers are looking to have product on hand for the spring and fall application seasons in the United States. Various factors affect potash sales and shipments, thereby increasing volatility of sales volumes from quarter to quarter and season to season. The specific timing of when farmers apply potash remains highly weather dependent and varies across the numerous growing regions within the U.S. The timing of potash sales is also significantly influenced by the marketing programs of potash producers, as well as storage volumes closer to the farm gate. Our sales volumes into the industrial market correlate to drilling activity in the oil and gas market, which slowed significantly during 2020, due to the containment actions taken to help reduce the spread of COVID-19. While restrictions continued to lessen during 2021, any further containment actions taken in response to the COVID-19 pandemic may impact future fertilizer application seasons if such actions affect available labor, transportation logistics, or cause supply disruptions.

• Potash production. We experienced significant rain at our HB Solar Solution during 2021 evaporative season leading to reduced extraction rates, potash grade, and overall potash production in our pond system. As a result of the increased precipitation and reduced evaporation, we have significantly fewer tons available in our ponds. We expect to produce approximately 70,000 tons at our HB facility during our current harvest period, which is expected to end in mid-January. As a result, we recorded an abnormal production cost adjustment of $3.6 million in the third quarter and if we continue to have above average precipitation we may have abnormal production cost adjustments in future periods. In response to the reduced production, we plan to restart production in mid-March and continue through May capture to meet historical demand during the spring season.

• Trio® pricing and demand. Our Trio® average net realized sales price per ton increased 78% and 38% during the third quarter and first nine months of 2021, respectively, as compared to the same periods of 2020. Similar to our potash sales, our results in both periods benefited from the multiple price increases announced in recent quarters. We increased our Trio® price per ton by $50 in August 2021 in response to the increased potash spot price as discussed above. We had minimal volumes committed prior to the price increase and expect the majority of this price increase will be realized in our fourth quarter results. Our ability to recognize the increased prices may be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases as a result of the COVID-19 pandemic, and the price and availability of other potassium products.

Trio® sales volume increased 15% and 6% in the third quarter and first nine months of 2021, respectively, when compared to the prior year periods. Higher commodity pricing led to strong demand in our domestic markets during the first nine months of 2021 which more than offset reduced international sales. We expect to remain very selective in international markets as we focus on growing our domestic Trio® sales.

We also experience seasonality in domestic Trio® demand, with more purchases coming in the first and second quarters in advance of the spring application season in the U.S. In turn, we generally have increased inventory levels in the third and fourth quarters in anticipation of expected demand for the following year. Further actions taken in response to the COVID-19 pandemic may also impact seasonal demand patterns if there is an effect on available labor, transportation logistics, or supply disruptions. We added extra production days at our East mine beginning in September to respond to strong demand and expect we will continue to operate an extra shift utilizing contract labor. This added shift is expected to add another 50,000 tons of production over the next 12 months, and we have the potential to add up to another 50,000 tons depending on market conditions.

• Water sales. In the third quarter of 2021, total water sales were $6.0 million compared to $3.6 million during the same period of 2020. Oilfield activity is increasing in the areas we operate and we expect water sales will continue to improve in the coming quarters. Rig counts, oil pricing, and oilfield activity have increased from the summer of 2020 and we expect oilfield activity will improve as the year continues, although economic uncertainty and the potential for future restrictions enacted by state and local governments resulting from the COVID-19 pandemic make forecasting future drilling activities difficult.

See Note 14 of our unaudited condensed consolidated financial statements included in "Item 1. Condensed Consolidated Financial Statements (Unaudited)" of this Quarterly Report on Form 10-Q regarding legal proceedings related to our water rights.

• Byproduct sales. We sell byproducts such as salt, magnesium chloride, brines, and water that are derived from our potash and Trio® operations. Byproduct sales were $6.4 million for the three months ended September 30, 2021, compared to $5.1 million for the three months ended September 30, 2020, and $18.8 million for the nine months ended September 30, 2021, compared to $13.8 million for the comparable prior year period. The increase for both the three and nine month periods was driven by an improving economy during 2021 as economic activity continues to recover from COVID-19 related impacts. Magnesium chlorides sales also increased in both periods due to increased product availability compared to the prior year.

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Wet weather in the summer of 2019 significantly limited our production of magnesium chloride and we had less product to sell in 2020.

• Diversification of products and services. We continue to diversify our products and services, particularly on our Intrepid South property. In addition to water sales, Intrepid South generates revenue from right-of-way agreements, surface damages and easements, caliche sales, a produced water royalty, and sales of cattle. We are also currently negotiating water transfer agreements with customers throughout the basin to utilize our existing infrastructure. As part of the Intrepid South acquisition, we acquired state grazing leases and submitted a comprehensive grazing plan which is currently pending approval with the New Mexico State Land Office. In the third quarter of 2020, we purchased a 400-head commercial cattle herd which we plan to move to our grazing leases when we receive final approval.

In March 2020, we sold approximately 320 acres of fee land from our Intrepid South property for $4.8 million and recognized a gain on the sale of the land of $4.7 million. The terms of the sale were highly restrictive and only allow the buyer to drill Acid Gas Injection ("AGI") wells on the property to dispose of natural gas with high concentrations of hydrogen sulfide ("H2S"). No water rights were included in the land sale, we retained surface access, and we restricted the use of caliche located on the property to the acreage that was sold in order to prevent sales to third parties or decrease future sales to the buyer. Due to the strategic location of Intrepid South, part of our long-term operating strategy is selling small parcels of land, including restricted use agreements of surface or subsurface rights, to customers, where such sales provide a solution to such customer's operations in the oil and gas industry. We may have additional strategic sales of small parcels of land in the future.

In May 2021, we sold 326 acres of land in Texas for $6.0 million and recognized a gain on the sale of the land of $2.8 million. We purchased this land in May 2019 for the development of a produced water disposal facility and had permitted two disposal wells on the property. Unlike the strategic land sale completed in March 2020 discussed above, we did not include any restrictions on the buyer of this land.

In May 2020, we acquired an 11% equity stake in the W.D. Von Gonten Laboratories ("WDVGL"), a global industry leader in drilling and completion chemistry and a strong supporter of the use of potassium chloride in oil and gas drilling and completion activities. With this investment we plan to revitalize our industrial sales and high-speed mixing service given the poor performance of clay-inhibition chemical substitutes in certain formations. Our investment in WDVGL is also part of our strategy to leverage our existing oil and gas midstream businesses in southeast New Mexico and expand into additional oil and gas midstream and upstream activities. This expansion may be through organic growth, other strategic investments, partnerships, or acquisitions of complementary businesses that expand our product and service offerings beyond our existing assets or products. Additionally, we may expand into oil and natural gas exploration and production or into new products or services in our current industry or other industries.

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Consolidated Results


(in thousands, except per ton amounts)	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Sales1	$	59,153	$	38,078	$	198,504	$	148,512

Cost of goods sold	$	34,974	$	27,045	$	123,815	$	104,100

Gross Margin (Deficit)	$	10,608	$	(308)	$	33,915	$	4,716

Selling and administrative	$	5,890	$	6,750	$	18,293	$	20,022

Net Income (Loss)	$	4,023	$	(10,175)	$	25,973	$	(26,444)

Average net realized sales price per ton2
Potash	$	381	$	238	$	319	$	251
Trio®	$	336	$	189	$	271	$	197

1Sales include sales of byproducts which were $6.4 million and $5.1 million for the three months ended September 30, 2021, and 2020, respectively, and $18.8 million and $13.8 million for the nine months ended September 30, 2021, and 2020, respectively.

2Average net realized sales price per ton is a non-GAAP financial measure. More information about this non-GAAP financial measure is below under the heading "Non-GAAP Financial Measure."

Consolidated Results for the Three Months Ended September 30, 2021, and 2020

Our total sales for the three months ended September 30, 2021 increased $21.1 million, or 55%, as compared to the three months ended September 30, 2020. Our potash sales increased $8.0 million, or 43%, during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020, as our average net realized sales price per ton increased 60% partially offset by a 6% decrease in tons sold. Strong demand in agricultural markets has led to multiple price increases announced since the fourth quarter of 2020.

Our Trio® sales increased $8.1 million, or 70%, in the third quarter of 2021, as compared to the third quarter of 2020, as our average net realized sales price per ton increased 78%, combined with a 15% increase in tons sold. Our Trio® average net realized sales price per ton increased due to multiple price increases announced since the fourth quarter of 2020. Our Trio® tons sold increased in the third quarter of 2021, as compared to the third quarter of 2020, as customers see the relative value of Trio® as compared to potash.

Our total water sales, including byproduct water sales, increased $2.3 million, or 65%, in the third quarter of 2021, compared to the third quarter of 2020. The overall increase in total water sales was due to higher oil prices resulting in increased oilfield activities as the economic rebound from the COVID-19 pandemic continues.

Our total byproduct sales excluding byproduct water sales, increased $1.4 million or 39% in the third quarter of 2021, compared to the third quarter of 2020, due to a $0.8 million increase in magnesium chloride sales, a $0.4 million increase in byproduct salt sales, and a $0.2 million increase in brine water sales. Magnesium chloride sales improved as we had more product to sell during the third quarter of 2021, as compared to the third quarter of 2020, as above average evaporation during the summer of 2020 has resulted in more product to sell in 2021. Byproduct salt sales increased in the third quarter of 2021, compared to the third quarter of 2020, as we sold more salt to oil and gas customers. Brine water sales increased in the third quarter of 2021, compared to the third quarter of 2020, due to the increase in oilfield activities.

Cost of Goods Sold

Our total cost of goods sold increased $7.9 million, or 29%, during the third quarter of 2021 compared to the third quarter of 2020. Our potash cost of goods sold increased by $3.5 million, or 23%, during the third quarter of 2021 compared to the third quarter of 2020. While we sold 6% fewer tons of potash in the third quarter of 2021, compared to third quarter of 2020, our weighted average carrying cost per ton was higher due primarily to the below average evaporation at our HB mine. For comparison, we had above average evaporation across our potash facilities, particularly at our HB mine, during the 2020 season. Most of our production costs are fixed and a decrease in tons produced increases our per ton weighted average cost. Our Trio® cost of goods sold increased $1.8 million, or 20%, for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020, due to a 15% increase in Trio® tons sold. Our cost of goods sold for the Oilfield Solutions Segment increased $2.7 million, or 80%, for the three months ended September 30, 2021, compared to the three

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months ended September 30, 2020, as we incurred increased third-party water purchases and water transfer costs due to increased water sales at Intrepid South.

Abnormal Production Costs

The Carlsbad, New Mexico area where our HB solar solution mining facility is located, received significant rainfall, well above the historical rainfall average during this period. Additionally, humidity was higher than normal and temperatures were cooler than average during this period which reduced our pond production and our ability to extract brine. Because of the wet, humid weather and cooler temperatures, we have fewer harvestable tons of potash from our HB solution ponds. Accordingly, we recorded abnormal production costs of $3.6 million during the three months ended September 30, 2021, and we may incur additional abnormal production costs in future periods. We did not incur any abnormal production costs during the three months ended September 30, 2020.

Gross Margin

During the third quarter of 2021, we generated gross margin of $10.6 million compared to a negative gross margin of $0.3 million during the third quarter of 2020, due to the factors discussed above.

Selling and Administrative Expense

During the third quarter of 2021, selling and administrative expenses decreased 13% as compared to the third quarter of 2020, driven mainly by a decrease in legal expenses. During the third quarter of 2020, we incurred additional legal expenses in preparation for the trial to determine the validity of our Pecos River water rights that was held in December 2020.

Interest Expense

During the third quarter of 2021, our interest expense decreased $2.4 million as compared to the third quarter of 2020, as we repaid the outstanding balance of our Series B Senior Notes in June 2021, and we repaid the outstanding balance on our credit facility in early August 2021.

Net Income

We generated net income of $4.0 million for the three months ended September 30, 2021, compared to a net loss of $10.2 million for the three months ended September 30, 2020, due to the factors discussed above.

Consolidated Results for the Nine Months Ended September 30, 2021, and 2020

Our total sales for the nine months ended September 30, 2021, increased $50.0 million or 34%, as compared to the nine months ended September 30, 2020. Our potash sales during the nine months ended September 30, 2021 increased $27.3 million or 39%, compared to the same period in 2020. Our potash average net realized sales price per ton increased 27% in the first nine months of 2021, compared to the same period in 2021, as good demand and limited supply have driven multiple potash price increases since the fourth quarter of 2020. Our total tons of potash sold increased 13% during the nine-months ended September 30, 2021 as strong commodity prices has created strong demand for potash.

Our Trio® sales increased $16.9 million or 33% during the first nine months of 2021, compared to the same period in 2020. Our Trio® average net realized sales price per ton increased 38% during the first nine months of 2021, compared to the same period in 2020, due to multiple price increases announced since the fourth quarter of 2020. We sold 6% more tons of Trio® in the first nine months of 2021, as strong domestic demand was partially offset by selling fewer tons in the international market.

Our water sales, excluding byproduct water sales, decreased $1.2 million, or 11%, in the first nine months of 2021, compared to the same period in 2020. Our water sales declined substantially beginning in April 2020 due to the COVID-19 pandemic and related governmental control measures that were implemented. Oil and gas activities near our facilities in New Mexico have increased, but were still below pre-pandemic levels for most of the first nine months of 2021.

Our sales of other oilfield solution segment offerings, including caliche, brine water, right-of-way agreements, surface damages and easements, increased $1.5 million, or 61% in the first nine months of 2021, compared to the same period in 2020, driven by a $1.0 million increase in produced water royalties, and a $0.5 million increase in surface use and rights of way agreements as oil and gas operators have increased fracking activities near our facilities in New Mexico as oil prices have increased during 2021 as the economy rebounds from the COVID-19 pandemic.

Our total byproduct sales increased $5.0 million, or 36%, for the nine months ended September 30, 2021, compared to the first nine months 2020, as our byproduct magnesium chloride sales increased $3.0 million, or 105%, our byproduct water sales increased $0.8 million, or 21%, our byproduct salt sales increased $0.8 million, or 13%, and our byproduct brine water sales increased $0.4 million, or 37%. Our byproduct magnesium chloride sales increased as we had more product to sell during 2021 compared to 2020. Our byproduct water sales and our byproduct brine water sales increased as oil and gas activities

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increased in 2021 compared to 2020, particularly during the third quarter of 2021, as oilfield activities have increased as oil prices rise with the economic recovery after the COVID-19 pandemic.

Cost of Goods Sold

Our cost of goods sold increased $19.7 million, or 19%, during the first nine months of 2021 compared to the same period in 2020. Our potash cost of goods sold increased $13.0 million, or 23%, during the first nine months 2021, compared to the same period in 2020, as we sold 13% more tons of potash, but had below average evaporation at our HB mine, which increased our per ton cost of sales. Our Trio® cost of goods sold increased $2.9 million, or 7%, during the first nine months of 2021, compared to the first nine months of 2020, as we sold 6% more tons of Trio®.

Our oilfield solutions cost of goods sold increased $3.8 million, or 46% during the first nine months of 2021, compared to the same period in 2020, due to increased third-party water purchases during 2021 to meet the significant daily refresh rates for certain frac jobs on our South ranch and increased water transfer costs due to increased water sales.

Abnormal Production Costs

A discussed above, we recorded $3.6 million in abnormal production costs during the third quarter of 2021 as wet weather and reduced evaporation rates decreased our production at our HB solar solution facility. We did not incur any abnormal production costs during the nine months ended September 30, 2020.

Gross Margin

During the first nine months of 2021, we generated gross margin of $33.9 million compared to gross margin of $4.7 million for the same period in 2020, driven by a 34% increase in total sales, partially offset by a 19% increase in our total cost of goods sold, as discussed above.

Gain on Sale of an Asset

In May 2021, we sold 326 acres of land in Texas for $6.0 million and recognized a gain on the sale of the land of $2.8 million. We purchased this land in May 2019 for the development of a produced water disposal facility and had permitted two disposal wells on the property. Unlike the strategic land sale completed in March 2020 discussed below, we did not include any restrictions on the buyer of this land.

In March 2020, we sold approximately 320 acres of fee land from our Intrepid South property for $4.8 million and recognized a gain on the sale of the land of $4.7 million. The terms of the sale were highly restrictive and only allow the buyer to drill AGI wells on the property to dispose of natural gas with high concentrations of H2S. No water rights were included in the land sale, we retained surface access, and we restricted the use of caliche located on the property to the acreage that was sold in order to prevent sales to third parties or decrease future sales to the buyer. Our long-term strategic operating plan for Intrepid South includes selling small parcels of land to other companies, where such sales provide a solution to a company's needs. We may have additional strategic sales of small parcels of land in the future.

Gain on Extinguishment of Debt

In June 2021, we received notice that the Small Business Administration ("SBA") had remitted funds to our bank to fully repay our $10 million loan we received in April 2020 under the Paycheck Protection Program (the "PPP") under the CARES Act. We elected to record the proceeds received under the PPP loan as debt and apply debt accounting prescribed under Accounting Standards Codification Topic 470. Accordingly, we recognized a gain of $10.1 million related to the forgiveness of the $10 million PPP loan and the associated accrued interest on the loan.

Litigation Settlement

In March 2020, we reached an agreement with Mosaic to settle ongoing litigation. As part of this matter we paid Mosaic an aggregate of $10 million to dismiss all claims against us in this litigation.

Selling and Administrative Expense

During the first nine months of 2021, selling and administrative expenses decreased 9% as compared to the same period 2020. We incurred more legal expenses in the first nine months of 2020 related to the settlement of ongoing litigation discussed above.

Net Income

We generated net income of $26.0 million for the nine months ended September 30, 2021, as compared to a net loss of $26.4 million for the nine months ended September 30, 2020, due to the factors discussed above.

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Potash Segment


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per ton amounts)	2021		2020		2021		2020
Sales1	$	31,673	$	22,187	$	112,944	$	80,504
Less: Freight costs	3,928		3,973		13,766		12,700
Warehousing and handling costs	1,241		1,173		4,004		3,673
Cost of goods sold	18,385		14,928		68,251		55,298
Lower of cost or net realizable value inventory adjustments	—		760		—		1,130
Costs associated with abnormal production	3,594		—		3,594		—
Gross Margin	$	4,525	$	1,353	$	23,329	$	7,703
Depreciation, depletion, and amortization incurred2	$	6,257	$	6,430	$	19,895	$	19,485

Potash sales volumes (in tons)	62		66		270		239
Potash production volumes (in tons)	37		61		201		202

Average potash net realized sales price per ton3	$	381	$	238	$	319	$	251

1 Sales include sales of byproducts which were $5.1 million and $3.6 million for the three months ended September 30, 2021, and 2020, respectively, and $15.7 million and $10.6 million for the nine months ended September 30, 2021, and 2020, respectively.

2 Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization amounts absorbed in or (relieved from) inventory.

3Average net realized per ton sales price per ton is a non-GAAP financial measure. More information about this measure is below under the heading "Non-GAAP Financial Measure."

Three Months Ended September 30, 2021, and 2020

Potash segment sales in the third quarter of 2021 increased 43% compared to the same period in 2020, due to a 60% increase in our average net realized sales price per ton, a $1.5 million increase in byproduct sales, partially offset by a decrease of 6% in tons of potash sold. Near-term potash shortages have led to multiple price increases since the fourth quarter of 2020 and driven the per ton price of potash to historical highs. Increased byproduct sales were driven by an increase of $0.8 million in magnesium chloride sales, a $0.6 million increase in salt sales and a $0.2 million increase in brine water sales. Our magnesium chloride sales increased as we had more product to sell in 2021 due to good evaporation during the summer of 2020. Byproduct salt and byproduct brine water sales increased due to the increased activity by oil and gas producers during the third quarter of 2021, as compared to the third quarter of 2020.

Potash segment freight expense decreased slightly in the third quarter of 2021, compared to the third quarter of 2020, as a result of a 6% decrease in potash tons sold. Our freight expense is impacted by the geographic distribution of our potash and byproduct sales and by the proportion of customers arranging for and paying their own freight costs.

Our potash segment cost of goods sold increased 23% in the third quarter of 2021, compared to the same period in 2020. While we sold 6% fewer tons of potash in the third quarter of 2021, compared to third quarter of 2020, our weighted average carrying cost per ton was higher due to below average evaporation at our HB mine in 2021, compared to above average evaporation across our potash facilities in 2020. Most of our production costs are fixed and a decrease in tons produced increases our per ton weighted average cost.

During the three months ended September 30, 2021, we recorded abnormal production costs of $3.6 million. The Carlsbad, New Mexico area where our HB solar solution mining facility is located, experienced unusually wet, humid weather during the evaporation season. Because of the wet, humid weather, our evaporation and extraction rates were well below normal, resulting in fewer harvestable tons of potash from our HB solution ponds.

Our potash segment gross margin increased $3.2 million in the third quarter of 2021, compared to the same period in 2020, due to the factors discussed above.

Nine Months Ended September 30, 2021, and 2020

Potash segment sales increased 40% for the nine months ended September 30, 2021, as compared to the same period in 2020, due to a 27% increase in our average net realized sales price per ton, a 13% increase in tons of potash sold and a $5.1

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million increase in byproduct sales. Agricultural sales volume increased 15% as strong commodity prices drove increased potash demand. Industrial potash sales volume increased 43% as oil and gas activities increased in response to rising oil prices. Average potash net realized sales price per ton was higher as near-term supply shortages drove price increases during the first nine months of 2021. Byproduct sales increased as economic activity continues to improve from the COVID-19 pandemic.

Potash segment freight expense increased $1.1 million, or 8%, in the first nine months of 2021, compared to the first nine months of 2020 as a result of a 13% increase in potash tons sold. Our freight expense is impacted by the geographic distribution of our potash and byproduct sales and by the proportion of customers arranging for and paying their own freight costs.

Our potash segment cost of goods sold increased $13.0 million, or 23%, compared to the prior year due to the 13% increase in potash tons sold volume in 2021, and our weighted average carrying cost of potash increased due to below average evaporation at our HB mine in 2021, compared to above average evaporation across our potash facilities in 2020. Most of our production costs are fixed and a decrease in tons produced increases our per ton weighted average cost.

As discussed above, we recorded abnormal production costs of $3.6 million due to wet weather in the Carlsbad, New Mexico area during the 2021 evaporation season.

Potash production was flat in the first nine months of 2021 compared to the first nine months of 2020 as increased production during the first six months was offset by abnormally low production during the third quarter, as discussed above.

Our potash segment gross margin increased $15.6 million in the first nine months of 2021, compared to the same period in 2020, due to the factors discussed above.

Additional Information Relating to Potash

The table below shows our potash sales mix for the three and nine months ended September 30, 2021, and 2020:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Agricultural	69%	77%	80%	79%
Industrial	10%	2%	5%	4%
Feed	21%	21%	15%	17%

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Trio® Segment


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per ton amounts)	2021		2020		2021		2020
Sales1	$	20,827	$	12,890	$	71,444	$	54,722
Less: Freight costs	4,038		3,878		16,515		15,950
Warehousing and handling costs	825		1,142		3,072		3,611
Cost of goods sold	10,528		8,754		43,329		40,405
Lower of cost or net realizable value inventory adjustments	—		464		—		2,885

Gross Margin (Deficit)	$	5,436	$	(1,348)	$	8,528	$	(8,129)
Depreciation, depletion, and amortization incurred2	$	1,321	$	1,531	$	4,204	$	4,556

Sales volumes (in tons)	46		40		191		180
Production volumes (in tons)	56		55		175		155

Average Trio® net realized sales price per ton3	$	336	$	189	$	271	$	197

1 Sales include sales of byproducts which were $1.3 million and $1.4 million for the three months ended September 30, 2021, and 2020, respectively, and $3.1 million and $3.2 million for the nine months ended September 30, 2021, and 2020, respectively.

2 Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization amounts absorbed in or (relieved from) inventory.

3Average net realized per ton sales price per ton is a non-GAAP financial measure. More information about this measure, is below under the heading "Non-GAAP Financial Measure."

Three Months Ended September 30, 2021, and 2020

Trio® segment sales increased 62% for the three months ended September 30, 2021, as compared to the same period in 2020. The increase was primarily due to a 78% increase in average net realized sales price per ton, coupled with a 15% increase in Trio® tons sold. Sales volumes increased as strong commodity prices and the economic rebound from the COVID-19 pandemic drove an increase in demand for Trio®. Our Trio® average net realized sales price per ton increased due to the price increases announced since the fourth quarter of 2020.

Trio® freight costs increased 4% in the third quarter of 2021, compared to the third quarter of 2020, due to a 15% increase in Trio® tons sold. Our freight expense is impacted by the geographic distribution of our Trio® sales and by the proportion of customers arranging for and paying their own freight costs.

Our Trio® cost of goods sold increased 23% in the third quarter of 2021, compared to the third quarter of 2020, due mainly to a 15% increase in Trio® tons sold.

Our Trio® production volume was flat in the third quarter of 2021, compared to the third quarter of 2020.

Our Trio® segment generated gross margin of $5.4 million in the third quarter of 2021, compared to a negative gross margin of $1.3 million in the third quarter of 2020, due to the factors discussed above, and we recorded a $0.5 million lower of cost or net realizable value inventory adjustment in the third quarter of 2020.

Nine Months Ended September 30, 2021, and 2020

Trio® segment sales increased 31% for the nine months ended September 30, 2021, as compared to the same period in 2020. The increase was primarily due to a 38% increase in Trio® average net realized sales price per ton combined with a 6% increase in Trio® tons sold. Our Trio® average net realized sales price per ton increased due to the price increases announced since the fourth quarter of 2020. Sales volumes increased as strong commodity prices and the economic rebound from the COVID-19 pandemic drove an increase in demand for Trio®.

Trio® freight costs increased 4% in the first nine months of 2021, compared to the first nine months of 2020, due to the 6% increase in Trio® tons sold . Our freight expense is impacted by the geographic distribution of our Trio® sales and by the proportion of customers arranging for and paying their own freight costs.

Our Trio® cost of goods sold increased 7% in the first nine months of 2021, compared to the first nine months of 2020, as Trio® sales volume increased 6%.

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Our Trio® production volume increased 13% compared to the first nine months of 2020, as we converted more work-in-process inventory to premium Trio®.

Our Trio® segment generated gross margin of $8.5 million in the first nine months of 2021, compared to a negative gross margin of $8.1 million in the first nine months of 2020, due to the factors discussed above, and we recorded a $2.9 million lower of cost or net realizable value inventory adjustment in the first nine months of 2020.

Additional Information Relating to Trio®

The table below shows the percentage of Trio® tons sold into the domestic and export markets during the three and nine months ended September 30, 2021, and 2020. Our percentage of Trio® tons sold internationally decreased for the three and nine months ended September 30, 2021, as compared to the same periods in 2020, as we continued to focus on the domestic Trio® market.


	United States	Export
For the Three Months Ended September 30 2021	90%	10%
For the Nine Months Ended September 30, 2021	93%	7%

For the Three Months Ended September 30, 2020	88%	12%
For the Nine Months Ended September 30, 2020	84%	16%

Oilfield Solutions Segment


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Sales	$	6,708	$	3,050	$	14,293	$	13,539


Cost of goods sold	6,061		3,363		12,235		8,397


Gross Margin	$	647	$	(313)	$	2,058	$	5,142
Depreciation, depletion, and amortization incurred	$	818	$	657	$	2,206	$	1,945

Three Months Ended September 30, 2021, and 2020

Our oilfield solutions segment sales increased $3.7 million in the third quarter of 2021, compared to the same period in 2020, due to a $2.4 million increase in water sales, a $0.5 million increase in caliche sales, a $0.4 million increase in produced water royalties, and a $0.2 million increase in surface use, right-of way and easement revenues. The increases in sales of our oilfield solutions products was due to the increased oil and gas activities as oil prices increased.

Our cost of goods sold increased 80%, or $2.7 million for the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily as a result of increased third-party water purchases to meet the significant daily refresh rates for certain fracs on our South ranch.

Gross margin for the three months ended September 30, 2021, increased $1.0 million compared to the prior year, due to the factors discussed above.

Nine Months Ended September 30, 2021, and 2020

Our oilfield solutions segment sales increased $0.8 million during the nine months ended September 30, 2021, compared to the same period in 2020, due to a $0.9 million increase in produced water royalty revenues, a $0.5 million increase in surface use, right-of way and easement revenues, an increase of $0.4 million in brine water sales, and an increase of $0.2 million in caliche sales, partially offset by $1.2 million decrease in water sales. These sales increases were driven by increased oilfield activities as a result of the increase in oil prices. While our water sales increased during the second and third quarters of 2021, our first quarter 2021 water sales recorded in the oilfield solutions segment decreased significantly, as compared to the first quarter of 2020, due to the negative economic effects from the COVID-19 pandemic. We expect our oilfield solutions water sales will to continue to improve during the fourth quarter 2021.

Our cost of goods sold increased 46%, or $3.8 million for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily a result of increased third-party water purchases to meet the significant daily refresh rates for certain fracs on our South ranch.

Our gross margin for the nine months ended September 30, 2021, decreased $3.1 million compared to the prior year, due to the factors discussed above.

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Specific Factors Affecting Our Results

Sales

Our gross sales are derived from the sales of potash, Trio®, water, salt, magnesium chloride, brine water and various other products and services offered to oil and gas producers. Total sales are determined by the quantities of product we sell and the sales prices we realize. For potash, Trio® and salt, we quote prices to customers both on a delivered basis and on the basis of pick-up at our plants and warehouses. We incur freight costs on most of our potash, Trio® and salt sales, but some customers arrange and pay for their own freight directly. When we arrange and pay for freight, our quotes and billings are based on expected freight costs to the points of delivery. When we calculate our potash and Trio® average net realized sales price per ton, we deduct any freight costs included in sales before dividing by the number of tons sold. We believe the deduction of freight costs provides a more representative measure of our performance in the market due to variations caused by ongoing changes in the proportion of customers paying for their own freight, the geographic distribution of our products, and freight rates. Freight rates have been increasing, and if we are unable to pass the increased freight costs on to the customer, our average net realized sales price per ton is negatively affected. We manage our sales and marketing operations centrally and we work to achieve the highest average net realized sales price per ton we can by evaluating the product needs of our customers and associated logistics and then determining which of our production facilities can best satisfy these needs.

The volume of product we sell is determined by demand for our products and by our production capabilities. We operate our potash and Trio® facilities at production levels that approximate expected demand and take into account current inventory levels and expect to continue to do so for the foreseeable future.

Our water sales and other products and services offered through our oilfield solutions segment are driven by demand from oil and gas exploration companies drilling in the Permian Basin. As such, demand for our water is generally stronger during a cyclical expansion of oil and gas drilling. Likewise, a cyclical contraction of oil and gas drilling may decrease demand for our water and the other products and services offered through our oilfield solutions segment. The COVID-19 pandemic caused an unprecedented decrease in the demand for oil, resulting in lower prices and significant decreases in oil and gas activity, and our total water sales, including byproduct water sales, decreased 3% in the first nine months of 2021 compared to the first nine months of 2020 because total water sales during the first three months of 2020 were not affected by the COVID-19 pandemic. We have seen an economic rebound from the COVID-19 pandemic during the second and third quarters of 2021, and our total water sales for the second and third quarters of 2021, including byproduct water sales, increased 42% as compared to the second and third quarters of 2020. Rising oil prices have led to increased oilfield activities since the summer of 2020 and we expect oilfield activity will continue to improve in the fourth quarter of 2021, although economic uncertainty and the potential for future restrictions enacted by state and local governments resulting from the COVID-19 pandemic may negatively impact oilfield activities.

Cost of Goods Sold

Our cost of goods sold reflects the costs to produce our products. Many of our production costs are largely fixed and, consequently, our cost of sales per ton on a facility-by-facility basis tends to move inversely with the number of tons we produce, within the context of normal production levels. Our principal production costs include labor and employee benefits, maintenance materials, contract labor, and materials for operating or maintenance projects, natural gas, electricity, operating supplies, chemicals, depreciation and depletion, royalties, and leasing costs. Certain elements of our cost structure associated with contract labor, consumable operating supplies, reagents, and royalties are variable, but these variable elements make up a smaller component of our total cost structure. Our costs often vary from period to period based on the fluctuation of inventory, sales, and production levels at our facilities.

Our production costs per ton are also impacted when our production levels change, due to factors such as changes in the grade of ore delivered to the plant, levels of mine development, plant operating performance, and downtime. Because all of our potash is produced from solution mining, weather has a significant impact on our potash production. We expect that our labor and contract labor costs in Carlsbad, New Mexico, will continue to be influenced most directly by the demand for labor in the local region where we compete for labor with another fertilizer company, companies in the oil and gas industry, and a nuclear waste processing and storage facility.

We pay royalties to federal, state, and private lessors under our mineral leases. These payments typically equal a percentage of sales (less freight) of minerals extracted and sold under the applicable lease. In some cases, federal royalties for potash are paid on a sliding scale that vary with the grade of ore extracted. For the three and nine months ended September 30, 2021, our average royalty rate was 4.8%. For the three and nine months ended September 30, 2020, our average royalty rate was 5.1 and 4.8%, respectively.

Income Taxes

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We are subject to federal and state income taxes on our taxable income. Our effective tax rate for the nine months ended September 30, 2021 and 2020, was zero percent. Our effective tax rate differed from the statutory rate during each period primarily due to the valuation allowance established to offset our deferred tax assets.

Our federal and state income tax returns are subject to examination by federal and state tax authorities.

For the nine months ended September 30, 2021 we incurred no income tax expense and for the nine months ended September 30, 2020 we recognized an immaterial amount of income tax benefit.

We evaluate our deferred tax assets and liabilities each reporting period 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. The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted most significantly by the states in which we conduct business. Changing business conditions for normal business transactions and operations, as well as changes to state tax rate and apportionment laws, potentially alter our apportionment of income among the states for income tax purposes. These changes in 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. These adjustments can increase or decrease the net deferred tax asset on our condensed consolidated balance sheet. However, any resulting impact to the deferred tax benefit or deferred tax expense would be offset by a corresponding adjustment to the valuation allowance and would have no income statement effect.

As of September 30, 2021, we were in a near break-even cumulative three-year income position. Additionally, weather issues which have negatively impacted our potash production, various legal issues which may have a material adverse effect on our future results of operations, supply chain issues that have driven near term potash supply shortages and have led to increased fertilizer prices, and the ongoing Covid-19 pandemic and any potential vaccine mandates, make it difficult to accurately forecast sustained amounts of future income. These circumstances are significant negative evidence when evaluating the realizability of our deferred tax assets. This negative evidence continues to outweigh the positive evidence of profitability in 2018, and 2019, thereby requiring us to maintain the full valuation allowance as of September 30, 2021. However, we believe that if positive pricing and sales evidence trends continue and our future long-term forecasts show sustained profitability, it is possible that there may be sufficient positive evidence to release all or a portion of our valuation allowance within the next 12 months. The timing and amount of any valuation allowance release is subject to significant judgement that is considered with the timing and amounts of actual and future earnings. Release of any valuation allowance would result in a benefit to income tax expense in the period the release is recorded, which could have a material effect on net earnings.

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Capital Investments

During the first nine months of 2021, cash paid for property, plant, equipment, mineral properties, intangible and other assets was $12.4 million.

We expect to make capital investments in 2021 of $18 million to $23 million, with approximately $15 million on sustaining capital projects and the remainder of our estimated spending on opportunity projects. We anticipate our 2021 operating plans and capital programs will be funded out of operating cash flows and existing cash. We may also use our revolving credit facility, to the extent available, to fund capital investments.

Liquidity and Capital Resources

As of September 30, 2021, we had cash on hand of $25.6 million, compared with cash of $19.5 million at December 31, 2020. In April 2020, we received a $10 million loan under the CARES Act Paycheck Protection Program (the "PPP"). We used the funds exclusively for allowed payroll, benefits and other allowed expenses and in June 2021, we received notice that the Small Business Administration ("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.

In June 2021, we repaid the remaining $15.0 million of principal outstanding on our Series B Senior Notes along with a make-whole payment of $0.5 million. During the third quarter of 2021, we also repaid the $29.8 million that was outstanding under our credit facility.

Our operations have primarily been funded from cash on hand, cash generated by operations, borrowings under our revolving credit facility, and proceeds from debt and equity offerings. We continue to monitor our future sources and uses of cash and anticipate that we will adjust our capital allocation strategies when, and if, determined by our Board of Directors. We may, at any time we deem conditions favorable, attempt to improve our liquidity position by accessing debt or equity markets in accordance with our existing debt agreements. We also may raise capital in the future through the issuance of additional equity or debt securities, subject to prevailing market conditions. However, there is no assurance that we will be able to successfully raise additional capital on acceptable terms or at all. With our current cash on hand, the remaining availability under our credit facility, and the expected cash generated from operations, we believe we have sufficient liquidity to meet our obligations for the next twelve months.

The following summarizes our cash flow activity for the nine months ended September 30, 2021, and 2020 (in thousands):


	Nine Months Ended September 30,
	2021		2020
Cash flows provided by operating activities	$	59,423	$	18,487
Cash flows used in investing activities	$	(6,395)	$	(12,801)
Cash flows used in financing activities	$	(46,881)	$	(17,001)

Operating Activities

Total cash provided by operating activities through September 30, 2021, was $59.4 million, an increase of $40.9 million compared with the first nine months of 2020 due to increased potash and Trio® sales.

Investing Activities

Total cash used in investing activities decreased by $6.4 million in the first nine months of 2021, compared with the same period in 2020. Cash used for capital investments decreased by $1.7 million compared to the first nine months of 2020 as we continue to prudently manage cash flow in light of economic uncertainty caused by the COVID-19 pandemic. Proceeds from the sale of assets increased $1.3 million during the first nine months of 2021, driven by the sale of land we owned in Texas for $6.0 million, while during the same period in 2020, we received $4.8 million in proceeds from a land sale from our Intrepid South ranch. Also, during the first nine months of 2020, we acquired a non-controlling equity interest in W.D. Von Gonten Laboratories for $3.5 million.

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Financing Activities

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. During the three and nine months ended September 30, 2021, we made no borrowings and we made $29.8 million of repayments under the facility. As of September 30, 2021, we had no borrowings outstanding under our credit facility and we had $1.0 million in outstanding letters of credit under our facility. Including the outstanding letters of credit, we had $74.0 million available under our facility as of September 30, 2021.

During the three months ended September 30, 2020, we made no borrowings or repayments under the facility. During the nine months ended September 30, 2020, we borrowed $10.0 million and made no repayments under the facility. As of December 31, 2020, we had $29.8 million of borrowings outstanding under our facility and we had $1.0 million in outstanding letters of credit under our the facility.

As of September 30, 2021, we were in compliance with all applicable covenants under the revolving credit facility.

As of October 31, 2021, we had no borrowings outstanding and $1.0 million in outstanding letters of credit under the facility, and approximately $26.4 million in cash. Including the outstanding letters of credit, we had $74.0 million available to be borrowed under the facility.

PPP Loan—In April 2020, we received a $10 million loan under the PPP under the CARES Act. 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 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.

After the repayment of our Series B Senior Notes and the forgiveness of our PPP loan in June 2021, our long-term debt balance, was zero at September 30, 2021. Our outstanding long-term debt, excluding deferred financing costs, as of December 31, 2020, was as follows (in thousands):


	December 31, 2020
Notes and Payroll Protection Loan	$	25,000
Advances on credit facility	29,817
Less current portion of long-term debt	(10,000)
Long-term debt	$	44,817

Off-Balance Sheet Arrangements

As of September 30, 2021, we had no material off-balance sheet arrangements aside from the bonding obligations described in Note 14 to the condensed consolidated financial statements.

Critical Accounting Policies and Estimates

Our Annual Report on Form 10-K for the year ended December 31, 2020, describes the critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. We have not made any significant changes to our critical accounting policies since December 31, 2020.

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Non-GAAP Financial Measure

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, from time to time we use "average net realized sales price per ton," which is a non-GAAP financial measure. This non-GAAP financial measure should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, because the presentation of this non-GAAP financial measure varies among companies, our presentation of this non-GAAP financial measure may not be comparable to similarly titled measures used by other companies.

We believe average net realized sales price per ton, when used in conjunction with GAAP financial measures, provides useful information to investors for analysis of our business and operating results, enhances the overall understanding of past financial performance and future prospects, and allows for greater transparency with respect to the key metric we use in our financial and operational decision making. We use this non-GAAP financial measure as one of our tools in comparing period-over-period performance on a consistent basis and when planning, forecasting, and analyzing future periods. We believe this non-GAAP financial measure is used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the potash mining industry. Many investors use the published research reports of these professional research analysts and others in making investment decisions.

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Average Net Realized Sales Price per Ton

We calculate average net realized sales price per ton for each of potash and Trio®. Average net realized sales price per ton for potash is calculated as potash segment sales less potash segment byproduct sales and potash freight costs and then dividing that difference by the number of tons of potash sold in the period. Likewise, average net realized sales price per ton for Trio® is calculated as Trio® segment sales less Trio® segment byproduct sales and Trio® freight costs and then dividing that difference by Trio® tons sold. We consider average net realized sales price per ton to be useful, and believe it to be useful for investors, because it shows our potash and Trio® average per-ton pricing without the effect of certain transportation and delivery costs. When we arrange transportation and delivery for a customer, we include in revenue and in freight costs the costs associated with transportation and delivery. However, some of our customers arrange for and pay their own transportation and delivery costs, in which case these costs are not included in our revenue and freight costs. We use average net realized sales price per ton as a key performance indicator to analyze potash and Trio® sales and price trends.

Below is a reconciliation of average net realized sales price per ton to the most directly comparable GAAP financial measure for the three and nine months ended September 30, 2021, and 2020:


	Three Months Ended September 30,
	2021				2020
(in thousands, except per ton amounts)	Potash		Trio®		Potash		Trio®
Total Segment Sales	$	31,673	$	20,827	$	22,187	$	12,890
Less: Segment byproduct sales	5,100		1,332		3,612		1,449
Freight costs	2,879		4,038		2,891		3,878
Subtotal	$	23,694	$	15,457	$	15,684	$	7,563

Divided by:
Tons sold	62		46		66		40
Average net realized sales price per ton	$	381	$	336	$	238	$	189

	Nine Months Ended September 30,
	2021				2020
(in thousands, except per ton amounts)	Potash		Trio®		Potash		Trio®

Total Segment Sales	$	112,944	$	71,444	$	80,504	$	54,722
Less: Segment byproduct sales	15,696		3,096		10,562		3,248
Freight costs	11,174		16,515		10,021		15,935
Subtotal	$	86,074	$	51,833	$	59,921	$	35,539

Divided by:
Tons sold	270		191		239		180
Average net realized sales price per ton	$	319	$	271	$	251	$	197

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Part II, Item 7A., "Quantitative and Qualitative Disclosure About Market Risk," of our Annual Report on Form 10-K for the year ended December 31, 2020, describes our exposure to market risk. There have been no significant changes to our market risk exposure since December 31, 2020.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain "disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act." Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Our disclosure controls and procedures are also designed to ensure that this information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures as of September 30, 2021. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of September 30, 2021, at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2021, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Intrepid have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II - OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

For information regarding litigation, other disputes and regulatory proceedings see Part I - Item1. Financial Statements, Note 14 - Commitments and Contingencies.

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ITEM 1A.RISK FACTORS

Our future performance is subject to a variety of risks and uncertainties that could materially and adversely affect our business, financial condition, results of operations, and the trading price of our common stock. These risks and uncertainties are described in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to these risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2020.

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ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities and Use of Proceeds


Issuer Purchases of Equity Securities
Period	(a) Total Number of Shares Purchased1	(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Programs
July 1, 2021 through July 31, 2021	30	31.02		—	N/A
August 1, 2021 through August 31, 2021	30	$	30.30	—	N/A
September 1, 2021, through September 30, 2021	—	$	—	—	N/A
Total	60	$	30.66	—	N/A

1 Represents shares of common stock withheld by us as payment of withholding taxes due upon the vesting of restricted stock held by our employees.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

We are committed to providing a safe and healthy work environment. The objectives of our safety programs are to eliminate workplace accidents and incidents, preserve employee health, and comply with all safety- and health-based regulations. We seek to achieve these objectives by training employees in safe work practices; establishing, following, and improving safety standards; involving employees in safety processes; openly communicating with employees about safety matters; and recording, reporting, and investigating accidents, incidents, and losses to avoid recurrence. As part of our ongoing safety programs, we collaborate with the Mine Safety and Health Administration (“MSHA”) and the New Mexico Bureau of Mine Safety to identify and implement accident prevention techniques and practices.

Our East, West, and North facilities in New Mexico are subject to regulation by MSHA under the Federal Mine Safety and Health Act of 1977 and the New Mexico Bureau of Mine Safety. MSHA inspects these facilities on a regular basis and issues various citations and orders when it believes a violation has occurred under federal law. Exhibit 95.1 to this Quarterly Report on Form 10-Q provides the information concerning mine safety violations and other regulatory matters required by SEC rules. Our Utah and HB facilities are subject to regulation by the Occupational Health and Safety Administration and, therefore, are not required to be included in the information provided in Exhibit 95.1.

ITEM 5.OTHER INFORMATION

None.

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ITEM 6.EXHIBITS


Exhibit No.						Description


31.1						Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.*

31.2						Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.*

32.1						Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2						Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

95.1						Mine Safety Disclosure Exhibit.*

101.INS						XBRL Instance Document.*

101.SCH						XBRL Taxonomy Extension Schema.*

101.CAL						XBRL Extension Calculation Linkbase.*

101.LAB						XBRL Extension Label Linkbase.*

101.PRE						XBRL Extension Presentation Linkbase.*

101.DEF						XBRL Extension Definition Linkbase.*

104						Cover page Interactive Data File (formatted as Inline XBRL and contained in exhibit 101)

* Filed herewith.

** Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						INTREPID POTASH, INC. (Registrant)

Dated: November 2, 2021						/s/ Robert P. Jornayvaz III
						Robert P. Jornayvaz III - Executive Chairman of the Board and Chief Executive Officer (Principal Executive Officer)




Dated: November 2, 2021						/s/ Matthew D. Preston
						Matthew D. Preston - Vice President - Finance (Principal Financial Officer and Principal Accounting Officer)