Intrepid Potash
Annual Report 2013

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549_______________________________________________________FORM 10-K_______________________________________________________xAnnual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the fiscal year ended December 31, 2013or¨Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934Commission File Number: 001-34025INTREPID POTASH, INC.(Exact Name of Registrant as Specified in its Charter)Delaware26-1501877(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)707 17th Street, Suite 4200, Denver, Colorado80202(Address of principal executive offices)(Zip Code)(303) 296-3006(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Stock, par value $0.001 per share New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No xIndicate 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 preceding12 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 x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submittedand posted 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 andpost such files.) Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. xIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large accelerated filer xAccelerated filer ¨Non‑accelerated filer ¨ (Do not check if a smaller reporting company)Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ¨ No xThe aggregate market value of 54,900,025 shares of voting stock held by non-affiliates of the registrant, based upon the closing sale price of the common stock on June 28,2013, the last business day of the registrant’s most recently completed second fiscal quarter, of $19.05 per share as reported on the New York Stock Exchange was $1,045,845,476.Shares of common stock held by each director and executive officer and by each person who owns 10% or more of the registrant's outstanding common stock and is believed by theregistrant to be in a control position were excluded. The determination of affiliate status for this purpose is not a conclusive determination of affiliate status for any other purposes.As of January 31, 2014, the registrant had 75,738,774 shares of common stock, par value $0.001, outstanding (including 333,364 restricted shares of common stock).DOCUMENTS INCORPORATED BY REFERENCETable of ContentsCertain information required by Items 10, 11, 12, 13 and 14 of Part III is incorporated by reference from portions of the registrant’s definitive proxy statement relating to its 2014annual meeting of stockholders to be filed within 120 days after December 31, 2013. Table of ContentsINTREPID POTASH, INC.TABLE OF CONTENTS Page PART I 1 Cautionary Note Regarding Forward‑Looking Statements1 Item 1. Business2 General2 Company History2 Our Products and Markets3 Industry Overview3 Competition5 Strategy5 Competitive Strengths6 International Marketing and Distribution8 Major Customers8 Environmental, Safety, and Health Matters8 Product Registration Requirements9 Operating Requirements and Government Regulations9 Reclamation Obligations10 Taxes and Insurance11 Seasonality11 Employees11 Available Information11 Glossary of Terms12 Executive Officers13 Item 1A. Risk Factors14 Item 1B. Unresolved Staff Comments24 Item 2. Properties24 Properties24 Proven and Probable Reserves31 Production33 Item 3. Legal Proceedings34 Item 4. Mine Safety Disclosures34 PART II 35 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities35 Item 6. Selected Financial Data38 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations39 Overview39 Significant Business Trends and Activities40 Capital Investment47 Liquidity and Capital Resources47 Results of Operations for the Years ended December 31, 2013, and 201250 Results of Operations for the Year ended December 31, 2012, and 201151 Critical Accounting Policies and Estimates53 Item 7A. Quantitative and Qualitative Disclosures About Market Risk58 Item 8. Financial Statements and Supplementary Data59 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure59iTable of Contents Item 9A. Controls and Procedures59 Item 9B. Other Information60 PART III61 Item 10. Directors, Executive Officers and Corporate Governance61 Item 11. Executive Compensation61 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters61 Item 13. Certain Relationships and Related Transactions, and Director Independence61 Item 14. Principal Accounting Fees and Services61 PART IV62 Item 15. Exhibits, Financial Statement Schedules62 Signatures65iiTable of ContentsPART IUnless the context otherwise requires, the following definitions apply throughout this Annual Report on Form 10-K:•"Intrepid," "our," "we," or "us" means Intrepid Potash, Inc. and its consolidated subsidiaries.•“West,” “East,” “North,” and “HB” mean our four operating facilities near Carlsbad, New Mexico. "Moab" means our operating facilityin Moab, Utah. "Wendover" means our operating facility in Wendover, Utah. You can find more information about our facilities in Item 2 of thisAnnual Report on Form 10-K.•“Tons” mean short tons. One short ton equals 2,000 pounds. Many of our international competitors refer to metric tonnes. One metric tonneequals 1,000 kilograms or 2,205 pounds.•To supplement our consolidated financial statements, which are presented in this Annual Report on Form 10-K and which are prepared andpresented in accordance with GAAP, we also use several non-GAAP financial measures to monitor and evaluate our performance. Thesenon-GAAP financial measures include net sales, average net realized sales price, cash operating costs and average potash and Trio® grossmargin. These non-GAAP measures are described and reconciled to the most comparable GAAP measures in Item 7: Management'sDiscussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures of this Annual Report on Form10-K.We have included technical terms important to an understanding of our business in the "Glossary of Terms” in Item 1 of this Annual Report onForm 10-K.CAUTIONARY NOTE REGARDING FORWARD‑LOOKING STATEMENTSThis Annual Report on Form 10-K contains forward‑looking statements within the meaning of the Securities Exchange Act of 1934, asamended (the “Exchange Act”), and the Securities Act of 1933, as amended (the “Securities Act”). These forward‑looking statements are madepursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements in this Annual Report on Form 10-Kother than statements of historical fact are forward‑looking statements. Forward-looking statements include statements about our future results ofoperations and financial position, our business strategy and plans, and our objectives for future operations, among other things, In some cases, youcan 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‑lookingstatements 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 potash or Trio®/langbeinite•circumstances that disrupt or limit our production, including operational difficulties or operational variances due to geological orgeotechnical variances•interruptions in rail or truck transportation services, or fluctuations in the costs of these services•increased labor costs or difficulties in hiring and retaining qualified employees and contractors, including workers with mining,mineral processing, or construction expertise•the costs of, and our ability to successfully construct, commission, and execute, any of our strategic projects, including our HB SolarSolution mine, our North compaction plant, our West plant upgrades, and our Moab cavern systems•adverse weather events, including events affecting precipitation and evaporation rates at our solar solution mines•changes in the prices of raw materials, including chemicals, natural gas, and power•the impact of federal, state, or local governmental regulations, including environmental and mining regulations; the enforcement ofthose regulations; and governmental policy changes•our ability to obtain any necessary governmental permits relating to the construction and operation of assets•changes in our reserve estimates•competition in the fertilizer industry•declines or changes in U.S. or world agricultural production or fertilizer application rates•declines in the use of potash products by oil and gas companies in their drilling operations•changes in economic conditions1Table of Contents•our ability to comply with covenants in our debt-related agreements to avoid a default under those agreements, or the total amountavailable to us under our credit facility is reduced, in whole or in part, because of covenant limitations•disruption in the credit markets•our ability to secure additional federal and state potash leases to expand our existing mining operations•the other risks, uncertainties, and assumptions described in Item 1A. Risk Factors and elsewhere in this Annual Report on Form 10-K.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 differmaterially 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 Annual Report on Form 10-K may notoccur and actual results could differ materially and adversely from those anticipated or implied in these forward-looking statements. As a result, youshould not place undue reliance on these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements,except as required by law.ITEM 1.BUSINESSGeneralWe are the largest producer of muriate of potash (“potassium chloride” or “potash”) in the United States and are one of two producers of langbeinite(“sulfate of potash magnesia”). Langbeinite is a low-chloride potassium fertilizer with the additional benefits of sulfate and magnesium. We generally describethis multi-nutrient specialty product as langbeinite when we refer to production and as Trio® when we refer to sales and marketing. Our revenues are generatedexclusively from the sale of potash and Trio®. We are a leader in the utilization of solution mining to produce potash. Our potash is marketed for sale into threeprimary markets. These markets are the agricultural market as a fertilizer input, the industrial market as a component in drilling and fracturing fluids for oiland gas wells and an input to industrial processes, and the animal feed market as a nutrient supplement.Potassium is one of the three primary macronutrients essential to plant formation and growth. Since 2005, we have supplied, on average,approximately 1.5% of annual world potassium consumption and 9.1% of annual U.S. potassium consumption. We also produce salt, magnesium chloride,and metal recovery salts from our potash mining processes, the sales of which are accounted for as by-product credits to our cost of sales.We own six active potash production facilities—four in New Mexico and two in Utah. We have a current estimated annual productive capacity ofapproximately 1.1 million tons of potash, including approximately 180,000 tons of designed productive capacity for the recently completed HB Solar Solutionmine, and approximately 200,000 tons of langbeinite, based on current design. We are not currently producing at annual rates equal to our estimated productivecapacity. Actual production is affected by operating rates, the grade of mined ore, recoveries, mining rates, evaporation rates, and the amount of developmentwork that we perform. Therefore, as with other producers in our industry, our production results tend to be lower than reported productive capacity. Afteryears of design and construction work, we recently completed construction of the HB Solar Solution mine near Carlsbad, New Mexico, and we are processingour first harvest of ore from the solar evaporation ponds. We expect the initial commissioning of the processing plant to continue through much of 2014. TheHB Solar Solution mine applies solution mining and solar evaporation techniques to produce potash from previously idled mine workings. We expectproduction from the HB Solar Solution mine to increase as we ramp up production through 2016. We have additional opportunities to develop mineralizeddeposits of potash in New Mexico as well as to improve recoveries in our processing plants. These opportunities potentially include additional solution miningactivities and improved recoveries of langbeinite. Longer-term opportunities include the potential reopening of the North mine, which was operated as atraditional underground mine until the early 1980s, and the acceleration of production from our reserves.Our principal offices are located at 707 17th Street, Suite 4200, Denver, Colorado 80202, and our telephone number is (303) 296-3006.Company HistoryIntrepid (through a predecessor entity) was formed in 2000. We initially acquired the Moab, Utah facility, a solar solution mine that had beenexperiencing declining production. Our management team stabilized and improved the production volumes at Moab substantially above the pre-acquisitionlevel by drilling additional wells into the then existing producing ore body. We further production by applying horizontal drilling technology, which iscommonly used in the oil and gas industry but had never before been used to mine potash, to drill wells into a previously untouched potash zone therebycreating a new multi-lateral horizontal cavern system in a deeper ore body.2Table of ContentsWe observed that potash from Moab shared markets with potash produced in Carlsbad, New Mexico, and Wendover, Utah. Accordingly, weformulated a strategy to acquire assets in those areas in order to consolidate marketing efforts and effect operating synergies. In February 2004, we acquired theassets of Mississippi Potash, Inc. and Eddy Potash, Inc. in Carlsbad, from Mississippi Chemical Company. In April 2004, we acquired the potash assets ofReilly Chemical, Inc. in Wendover.From January 2000 through December 31, 2013, we have invested over $1.0 billion to build new and update existing assets to improve the reliability,recoveries, efficiencies, flexibility, and productivity of our operations. The most significant of our capital expenditures occurred over the last three years, whenwe deployed $256.2 million, $253.0 million, and $136.3 million, during 2013, 2012, and 2011, respectively. The majority of our more recent investmentsare associated with several major projects that have only recently been placed into service. With the recent completion of the HB Solar Solution mine, ourcapital investment program is expected to be significantly smaller in 2014 with approximately $40 million to $50 million of total capital investment which isshared between completing larger opportunity projects and sustaining capital. The investment of this capital is designed to bring on projects that lower our per-ton operating costs, improve our reliability, improve our recoveries, and add production flexibility to our processes. An example is the new production expectedfrom the HB mine. Beginning with our third potash harvest in the fall of 2015, the per-ton cash operating costs from this facility are expected to be nearly halfof our per-ton cash operating costs today. The additional production from this facility will lower our overall per-ton cash operating costs, making Intrepid morecompetitive in the volatile potash market.We have one operating segment which is the extraction, production and sale of potassium containing products. Our extraction and productionoperations are conducted entirely in the continental United States. We focus on the marketing and sale of potash in the United States into regions and specificlocations that generate the most favorable average net realized sales prices for the specific product needs of our customers. Our Trio® product is sold into boththe domestic and international markets, as driven by the margin considerations for the tons being sold and the specific product needs of customers.Our Products and MarketsOur two primary products are potash and langbeinite, which is marketed as Trio®.PotashThe majority of our revenues and gross margin are derived from the production and sales of potash. Our potash is marketed for sale into threeprimary markets. These markets are the agricultural market as a fertilizer input, the industrial market as a component in drilling and fracturing fluids for oiland gas wells and an input to industrial processes, and the animal feed market as a nutrient supplement. The agricultural market is predominately a user ofgranular-sized potash and Trio®, while the industrial and animal feed markets largely consume standard and fine standard-sized product. Our recentinvestments in granulation capacity have afforded us the flexibility to produce all of our product in a granular form. This flexibility has allowed us to expandour geographical reach for granular sales and to adjust our production of standard-sized product to more closely align with the specific product demand,thereby decreasing our dependence on sales of any one particular size of potash.Our sales of potash tend to focus on agricultural areas and feed manufacturers in the central and western United States, as well as oil and gasdrilling areas in the Rocky Mountains and the greater Permian Basin area. We also have domestic sales, primarily of Trio®, that go into the southeastern andeastern United States, with a focus on areas with specific agricultural nutrition requirements. We manage our sales and marketing operations, including ourfreight and logistics planning, centrally, which allows us to evaluate the product needs of our customers and then determine which of our production facilitiescan be utilized to fill customer orders, all with the design of realizing the highest average net realized sales price for our potash.Because many of our sales are geographically concentrated in the central and western United States, our sales can be affected by weather and otherconditions in these regions. Through industry publications, we monitor oil and gas drilling rig count in the United States as an indicator of activity. Industrialdemand for our standard‑sized product likely will continue to correlate with oil and gas pricing, as well as drilling and well completion activity.Trio® Trio® is marketed into two primary markets. These markets are the agricultural market as a fertilizer and the animal feed market as a nutrient. Wemarket Trio® internationally through an exclusive marketing agreement with PCS Sales (USA), Inc. (“PCS Sales”) for sales outside the United States andCanada and via a non-exclusive agreement for sales into Mexico. Sales of Trio® on an international basis tend to be larger, less frequent bulk shipments andvary as to when such shipments take place; therefore, we see greater variability in our sales volumes from period-to-period when compared to our domesticsales.Industry OverviewLong-term global fertilizer demand has been driven primarily by population growth, planted acreage, agricultural commodity yields and prices,inventories of grains and oilseeds, application rates of fertilizer, global economic conditions,3Table of Contentsweather patterns, and farm sector income. We expect these key variables to continue to have an impact on fertilizer demand for the foreseeable future. Sustainedincome growth and agricultural policies in the developing world also affect demand for fertilizer. Fertilizer demand is affected by other geopolitical factors suchas temporary disruptions in fertilizer trade related to government intervention and changes in the buying patterns of key consuming countries. Dealers whopurchase our products have increasingly sought to minimize their inventory risk as a general business practice and in response to economic uncertainty in theU.S. and the world. This uncertainty, along with tight grain stocks, has resulted in volatility in agricultural commodity prices, which has impacted farmerfertilizer buying decisions. This climate of economic uncertainty could continue to have an impact on the fertilizer market.The price of potash has been in a decline for nearly two and half years. The announcements in July 2013 by the Russian producer Uralkali that itwas withdrawing from its international marketing group arrangement, Belarusian Potash Company ("BPC"), further accelerated potash price erosion.Uralkali also indicated that it was going to shift to a volume over price model. These statements led to a rapid price decrease and further deferral of potashpurchasing in the fall of 2013. We also believe potash pricing has been impacted by new brownfield capacity added by the Canadian producers in the last twoyears that has the potential to further exacerbate the current imbalance of potash supply and demand. As these brownfield projects are brought into production,North American potash production and inventory levels may be further impacted by the utilization and operating rates of these projects, including any provingproduction runs required by Canpotex to establish sales allocations levels within Canpotex.Potash prices are currently at the lowest levels in seven years. The depressed price has led some producers, including us, to reduce their workforce toadjust their costs in anticipation of lower revenues. In January 2014, we undertook several cost-savings initiatives, including a workforce reduction at all ofour sites, including our headquarters in Denver. The goal of these cost-savings initiatives was to better align our cost structure with the declining potash pricesand the conclusion of our major capital projects.Fertecon Limited (“Fertecon”), a fertilizer industry consultant, expects global potash consumption to grow approximately 9% from 2013 to 2014 andthen by approximately 4% annually from 2014 through 2020. This growth is expected to be driven primarily by global demand for agricultural commodities,which in turn is driven by the demand for food and alternative energy sources. As the population grows, more food is required from decreasing arable land percapita. A balanced approach to nutrient application will allow farmers to maximize yield and aid in feeding this growing population. As incomes grow in thedeveloping world, people tend to change their diet and consume more animal protein, which requires larger amounts of grain for feed. In addition, the focus inthe U.S. on increasing renewable energy has led to regulatory policies supportive of ethanol and bio-diesel production, which currently rely on agriculturalproducts as feedstock.Fertilizer serves a fundamental role in global agriculture by providing essential crop nutrients that help sustain both the yield and the quality ofcrops. The three primary nutrients required for plant growth are nitrogen, phosphate, and potassium, and there are no known substitutes for these nutrients. Aproper balance of each of the three nutrients is necessary to maximize their effectiveness. Potassium helps regulate plants’ physiological functions andimproves plant durability, providing crops with protection from drought, disease, parasites, and cold weather. Unlike nitrogen and phosphate, the potassiumcontained in naturally‑occurring potash does not require additional chemical conversion to be used as a plant nutrient.While industry experts continue to expect that consumption rates will increase as world population grows, significant additional capacity has beenbrought on line over the last two years by existing producers. There are a number of brownfield expansions that have been commissioned or that are underconstruction by the larger Canadian potash producers. As a result of the imbalance between supply and demand, the estimated worldwide annual capacity isnow in excess of recent annual demand. It is expected that this supply surplus will exist for several years. The larger, well-established producers are operatingat less than full capacity, and have a history of managing production levels to more closely meet worldwide demand.Potash is mined from conventional underground mines, such as at our West and East mines near Carlsbad, as well as through solution mining sub-surface structures and brine recovery from surface resources, as is done at our Moab, Wendover and HB Solar Solution mine operations.Virtually all of the world’s potash is currently extracted from approximately 20 commercial deposits. According to the International Fertilizer IndustryAssociation (“IFA”) and data published by potash mining companies, six countries accounted for approximately 90% of the world’s aggregate potashproduction during 2012. During this time period, the top nine potash producers supplied approximately 95% of world production. The three major Canadianproducers participate in the Canpotex marketing group that supplied approximately 31% of the global potash production in 2012, and, until mid-2013, twoother producers in Russia and Belarus participated in a second marketing group that supplied approximately 34% of global potash production during 2012.4Table of ContentsThere are substantial challenges to adding new potash production as economically recoverable potash deposits are scarce, deep in the earth andgeographically concentrated. In addition, a considerable amount of capital is required to produce potash. In addition to typical mining and processinginfrastructure, product storage, product load out, and rail access to ship the product are required. A further challenge is that the majority of unexploitedmineralized deposits of potash existing outside the Canadian province of Saskatchewan are located in remote and/or politically unstable regions such as theCongo, Thailand, Ethiopia, Argentina, and Kazakhstan. In addition, there are a number of smaller companies, commonly referred to as "juniors," that haveobtained potash leases or concessions.Energy prices and consumption affect the potash industry in several ways. Energy policies in the U.S. have supported the development of biofuels,which currently rely upon agricultural products as feedstock. As demand and prices for these agricultural products increase or decrease, the use of fertilizerbecomes more or less economically attractive. In addition, energy prices affect the global levels of oil and gas drilling, and potash is used as a fluid additive asa means to reduce the risk of swelling in clays in the formation. We believe the positive benefit of potassium chloride in drilling and fracturing fluids has beenwell established in the oil and gas industry. According to drilling rig count data compiled by Baker Hughes, we have seen a decrease in activity in the regionswe serve from our facilities. The decrease in drilling has resulted in decreased demand for drilling and fracturing fluids.Changes in fuel prices directly affect the cost of producing, drying and transporting potash from producing to consuming regions. The price ofnatural gas has been relatively low over the past several years. The forward price indications, if sustained, suggest natural gas prices will have a neutralimpact on our production costs in 2014. Although the forward gas prices have increased in the last year, spot prices remain close to the five-year average.CompetitionWe sell into commodity markets and compete based on delivered price of potash and Trio®, timely service, reliability of supply, and product quality.Products must be durable, and maintain particle size and potassium oxide (“K2O”) content benchmarks in order to compete effectively. Further, our customersvalue our ability to deliver product in a timely manner.We compete primarily with much larger potash producers, principally Canadian producers and, to a lesser extent, producers located in Russia,Chile, Germany, and Israel. As a smaller producer, we seek to maintain an advantage through customized and timely service for our customers, and a focuson the markets in which we have a transportation cost advantage.StrategyOur strategy is to maximize margins from selling our two primary products, potash and Trio®. Our margin maximization strategy is dependent uponearning a higher per-ton average net realized sales price and lowering our per-ton production costs. Over the long term, we have typically achieved a higheraverage net realized sales price for our potash products compared to our North American competitors because of our freight advantage to key geographies, ourdiverse customer and market base and our flexible marketing approach. We believe each of these factors provides us with a competitive advantage. Our abilityto lower our per-ton costs also positively influences margins.Our capital expenditures are designed to improve the efficiencies and productive capacity of our existing mine and plant operations with specificreliability, de-bottlenecking, granulation, and product recovery projects. We may also attempt to increase potash and langbeinite production through thereopening of mines and expansion of production capabilities at our facilities. Key to our ability to lower costs is increasing the percentage of potash productionusing our combined solution and solar evaporation technology, which is among the lowest cost methods of production. Our understanding and application ofsolution mining, combined with solar evaporation, allows us to benefit from producing an increasing number of potash tons at our lower per-ton productioncost.In the current market environment and as we complete our major capital project phase, our strategy is focused on optimizing our assets, and gainingthe operating efficiencies of the major capital projects that have been completed in recent years.•Focus on margin. We focus on marketing our products into markets that provide the greatest margins relative to our production capacity.By fully participating in these markets at competitive prices, we aim to keep inventory moving through the plants, which in turn,maximizes production and reduces per ton operating costs. We have the advantage of being located close to the markets we serveand the North5Table of ContentsAmerican market is much larger than our production capacity. We continue to look for additional opportunities to control our fixed andvariable operating expenses and plan to pursue various initiatives to increase the sustainability and reliability of our mining and plantfacilities.•Increase marketing flexibility. We have been strategically adding more granulation capacity to our operations. By increasing ourcompaction capacity, we have the ability to convert more of our standard-sized product into granular-sized product,which is typically sold into the agricultural market as market conditions warrant. This also provides us with increasedmarketing flexibility as well as decreased dependence on any one particular market. In 2013, we substantially completedthe upgrade and expansion of our North compaction facility, which will be able to compact the production from the HBSolar Solution mine and the expansion of mining and milling capacity at the West mine. We have installed andcommissioned the first two compactor lines in 2013, and expect to have the third and final line commissioned in the firsthalf of 2014. After the third compaction line is fully operational, the total compaction capacity of the North facility willsignificantly exceed our production. We also completed construction of new granulation facilities in Moab and Wendoverin late 2010 and 2011, respectively.In late 2013, we expanded our warehouse distribution capabilities by acquiring a warehouse in St. Joseph, Missouri. This warehouseprovides us with the opportunity to have our products positioned closer to the end market, and further reduces surges in loading at ourproduction facilities.•Expand potash production from existing facilities and add production from new facilities. We have expansion opportunities at ouroperating facilities that we expect will increase production, drive down our per-ton cost and increase our cash flow. Our HB SolarSolution mine is our most significant project to increase production at lower operating costs. The HB Solar Solution mine uses thesame low-cost solar evaporation and solution mining technology we have been using continuously since the acquisition of ourMoab mine in 2000. The HB Solar Solution mine was formerly operated as a conventional underground mine before it was idledin 1996 by its previous owner. We began construction on the HB Solar Solution mine in March 2012, recently completed plantconstruction and have begun initial commissioning activities as we process our first harvest of product from the solar evaporationponds. We expect to ramp up production after the summer evaporation seasons in 2014 and 2015, and expect to reach designedproduction levels in 2016, assuming the benefit of average annual evaporation cycles applied to full evaporation ponds.We have also been expanding our mining capacity at our Carlsbad facilities through the addition of new mining panels at our East facilityin 2013 and 2012 and at our West facility in 2012. Beginning in 2013, we began a series of projects at our West facility that are designed torestore our recovery rates for potash as we transition into more difficult ore zones, which will result in increased production levels. Whilesome of these projects have been completed, we do not expect to realize their full designed potential until all of the projects are fullycommissioned, which is expected to occur throughout 2014.Further, during 2012 and 2013, we completed the development of our second and third horizontal cavern systems at our Moab facility.These new caverns are expected to not only maintain current production levels, but also increase production in future production periodsbeginning in the second half of 2014.•Expand langbeinite production. The only known commercial reserves of langbeinite ore in the world are located near Carlsbad, NewMexico. We are one of the only two producers of langbeinite. To increase our Trio® production, we completed construction of theLangbeinite Recovery Improvement Project ("LRIP") in late 2011. As a result, we have increased our Trio® production andcontinue our efforts to maximize the amount of pelletized product we manufacture as we see strong demand for the naturalgranular and premium pelletized product.Competitive Strengths•U.S. based potash-only producer. We are one of three publicly traded potash-only companies. We are dedicated to the production andmarketing of potash and langbeinite. Provided that mining and milling operations occur at steady operating rates, thecosts to mine and produce potash are relatively fixed and stable, whereas the costs to produce other fertilizers havesignificantly greater exposure to volatile raw material costs, such as natural gas used to produce nitrogen and ammoniaand sulfate used to produce6Table of Contentsphosphate products. The mining sector has experienced considerable cost pressures over the past several years.As a U.S. producer, we enjoy a significantly lower total production tax and royalty burden than our principal competitors, which operateprimarily in Saskatchewan, Canada. The Saskatchewan tax system for potash producers includes a capital tax and several potash mineraltaxes, none of which are imposed on us as a U.S. producer. The Saskatchewan potash mineral tax includes a crown royalty, a basepayment, and a profit tax. We currently pay an average royalty rate of approximately 4% of our net sales, which compares favorably to thatof our competitors in Canada. We expect our average royalty rate to increase closer to 5% in the coming years, as our federal potash leasesin New Mexico are expected to be renewed at a flat 5% rate rather than at a sliding scale of 2% to 5%. The relative tax and royalty advantagefor U.S. producers becomes more pronounced when profits per ton increase due primarily to the profit tax component of the Saskatchewanpotash mineral tax.•Solar evaporation operations. The HB Solar Solution mine, located in the New Mexico desert, the Moab mine and the Wendover facility,both located in the Utah desert, utilize solar evaporation to crystallize potash from brines. Solar evaporation is a low-costand energy-efficient method of producing potash. Our understanding and application of low cost solution mining,combined with the favorable climate for evaporation at our solution mining locations, allow these facilities to enjoyrelatively low production costs.•Assets located near our primary customer base. Our mines are advantageously located near our largest customers. We believe that ourlocations allow us to obtain higher average net realized sales prices than our competitors, who must ship their productsacross longer distances to consuming markets, which are often export markets. Our location allows us to target sales tothe markets in which we have the greatest transportation advantage, maximizing our average net realized sales price. Ouraccess to strategic rail destination points and our location along major agricultural trucking routes support thisadvantage. In addition, our location in oil and gas producing regions allows us to serve industrial customers, themajority of whom we service by truck.•Diversity of markets. We sell to three different markets for potash—the agricultural, industrial and feed markets. During 2013, thesemarkets represented approximately 71%, 21%, and 8% of our potash sales, respectively. According to Fertecon,approximately 91% of all potash produced is used as a fertilizer highlighting that we have more diversified markets intowhich we sell our potash. A primary component of the industrial markets we serve is the oil and natural gas servicesindustry, where potash is commonly used in drilling and fracturing oil and natural gas wells.•Participation in specialty markets. Given the greater scarcity of langbeinite relative to potash and its agronomic suitability for certain soilsand crops, there is demand for our langbeinite product, known as Trio®, outside of our core potash markets. As ourlangbeinite production levels have increased following completion of the Langbeinite Recovery Improvement Project, wehave increased our marketing activities for this specialty product. There appears to be a growing awareness of theagronomic value of the magnesium and sulfate in this specialty product, which was evidenced by stronger Trio® pricingin 2013 as potash pricing softened.•Significant reserve life and water rights. Our potash and langbeinite reserves each have substantial years of reserve life, with remainingreserve life ranging from 28 to 170 years, based on proven and probable reserves estimated in accordance with U.S.Securities and Exchange Commission (“SEC”) requirements. This lasting reserve base is the result of our pastacquisition and development strategy. In addition to our reserves, we have valuable water rights and access to significantmineralized areas of potash for potential future exploitation.•Existing facilities and infrastructure. Constructing a new potash production facility requires substantial time and extensive capitalinvestment in mining, milling, and infrastructure to process, store and ship product. Our six operating facilities alreadyhave significant facilities and infrastructure in place. We have the ability to expand our business using existing installedinfrastructure, in less time and with lower expenditures than would be required to construct entirely new mines.•Track record of innovation and modernization. Our management team has a history of building successful operations through theacquisition of underutilized assets, followed by creative use of technology to increase productivity and reliability and tore-invest cash flows into the business to grow production. As an entrepreneurial, potash-only producer, we have devotedconsiderable management attention to each facility,7Table of Contentswith a focus on modernization, sustainability, and improving production. We have applied technologies from other industries, includingthe oil and gas industry, and implemented innovative production processes. We have systematically made investments in our facilities suchas warehousing storage systems for ore, the replacement of older equipment, new granulation assets, and new and upgraded mill facilities.Over the last three years, we have invested over $650 million in capital at our facilities to enhance the productivity and reliability of ouroperations.International Marketing and DistributionInternationally, our sales of potash and Trio® are marketed on a spot basis by PCS Sales under an exclusive marketing agreement for sales outsideNorth America and under a non-exclusive agreement for sales into Mexico. This relationship gives us access to PCS Sales' extensive international salesnetwork and informs us about developments related to sulfate of potash magnesium in the international market. During 2013, approximately 24% of our Trio®tons were sold internationally, representing approximately 3% of our total net sales. During the years ended December 31, 2013, 2012, and 2011,approximately 96% of our net sales were in the United States, with the remaining sales into countries and regions such as Ghana, Canada, Mexico and LatinAmerica.Major CustomersWe have a diversified customer base exceeding 180 customers in the agricultural, industrial, and feed markets.Within the agricultural market, we supply a diversified customer base of distributors, cooperatives, retailers, and dealers, which in turn supplyfarmers producing a wide range of crops. Agricultural markets primarily consume granular‑sized potash, whereas the industrial and feed markets primarilyconsume standard‑sized potash. Our facilities were designed to produce either of these products, and we are able to switch production between them, giving usflexibility to adjust our product mix to market conditions. Servicing the industrial and feed markets provides us with a customer base that is unrelated toagricultural markets.In 2013, 2012, and 2011, one of our distributor customers accounted for approximately 11%, 22%, and 17%, respectively, of our sales, andanother distributor customer accounted for approximately 7%, 9%, and 12% of sales, respectively. Our industry is competitive, and we consider ourrelationship with these customers to be very important. While we believe that the loss of any customer is significant, because of the size of our companycompared to the overall size of the North American market and the regional demands for our products, we do not believe that the decline in a specificcustomer's purchases would have a material adverse long-term effect upon our financial results.Environmental, Safety, and Health MattersWe mine and process potash and potassium-related products, which subjects us to an evolving set of federal, state, and local environmental, safety,and health (“ESH”) laws that regulate, or propose to regulate: (1) soil, air and water quality standards for our facilities; (2) disposal, storage, and managementof hazardous and solid wastes; (3) post-mining land reclamation and closure; (4) conditions of mining and production operations; (5) employee and contractorsafety and occupational health; and (6) product content and labeling.We employ, both within and outside Intrepid, environmental professionals to review our operations, assist with environmental compliance, andobtain new and maintain established permits and licenses to operate. These environmental professionals identify and address compliance issues regardinghydrocarbon management, solid and hazardous waste management, protection of water and air quality, asbestos abatement, potable water standards,reclamation and closure, radiation control, animal and plant life, and other ESH issues.We have spent, and anticipate that we will continue to spend, financial and managerial resources to comply with ESH standards. The majority ofthese resources will be expended through our capital budget. In 2013, we expended approximately $8.3 million on environmentally‑related capital projects toenhance environmental compliance and protection and expect to invest a similar amount in 2014. In 2013, we recognized an environmental expense of$0.4 million within cost of goods sold expense, principally for environmental enhancement projects to improve compliance, disposal of hazardous materialsand environmental studies and remediation efforts. We expect to incur similar environmental expenses within our cost of goods sold expense in 2014. Ifpotential negative effects to the environment are discovered, or if the potential negative effects are of a greater magnitude than currently estimated, materialexpenditures could be required in the future to remediate the identified effects at these or at other current or former sites.We cannot predict the potential effects of new or changed laws, regulations, or permit requirements, including the matters discussed below, orchanges in the ways that such laws, regulations, or permit requirements are enforced, interpreted, or administered. ESH laws and regulations are complex, aresubject to change and have become more stringent over time. It is possible that greater than anticipated ESH capital expenditures or reclamation and closureexpenditures will be required in 2014 or in the future. We expect continued government and public emphasis on environmental issues will result in increasedfuture investments for environmental controls at our operations.8Table of ContentsProduct Registration RequirementsWe are required to register fertilizer products with each U.S. state and foreign country where products are sold. Each brand and grade of commercialfertilizer must be registered with the appropriate state agency before being offered for sale, sold, or distributed in that state. Registration requires a completedapplication, guaranteed analysis, product labels, and registration fee. Sold products must have specified information printed on the bag, on tags affixed to theend of the package, or, if in bulk shipments, written or printed on the invoice, bill of lading, or shipping papers.State registrations are for one to two-year periods, depending on each state’s requirements. In addition, each state requires tonnage reporting forproducts sold into that state either monthly, quarterly, semi-annually, or annually, depending on the state’s requirements. Some states require the sameregistration and reporting process for feed grade products; industrial-grade products do not require registration or tonnage reporting.Operating Requirements and Government RegulationsPermits. We are subject to numerous environmental laws and regulations, including laws and regulations regarding land use and reclamation; releaseof air or water emissions; plant and animal life; and the generation, treatment, storage, disposal, and handling of hazardous substances and wastes. Theselaws include the Clean Air Act; the Clean Water Act; the Resource Conservation and Recovery Act; the Comprehensive Environmental Response,Compensation, and Liability Act (“CERCLA”); the Toxic Substances Control Act; and various other federal, state, and local laws and regulations. Violationscan result in substantial penalties, court orders to install pollution‑control equipment, civil and criminal sanctions, permit revocations and facility shutdowns.In addition, environmental laws and regulations may impose joint and several liability, without regard to fault, for cleanup costs on potentially responsibleparties who have released, disposed of or arranged for release or disposal of hazardous substances in the environment.We hold numerous environmental, mining and other permits or approvals authorizing operations at each of our facilities. Our operations are subjectto permits for, among other things, extraction of salt and brine, discharges of process materials and waste to air and surface water, and injection of brine.Some of our proposed activities may require waste storage permits. A decision by a government agency to deny or delay issuing a new or renewed permit orapproval, or to revoke or substantially modify an existing permit or approval, could limit or prevent us from mining at these properties. In addition, changesto environmental and mining regulations or permit requirements could limit our ability to continue operations at the affected facility. Expansion of ouroperations also is predicated upon securing the necessary environmental or other permits or approvals. In certain cases, as a condition to procuring thenecessary permits and approvals, we are required to comply with financial assurance regulatory requirements. The purpose of these requirements is to assurethe government that sufficient company funds will be available for the ultimate reclamation, closure, and post-closure care at our facilities. We obtain bonds asfinancial assurance for these obligations. These bonds require annual payment and renewal.We believe we are in compliance with existing regulatory programs, permits, and approvals where non-compliance could have a material adverseeffect on our operating results or financial condition. From time to time, we have received notices from governmental agencies that we are not in compliancewith certain environmental laws, regulations, permits, or approvals. For example, although designated as zero discharge facilities under the applicable waterquality laws and regulations, our East facility, North facility, and Moab facility at times may experience some water discharges during periods of significantrainfall. We have implemented several initiatives to address discharge issues, including the reconstruction or modification of certain impoundments,increasing evaporation, and reducing process water usage and discharges. State and federal officials are aware of these issues and have visited the sites toreview our corrective efforts and action plans.Air Emissions. With respect to air emissions, we anticipate that additional actions and expenditures may be required in the future to meetincreasingly stringent U.S. federal and state regulatory and permit requirements, including existing and anticipated regulations under the federal Clean Air Act.The U.S. Environmental Protection Agency and the New Mexico Environment Department have issued a number of regulations establishing requirements toreduce nitrogen oxide emissions and other air pollutant emissions. Additionally, with increased attention paid to emissions of greenhouse gases, includingcarbon dioxide, new federal or state regulations could go into effect that may affect our operations. We will continue to monitor developments in these variousprograms and assess their potential impacts on our operations.From time to time, in the ordinary course of our business, we receive notices from the New Mexico Environment Department of alleged air qualitycontrol violations. Upon receipt of such notices, we promptly evaluate the matter and take any required corrective actions. In these circumstances, we may berequired to pay certain civil penalties for any such notices of violation. The malfunction or failure of pollution control equipment and/or productionequipment, the failure to follow operating procedures, more stringent air quality regulations, or a change in interpretation and enforcement of applicable airquality laws and regulations could result in future enforcement actions.9Table of ContentsSafety and Health Regulation and Programs. Our New Mexico and Utah facilities are subject to the Federal Mine Safety and Health Act of 1977,the Occupational Safety and Health Act, related state statutes and regulations, or a combination of these laws.The Mine Safety and Health Administration ("MSHA") is the governing agency for our New Mexico facilities. As required by MSHA forunderground mines and attendant surface facilities, our New Mexico facilities are inspected by MSHA personnel regularly. Item 4 and Exhibit 95 to thisAnnual Report on Form 10-K provide information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K.Our New Mexico facilities participate in MSHA’s Region 8 “Partnership Program.” There is a formally signed document and plan, pursuant towhich each party commits to specific actions and behaviors. Examples of principles include working for an open, cooperative environment; agreeing tocitation and conflict processes; and improving training. Our New Mexico facilities are serviced by a trained mine rescue team, which is ready to respond to on-site incidents. The team practices and participates at state and federal events and competitions.The Occupational Safety and Health Administration ("OSHA") is the governing agency relating to the safety standards at our Utah facilities, as wellas our HB Solar Solution mine. Regular meetings are held covering various safety topics. Training and other certifications is provided to employees as neededbased upon their work duties.Remediation at Intrepid Facilities. Many of our current facilities have been in operation for a number of years. Operations by us and ourpredecessors have involved the historical use and handling of potash, salt, related potash and salt by-products, process tailings, hydrocarbons and otherregulated substances. Some of these operations resulted, or may have resulted, in soil, surface water or groundwater contamination. At some locations, thereare areas where process waste, building materials (including asbestos‑containing transite), and ordinary trash may have been disposed or buried, and havesince been closed and covered with soil and other materials.At many of these facilities, spills or other releases of regulated substances may have occurred previously and potentially could occur at any of ourfacilities in the future, possibly requiring us to undertake or fund cleanup efforts under CERCLA or state laws governing cleanup or disposal of hazardousand solid waste substances.We work closely with governmental authorities to obtain the appropriate permits to address identified site conditions. For example, buildings locatedat our facilities in both Utah and New Mexico have a type of siding that contains asbestos. We have adopted programs to encapsulate and stabilize portions ofthe siding through use of an adhesive spray and to remove the siding, replacing it with an asbestos-free material. Also, we have trained asbestos abatementcrews that handle and dispose of the asbestos‑containing siding and related materials. We have a permitted asbestos landfill in Utah. We have worked closelywith Utah officials to address asbestos‑related issues at our Moab mine. We are working with federal officials to resolve issues concerning the historicdisposal of asbestos‑containing material at an unpermitted location at our West mine, which may require additional removal of the asbestos-containing materialor another remedy.Reclamation ObligationsMining and processing of potash generates residual materials that must be managed both during the operation of the facility and upon facilityreclamation and closure. Potash tailings, consisting primarily of salt and fine sediments, are stored in surface disposal sites. Some of these tailing materialsmay also include other contaminants that were introduced as reagents during historic processing methods, such as lead, that may require additionalmanagement and could cause additional disposal and reclamation requirements to be imposed. For example, at least one of our New Mexico mining facilitiesmay have legacy issues regarding lead in the tailings pile resulting from production methods utilized prior to our acquisition of these assets. During the life ofthe tailings management areas, we have incurred and will continue to incur significant costs to manage potash residual materials in accordance withenvironmental laws and regulations and with permit requirements. Additional legal and permit requirements will take effect when these facilities are closed.Our surface permits require us to reclaim property disturbed by operations at our facilities. Our operations in Utah and New Mexico have specificobligations related to reclamation of the land after mining and processing operations are concluded. The discounted present value of our estimated reclamationcosts for our mines as of December 31, 2013, is approximately $21.0 million, which is reflected in our financial statements. Various permits andauthorization documents negotiated with or issued by the appropriate governmental authorities include these estimated reclamation costs on an undiscountedbasis. The undiscounted amount of our estimated reclamation costs for our mines as of December 31, 2013, is approximately $54.9 million. During the yearended December 31, 2013, our estimate of our asset retirement obligations increased primarily as a result of the construction activity for our HB Solar Solutionmine and our North compaction facility. We also revised our estimate to close mine shafts that are no longer in service, as well as our operating mine shafts.10Table of ContentsIt is difficult to estimate and predict the potential actual costs and liabilities associated with remediation and reclamation, and there is no guaranteethat we will not be identified in the future as potentially responsible for additional remediation and reclamation costs, either as a result of changes in existinglaws and regulations or as a result of the identification of additional matters subject to remediation and/or reclamation obligations or liabilities.Taxes and InsuranceRoyalties and Other TaxesThe potash, langbeinite, and by-products we produce and sell from mineral leases are subject to royalty and other tax payments. We produce and sellfrom leased land owned by the U.S. Federal government, the states of New Mexico and Utah, and private landowners. The terms of the royalty payments aredetermined at the time of the issuance or renewal of the leases. Some royalties are determined as a fixed percentage of revenue and others are on a sliding scalethat varies with the ore grade. Additionally, some of our leases are subject to overriding royalty interest payments paid to various owners. In 2013, we paid$10.9 million, or an average of 4% of net sales, in royalties and other taxes.Income TaxesWe are a subchapter C corporation and therefore are subject to U.S. federal and state income taxes. We recognize income taxes under the asset andliability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financialstatement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax ratesexpected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. We record a valuation allowanceif it is deemed more likely than not that our deferred income tax assets will not be realized in full. Such determinations are subject to ongoing assessment.InsuranceWe maintain insurance policies covering general liability, property and business interruption, workers’ compensation, business automobile,umbrella liability, aviation hull and liability, directors’ and officers’ liability and various ancillary and customary policies. Our policy periods are typicallyfor one year. We evaluate our limits each year based on our exposures and risk tolerance. Generally, our premiums are adjusted to reflect the marketplace forinsurance and changes in our exposures, inclusive of changes in invested capital and changes in the market values of the products we sell.SeasonalityThe sales patterns of our agricultural products are generally seasonal. Using averages of the monthly sales data over the last three years, our salesvolumes are highest from March through October, which coincides with the spring and fall application seasons in the United States. Likewise, during thecolder, winter months, our sales tend to be lower. The month-to-month seasonality of our sales is somewhat moderated due to the variety of crops, industriesand geographies that we serve. We generally build inventories during the low demand periods of the year in order to ensure timely product availability duringthe peak sales seasons. The seasonality of fertilizer demand results in our sales volumes and net sales being the highest during the spring and our workingcapital requirements being the highest just before the start of the spring season. We have seen that the fertilizer dealers in North America have institutedpractices that are designed to reduce their risk of changes in the price of fertilizer products through consignment type programs. These programs tend to makethe timing of the spring and fall seasonal demand profile less predictable within the season.Our quarterly financial results can vary from one year to the next due to weather‑related shifts in planting schedules and purchasing patterns.EmployeesAs of December 31, 2013, we had 993 employees, the majority of which were full-time employees. In January 2014, we undertook several cost-savings initiatives, including a workforce reduction that impacted approximately 7% of our workforce. The goal of these cost-savings initiatives was to betteralign our cost structure with declining potash prices and the conclusion of our major capital projects.We have a collective bargaining agreement with a labor organization representing our hourly employees in Wendover, Utah, which expires onMay 31, 2014. This is the fifth agreement negotiated between us and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrialand Service Workers International Union 00867. We do not anticipate any significant issues to arise as a result of the renewal of this agreement. We considerour relationships with our employees to be good.Available Information11Table of ContentsWe file or furnish with the SEC reports, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, currents reports on Form 8-K,proxy statements, and any amendments to these reports. These reports are available free of charge on our website at www.intrepidpotash.com as soon asreasonably practicable after they are electronically filed with or furnished to the SEC. These reports also can be obtained at www.sec.gov, or by visiting thePublic Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549, or by calling the SEC at 1-800-SEC-0330.We routinely post important information about us and our business, including information about upcoming investor presentations, on our websiteunder the Investor Relations tab. We encourage investors and other interested parties to enroll on our website to receive automatic email alerts or Really SimpleSyndication (RSS) feeds regarding new postings. The information found on, or that can be accessed through, our website is not part of this or any other reportwe file with, or furnish to, the SEC.Glossary of TermsDesignated Potash Area: A 497,000 acre location in southeastern New Mexico established by order of the U.S. Secretary of the Department of theInterior and administered by the BLM encompassing the United States' strategic potash reserve.Langbeinite (K2SO4(MgSO4)2—potassium magnesium sulfate): A generic term for the mineral double sulfate of potash magnesia, also sometimesreferred to as sulfate of potash magnesia. The processing of ores containing langbeinite results in a concentrated double sulfate of potash magnesia, which wemarket for sale as Trio®.Magnesium Chloride (MgCl2): A by-product brine containing approximately 30% magnesium chloride that is typically used as a de-icing and de-dusting agent.Metal Recovery Salt: Potash combined with salt in various ratios that chemically enhances the recovery of aluminum in aluminum recyclingprocessing facilities.Mill Feed Grade: A measurement of the amount of mineral contained in an ore as a percentage of the total weight of the ore. For potash it is oftenrepresented as percent of potassium oxide (K2O) or percent potassium chloride (KCl).MMBtu: A standard unit of measurement used to denote the amount of energy in fuels. Million British Thermal Units.Potash: A generic term for potassium salts (primarily potassium chloride, but also potassium nitrate, potassium sulfate and sulfate of potashmagnesia, or langbeinite) used predominantly and widely as a fertilizer in agricultural markets worldwide. Potash also has numerous industrial uses,including oil and gas drilling and stimulation fluids. The chloride containing potash salt is commonly called sylvite in the mineral form or muriate of potashin the product form. Unless otherwise indicated, references to “potash” refer to muriate of potash.Potassium Chloride (KCl—muriate of potash): The most abundant, least expensive source of potassium on a delivered K2O basis and thepreferred source of potassium for fertilizer use, currently accounting for approximately 91% of total worldwide fertilizer use of K2O. Commercial grades forfertilizer use are typically 95% to 98% potassium chloride, containing about 60% to 62% K2O. Potassium chloride is the primary raw material used toproduce industrial potassium hydroxide and its derivative salts, the most commercially important of which are potassium carbonate, potassium chromate,potassium permanganate and the potassium phosphates. It is also used as an intermediate in chemical synthesis routes to potassium sulfate and potassiumnitrate. Muriate of potash is either red or white in appearance, depending on how it is processed.Potassium Nitrate (KNO3—niter, saltpeter, nitrate of potash or sal prunella): A white crystalline salt. In the U.S., its use is limited but it is used asa nonchloride source of potash and nitrate nitrogen. The nutrient content of commercial, fertilizer‑grade material is about 13% to 14% nitrogen and 44% K2O.Although potassium nitrate does exist as such in nature, there are no known large deposits of concentrated potassium nitrate‑containing minerals. Recovery ofnaturally occurring materials has been primarily from the crude sodium nitrate (caliche) beds in Chile. Potassium nitrate is referenced in the “potash” and“potassium chloride” terms above.Potassium Oxide (K2O): The potassium content of commercial fertilizers is expressed as percent potassium oxide (K2O). Potassium oxide, however,is merely a customary means of reporting potassium content within the fertilizer industry on the N-P-K (nitrogen‑phosphorus‑potassium) numbers on thelabels of fertilizers. Although K2O is the formula for potassium oxide, potassium oxide is not used as a fertilizer. The potassium content of pure potassiumchloride fertilizer is expressed as 63% K2O, which is the equivalent of 52.3% elemental K (potassium). In the soil, potassium chloride dissolves intopotassium ions (K+) and chloride ions (Cl−). Percent potassium oxide (K2O) is referenced in other terms in this glossary.12Table of ContentsPotassium Sulfate (K2SO4—sulfate of potash or SOP): A crystalline salt that is derived directly from brines or synthesized from other potassiumsalts and minerals. Commercial grades for fertilizer use are usually 93% to 95% potassium sulfate, containing 50% to 51% K2O. Potassium sulfate accountsfor 6% of total worldwide potash fertilizer use. Potassium sulfate is referenced in the “potash” and “potassium chloride” terms above.Probable (Indicated) Reserves: Reserves for which quantity and grade and/or quality are computed from information similar to that used forproven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree ofassurance of probable (indicated) reserves, although lower than that for proven (measured) reserves, is high enough to assume geological continuity betweenpoints of observation. The classification of minerals as probable reserves requires that Intrepid believe with reasonable certainty that access to the reserves canbe obtained, even though currently‑issued permits are not required.Productive Capacity: The estimated amount of potash production that will likely be achieved based on the amount and quality of ore that weestimate can currently be mined, milled, and/or processed, assuming an estimated average reserve grade, no modifications to the systems, a normal amount ofscheduled down time, average or typical mine development efforts and operation of all of our mines and facilities at or near full capacity.Proven (Measured) Reserves: Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drillholes; grade and/or quality are computed from the results of detailed sampling, and (b) the sites for inspection, sampling and measurement are spaced soclosely and the geologic character is so well-defined that the size, shape, depth and mineral content of the reserves are well-established.Recovery: The percentage of valuable material in the ore that is beneficiated prior to further treatment to develop a saleable product.Reserve: That part of a mineral deposit, which could be economically and legally extracted or produced at the time of the reserve determination.Salt (NaCl—sodium chloride): The salt industry is a commodity business with a heavy emphasis on price competition, which results in marketboundaries being defined by delivered costs.Solar Evaporation: A mineral concentration process by which brines containing salt, potash and magnesium chloride are collected into ponds, andsolar energy is used to evaporate water thus crystallizing out the salt and potash contained in the brine. The resulting evaporate is then processed to separate thepotash from the salt and subsequently prepared for sale.Solution Mining: For potash, a mining process by which potash is extracted from mineralized beds by injecting a salt-saturated brine into a potashore body and recovering a brine that is saturated in salt and also close to saturated in potash. The double mineral heavy brine is rich in potash that is broughtto the surface for mineral recovery. Solution mining does not require men or machines to be underground.Sulfate of Potash Magnesia (K2SO4.2MgSO4)—langbeinite or potassium magnesium sulfate: A double sulfate mineral containing potassium andmagnesium sulfates. In the United States, sulfate of potash magnesia, which is produced by refining langbeinite ore, accounts for approximately 3% of potashfertilizer, based on 2011 estimates by the Association of American Plant Food Control Officials, Inc. Commercial products from the United States typicallycontain 22% K2O, 11% magnesium and 22% sulfur. In Europe, a variety of these mixed salts is made from different ores, in grades ranging from 12% to42% K2O, 2% to 5% magnesium and 3% to 7% sulfur.Tailings: Salt and insoluble minerals that remain after potash is removed from ore during processing, typically disposed of in a tailings pile.Ton: A short ton, or a measurement of mass equal to 2,000 pounds. Unless expressly stated otherwise or the context otherwise requires, references to“tons” in this report refers to short tons.Trio®: The product Intrepid markets for sale that is recovered from langbeinite ore and which serves as a low-chloride potassium, magnesium andsulfur‑bearing fertilizer primarily for use in citrus, vegetable, sugarcane and palm applications and as an animal feed supplement. This product is a doublesulfate of potash magnesia concentrate containing approximately 95% langbeinite and 5% salt or other minerals.Underground Mine: A mine that uses a method of extracting economically attractive mineralization from deeper deposits. Underground mininggenerally consists of multiple shafts and/or entry points and a network of tunnels to provide access to minerals and haulage and conveyance systems totransport materials to the surface. Underground mining machines are used to remove the ore and a series of pillars are left behind to provide the appropriatelevel of ground support to ensure safe access and mining.Executive OfficersThe following section includes biographical information for our executive officers.Name Age PositionRobert P. Jornayvaz III 55 Executive Chairman of the BoardDavid W. Honeyfield 47 President and Chief Financial OfficerMartin D. Litt 49 Executive Vice President, General Counsel and SecretaryJames N. Whyte 55 Executive Vice President of Human Resources and Risk ManagementJohn G. Mansanti 58 Senior Vice President of OperationsKelvin G. Feist 46 Senior Vice President of Sales and MarketingBrian D. Frantz 51 Vice President - Finance, Controller and Chief Accounting OfficerRobert P. Jornayvaz III has served as our Executive Chairman of the Board since May 2010. Mr. Jornayvaz served as our Chairman of the Board and ChiefExecutive Officer from our formation in November 2007 until May 2010. Mr. Jornayvaz served, directly or indirectly, as a manager of our predecessor,Intrepid Mining LLC, from 2000 until its dissolution at the time of our initial public offering (“IPO”) in 2008. Mr. Jornayvaz is the sole owner of IntrepidProduction Corporation, which owns approximately 14% of our common stock. Mr. Jornayvaz has over 30 years of experience in the oil and gas industry and15 years of experience in the potash industry.David W. Honeyfield has served as our President since May 2010 and our Chief Financial Officer since March 2008. Mr. Honeyfield also served as ourExecutive Vice President and Secretary from March 2008 to May 2010 and as our Treasurer from March 2008 to December 2010. From 2003 to 2008, he heldvarious positions with SM Energy Company (formerly St. Mary Land & Exploration Company), including Senior Vice President from 2007 to 2008, ChiefFinancial Officer from 2005 to 2008, and Vice President-Finance, Treasurer, and Secretary from 2003 to 2005. From 2002 to 2003, Mr. Honeyfield wasController and Chief Accounting Officer of Key Production Company, Inc. and then Cimarex Energy Co., which acquired Key Production Company. From1991 to 2002, Mr. Honeyfield was with Arthur Andersen LLP in Denver, most recently as a senior manager in the audit practice, serving clients primarily inthe mining, oil and gas, and manufacturing sectors.Martin D. Litt has served as our Executive Vice President and General Counsel since July 2008 and as our Secretary since January 2012. He began his legalcareer in 1991 with the law firm of Skadden, Arps, Slate, Meagher & Flom LLP. In 1993, Mr. Litt joined the law firm of Holme Roberts & Owen LLP (nowknown as Bryan Cave LLP), where he served as a partner for nine years and a member of the firm’s Executive Committee, a committee responsible formanaging the law firm. During his time at Holme Roberts & Owen LLP, Mr. Litt focused his practice on commercial litigation, antitrust matters, and generalbusiness counseling and served as outside counsel to us and Intrepid Mining LLC for approximately six years.James N. Whyte has served as our Executive Vice President of Human Resources and Risk Management since December 2007. Mr. Whyte joined IntrepidMining LLC as Vice President of Human Resources and Risk Management in 2004. Prior13Table of Contentsto joining Intrepid, Mr. Whyte spent 17 years in the property and casualty insurance industry including roles with Marsh and McLennan, Incorporated,American Re-Insurance, and a private insurance brokerage firms he founded. Mr. Whyte is a director of American Eagle Energy Corporation.John G. Mansanti has served as our Senior Vice President of Operations since November 2011. Mr. Mansanti also served as our Vice President of Operationsfrom October 2009 to November 2011. From 2006 to October 2009, Mr. Mansanti worked for Barrick Gold Corporation, a gold production company. From2008 to 2009, Mr. Mansanti served as General Manager of Goldstrike Mines in Nevada, where he was responsible for managing Barrick’s largest goldproducer at approximately 1.7 million ounces a year. From 2006 to 2008, Mr. Mansanti served as General Manager at the Cortez Gold Mine in Nevada, wherehe was responsible for managing all aspects of operations and managing the engineering, underground development, and permitting associated with the CortezHills project. From 2003 to 2006, Mr. Mansanti served as General Manager at the Turquoise Ridge Joint Venture (a joint venture between Placer Dome Inc. andNewmont Mining Corporation).Kelvin G. Feist has served as our Senior Vice President of Sales and Marketing since November 2011. Mr. Feist also served as our Vice President of Sales andMarketing from February 2011 to November 2011. From 1994 to January 2011, Mr. Feist held various positions with Agrium Inc., a provider of fertilizerproducts and services, and its subsidiaries, most recently as Director of Potash Marketing from July 2010 to January 2011 and National Account Managerfrom July 2007 to July 2010. While at Agrium, Mr. Feist was responsible for all marketing and sales programs related to Agrium’s potash portfolio, includingmatters relating to production and logistics.Brian D. Frantz has served as our Vice President-Finance since February 2012 and our Controller and Chief Accounting Officer since July 2010. FromOctober 2008 to July 2010, Mr. Frantz served as Chief Financial Officer of Honnen Equipment Company, a private company specializing in selling andleasing construction equipment. In 2008, Mr. Frantz served as Chief Financial Officer of DWF Wholesale Florists Company, a national wholesale florist.From 1998 to 2007, Mr. Frantz held various positions at RE/MAX International, Inc., a private company engaged in the franchising of real estate brokeragebusinesses, most recently as Senior Vice President and Chief Financial Officer. From 1986 to 1998, Mr. Frantz was with Arthur Andersen LLP in Denver,most recently as a senior manager, serving public and private companies primarily in the cable television, manufacturing, mining, and real estate industries.ITEM 1A.RISK FACTORSOur future performance is subject to a variety of risks and uncertainties that could materially and adversely affect our business, financialcondition, and results of operations, and the trading price of our common stock.Risks Related to Our BusinessOur potash sales are subject to price and demand volatility resulting from periodic imbalances of supply and demand, which could negativelyaffect our results of operations.Historically, the market for potash has been cyclical, and the prices and demand for potash have fluctuated. Periods of high demand, increasingprofits, and high-capacity utilization tend to lead to new plant investment and increased production. This growth continues until the market is over-saturated,leading to decreased prices and lower-capacity utilization until the cycle repeats. Furthermore, individual potash producers have, at various times,independently suspended production in response to delayed purchasing decisions by potash customers in anticipation of lower prices. As a result of thesevarious factors, the prices and demand for potash can be volatile. This volatility could reduce profit margins and negatively affect our results of operations.We sell the majority of our potash into the spot market in the U.S. and generally have no long-term or material short-term contracts for the sale of potash. Inaddition, there is no active hedge market for potash as compared to many other commodities. As a result, we do not have and cannot obtain protection fromthis price and demand volatility.Changes in fertilizer application rates could exacerbate the cyclical nature of the prices and demand for our products.Farmers attempt to apply the optimum amounts of fertilizer to maximize their economic returns. A farmer’s decision about the application rate foreach fertilizer, or the decision to forgo the application of a fertilizer, particularly potash and Trio®, varies from year to year depending on a number of factors.These factors include crop prices, weather patterns, fertilizer and other crop input costs, and the level of crop nutrients remaining in the soil following theprevious harvest. Farmers are more likely to increase application rates of fertilizers when crop prices are relatively high, fertilizer and other crop input costs arerelatively low, or the level of crop nutrients remaining in the soil is relatively low. Conversely, farmers are likely to reduce application of fertilizers when farmeconomics are weak or declining or the level of crop nutrients remaining in the soil is relatively high. This variability in application rates can impact thecyclical nature of the prices and demand for our products.14Table of ContentsIn addition, farmers may buy and apply potash or Trio® in excess of current crop needs, which results in a build-up of potassium in the soil that can be usedby crops in subsequent crop years. If this occurs, demand for our products could be delayed to future periods. If we fail to accurately predict this shift, wecould have insufficient product available to meet the early demand and could lose sales to our competitors.Aggressive pricing or operating strategies by other potash producers could adversely affect our sales and results of operations.The potash industry is concentrated, with a relatively small number of producers accounting for the majority of global production. Many of theseproducers have significantly larger operations than we do and mine potash from reserves that are thicker, higher-grade, and less geologically complex than ourreserves. These larger producers may have greater leverage in pricing negotiations with customers and may be able to negotiate better rates for transportation ofproducts sold. They may also be able to mine their potash at a lower cost due to economies of scale or other competitive advantages. In addition, they maydecide to pursue aggressive or new pricing or operating strategies that disrupt the global and U.S. potash markets. These disruptions could cause lower pricesor demand for our product, which would adversely affect our sales and results of operations.Some of our competitors have greater resources than we do, which could place us at a competitive disadvantage and adversely affect our sales andresults of operations.Some of our competitors have greater capital, human, and other resources than we do. Competition in the U.S. potash market is based on a numberof considerations, including price, transportation costs, product quality, brand reputation, client service, and support. To remain competitive, we need toinvest continuously in marketing activities, customer relationships, and production infrastructure to lower our production costs. We may have to adjust theprices of some of our products to stay competitive. We may also need to borrow funds and increase our leverage. We may not have sufficient resources tocontinue to make these investments or maintain our competitive position relative to some of our competitors that have greater resources than we do. To the extentother potash producers enjoy competitive advantages, the price of our products, our sales volumes, and our results of operations could be adversely affected.Adverse conditions in the global economy and disruptions in the financial markets could negatively affect our results of operations and financialcondition.The global economy continues to experience some volatility and uncertainty. This volatility and uncertainty can create uncertainty for farmers andcustomers in the geographic areas where we sell our products. If farmers, who are serviced by our customers, reduce, delay, or forego their potash and Trio®purchases due to this uncertainty, our results of operations would be adversely affected. Moreover, volatility and disruptions in the financial markets couldlimit our customers’ ability to obtain adequate financing or credit to purchase and pay for our products, which would decrease our sales volume. Changes ingovernmental banking, monetary, and fiscal policies to restore liquidity and increase credit availability may not be effective. It is difficult to determine theextent of economic and financial market problems and the many ways in which they could negatively affect our customers and business. In addition, if we arerequired to raise additional capital or obtain additional credit during an economic downturn, we could be unable to do so on favorable terms or at all.If we are required to write down the value of our inventories, our financial condition and results of operations would be adversely affected.We carry our inventories at the lower of cost or market. In periods when the market prices for our products fall below our cost to produce them andthe lower prices are not expected to be temporary, we could be required to write down the value of our inventories. Any write-down would adversely affect ourfinancial condition and results of operations, possibly materially.Mining is a complex process that frequently experiences production disruptions. Because of the nature of our operations, we could be morevulnerable to these disruptions than our competitors, which could adversely affect our results of operations.The process of mining is complex. Production delays can occur due to equipment failures, unusual or unexpected geological conditions,environmental hazards, acts of nature, and other unexpected events or problems. In addition, we must transport mined ore for long distances to remove it fromthe mines for processing, which creates a higher probability of incidents. Other than our HB Solar Solution mine, our facilities have had long service lives andmay require more maintenance or be more likely to fail than newer facilities or equipment. For example, the shafts at our West mine were constructed in 1931,are located in an area of known subsidence, and require frequent maintenance due to water inflow, wooden structures, and salt build-up. Additionally, at ourEast mine, the mining of langbeinite ore, which is harder and more abrasive than sylvite ore, has caused greater wear on our equipment, thereby increasing theexpense and frequency of maintenance and repairs. Operational15Table of Contentsdifficulties can also arise from our milling processes. For example, the mill at our East mine experiences build-ups of complex salts, an undesirable by-productof langbeinite production that we must remove. In addition, the mixed ore body, which contains sulfates, can cause changes in brine chemistry that mayimpact potash production. Furthermore, production at our facilities is dependent upon the maintenance and geotechnical structural integrity of our tailings andstorage ponds. The amounts that we are required to spend on maintenance and repairs may be significant and higher than expected, and we may have to divertresources from capital expenditures that are focused on growth to capital expenditures that are focused on maintenance. Production delays and stoppages, andhigher-than-expected maintenance and repair expense, could have an adverse effect on our results of operations.Mining is a hazardous process, and accidents occurring in the course of our operating activities could result in significant costs or productiondelays.The process of mining is hazardous and involves various risks and hazards that can result in serious accidents. If unforeseen accidents or eventsoccur, or if our safety procedures are not effective, we could be subject to liabilities arising out of personal injuries or death, our operations could beinterrupted, or we could be required to shut down or abandon affected facilities. Accidents could cause us to expend significant amounts to remediate safetyissues or repair damaged facilities.Existing or expanded oil and gas development near our mines could result in methane gas leaking from an oil and gas well into our mines. We test ourmines daily for methane gas. However, unlike coal mines, our mines are not constructed or equipped to deal with methane gas. Any intrusion of methane gasinto our mines could cause an explosion resulting in loss of life or significant property damage or could require the suspension of all mining operations untilthe completion of extensive modifications and re-equipping of the mine. The costs of modifying our mines and equipment could make it uneconomical toreopen our mines. You can find more information about the co-development of potash and oil and gas resources in the Designated Potash Area under the riskfactor below entitled “Existing and further oil and gas development in the Designated Potash Area could impair our potash reserves, which could adverselyaffect our financial condition or results of operations."The grade of ore that we mine could vary from our projections due to the complex geology and mineralogy of potash reserves, which couldadversely affect our potash production and our results of operations.Our potash production is affected by the potassium content of the ore and the mineralogy of the ore. Our projections of ore grade vary from time totime, and the amount of potash that we produce could vary substantially from our projections. There are numerous uncertainties inherent in estimating oregrade, including many factors beyond our control. Potash ore bodies have complex geology. An unexpected reduction in the grade of our ore reserves woulddecrease our potash production because we would need to process more ore to produce the same amount of saleable-grade product. As a result, our results ofoperations would be adversely affected.If the assumptions underlying our reserve estimates are inaccurate, the quantities and value of our reserves could be adversely affected, whichcould adversely affect our financial condition and results of operations.There are numerous uncertainties inherent in estimating our potash and langbeinite reserves. As a result, our reserve estimates necessarily dependupon a number of assumptions, including the following:•geologic and mining conditions, which may not be fully identified by available exploration data and may differ from our experiences inareas where we currently mine or operate•future potash prices, operating costs, capital expenditures, royalties, severance and excise taxes, and development and reclamation costs•future mining technology improvements•the effects of governmental regulation•variations in mineralogyIn addition, because reserves are only estimates built on various assumptions, they cannot be audited for the purpose of verifying exactness. It isonly after extraction that reserve estimates can be compared to actual values to adjust estimates of the remaining reserves. Reserve information is reviewed by ageologist, mine engineer, and process engineer in sufficient detail to determine if, in the aggregate, the data provided by us are reasonable and sufficient toestimate reserves in conformity with practices and standards generally employed by and within the mining industry and in accordance with SECrequirements. If any of the assumptions that we make in connection with our reserve estimates are incorrect, the amounts of potash and langbeinite that we areable to economically recover from our mines could be significantly lower than our reserve estimates. In turn, our financial condition and results of operationscould be adversely affected.16Table of ContentsThe seasonal demand for our products, and the resulting variations in our cash flows from quarter to quarter, could have an adverse effect onour results of operations and working capital requirements.The fertilizer business is seasonal. The degree of seasonality can change significantly from one year to the next due to weather-related shifts inplanting schedules and purchasing patterns. We and our customers generally build inventories during low-demand periods of the year to ensure timely productavailability during high-demand periods. We typically experience increased sales during the North American spring season and fall harvest and increasedworking capital requirements just before the starts of these seasons. Likewise, during the colder, winter months our sales tend to be lower. If seasonal demandis higher than we expect, our customers may shift some or all of their business to our competitors. In contrast, if seasonal demand is less than we expect, wemay be left with excess inventory and higher working capital and liquidity requirements. In addition, if prices decrease rapidly, we may need to write down thevalue of our inventories.Changes in laws and regulations affecting our business, or changes in enforcement practices with respect to those laws and regulations, couldhave an adverse effect on our financial condition or results of operations.We are subject to numerous federal and state laws and regulations covering a wide variety of subject matters. Changes in these laws or regulationscould require us to modify our operations, objectives, or reporting practices in ways that adversely impact our financial condition or results of operations. Inaddition, new laws and regulations, or new interpretations of or enforcement practices with respect to existing laws and regulations, could similarly impact ourbusiness.For example, we are subject to significant regulation under MSHA and OSHA. High-profile mining accidents could prompt governmental authoritiesto enact new laws and regulations that apply to our operations or to more strictly enforce existing laws and regulations.Climate change legislation and the physical effects of climate change could have a negative effect on our operations and results of operations.There is a continuing discussion that emissions of greenhouse gases could be altering the composition of the global atmosphere in ways that could beaffecting the global climate. Federal and state legislators and regulators regularly consider ways to reduce these emissions. Any new rules could have asignificant impact on our operations and products and could result in substantial additional costs for us.The potential physical effects of climate change could also have an adverse effect on us and our customers. These effects could include changes inweather patterns (including drought and rainfall levels), water availability, storm patterns and intensities, and temperature levels. These changes could have anadverse effect on our costs, production, or sales. These changes could also have an adverse effect on our customers, which in turn could reduce the demand orprice for our products. For example, droughts or floods could decrease the amount of arable land in our markets, thereby decreasing demand for our products.Our business depends on skilled and experienced workers, and our inability to find and retain quality workers could have an adverse effect onour development and results of operations.The success of our business depends on our ability to attract and retain skilled managers, engineers, and other employees and contractors. At times,we may not be able to find or retain qualified employees or contractors. In particular, the labor market around Carlsbad, New Mexico, is very competitive andemployee turnover is generally high. In that market, we compete for experienced laborers with several other employers, including natural resource facilities, oilfields, and other potash facilities. In addition, there is high demand globally for technical mining talent. If we are not able to attract and retain quality workers,the development of our business could suffer or we could be required to raise wages to keep our employees, hire less qualified workers, or incur higher trainingcosts. The occurrence of any of these events could have an adverse effect on our results of operations.Changes in the prices of energy and other important materials used in our business, or disruptions to their supply, could adversely impact oursales, results of operations, or financial condition.Natural gas, electricity, steel, water, chemicals, diesel, and gasoline are key materials that we purchase and use in the production of our products.The prices of these commodities are volatile.Our sales and profitability are impacted by the price and availability of these materials. A significant increase in the price of these materials that isnot recovered through an increase in the price of our products, or an extended interruption in the supply of these materials to our production facilities, couldadversely affect our results of operations or financial condition. In addition, high natural gas or other fuel costs could increase crop input costs for farmers,which could cause our sales to decline. We could also lose sales to competitors with lower production costs, and our profitability could be adversely affected.In17Table of Contentsaddition, our capital expenditure forecasts are based on a variety of assumptions, including assumptions about the prices of input commodities. If inputcommodity prices are higher than we expected, our capital expenditures could increase.Any decline in U.S. agricultural production or any limitations on the use of our products for agricultural purposes could adversely affect themarkets for our products and our results of operations.The U.S. agricultural industry can be affected by a number of factors, including weather patterns, field conditions, current and projected graininventories and prices, the domestic and international demand for U.S. agricultural products, and U.S. and foreign policies regarding trade in agriculturalproducts. State and federal governmental policies, including farm and ethanol subsidies and commodity support programs, may also directly or indirectlyinfluence the number of acres planted, the mix of crops planted, and the use of fertilizers for particular agricultural applications. In addition, there are variouscity, county, and state initiatives to regulate the use and application of fertilizers due to various environmental concerns. If U.S. agricultural production orfertilizer use decreased significantly due to one or more of these factors, our results of operations could be adversely affected.A decline in oil and gas drilling or a reduction in the use of potash in drilling fluids in the Permian Basin or Rocky Mountain regions couldincrease our operating costs and decrease our average net realized sales price of potash.A significant portion of our sales consists of sales of standard-sized potash for use in oil and gas drilling fluids in the Permian Basin and RockyMountain regions. A decline in oil and gas drilling could reduce our sales into this industrial market. In addition, alternative products that have some of thesame clay-inhibiting properties that potash has are commercially available. Depending upon the prices of these alternative products as compared to the price ofpotash, these alternative products could temporarily or permanently replace some of our sales into the industrial market. If a significant amount of salesshifted from the industrial market to the agricultural market due to any of these factors, our average net realized sales price of potash could decline. This isbecause our agricultural sales generally require more costly transportation to more distant delivery points. In addition, we could be required to incur additionalcosts to compact the standard-sized product into the granular-sized product favored in agriculture.Increased costs could affect our per-ton profitability.Costs at our facilities may vary due to a number of factors, including changing ore grade, revisions to mine plans, and location of the ore bodies. Asubstantial portion of our operating costs is comprised of fixed costs that do not vary based on production levels. These fixed costs include labor and benefits,base energy usage, property taxes, insurance, maintenance expenditures, and depreciation. Any increase in fixed costs or decrease in production generallyincreases our per-ton costs and correspondingly decreases our per-ton operating margin. As a result, a significant increase in costs at any of our facilities couldhave an adverse effect on our profitability and cash flows, particularly during periods of decreasing potash prices.A shortage of railcars or trucks for transporting our products, increased transit times, or interruptions in railcar or truck transportation couldresult in customer dissatisfaction, loss of sales, higher transportation or equipment costs, or disruptions in production.We rely heavily upon truck and rail transportation to deliver our products to our customers. In addition, the cost of transportation is an importantcomponent of the price of our products. Identifying and securing affordable and dependable transportation is important in supplying our customers and, tosome extent, in avoiding delays in the delivery to us of supplies and equipment necessary for our operations. A shortage of trucks or railcars for carryingproduct or increased transit times due to accidents, highway or railway disruptions, congestion, high demand, labor disputes, adverse weather, naturaldisasters, changes to transportation systems, or other events could prevent us from making timely delivery to our customers or lead to higher transportationcosts. As a result, we could experience customer dissatisfaction or a loss of sales. Similarly, disruption within the transportation systems could negativelyaffect our ability to obtain the supplies and equipment necessary to produce our products. We may also have difficulty obtaining access to ships to deliver ourproducts to overseas customers.We rely on our management personnel for the development and execution of our business strategy, and the loss of one or more members of ourmanagement team could harm our business.Our management personnel have significant relevant industry and company-specific experience. Our senior management team has developed andimplemented first-of-their-kind processes and other innovative ideas that are largely responsible for the success of our business. If we are unable to retain theseindividuals, our operations could be disrupted and we may be unable to achieve our business strategies and grow effectively. We do not currently maintain“key person” life insurance on any of our management personnel.Weakening of the Canadian dollar and Russian ruble against the U.S. dollar could lead to lower domestic potash prices, which would adverselyaffect our results of operations. Fluctuations in these currencies could cause our results of operations to fluctuate.18Table of ContentsThe U.S. imports the majority of its potash from Canada and Russia. If the Canadian dollar and the Russian ruble strengthen in comparison to theU.S. dollar, foreign suppliers realize a smaller margin in their local currencies unless they increase their nominal U.S. dollar prices. Strengthening of theCanadian dollar and Russian ruble therefore tend to support higher U.S. potash prices as Canadian and Russian potash producers attempt to maintain theirmargins. However, if the Canadian dollar and Russian ruble weaken in comparison to the U.S. dollar, foreign competitors may choose to lower pricesproportionally to increase sales volumes while again maintaining a margin in their local currency. These activities could cause our sales prices and results ofoperations to decrease or fluctuate significantly.Existing and further oil and gas development in the Designated Potash Area could impair our potash reserves, which could adversely affect ourfinancial condition or results of operations.The U.S. Department of the Interior regulates the development of federal mineral resources-both potash and oil and gas-on federal lands in theDesignated Potash Area. This 497,000-acre region outside of Carlsbad, New Mexico, includes all of our New Mexico operations and facilities. In December2012, the U.S. Department of the Interior issued an updated order that provides guidance to the BLM and industry on the co-development of these resources.Even under the new order, it is possible that oil and gas drilling in this area could limit our ability to mine valuable potash reserves or mineralizeddeposits because of setbacks from oil and gas wells and the establishment of unminable buffer areas around oil or gas wells. It is also possible that the BLMcould determine that the size of these unminable buffer areas should be larger than they are currently, which could impact our ability to mine our potashreserves. We review applications for permits to drill oil and gas wells as they are publicly disclosed by the BLM and the State of New Mexico Oil and GasConservation Commission. When appropriate, we protest applications for drilling permits that we believe should not be drilled consistent with the operativefederal and state rules and that could impair our ability to mine our potash reserves or put at risk the safety of our potash miners. We may not prevail in theseprotests or be able to prevent wells from being drilled in the vicinity of our potash reserves. If, notwithstanding our protests and appeals, a sufficient numberof wells are drilled through or near our potash reserves, our potash reserves could be significantly impaired, which could adversely affect our financialcondition or results of operations.If we are unable to obtain and maintain the required permits, governmental approvals, and leases necessary for our operations, our businesscould be adversely affected.We hold numerous governmental, environmental, mining, safety, and other permits and approvals authorizing the operations at each of our facilities.A decision by a governmental agency to deny or delay issuing a new or renewed permit or approval, or to revoke or substantially modify an existing permit orapproval, could prevent or limit us from continuing our operations at the affected facility, which could have an adverse effect on our business, financialcondition, and results of operations.Any expansion of our existing operations would also require us to secure the necessary environmental and other permits and approvals. We may notbe able to obtain these permits and approvals in a timely manner or at all. In addition, the federal government must consider and study a project’s likelyenvironmental impacts. Based on the federal government’s conclusion, it could require an environmental assessment or an environmental impact statement asa condition of approving a project or permit, which could result in significant time delays and costs. Furthermore, many of our operations take place on landthat is leased from federal and state governmental authorities. Expansion of our existing operations could require securing additional federal and state leases.We may not be able to obtain these leases in a timely manner or at all. In addition, our existing leases generally require us to commence mining operationswithin a specified time frame and to continue mining in order to retain the lease. The loss of a lease could adversely affect our ability to mine the associatedreserves.Also, our existing leases require us to make royalty payments based on the revenue generated by the potash we produce from the leased land. Theroyalty rates are subject to change whenever we renew our leases, which could lead to significant increases in these rates. As of December 31, 2013,approximately 11% of our state and federal lease acres at our New Mexico facilities (including leases at the HB and North mines) and none of our state andfederal lease acres at our Utah operations will be up for renewal within the next five years. Increases in royalty rates would reduce our profit margins and, ifthe increases were significant, would adversely affect our results of operations.The execution of our strategic projects, including our new HB Solar Solution mine, could require more time and costs than we expect, whichcould adversely affect our results of operations and financial condition.After several years of design and construction, we have completed initial construction of the HB Solar Solution mine and are in the initialcommissioning phases for the project. Initial commissioning of the processing plant will continue through much of 2014. We expect production from the HBSolar Solution mine to ramp up throughout 2014, with full production rates19Table of Contentsbeginning with the harvest in the second half of 2015, assuming the benefit of an average annual evaporation cycle applied to full evaporation ponds.Final completion and commissioning of the HB Solar Solution mine could involve significant costs and risks. Commissioning of the mine,processing plant, and associated infrastructure could take longer or cost more than we expect. The anticipated production schedule could be impacted by avariety of factors, including the length and success of the commissioning process, the rate of injection into the mines, and the weather. In addition, the level ofproduction from the mine might not be as we anticipate. We may be unable to produce potash economically from the HB Solar Solution mine, or ourprofitability from the project could be lower than we expect.From time to time, we invest time and money into other strategic projects. The completion of these projects, which includes commissioning, couldrequire significantly more time and costs than we expect. In some cases, the construction or commissioning processes could force us to slow or shut downnormal operations at the affected facility for a period of time, which would cause lower production volumes and higher production costs per ton. In addition,our management team and other employees may be required to spend a significant amount of time addressing strategic projects, which could mean that ournormal operations receive less time and attention. We are considering various other potential opportunities for revenue and strategic growth, includingpotentially reopening the idled North mine or solution mining the Amax/Horizon mine. These potential projects are at an early stage, and we may not proceedwith any of them. Even if we proceed with one or more future strategic projects, they may not succeed despite substantial investments, they may costsignificantly more than we expect, or we may encounter additional risks that we did not initially expect.New long-term product supply can create structural market imbalances, which could negatively affect our results of operations and financialcondition.Potash is a commodity, and the market for potash is highly competitive and affected by global supply and demand. At times, producers engage inaggressive expansion and development projects to increase production. Many of these projects to increase potash production on a long-term basis arespeculative. However, if potash production is increased beyond potash demand, the price at which we sell our potash and our sales volume would likely fall,which would adversely affect our results of operations and financial condition.The market for langbeinite is still developing, and our Trio® sales could be affected by new market entrants or the introduction of langbeinitealternatives.Langbeinite, a low-chloride source of potassium, is produced by Intrepid and one other company from the only known langbeinite reserves in theworld located near Carlsbad, New Mexico. The demand for langbeinite has been limited due mostly to its limited availability. It is difficult to determine howthe supply, demand, and pricing for langbeinite will develop. Furthermore, additional competition in the market for langbeinite and comparable products existsand could increase in the future. A German company is currently producing a low-chloride fertilizer similar to langbeinite, and Chinese producers are workingon a project to synthesize a product similar to langbeinite from brines. Other companies could seek to create and market chemically similar alternatives tolangbeinite. The market for langbeinite and our Trio® sales could be affected by the success of these and other products that are competitive with langbeinite,which could adversely affect the viability of our Trio® business and our results of operations and financial condition.We are less diversified than nearly all of our competitors, and a decrease in the demand for potash and langbeinite or an increase in potashsupply could have an adverse effect on our financial condition and results of operations.We are dedicated exclusively to the production and marketing of potash and langbeinite, whereas nearly all of our competitors are diversified,primarily into nitrogen- or phosphate-based fertilizer businesses or other chemical or industrial businesses. Because we are focused exclusively on potash andlangbeinite, and because we sell our products primarily within the U.S., we could be impacted more acutely by factors affecting our industry or the regions inwhich we operate than we would if our business was more diversified and our sales more global. A decrease in the demand for potash and langbeinite couldhave an adverse effect on our financial condition and results of operations. Similarly, a large increase in potash supply could also impact our financialcondition more than our diversified competitors.Inflows of water into our potash mines from heavy rainfall or groundwater could result in increased costs and production downtime and couldrequire us to abandon a mine, any of which could adversely affect our results of operations.Major weather events such as heavy rainfall can result in water inflows into our mines. The potential effects of climate change may increase thepossibility of heavy rainfall that results in water inflows into our mines. In October 2006, water inflows from rainfall caused unused utilities in a mine shaftat our West mine to break loose and block the mine shaft. As a result, we were forced to shut down the West mine for 54 days to remove the utilities andimprove water controls in the shaft. The shutdown significantly lowered our 2006 potash production from the West mine. Additionally, the presence of water-20Table of Contentsbearing strata in many underground mines carries the risk of water inflows into the mines. If we experience water inflows at our mines, our employees could beinjured and our equipment and mine shafts could be seriously damaged. We could be forced to shut down the affected mine temporarily, potentially resultingin significant production delays, and spend substantial funds to repair or replace damaged equipment. Inflows may also destabilize the mine shafts over time,resulting in safety hazards for employees and potentially leading to the permanent abandonment of a mine.Heavy fall precipitation or low evaporation rates at our solar solution mines could delay our potash production at those facilities, which couldadversely affect our sales and results of operations.Our Moab and Wendover facilities and our new HB Solar Solution mine use solar evaporation ponds to form potash crystals from brines. Weatherconditions could negatively impact potash production at these facilities. For example, heavy rainfall in September and October, just after the evaporationseason ends, would temporarily reduce the amount of potash we can produce by causing the potash crystals to dissolve and consume pond capacity.Similarly, lower-than-average temperatures or higher-than-average seasonal rainfall would reduce evaporation rates and therefore delay production. Thepotential effects of climate change may increase the possibility of adverse weather conditions. If we experience heavy rainfall or low evaporation rates at any ofour solar solution mines, we would have less potash available for sale, and our sales and results of operations could be adversely affected. As we increase thelevel of production associated with our use of solar ponds, our production risks related to rainfall and evaporation rates increase.Environmental laws and regulations could subject us to significant liability and require us to incur additional costs.We are subject to many environmental, safety, and health laws and regulations, including laws and regulations relating to mine safety, mine landreclamation, remediation of hazardous substance releases, and discharges into the soil, air, and water. Our operations, as well as those of our predecessors,have involved the use and handling of regulated substances, hydrocarbons, potash, salt, related potash and salt by-products, and process tailings. Theseoperations resulted, or may have resulted, in soil, surface water, and groundwater contamination. At some locations, salt-processing waste, building materials(including asbestos-containing material), and ordinary trash may have been disposed or buried in areas that have since been closed and covered with soil andother materials. Under environmental remediation laws such as CERCLA, liability is imposed on certain categories of persons who are considered to havecontributed to the release of hazardous substances into the environment, without regard to fault or the legality of a party’s conduct. We could incur significantliabilities under CERCLA and other environmental remediation laws, with regard to our current or former facilities, adjacent or nearby third party facilities, oroff-site disposal locations. Under CERCLA or similar state laws, one party may, under some circumstances, be required to bear more than its proportionalshare of cleanup costs at a site where it has liability if payments cannot be obtained from other responsible parties. Liability under these laws involves inherentuncertainties.In the past, governmental agencies have required us to undertake remedial activities to address identified site conditions. For example, we haveworked with Utah officials to address asbestos-related issues at our Moab mine. Many of our facilities also contain permitted asbestos landfills, some ofwhich have been closed. Additionally, we are currently working with federal officials to resolve issues concerning the historic disposal of asbestos-containingmaterial at an unpermitted location at our West mine, which may require additional removal of asbestos-containing material, a land swap, and/or anotherremedy.We are also subject to federal and state environmental laws that regulate discharges of pollutants and contaminants into the environment, such as theU.S. Clean Water Act and the U.S. Clean Air Act. For example, our water disposal processes rely on dikes and reclamation ponds that could breach or leak,resulting in a possible prohibited release into the environment. Moreover, although the North and East mines in New Mexico and the Moab mine in Utah aredesignated as zero discharge facilities under the applicable water quality laws and regulations, these mines could experience some water discharges duringsignificant rainfall events.We expect that we will be required to continue to invest in environmental controls at our facilities and that these expenses could be significant. Inaddition, violations environmental, health, and safety laws could subject us to civil, and in some cases, criminal sanctions. We could also be required toinvest in additional equipment, facilities, or employees, or could incur significant liabilities, due to any of the following:•changes in the interpretation of environmental laws•modifications to current environmental laws•the issuance of more stringent environmental laws•malfunctioning process or pollution control equipmentMining and processing of potash also generates residual materials that must be managed both during the operation of the facility and upon facilityclosure. For example, potash tailings, consisting primarily of salt, iron, and clay, are stored in21Table of Contentssurface disposal sites and require management. At least one of our New Mexico facilities, the HB Solar Solution mine, may have issues regarding lead in thetailings pile as a result of operations conducted by previous owners. During the life of the tailings management areas, we have incurred and will continue toincur significant costs to manage potash residual materials in accordance with environmental laws and regulations and permit requirements.As a potash producer, we currently are exempt from certain State of New Mexico mining laws related to reclamation obligations. If this exemptionwere to be eliminated or restricted, we could be required to incur significant expenses related to reclamation at our New Mexico facilities.For more information about environmental, health, and safety matters affecting our business, see “Business-Environmental, Health and SafetyMatters.”Current and future indebtedness could adversely affect our financial condition and impair our ability to operate our business.In April 2013, we issued $150 million aggregate principal amount of unsecured senior notes (“the Notes”). We also have an unsecured credit facilitythat allows us to borrow up to an additional $250 million. As of January 31, 2013, we had advances outstanding under the facility of $10 million and weexpect to have advances outstanding under the facility periodically during 2014. The total amount available to us under the facility as of December 31, 2013,was limited to $222 million. Based on current market conditions and expectations of lower levels of adjusted EBITDA (earnings before interest, income taxes,depreciation, amortization, and certain other expenses, as defined in the credit facility), we expect that the total amount available to us under the facility will besubstantially reduced during 2014. We believe the amounts available to us will be adequate to fund our operations and our capital investment projects.Current and future indebtedness could have important consequences, including the following:•it could limit our ability to borrow additional money or sell additional shares of common stock to fund our working capital, capitalexpenditures, and debt service requirements•it could limit our flexibility in planning for, or reacting to, changes in our business•we could become more highly leveraged than some of our competitors, which could place us at a competitive disadvantage•it could make us more vulnerable to a downturn in our business or the economy•it could require us to dedicate a substantial portion of our cash flow from operations to the repayment of our indebtedness, thereby reducingthe availability of our cash flow for other purposes•it could adversely affect our business and financial condition if we are unable to service our indebtedness or obtain additional financing, asneededOur debt agreements contain financial and other restrictive covenants. These covenants could limit our ability to engage in activities that are in ourlong-term best interests or limit our ability to access the full amount of the credit facility. In addition, our failure to comply with these covenants could result inan event of default that, if not cured or waived, could result in the acceleration of all outstanding indebtedness. The credit facility contains two financialcovenants. First, our leverage ratio, or the ratio of our total funded indebtedness to our adjusted EBITDA, for the prior four fiscal quarters may not exceed 3.5to 1. Second, our fixed charge coverage ratio, or the ratio of our adjusted EBITDA to fixed charges for the prior four fiscal quarters may not fall below 1.3 to 1.We are currently in compliance with each of these financial covenants. If our adjusted EBITDA decreased significantly over several quarters with no change toindebtedness or our fixed charges, our leverage ratio could rise or our fixed charge coverage ratio could fall to levels where some or all of the $250 million underthe credit facility would not be available to us or where any amounts outstanding would become immediately due and payable.The credit facility is scheduled to expire in 2018 and the Notes are due in 2020, 2023, and 2025. In the future, we may be unable to obtain newfinancing or financing on acceptable terms.The mining business is capital intensive, and our inability to fund necessary or desirable capital expenditures could have an adverse effect on ourgrowth and profitability.The mining business is capital intensive. We may find it necessary or desirable to make significant capital expenditures in the future to sustain orexpand our existing operations. Materials and construction costs associated with capital expenditures have escalated on an industry-wide basis over the lastseveral years, largely as a result of major factors beyond our control such as increases in the price of steel and other commodities. As costs associated withcapital expenditures continue to increase, we could have difficulty funding any necessary or desirable capital expenditures at an acceptable rate or at all. Thiscould limit the expansion of our production or make it difficult for us to sustain our existing operations at optimal levels. Increased costs for capitalexpenditures could also have an adverse effect on the profitability of our existing operations and returns from our most recent strategic projects.22Table of ContentsMarket upheavals due to global pandemics, military actions, terrorist attacks, or economic repercussions from those events could reduce our salesor increase our costs.Global pandemics, actual or threatened armed conflicts, terrorist attacks, or military or trade disruptions affecting the areas where we or ourcompetitors do business could disrupt the global market for potash. As a result, our competitors may increase their sales efforts in our geographic marketsand pricing of potash could suffer. If this occurs, we could lose sales to our competitors or be forced to lower our prices. In addition, due to concerns related toterrorism or the potential use of certain fertilizers as explosives, local, state, and federal governments could implement new regulations impacting theproduction, transportation, sale, or use of potash. These new regulations could result in lower sales or higher costs.A significant disruption to our information technology systems could adversely affect our business and operating results.We rely on a variety of information technology and automated operating systems to manage or support our operations. The proper functioning ofthese systems is critical to the efficient operation and management of our business. In addition, these systems could require modifications or upgrades as of aresult of technological changes or growth in our business. These changes could be costly and disruptive to our operations, and could impose substantialdemands on management time. Our systems, and those of third party providers, also could be vulnerable to damage or disruption caused by circumstancesbeyond our control such as catastrophic events, power outages, natural disasters, computer system or network failures, viruses or malware, physical orelectronic break-ins, unauthorized access, and cyber-attacks. Although we take steps to secure our systems and electronic information, these securitymeasures may not be adequate. Any significant disruption to our systems could adversely affect our business and operating results.Our business may be adversely affected by union activities.Hourly employees at our Wendover facility are represented by a labor union. These employees represent approximately 4% of our workforce. Ourcurrent collective bargaining agreement with the union expires on May 31, 2014. Although we believe that our relations with our unionized employees are good,we may not be successful in negotiating a new collective bargaining agreement as a result of general economic, financial, competitive, legislative, political, andother factors beyond our control. Any new agreement could result in a significant increase in our labor costs. In addition, a breakdown in negotiations coulddisrupt our Wendover operations.From time to time, efforts have been made to unionize employees at our other facilities. Additional unionization efforts could disrupt our business,consume management attention, or increase our operating costs. In addition, if these efforts were successful, we could experience increased labor costs, anincreased risk of work stoppages, and limits on our flexibility to run our business in the most efficient manner to remain competitive.Risks Related to our Common StockThe price of our common stock may be volatile and you could lose all or part of your investment.Securities markets experience significant price and volume fluctuations due to general economic and market conditions and other factors outside ourcontrol. This market volatility could cause the price of our common stock to decline significantly and without regard to our operating performance. Otherfactors that could affect the price of our common stock include the following:•our operating performance and the performance of our competitors•the public’s reaction to our press releases, our other public announcements and our filings with the SEC•changes in earnings estimates or recommendations by research analysts who follow Intrepid or other companies in our industry•variations in general economic, market, and political conditions•actions of our current stockholders, including sales of common stock by our directors and executive officers•the arrival or departure of key personnel•other developments affecting us, our industry, or our competitors•the other risks described in this reportIf our stock price declines due to one or more of these factors, you may not be able to sell your shares at or above the price you paid for them.We may issue additional securities, including securities that are senior in right of dividends, liquidation, and voting to our common stock, withoutyour approval, which would dilute your existing ownership interests.Our board of directors may issue shares of preferred stock or additional shares of common stock without the approval of our stockholders, except asmay be required by applicable New York Stock Exchange (“NYSE”) rules. Our board of23Table of Contentsdirectors may approve the issuance of preferred stock with terms that are senior to our common stock in right of dividends, liquidation or voting. Ourissuance of additional common shares or other equity securities of equal or senior rank will have the following effects:•our pre-existing stockholders’ proportionate ownership interest in us will decrease•the relative voting strength of each previously outstanding common share may be diminished•the market price of the common stock may declineFuture sales of our common stock, or the perception that future sales may occur, could depress our common stock price.Sales of a substantial number of shares of our common stock, including sales by our directors or executive officers, or the perception that these salesmay occur, could depress the market price of our common stock. We cannot predict the effect, if any, that future sales of shares of our common stock wouldhave on the market price of our common stock.We do not intend to pay regular dividends for the foreseeable future.We paid a one-time, special cash dividend of $0.75 per share to our common stockholders in December 2012. For the foreseeable future, we intend toretain future earnings to finance the development and expansion of our business, and we do not anticipate paying regular cash dividends on our commonstock.Provisions in our charter documents and Delaware law may delay or prevent a third party from acquiring us.We are a Delaware corporation and the anti-takeover provisions of Delaware law impose various barriers to the ability of a third party to acquirecontrol of us, even if a change of control would be beneficial to our existing stockholders. In addition, our current certificate of incorporation and bylawscontain several provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors. Theseprovisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding common stock. Among other things, theseprovisions provide for the following:•allow our board of directors to create and issue preferred stock with rights senior to those of our common stock without prior stockholderapproval, except as may be required by applicable NYSE rules•do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to electdirector candidates•prohibit stockholders from calling special meetings of stockholders•prohibit stockholders from acting by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders•require vacancies and newly created directorships on the board of directors to be filled only by affirmative vote of a majority of the directorsthen serving on the board•establish advance notice requirements for submitting nominations for election to the board of directors and for proposing matters that can beacted upon by stockholders at a meeting•classify our board of directors so that only some of our directors are elected each yearThese provisions also may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in ourstockholders receiving a premium over the market price of the common stock they own.ITEM 1B.UNRESOLVED STAFF COMMENTSNone.ITEM 2.PROPERTIESPropertiesOur potash production currently comes from six facilities—four near Carlsbad, New Mexico and two in Utah, all of which we own and operate. Ouractive producing facilities near Carlsbad include the West mine and East mine, both of which are conventional underground mines, and the North compactionplant which processes potash from the West mine.24Table of ContentsThe HB Solar Solution mine recently began producing potash from the initial harvest. Our facilities in Utah are the Moab mine, consisting of a solution mine,solar evaporation ponds and a process plant located near Moab, and the Wendover facility, consisting of a brine collection system, solar evaporation ponds,and process plant located near Wendover.We control the rights to mine approximately 130,000 acres of land northeast of Carlsbad, New Mexico. We lease approximately 32,000 acres from thestate of New Mexico, approximately 98,000 acres from the federal government through the BLM, and approximately 240 acres from private leaseholders.25Table of ContentsWe control the rights to mine approximately 10,300 acres of land west of Moab, Utah. We lease approximately 10,100 acres from the state of Utahand approximately 200 acres from the BLM. We own approximately 3,700 surface acres overlying and adjacent to portions of our mining leases with the stateof Utah.26Table of Contents27Table of ContentsWe control the rights to mine approximately 88,000 acres of land near Wendover, Utah. We own approximately 57,000 acres, and we leaseapproximately 6,000 acres from the state of Utah and approximately 25,000 acres from the federal government through the BLM.28Table of Contents29Table of ContentsWe conduct most of our mining operations on properties that we lease from the state or federal government. These leases generally contain stipulationsthat require us to commence mining operations within a specified term and continue mining to retain the lease.The stipulations on our leases are subject to periodic readjustment by the state and federal government. The lease stipulations could change in thefuture, which could impact the economics of our operations. Our federal leases are subject to readjustment of the lease stipulations, including the royaltypayable to the federal government, every 20 years. Our leases with the state of New Mexico are issued for terms of ten years and for as long thereafter as potashis produced in commercial quantities and are subject to readjustment of the lease stipulations, including the royalty payable to the state. Our leases with thestate of Utah are for terms of ten years subject to extension and possible readjustment of the lease by the state of Utah. Our leases for our Moab mine areoperated as a unit under a unit agreement with the state of Utah, which extends the terms of all of the leases as long as operations are conducted on any portionof the leases. The term of the state leases for our Moab mine is currently extended until 2014 or so long as potash is being produced. Our federal leases are forindefinite terms subject to readjustment every 20 years. As of December 31, 2013, approximately 11% of our state, federal, and private lease acres at our NewMexico facilities (including leases at the HB Solar Solution and North mines) will be up for renewal within the next five years. None of our state and federallease acres at our Utah operations will be up for renewal within the next five years.We pay royalties to the state and federal governments and private leaseholds for potash, langbeinite, and by-products produced from our leases. Theroyalty rates on our state and federal leases in New Mexico are currently set at various rates from 2.0% to 5.0%. The royalty rates for the private leaseholds arebetween 5.0% and 8.0%. The royalty rates on our state and federal leases in Utah are currently set at rates from 2.0% to 5.0%.We have water rights at each of our mine properties that we believe are adequate for our needs. All of our mining operations are accessible by pavedstate or county highways and are accessible by rail. All of our operations obtain electric power from local utilities.Our mines, plants, and equipment have been in substantially continuous operation since the dates indicated in the chart entitled Proven and ProbableReserves on the following pages; and our mineral development assets, mills, and equipment have been acquired over the interval since these dates.The HB Solar Solution mine, while previously operated as a conventional underground mine, began operating as a solar solution mine in 2013 withcommercial quantities of production beginning in early 2014.As noted, we have relatively long-lived proven and probable reserves and consequently expect to conduct limited and focused additional explorationin the coming five years. We plan to drill core holes on occasion in areas near our Carlsbad, New Mexico, operations that are located in the Designated PotashArea, in order to further define the ore body. Development of the underground mines is expected to be coincident with the continued advancement of ore zones.Development of the solution mine and brine evaporation operations is expected to be enhanced by the drilling of additional wells. We are consideringrehabilitation of the shafts at the currently idled North mine and additional surface infrastructure to accelerate mining of reserves.We have made significant investments to modernize and improve the condition of our plants and equipment. We invested approximately $256.2million in our facilities in 2013, including the HB Solar Solution mine, the North compaction project, Moab cavern system and various throughput andrecovery enhancement projects. We believe that our plants and equipment are adequate for executing our operating plans.Including the initial acquisition of our assets, the total historical cost of mineral development assets, property, plant, and equipment as ofDecember 31, 2013, is approximately $1.0 billion. By location, the historical costs of mineral development assets, property, plant and equipment as ofDecember 31, 2013, are $873.7 million for Carlsbad (including the HB Solar Solution mine), $94.9 million for Moab, $55.6 million for Wendover, and$12.6 million for other supporting sites. These amounts include land, construction in progress, building, plant, equipment, and mineral development inprogress. We believe we acquired facilities at bargain prices and hence these costs are not representative of replacement costs.Our leased office space in Denver, Colorado, is approximately 39,726 square feet and has a term extending through April 30, 2019. We leaseapproximately 8,327 square feet of office space in Carlsbad, New Mexico, for a term extending through November 30, 2017.We believe that all of our present facilities are adequate for our current needs and that additional space is available for future expansion on acceptableterms.30Table of ContentsProven and Probable ReservesOur potash (muriate of potash) and langbeinite (sulfate of potash magnesia) reserves each have substantial life, with remaining reserve life rangingfrom 28 to 170 years, based on proven and probable reserves estimated in accordance with SEC requirements. This lasting reserve base is the result of ourpast acquisition and development strategy. The estimates of our proven and probable reserves as of December 31, 2013, were prepared by us and werereviewed and independently determined by Agapito Associates, Inc. (“Agapito”) based on mine plans and other data furnished by us as described in footnoteone below. The following table summarizes our proven and probable reserves, stated as product tons and associated percent ore grade, as of December 31,2013.Our Proven and Probable Reserves (thousands of tons)(1) Proven (4) Probable (7)Product/Operations Date MineOpened (2) Current ExtractionMethod MinimumRemaining Life(years) (3) Recoverable OreTons (5) Ore Grade (6)(% KCl) Product Tons asKCl Recoverable OreTons (5) Ore Grade (6)(% KCl) Product Tons asKClMuriate of Potash Carlsbad West 1931 Underground 170 231,000 21.9% 42,840 156,630 20.9% 28,460Carlsbad East (including EastMixed (8)) 1965 Underground 61 68,070 18.7% 10,400 72,680 18.6% 11,300Carlsbad HB Solar Solution Mine(2,9) 2012 Solution 28 15,400 34.7% 4,750 710 32.3% 210Moab 1965 Solution 133 20,568 40.8% 7,290 12,653 40.4% 4,530Wendover (10) 1932 Brine Evaporation 30 — — — 0.8% 3,530Total Muriate of Potash 24.4% 65,280 20.8% 48,030 Proven (4) Probable (7)Product/Operations Date MineOpened (2) Current ExtractionMethod MinimumRemaining Life(years) (3) Recoverable OreTons (5) Ore Grade (6)(% Lang) Product Tons asLangbeinite Recoverable OreTons (5) Ore Grade (6)(% Lang) Product Tons asLangbeiniteSulfate of Potash Magnesia Carlsbad East (11)(including East Mixed(8)) 1965 Underground 97 99,180 31.9% 29,820 109,030 33.1% 34,770(1)The determination of estimated reserves has been prepared by us and is based on an independent review and analysis of our mine plans and geologic, financialand other data by Agapito, which is familiar with our mines. The most recent review performed by Agapito for the New Mexico East and Westproperties was in 2013. Agapito's analysis for the West and East mines was based on detailed examination of our geologic data that was updatedwith information from 2013 and 2012. As a result of the Agapito 2013 review, the East mixed ore reserve life was reduced due to reclassifying aportion of those reserves as langbeinite only. Additionally, a portion of langbeinite ore in the West 4th ore zone was reclassified as sylvite ore,which increased the West muriate of potash reserve and reduced the West sulfate of potash reserve that is reported in East reserves as described innotes 8 and 11. The Moab property reserves are based on Agapito's 2012 mine reserve estimate report less 2013 depletion. The Wendoverproperty reserves are based on Agapito's 2012 mine reserve estimate report less 2013 depletion. However, depletion did not change the reserve lifeof 30 years as discussed in note 3 below. No changes to the HB Solar Solution mine reserve estimate were made to the 2008 Agapito review asthere have been no changes to the geologic database for that area since that time. Additionally, although we began injection and extraction activitiesin 2012, no production from the HB Solar Solution mine occurred in 2013. Because reserves are estimates, they cannot be audited for thepurpose of verifying exactness. Instead, reserve information was reviewed in sufficient detail to determine if, in the aggregate, the data providedby us is reasonable and sufficient to estimate reserves in conformity with practices and standards generally employed by and within the miningindustry and that are consistent with the requirements of U.S. securities laws.31Table of Contents(2)These mines, excluding the HB Solar Solution mine, have operated in a substantially continuous manner since the dates set forth in this table. The HBSolar Solution mine was originally opened in 1934 and operated continuously as an underground mine until 1996. We are currently operating theHB Solar Solution mine and achieved substantial completion of construction in the fourth quarter of 2013. Our first production began in early in2014, and is expected to ramp up to full production in late 2015, assuming the benefit of average annual evaporation cycles applied to fullevaporation ponds.(3)Minimum remaining lives at the West, East, HB Solar Solution mine, and Moab mines are based on reserves (product tons) divided by annual effectiveproductive capacity over the full expected life of the ore body, and corrections for purity: one ton of red muriate of potash equals 0.95 ton ofKCl; one ton of East white muriate of potash equals 0.98 ton of KCl; one ton of Moab white muriate of potash equals 0.97 ton of KCl; one tonof sulfate of potash magnesia equals 0.97 ton of langbeinite. East minimum remaining life was based on three phases, with various plant capacities:first, combined potash and langbeinite production; second, langbeinite only; and third, potash only. Annual effective productive capacitycontemplates the grade of the ore, and estimated recovery percentages estimated at the time of the single stream processing for the langbeiniteproduction and the potash production. The current effective productive capacity is different than annual effective productive capacity whichcontemplates future additional investment in the East facility. We currently do not report more than 30 years mining life for Wendover due to theuncertainties associated with natural brine‑containing aquifers.(4)Proven reserves mean tonnages computed from projection of data using the inverse distance squared method taking into account mining dilution, mineextraction efficiency, ore body impurities, metallurgical recovery factors, sales prices and operating costs from potash ore zone measurements asobserved and recorded either in drill holes using cores, or channel samples in mine workings. This classification has the highest degree of geologicassurance. The data points for measurement are adequately spaced and the geologic character so well defined that the thickness, areal extent, size,shape, and depth of the potash ore zone are well-established. The maximum acceptable distance for projection from ore zone data points varieswith the geologic nature of the ore zone being studied.(5)Recoverable ore tons is defined as the hoisted ore for the conventionally mined ore in our East and West Mines. This figure was derived from the in-place oreestimate that has been adjusted for factors such as geologic impurities and mine extraction ratios. For the HB Solar Solution mine and the Moabproperty, recoverable ore tons are defined as the potassium that can be extracted from the underground workings and pumped to the surface.This figure was derived from the in-place ore estimate that has been adjusted for factors such as geologic impurities, potash that dissolves butremains in the cavern (dissolution factor), and an extraction factor that accounts for potash that may not be recovered because solution may bechanneled away or stranded due to cavern geometry. We do not calculate recoverable ore tons for the Wendover property as it is a lake brineresource, not an in-place ore deposit.(6)Ore grade expressed as expected mill feed grade to account for minimum mining height for the East and West mines. Muriate of potash ore grade is reportedin % KCl and sulfate of potash magnesia ore grade is reported in % langbeinite. The ore grade for the Moab and HB Solar Solution mines is thein-place KCl grade.(7)Probable reserves means tonnages computed by projection of data using the inverse distance squared method taking into account mining dilution, mineextraction efficiency, ore body impurities, metallurgical recovery factors, sales prices and operating costs from available ore zone measurements asobserved either in drill holes using cores or in mine workings for a distance beyond potash classified as proven reserves. This classification has amoderate degree of geological assurance.(8)Our reserves in the 1st, 3rd, 4th, 7th, 8th and 10th ore zones contain either sylvite (KCl) or langbeinite (K2SO4(MgSO4)2) separately. Reservescurrently being mined at our East mine are from the 5th ore zone and contain both sylvite and langbeinite which we call mixed ore.East mine 5th ore zone also contains ore classified as langbeinite only. Additionally, the reserve amounts include West mine3rd and 4th ore zones which contain langbeinite that we anticipate will be processed at the East mine.(9)The HB Solar Solution mine reserves were based on solution mining of old workings and recovery of potash from the residual pillars. Reserves are basedon thicknesses, grades, and mine maps provided by us. Capital costs to establish economic viability for the HB Solar Solution mine reserves arebased on updated internal estimates derived from third party engineering estimates, vendor and contractor quotes, and in-32Table of Contentshouse estimates. Operating costs to establish economic viability were updated in 2013 based on designed operating parameters for reagentusage, power, materials and supplies, and anticipated staffing requirements for operations and environmental compliance.(10)The Wendover facility reserves are the combination of a shallow and a deep aquifer. There were no proven reserves reported for either aquifer because theshallow aquifer represents an unconventional resource and there is uncertainty of the hydrogeology of the deep aquifer. The estimating method forthe shallow aquifer was based on brine concentration, brine density, soil porosity within the aquifer, and aquifer thickness from historical reports.The brine concentrations and brine density were confirmed by us recently, but values for the aquifer thickness and the porosity were obtainedfrom literature published by other sources. Probable reserves for the shallow brine at the Wendover facility were calculated from KCl contained inthe shallow aquifer based on estimates of porosity and thickness over the reserve area. The distance for projection of probable reserves is a radiusof three‑quarters of a mile from points of measurement of brine concentration. Probable reserves for the deep-brine aquifer were estimated basedon historical draw-down and KCl brine concentrations. The ore grade (% KCl) for both the shallow and deep aquifer is the percentage by weightof KCl in the brine.(11)A portion of these reserves are within the West mine boundary. The classification of the reserve as being associated with the East mine is a result of wherethe ore is intended to be processed.ProductionOur facilities have a current estimated annual productive capacity of approximately 1.1 million tons of potash, including approximately 180,000 tonsof designed productive capacity for the recently completed HB Solar Solution mine, and approximately 200,000 tons of langbeinite, based on current design.We are not currently producing at annual rates equal to our estimated productive capacity. Actual production is affected by operating rates, the grade of oremined, recoveries, mining rates, evaporation rates, and the amount of development work that we perform. Therefore, as with other producers in our industry,our production results tend to be lower than reported productive capacity. After years of design and construction work, we recently completed construction ofthe HB Solar Solution mine near Carlsbad, New Mexico, and we are processing our first harvest of ore from the solar evaporation ponds. We have beguninitial commissioning of the processing plant, which we expect to continue through much of 2014. The HB Solar Solution mine applies solution mining andsolar evaporation techniques to produce potash from previously idled mine workings. We expect production from the HB Solar Solution mine to increase as weramp up production through 2016.Our production capabilities and capital improvements at our facilities are described in more detail below, along with our historical production of ourprimary products and by-products for the years ended December 31, 2013, 2012 and 2011.Carlsbad, New Mexico•Sylvite and langbeinite ore at our Carlsbad locations is mined from a stacked ore body containing at least 10 different mineralized zones, seven of whichcontain proven and probable reserves.•The West mine has a current estimated productive capacity of approximately 420,000 tons of red potash annually. Potash produced from our West mine isshipped to the North facility for compaction.•The North facility receives potash from the West mine via truck and converts the compactor feed to finished red granular-sized product and standard-sized product.•The East mine has a current estimated productive capacity of approximately 250,000 tons of white potash and, based on current design approximately200,000 tons of langbeinite annually. Our productive capacity is impacted by the East’s mine plan and the mix of sylvite and langbeiniteore in the ore body. Our choice of the ore we mine impacts productive capacity in that the relative mixture of ore grade of sylvite andlangbeinite drive the productive capacity of our facility.•The assets comprising the HB Solar Solution mine were previously operated as conventional underground operations until their closure in 1996 due to low potashprices and inefficient mineral processing at the facilities. We recently completed construction of the HB Solar Solution mine as a solution mine,and have begun commissioning and production activities. We believe the HB Solar Solution mine project has the potential, when fullyoperational, to ultimately increase production by an estimated 5 million tons of additional low-cost potash production. We expect productionrates to be between 150,000 to 200,000 tons annually for a period of approximately 28 years.Moab, Utah•Potash ore at Moab is mined from two stacked ore zones: the original mine workings in Potash 5 that were converted to a solution mine and the horizontal caverns inPotash 9.•The Moab mine has a current estimated productive capacity of approximately 110,000 tons of potash annually; evaporation rates have historically varied and,consequently, productive capacity may vary between approximately 75,000 and 120,000 tons of potash.Wendover, Utah•Potash at Wendover is produced primarily from brine containing salt, potash and magnesium chloride that is collected in ditches from the shallow aquifers ofthe Bonneville Salt Flats. These materials are also collected from a deeper aquifer by means of deep brine wells.•The Wendover facility has a current estimated productive capacity of approximately 100,000 tons of potash annually; evaporation rates have historicallyresulted in actual production between approximately 65,000 and 100,000 tons of potash.Our Development AssetsWe have significant additional development opportunities in our New Mexico facilities with the acceleration of production from our reserves andmineralized deposits of potash, and the potential construction of additional production facilities in the region. We also own the leases on two idled mines in ornear Carlsbad — the Amax/Horizon mine and the North mine.Amax/Horizon mine•We acquired the potash leases associated with the Amax/Horizon mine in October 2012. The Amax/Horizon mine was in continuous operation between 1952 and1993, averaging over 450,000 tons of potash production annually prior to being idled. This mine, similar to the HB Solar Solution mine, is aviable candidate for solution mining in a manner that is consistent with the HB Solar Solution mine. As these are relatively new leaseholdings, we have not yet determined the feasibility associated with this potential development project, however, work is being performed todetermine the ability to convert this area to a solution mining opportunity.•The newly constructed plant for the HB Solar Solution mine has additional capacity to process potash. The development of theAmax/Horizon mine is expected to utilize much of the same pipeline system, evaporation ponds, and the processing mill as the HB SolarSolution mine.North mine•The North mine operated from 1957 to 1982 when it was idled mainly due to low potash prices and mineralogy changes which negatively impacted mineral processingat the facilities. The production rate from this mine was approximately 330,000 tons annually prior to being idled. Although the mining andprocessing equipment has been removed, the mine shafts remain open. The compaction facility at the North mine is where we granulate, store,and ship potash produced at the West mine and the HB Solar Solution mine. Two operable mine shafts and much of the transportation andutility infrastructure required to operate the mine, rail access, storage facilities, water rights, utilities and leases covering potash deposits, arealready in place. As part of our overall mine planning efforts, we continue to evaluate our strategic development options with respect to theshafts at the North mine and their access to mineralized deposits of potash. These development options contemplate a refurbishment of theshafts, underground development, a mill, and operating infrastructure that would produce at rates in excess of historical production levels,thereby leveraging the operating size and gaining benefits of scale towards per ton operating costs.Production of Our Primary Products (thousands of product tons)One product ton of potash contains approximately 0.60 tons of K2O when produced at our West, Moab, and Wendover facilities and approximately0.62 tons of K2O when produced at our East facility. The following table summarizes33Table of Contentsproduction of our primary products at each of our facilities for each of the years ended December 31, 2013, 2012, and 2011. Year Ended December 31, 2013 2012 2011 OreProduction Mill FeedGrade (1) FinishedProduct OreProduction Mill FeedGrade (1) FinishedProduct OreProduction Mill FeedGrade (1) FinishedProductMuriate of Potash Carlsbad West 3,044 11.6% 379 3,101 11.8% 413 2,896 11.5% 411Carlsbad East 2,608 7.7% 196 2,522 8.8% 199 2,309 8.9% 202Carlsbad HB — 13.8% — — — — — — —Moab 596 13.5% 112 521 14.1% 97 573 15.4% 116Wendover 447 17.5% 93 389 18.4% 87 405 17.8% 84 6,695 780 6,533 796 6,183 813Langbeinite CarlsbadEast(2) 2,608 4.6% 177 2,522 4.7% 131 2,309 5.7% 141Total Primary Products 957 927 954(1)Mill feed grade is shown as percent K2O.(2)Muriate of potash and langbeinite at our East mine are processed from the same ore.(3)Our HB Solar Solution mine began processing a small amount of ore in late 2013; however, no ore production or finished product is shown due to rounding.Our By-Product ProductionDuring the extraction of potash, we also recover marketable salt and magnesium chloride. At our Wendover facility, we also produce metal recoverysalt, which is potash mixed with salt, in ratios requested by our customers. We account for the revenue generated from sales of these minerals as a reduction inthe cost of goods sold of our primary potash product.ITEM 3.LEGAL PROCEEDINGSWe are subject to claims and legal actions in the ordinary course of business. While there are uncertainties in predicting the outcome of any claim orlegal action, we believe that the ultimate resolution of these claims or actions is not reasonably likely to have a material adverse effect on our consolidatedfinancial position or the results of operations. We maintain liability insurance that will apply to some claims and actions and believe that our coverage isreasonable in view of the insurable legal risks to which our business ordinarily is subject.ITEM 4.MINE SAFETY DISCLOSURESWe are committed to providing a safe and healthy work environment. The objectives of our safety programs are to eliminate workplace accidents andincidents, preserve employee health, and comply with all safety- and health-based regulations. We seek to achieve these objectives by training employees insafe work practices; establishing, following, and improving safety standards; involving employees in safety processes; openly communicating withemployees about safety matters; and recording, reporting, and investigating accidents, incidents, and losses to avoid recurrence. As part of our ongoing safetyprograms, we collaborate with 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 (the“Mine Act”) and the New Mexico Bureau of Mine Safety. MSHA inspects these facilities on a regular basis and issues various citations and orders when itbelieves a violation has occurred under the Mine Act. Exhibit 95.1 to this Annual Report on Form 10-K provides the information concerning mine safetyviolations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 ofRegulation S-K. Our Utah facilities and our HB Solar Solution mine are subject to regulation by OSHA and, therefore, are not required to be included in theinformation provided in Exhibit 95.1.34Table of ContentsPART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OFEQUITY SECURITIESMarket InformationOur common stock is traded on the NYSE under the symbol IPI.The following table sets forth the range of high and low sales prices of our common stock for the periods indicated, as reported by the NYSE. High Low2013 Quarter ended December 31, 2013$17.53 $13.51Quarter ended September 30, 2013$19.51 $10.60Quarter ended June 30, 2013$19.31 $16.88Quarter ended March 31, 2013$24.05 $18.562012 Quarter ended December 31, 2012$22.72 $19.82Quarter ended September 30, 2012$24.39 $21.18Quarter ended June 30, 2012$25.13 $18.95Quarter ended March 31, 2012$26.11 $22.79Performance Graph—Comparison of Cumulative ReturnThe graph below compares the cumulative total stockholder return on our common stock with the cumulative total stockholder return on theS&P 500 Index, the Dow Jones US Basic Materials Index, and Intrepid’s peer group (Potash Corporation of Saskatchewan Inc., The Mosaic Company, andAgrium Inc.) for the period beginning on December 31, 2008, through December 31, 2013, assuming an initial investment of $100 and the reinvestment ofdividends.35Table of Contents Dow Jones U.S. IPI Peer Group S&P 500 Basic MaterialsDecember 31, 2008$100.00 $100.00 $100.00 $100.00December 31, 2009$140.44 $162.79 $126.46 $165.51December 31, 2010$179.54 $225.01 $145.51 $218.02December 31, 2011$108.96 $166.81 $148.59 $185.93December 31, 2012$103.27 $186.99 $172.37 $205.43December 31, 2013$76.83 $157.64 $228.19 $247.29The preceding information included under the caption “Performance Graph” is not “soliciting material,” is not deemed filed with the SEC, and is notto be incorporated by reference in any of our filings under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespectiveof any general incorporation language in any such filing.HoldersAs of January 31, 2014, the estimated number of record holders of our common stock was approximately 90 based upon information provided byour transfer agent.DividendsUp until 2012, the only dividend that we paid was a special dividend paid in connection with our formation in 2008 at the time of our IPO. InDecember 2012, we declared and paid a special cash dividend of $0.75 per share. This 2012 special dividend does not represent a move towards payingregular or special dividends in the future. For the foreseeable36Table of Contentsfuture, we intend to retain earnings to reinvest for future operations and growth of our business and do not anticipate paying any cash dividends on ourcommon stock. However, our board of directors, in its discretion, may decide to declare a dividend at an appropriate time in the future. A decision to pay adividend would depend, among other factors, upon our results of operations, financial condition and cash requirements and the terms of our unsecured creditfacility and other financing agreements at the time such a payment is considered.Unregistered Sales of Equity Securities and Use of ProceedsNone.Issuer Purchases of Equity SecuritiesPeriod (a)Total Number ofShares Purchased(1) (b)Average Price PaidPer Share (c)Total Number of SharesPurchased as Part ofPublicly Announced Plansor Programs (d)Maximum Number (orApproximate Dollar Value) ofShares that May Yet BePurchased Under the Plan orProgramsOctober 1, 2013, through October 31, 2013 – — – N/ANovember 1, 2013, through November 30, 2013 – — – N/ADecember 1, 2013, through December 31, 2013 4,814 $15.67 – N/A(1)Represents shares of common stock delivered to us as payment of withholding taxes due upon the vesting of restricted stock held by our employees.37Table of ContentsITEM 6.SELECTED FINANCIAL DATAThe following table sets forth our historical selected financial and operating data for the periods indicated (in thousands, except per share data). Theselected financial and operating data should be read together with the other information contained in this document, including “Item 1. Business,” wherein thepresentation below is described more fully, and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” theaudited historical financial statements and the notes thereto included elsewhere in this document, and the unaudited historical consolidated financial statementswhich have not been included in this document. Year Ended December 31, 2013 2012 2011 2010 2009Sales $336,312 $451,316 $442,954 $359,304 $301,803Net Income $22,275 $87,443 $109,411 $45,285 $55,342Earnings Per Share: Basic $0.30 $1.16 $1.46 $0.60 $0.74Diluted $0.30 $1.16 $1.45 $0.60 $0.74Cash dividends declared and paid per common share $— $0.75 $— $— $— December 31, 2013 2012 2011 2010 2009Total assets $1,175,273 $994,623 $932,870 $828,884 $768,990Total debt $150,000 $— $— $— $—Supplemental Selected Financial Data: December 31, 2013 2012 2011 2010 2009Cash, cash equivalents and investments $25,113 $57,747 $176,794 $142,988 $107,136Stockholders’ equity $933,971 $905,736 $871,133 $757,841 $709,22238Table of ContentsITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of our financial condition and results of operations should be read in conjunction with ourconsolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. The following discussion and analysiscontains forward‑looking statements that involve risks, uncertainties, and assumptions as described under the heading “Cautionary Note RegardingForward‑Looking Statements,” in Part I of this Annual Report on Form 10-K. Our actual results could differ materially from those anticipated bythese forward‑looking statements as a result of many factors, including those discussed under “Item 1A. Risk Factors” and elsewhere in this AnnualReport on Form 10-K.Our CompanyWe are the largest producer of muriate of potash (“potassium chloride” or “potash”) in the United States and are one of two producers of langbeinite(“sulfate of potash magnesia”). Langbeinite is a low-chloride potassium fertilizer with the additional benefits of sulfate and magnesium. We generally describethis multi-nutrient specialty product as langbeinite when we refer to production and as Trio® when we refer to sales and marketing. Our revenues are generatedexclusively from the sale of potash and Trio®. Potassium is one of the three primary macronutrients essential to plant formation and growth. Since 2005, wehave supplied, on average, approximately 1.5% of annual world potassium consumption and 9.1% of annual U.S. potassium consumption. We also producesalt and magnesium chloride from our potash mining processes, the sales of which are accounted for as by-product credits to our cost of sales. These by-product credits represented approximately 3% to 4% of total cost of goods sold in each of the last three years.Our potash is marketed for sale into three primary markets. These markets are the agricultural market as a fertilizer input, the industrial market as acomponent in drilling and fracturing fluids for oil and gas wells and the feedstock for industrial processes, and the animal feed market as a supplementalnutrient. The agricultural market is predominately a user of granular-sized potash and Trio®, while the industrial and animal feed markets largely consumestandard and fine standard-sized product. Each of our operating facilities supplies these markets. Additionally, we have the capability to supply customersfrom our different locations due to the relatively homogeneous nature of our products. The flexibility to compact all of our production in granular form allowsus to meet demand and maximize our average net realized sales price. Our investments in granulation capacity have allowed us to expand our geographicalreach for granular product sales that would otherwise be unavailable. This flexibility also allows us to adjust our production to more closely align with thespecific markets, thereby decreasing our dependence on sales of any one particular size of potash.Our sales of potash tend to focus on agricultural areas, feed manufacturers in the central and western United States, and oil and gas drilling areas inthe Rocky Mountains and the greater Permian Basin area. We also have domestic sales, primarily of Trio®, in the southeastern and eastern United States, witha focus on areas with specific agricultural nutrition requirements of crops in those regions. We manage our sales and marketing operations centrally, includingour freight and logistics planning. This allows us to evaluate the product needs of our customers and then determine which of our production facilities can beused to fill customer orders, all with the goal of realizing the highest average net realized sales price for our potash.We own six active potash production facilities—four in New Mexico and two in Utah —and we have a current estimated annual productive capacityof approximately 1.1 million tons of potash, including approximately 180,000 tons of designed productive capacity for the recently completed HB SolarSolution mine, and approximately 200,000 tons of langbeinite, based on current design. We are not currently producing at annual rates equal to our estimatedproductive capacity. Actual production is affected by operating rates, recoveries, mining rates, evaporation rates, and the amount of development work that weperform. Therefore, as with other producers in our industry, our production results tend to be lower than reported productive capacity. After years of designand construction work, we recently completed construction of the HB Solar Solution mine near Carlsbad, New Mexico, and we are processing our firstharvest of ore from the solar evaporation ponds. We have begun initial commissioning of the processing plant, which we expect to continue through much of2014. The HB Solar Solution mine applies solution mining and solar evaporation techniques to produce potash from previously idled mine workings. Weexpect production from the HB Solar Solution mine to increase as we ramp up production through 2016. We have additional opportunities to developmineralized deposits of potash in New Mexico as well as improve recoveries in our processing plants. These opportunities potentially include additionalsolution mining activities and additional recoveries of our langbeinite. Longer-term opportunities include the potential reopening of the North mine, which wasoperated as a traditional underground mine until the early 1980s, or the acceleration of production from our reserves.39Table of ContentsSignificant Business Trends and ActivitiesOur financial results have been impacted by several significant trends, which are described below. We expect that these trends will continue to drive our resultsof operations, cash flows, and financial position.• Potash demand. We sold 692,000 tons of potash during 2013, a decline of 147,000 tons compared with 2012. Our 2013 sales volumes were impactedby unseasonable spring weather patterns and significant cautiousness in the global potash market caused by pricing uncertainty, particularly in the lastsix months of the year. During the spring of 2013, persistent wet weather across much of the Midwestern growing area of the United States compressed thespring planting season, limiting the amount of potash that was applied in this area during the first half of the year. During the latter half of the year, salesvolumes were impacted by the lack of confidence in price stability and cautiousness from dealers resulting from a lack of immediate demand by retailersand farmers. As North American brownfields have come into production, North American potash supply has exceeded demand, causing an increase inNorth American potash inventory levels. Potash pricing has been declining for two and a half years. Uralkali announced in July 2013 that it wouldwithdraw from its BPC marketing arrangement and subsequently announced its intention to pursue a volume-over-price strategy. These announcementsaccelerated price erosion globally, including in North America. These statements subsequently led to a deferral of potash purchasing in the fall of 2013.The specific timing of when farmers apply potash remains highly weather dependent and varies across the numerous growing regions within theUnited States. In addition, potash demand is significantly influenced by dealer storage volumes and the marketing programs of potash producers andretailers. The combination of these items results in variability in potash sales and shipments, thereby increasing volatility of sales volumes from quarterto quarter and season to season.• Potash prices. Potash prices are a significant driver of profitability for our business. Our average net realized sales price decreased to $382 per ton in2013 from $454 per ton in 2012. This was the third straight year of decreased potash prices and our net realized sales price. The decrease in 2013 waslargely due to continued downward pressure on potash prices driven by the uncertainty in the global potash market caused by the Uralkaliannouncements discussed previously, and a general view in the market that there is adequate global potash supply. Uncertainty around global potashdemand levels, especially into large international markets such as China and India, has also put pressure on domestic potash prices. While new contractsfor a portion of China's expected demand for the first half of 2014 were recently announced, uncertainty continues to exist around China's expected fullyear demand, as well as the impact of those contracts on future pricing and volumes into India. Suppliers to these markets have accumulated inventoryand have to manage production volumes. The larger Canadian producers have announced production curtailments in the fall and winter of 2013. Thesepressures and the ongoing uncertainty in global potash demand continue to cloud the long-term global potash market. Further, North American potashinventory levels remain above the five-year average, which also pressures pricing. Throughout the latter half of 2013, sales levels and pricing have beensoft as dealers have been postponing fertilizer purchases in response to the market uncertainty caused by these global concerns about the balance betweensupply and demand.Due to the significant decline in potash pricing, we incurred a net loss for the three months ended December 31, 2013. As a result, we initiated cost savinginitiatives as discussed below. If potash prices remain soft, we expect to incur additional net losses in 2014 until meaningful production from the HBSolar Solution mine come into production, which is expected to lower our per-ton operating costs.• Trio® prices and demand. The average net realized sales price of Trio® increased to $352 per ton in 2013 from $329 per ton in 2012. Trio® domesticpricing has historically tended to move in a relatively close correlation to potash pricing. Over the last year, dealers' and farmers' recognition of the addedvalue of magnesium and sulfate and the low-chloride benefits from this specialty product has translated into higher prices despite sequentially lowerpotash prices. Demand for granular-sized Trio® continues to exceed production, which has also been supportive of Trio® pricing. Demand for standard-sized Trio®, however, has been less predictable, particularly in the export market. We expect that the general softness in the potash market, combinedwith a decrease in the market price for sulfur, could negatively impact pricing for our standard-sized Trio®.• Major capital projects. During 2013, we substantially completed the majority of the construction activities associated with the initial design for the HBSolar Solution mine, the North compaction project and the Moab cavern system.40Table of ContentsIn late 2013, we began initial commissioning of the HB Solar Solution processing plant and expect this work to continue through much of 2014.The total expected investment for the project is between $235 million and $245 million, of which $234.0 million had been invested as of December 31,2013.The North compaction project is approaching completion. The first two compaction lines are in service and the third compaction line is expectedto be completed in the first half of 2014. The new facility uses state-of-the-art equipment to enable us to produce high quality granular product andexpands our granulation capacity to accommodate the increased tonnage expected from the HB Solar Solution mine and ongoing upgrades at our Westfacility. Total capital expenditures for this project totaled $97.0 million in 2013. The total capital investment for this project is anticipated to be less than$100 million.We continued to develop additional solution mining opportunities at our Moab facility by expanding our producing cavern systems. During2013, we completed drilling activities into our third multi-lateral cavern system. This was the largest cavern system we have drilled, nearly three times thesize of our other caverns. We expect this cavern system will provide higher grade extraction brines that will offset the typical decreasing production profileas other cavern systems are depleted and will allow for incremental production opportunities in future years. The total capital investment for this projectwas $19.5 million in 2013.We have several ongoing recovery enhancement projects at the West facility with total expected investment of approximately $25 million to $35million, with $21.2 million invested through December 31, 2013. The projects underway at the West facility, some of which began in 2012, are intendedto sustain and increase production by improving recoveries at the West facility that have decreased in recent quarters as we transition into different orezones that are more difficult to process. The majority of these projects are expected to be completed in the first half of 2014. The capabilities of the newNorth compaction facility now allow us the flexibility to make design changes at the West facility to increase recovery. There is a level of coordinationamong the projects at the West facility and North compaction facility that will cause some variation in production at the West facility as the projects areplaced in service and resulting design changes are realized.We expect the level of capital project investment to decrease significantly in 2014, as we have substantially completed these major capital projectsin the last two years. During 2014, we intend to focus on optimizing and gaining the efficiencies from these projects, which are intended to increaseproduction, decrease our per ton operating costs and increase our overall marketing flexibility.• East facility production. We have dedicated significant resources to the long-term improvement plan that we began in early 2012 to address productionchallenges at the East facility. At our East facility, our recovery and production of both potash and langbeinite are directionally impacted by the ore gradeand the development work we do in the mine's complex mixed ore zones. During the second half of 2013, our production of both potash and langbeinitedeclined from the second quarter of 2013 as we encountered lower grades within the mixed ore zones in which we were mining. As a result, we incurredhigher production costs, which were allocated over fewer production tons, thereby resulting in higher per-ton cost of goods sold and a lower of cost ormarket inventory charge. In the fourth quarter of 2013, we made operational changes that have resulted in slightly improved ore grades, albeit lower thanthe comparable ore grades mined in 2012. Production costs in the fourth quarter of 2013 were impacted by the planned annual maintenance activities atour East facility that occurred in October 2013. As a consequence of the production results in 2013, combined with decreased potash prices, we recordedlower of cost or market adjustments of approximately $3.7 million, of which a majority is associated with inventory we produced at our East facility. Ourproduction and recovery results historically have had a positive correlation to ore grade. Our ore grade is also influenced by the amount of developmentactivity we perform.• Other Expense (Income). In 2013, our application for certain New Mexico employment-related tax credits was denied. We believe the denial is improperand we intend to vigorously pursue recovery of these credits. Nonetheless, we recorded a reserve of approximately $2.8 million for tax credits relating tothe denied credits.• Cost saving initiatives. In January 2014, in response to the declining potash prices since mid-2013 and the substantial completion of our major capitalprojects, we undertook a number of cost saving actions that are intended to better align our cost structure with the current business environment. Theseinitiatives include the elimination of approximately 7% of the workforce, including capital project related support associated with the our major capitalprojects, decreases in executive compensation, reduction in the use of outside professionals, and cutbacks in other general and administrative areas. Weestimate that these measures will result in annual savings of approximately $15 million, with the majority being in general and administrative expenseand the remainder being cost of goods sold. The workforce reduction occurred in January of 2014, generating a pre-tax charge of approximately $1.5million to $2.0 million.41Table of Contents Selected Operating and Financial DataThe following tables present selected operations data for the periods noted. Analysis of the details of this information is contained throughout thisdiscussion. We present this table as a summary of information relating to key indicators of financial condition and operating performance that we believe areimportant. We calculate average net realized sales price by deducting freight costs from gross revenues and then by dividing this result by tons of product soldduring the period.42Table of Contents Year Ended December 31, 2013 2012 2011Production volume (in thousands of tons): Potash 780 796 813 Langbeinite 177 131 141Sales volume (in thousands of tons): Potash 692 839 793 Trio® 123 125 173 Gross sales (in thousands): Potash $284,831 $402,382 $392,331 Trio® 51,481 48,934 50,623 Total 336,312 451,316 442,954Freight costs (in thousands): Potash 20,796 21,396 18,470 Trio® 8,060 7,768 9,869 Total 28,856 29,164 28,339Net sales (in thousands)(1): Potash 264,035 380,986 373,861 Trio® 43,421 41,166 40,754 Total $307,456 $422,152 $414,615 Potash statistics (per ton): Average net realized sales price(1) $382 $454 $472 Cash operating costs(1)(2) 195 180 173 Depreciation and depletion 52 43 33 Royalties 13 17 17 Total potash cost of goods sold $260 $240 $223 Warehousing and handling costs 16 15 14 Average potash gross margin(1) $106 $199 $235 Trio® statistics (per ton): Average net realized sales price(1) $352 $329 $236 Cash operating costs(1) 201 209 180 Depreciation and depletion 55 61 22 Royalties 18 16 12 Total Trio® cost of goods sold $274 $286 $214 Warehousing and handling costs 15 16 15 Average Trio® gross margin (1) $63 $27 $7(1)Additional information about our non-GAAP financial measures is set forth under the heading"Non-GAAP Financial Measures.”(2)Amounts do not include by-product credits. On a per-ton basis, by-product credits were $9 for the year ended December 31, 2013, and $8 for both of theyears ended 2012, and 2011. By-product credits were $6.5 million, $6.5 million and $6.0 million for the years ended December 31, 2013, 2012, and2011, respectively.Results of OperationsOperating Highlights43Table of ContentsNet income for 2013 was $22.3 million, or $0.30 per diluted share, and cash flows from operations were $64.9 million. During 2013, we sold692,000 tons of potash at a net realized sales price of $382 per ton and 123,000 tons of Trio® at a net realized sales price of $352 per ton. We made capitalinvestments of $256 million in 2013, received $149.3 million of net proceeds from the issuance of unsecured senior notes in April 2013, and ended the yearwith $25 million of cash and investments. We produced 780,000 tons of potash and 177,000 tons of langbeinite in 2013.We experienced a sequential decrease in net income each quarter throughout 2013, and incurred a net loss of $6.0 million in the fourth quarter of2013. The impact of decreased pricing and increased costs per ton will likely result in net losses during the first part of 2014.PotashThe majority of our revenues and gross margin are derived from the production and sales of potash. Potash sales as a percentage of our net sales,which we calculate as gross sales less freight costs, and gross margin were approximately as follows for the indicated periods. Contribution from Potash Sales Net Sales Gross MarginFor the year ended December 31, 2013 86% 90%For the year ended December 31, 2012 90% 98%For the year ended December 31, 2011 90% 99%We sold 692,000 tons of potash in 2013 compared with 839,000 tons in 2012. The decline in sales volumes was driven by unseasonable springweather patterns and general cautiousness in the global potash market caused by pricing uncertainty, particularly in the last six months of the year, eachdiscussed previously. Our average net realized sales price of potash was $382 per ton in 2013, compared with $454 per ton in 2012. Potash pricing continuedto come under pressure due to uncertainty surrounding increased global potash supply and North American inventory levels that were above the five-yearaverage.The table below shows our potash sales mix for 2013 and 2012. The percentage of sales into the industrial market increased in 2013 compared with2012, as a result of an increase in sales of standard-sized potash for industrial purposes as we reduced our level of standard-sized inventory during 2013. Year Ended December 31, 2013 2012 2011Agricultural 71% 81% 79%Industrial 21% 12% 14%Feed 8% 7% 7%We continue to focus on increasing the flexibility of our operations to produce the right amount of product for the demands of our specific markets.For example, we have invested in granulation facilities at each of our operations. The flexibility to produce more granular-sized product is important as wecontinue to see long-term trends that support utilization of potash in agriculture. Data generated by Fertecon Limited, a fertilizer industry consultant, showsthat, over the past 25 years, domestic potash consumption has averaged approximately 9.3 million tons with annual volatility of approximately 10%. Theseresults have occurred through historical periods of low and high agricultural commodity prices, weather conditions, variability in oil and gas drilling, negativefarmer margins, and a variety of other macro-economic factors. Continuing improvements in agriculture production technology, such as hybrid seeds andequipment advancements, now allow for the potential of higher yields per acre. These improvements need to be matched with potassium application rates tomaximize agricultural productivity. We believe these factors suggest increased domestic potash consumption is possible in the coming years.The replacement of potassium in the soil is critical to continue high-yielding agricultural production and to satisfy the demands placed on soils forplant nutrition. The International Plant Nutrition Institute has tracked historical soil potassium levels and trends show a decline in soil potassium which willlead to an increasing potassium deficiency of some agricultural soils in North America. In order for the North American farmer to maximize yields, we believethe application of higher rates of potash will be necessary in the future. With higher crop yields in 2013, more potassium was removed from the soil. Webelieve replenishment of potassium prior to the seeding of the 2014 crop will be an important factor in maximizing 2014 yields. We anticipate the 2014 springpotash application season will be a higher priority for farmers given the soil depletion compared to the 2013 fall application season.44Table of ContentsOur production volume of potash in 2013 decreased slightly to 780,000 tons, compared with 796,000 tons produced in 2012. This decrease waslargely driven by lower production at our East and West facilities, offset by a modest increase in production at our Wendover facility. As discussed above, weare currently mining more complex ore zones at our East facility, which has impacted the quality of the material delivered to the mill and reduced our potashproduction. Production from our West facility was impacted by recovery challenges prior to completion of certain capital projects at West that are designed toincrease recoveries. Due to the reduced production levels at our East and West facilities, we had fewer tons of potash produced over which to allocateproduction costs. As a result, our cash operating costs increased to $195 per ton in 2013, compared with $180 per ton in 2012.Trio® Our Trio® production was higher in 2013 than in 2012 as we benefited from stronger operating performance associated with the long-termimprovement plan at our East facility. Pricing and demand for this specialty product remains strong, particularly for our granular-sized product. Our sales ofTrio® decreased to 123,000 tons in 2013 as compared with 125,000 tons in 2012, as we accumulated standard-sized Trio® inventory during 2013. Thestandard-sized product is largely sold into the export market or converted into pelletized product. We are focused on improving the overall operatingeffectiveness of the pellet plant, which is intended to convert our standard-sized Trio® inventory, which has experienced reduced demand, into a pelletizedproduct, for which there is currently very strong demand.In 2013, as compared with 2012, our average Trio® gross margin increased by $36 per ton as our average net realized sales price for Trio® increasedby $23 per ton, and our cash operating costs for Trio® decreased $8 per ton. Our cash operating costs for Trio® decreased as a result of the productionincreases mentioned above. The cash operating costs per ton have also been negatively affected by the inefficiency and resulting high cost per ton associatedwith the production of the pelletized product. This resulted in a higher per-unit cash operating cost per ton associated with the pelletized product. As the marketfor granular and pelletized Trio® remains strong, we will continue to develop our operating practices to improve the yield and productivity of this productionfacility.Our export sales of Trio® tend to be in larger quantities and with more variability as to the timing of those sales, which has an impact on thequarterly results. United States ExportTrio® only For the year ended December 31, 2013 76% 24%For the year ended December 31, 2012 63% 37%For the year ended December 31, 2011 56% 44%Average Net Realized Sales PriceDomestic pricing of our potash is influenced principally by the price established by our competitors. The interaction of global potash supply anddemand, ocean, land and barge freight rates, and currency fluctuations also influence pricing. Any of these factors could have a positive or negative impact onthe price of our products. Our average net realized sales price for potash decreased by $72 per ton in 2013, to $382 per ton, largely as a result of uncertainty inthe global potash markets after Uralkali announced its departure from its BPC marketing arrangement, as discussed previously. Domestically, the marketcontinues to experience ongoing price pressure from these same forces.We market Trio® as a specialty product. As farmers have increasingly recognized the agronomic value of this product, demand for the product hasgrown and we have enjoyed a higher market price in 2013 as compared to 2012. This recognition has resulted in pricing that more closely reflects the tightsupply of this product and the nutrient value of this product. However, we expect pressure on Trio® pricing in 2014 due to the softening in the potash andsulfate markets.45Table of ContentsThe table below demonstrates the progression of our average net realized sales price for potash and Trio® through 2012 and 2013.Average net realized sales price for the three months ended: Potash Trio® (Per ton)December 31, 2013 $338 $345September 30, 2013 $363 $353June 30, 2013 $402 $359March 31, 2013 $417 $351December 31, 2012 $434 $347September 30, 2012 $444 $336June 30, 2012 $465 $322March 31, 2012 $477 $302Specific Factors Affecting Our ResultsSalesOur gross sales are derived from the sales of potash and Trio® and are determined by the quantities of product we sell and the sales prices we realize.We quote prices to customers both on a delivered basis and on the basis of pick-up at our plants and warehouses. Freight costs are incurred on only a portionof our sales as many of our customers arrange and pay for their own freight directly. When we arrange and pay for freight, our quotes and billings are basedon expected freight costs to the points of delivery. Although our gross sales include the freight that we bill, we do not believe that gross sales provide arepresentative measure of our performance in the market due to variations caused by ongoing changes in the proportion of customers paying for their ownfreight, the geographic distribution of our products, and freight rates. Rail freight rates have been steadily increasing, thereby negatively influencing our netrealized sales prices. We view net sales, which are gross sales less freight costs, as the key performance indicator of our revenue as it conveys the net salesprice of the product that we realize. We manage our sales and marketing operations centrally and we work to achieve the highest average net realized sales pricewe can by evaluating the product needs of our customers and associated logistics and then determining which of our production facilities can best satisfy theseneeds.The volume of product we sell is determined by demand for our products and by our production capabilities. We intend to operate our facilities atfull production levels, which provide the greatest operating efficiencies. By having adequate warehouse capacity, we can maintain production levels duringperiods of fluctuating product demand.Cost of Goods SoldOur cost of goods sold reflects the costs to produce our potash and Trio® products, less credits generated from the sale of our by-products. Many ofour production costs are largely fixed and, consequently, our costs of sales per ton on a facility-by-facility basis tend to move inversely with the number oftons 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. There are elements of our cost structure associated with contract labor, consumable operating supplies, and reagents and royaltiesthat are variable, which make up a smaller component of our cost base. Our periodic production costs and costs of goods sold will not necessarily match oneanother 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 theplant, levels of mine development, plant operating performance, downtime, and annual maintenance turnarounds. We expect that our labor and contract laborcosts in Carlsbad, New Mexico, will continue to be influenced most directly by the demand for labor in the local Carlsbad, New Mexico, region where wecompete for labor with the potash, oil and gas, and nuclear waste storage industries. Additionally, the East mine has a complex mineralogy with a mixed orebody comprised of potash and langbeinite. This complex ore is processed through a singular product flow at the surface facility. The specific grade, volume,and characterization of the ore that is mined at any particular time influences the amount of tons of potash and langbeinite ultimately produced from thefacility, which affects our production costs per ton for both products and affects our quarter-to-quarter results.We pay royalties to federal, state, and private lessors under our mineral leases. These payments typically equal a percentage of net sales of mineralsextracted and sold under the applicable lease. In some cases, federal royalties for potash are46Table of Contentspaid on a sliding scale that varies with the grade of ore extracted. Our average royalty rate was 3.6%, 3.9% and 3.7% in 2013, 2012 and 2011. We expect thatfuture average royalty rates will increase modestly from rates experienced in 2013, as certain New Mexico mineral leases are currently being renewed at a fixedroyalty rate of 5.0%.Income TaxesWe are a subchapter C corporation and, therefore, are subject to federal and state income taxes on our taxable income. Our effective tax rate for theyears ended December 31, 2013, 2012, and 2011 was 41.5%, 36.1%, and 37.6%, respectively. Our effective income tax rates are impacted primarily bychanges in the underlying tax rates in jurisdictions in which we are subject to income tax and permanent differences between book and tax income for theperiod, including the benefit associated with the estimated effect of the depletion and domestic production activities deduction and research and developmentcredits. Our federal and state income tax returns are subject to examination by federal and state tax authorities.During the year ended December 31, 2013, we recognized income tax expense of $15.8 million compared with income tax expense of $49.5 millionand $65.9 million during the years ended December 31, 2012 and 2011, respectively. Total tax expense for the year ended December 31, 2013, was comprisedof $14.3 million of current income tax benefit and $30.1 million of deferred income tax expense. The current income tax benefit in 2013 was derived from thecreation of a net operating loss. We expect to carry back our net operating loss to 2011 and 2012, with the remaining amount carried forward as a deferred taxasset. Total tax expense for the year ended December 31, 2012, was comprised of $11.5 million of current income tax expense and $38.0 million of deferredincome tax expense. Total tax expense for the year ended December 31, 2011, was comprised of $16.9 million of current income tax expense and $49.0 millionof deferred income tax expense. Our current tax expense for each of these periods was less than our total tax expense in large part due to the impact of acceleratedtax bonus depreciation and the utilization of percentage depletion.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 inwhich 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 deferredincome tax calculations are impacted most significantly by the states in which we do business. Changing business conditions for normal businesstransactions and operations as well as changes to state tax rate and apportionment laws potentially alter our apportionment of income among the states forincome tax purposes. These changes in apportionment laws result in changes in the calculation of our current and deferred income taxes, including thevaluation of our deferred tax assets and liabilities. The effects of any such changes are recorded in the period of the adjustment. These adjustments canincrease or decrease the net deferred tax asset on the balance sheet and impact the corresponding deferred tax benefit or deferred tax expense on the incomestatement. As of December 31, 2013, our estimate of our blended state tax rate increased, resulting in an increase of the value of the deferred tax asset by net$0.9 million to reflect changes in business conditions in concert with changes in apportionment rules of the states in which we operate, and a decrease in thestate tax rate for the state of New Mexico.Capital InvestmentsWe believe that, in the long term, demand for potash will remain at, or exceed, historical levels. We have developed and have been executing a capitalinvestment plan at each of our facilities to respond to this anticipated increase in demand. These plans focus on growing productivity and improvingrecoveries while improving safe and reliable production, ensuring environmental and regulatory compliance, and improving facility reliability. Likewise, as weinvest in our facilities, we seek to deploy capital while maintaining sufficient liquidity to react strategically to market conditions.During 2013, much of our strategic focus was on investing in and completing our large capital projects. Construction of the HB Solar Solution minewas substantially completed in 2013, and two of the three compaction lines at our North compaction facility were also completed in 2013. We have othercapital projects either in progress or planned for 2014, but expect the level of capital investment to decrease significantly in 2014. We expect our investmentswill grow production capacity and decrease per-ton production costs while also increasing the flexibility of our production mix to support our marketingefforts. We have already made significant steps towards improving our granulation capacity for both potash and Trio® through previous capital investments.During 2013, we invested $256.2 million in capital projects, including $3.4 million of capitalized interest. These capital projects includedinvestments related to the substantial completion of the construction for the HB Solar Solution mine and the related production plant, the expansion of ourNorth compaction facility and the drilling program to create the third multi-lateral cavern system in Moab.In 2014, we expect our level of capital investment to be approximately $40 million to $50 million, which includes approximately $10 million to $15million for remaining investment on the HB Solar Solution mine and the North Compaction facility. We expect approximately $5 million to $10 million ofadditional investment in recovery improvement projects at our West plant during 2014. As these projects are completed, we expect to reduce our capitalinvestment activity,which will allow us to shift our focus to the optimizing and increasing efficiencies of our operating facilities to extract the value from the capital investmentsmade over the last several years. We expect our 2014 operating plans and capital programs to be funded out of operating cash flows, existing cash andinvestments, and availability under our unsecured credit facility.The following details several of the significant projects that are designed to improve the overall reliability of the operations and to increase productiveand compaction capacity:•During 2013, we substantially completed the construction activities associated with the initial design for the HB Solar Solution mine. We filled all ofour solar evaporation ponds and substantially completed construction for the processing plant. During December, 2013, we began initialcommissioning of the processing plant and we expect initial limited production of finished product from the HB Solar Solution mine to occur in thefirst quarter of 2014 with our first harvest. We expect our production from the HB Solar Solution mine to ramp up throughout 2014, with productionlevels increasing into the harvest seasons in 2015 and 2016, assuming the benefit of an average annual evaporation cycle applied to full evaporationponds. The anticipated production schedule may be impacted by delays due to commissioning activities, the rate of injection into the mines, and theimpact of weather events or patterns on commissioning and evaporation seasons. The total expected investment for the project is estimated to bebetween $235 million and $245 million, of which $234.0 million had been invested as of December 31, 2013.•The North compaction project is nearing completion. The first two compaction lines are in service and the third compaction line is expected to becompleted in the first half of 2014. This project is designed to provide adequate capacity for the increased throughput expected at the West facilityand the anticipated production from the HB Solar Solution mine. Total capital investment for the project through December 31, 2013, wasapproximately $97.0 million. The total capital investment for this project is anticipated to be less than $100 million.•We have developed additional solution mining opportunities at our Moab facility. We completed the development of our second horizontal cavernsystem in the fourth quarter of 2012. During 2013, we completed the drilling on our third multi-lateral cavern system and we began injecting brine.Beginning in the second half of 2014, we expect this cavern system will provide higher grade extraction brines, which will offset the typicalproduction profile as other cavern systems are depleted and allow for incremental production opportunities. The total capital investment for thisproject was $19.5 million in 2013.•There are several ongoing projects at our West facility that are intended to sustain and increase production through improvements in recovery rates.We have made ongoing improvements to the West facility since its acquisition to increase the volume of tons going through the facility. This currentphase of improvements is designed to address the lower recoveries experienced at the West facility in recent quarters as we transition into different orezones that require different processing techniques. The majority of these projects are expected to be completed in the first half of 2014 with operationalimprovements beginning to be realized as the major components of the projects are completed. The capabilities of the new North compaction facilitynow allow us to make design changes that increase recovery. Accordingly, there is a level of coordination among the projects at the West facility andNorth compaction facility that will cause some interruptions in production at the West facility as the projects are placed in service and resultingdesign changes are realized. We estimate the total investment for these projects will be between $25 million and $35 million, of which $21.2 millionhad been invested as of December 31, 2013.Liquidity and Capital ResourcesAs of December 31, 2013, we had cash, cash equivalents, and investments of $25.1 million, we had $150 million of debt, and had no amountsoutstanding under our unsecured credit facility discussed below. In April 2013, we received the funding of our Notes with net proceeds of $149.3 million, asdescribed in more detail below. The $25.1 million of cash, cash equivalents, and investments was made up of the following:•$0.4 million in cash equivalent investments, consisting of money market accounts with banking institutions that we believe are financiallysound; and•$15.2 million and $9.5 million invested in short and long-term investments, respectively.Our operations have been and are expected to be primarily funded from cash on hand and cash generated by operations; if necessary, we have theability to borrow under our unsecured credit facility, subject to availability as determined by our financial covenants. The total amount we have availableunder the credit facility could be limited if our adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, and certain otherexpenses, as defined in the credit facility) decreased significantly over several quarters, as discussed in more detail below under the heading "UnsecuredCredit Facility." Due to the decreasing levels of adjusted EBITDA during 2013, the aggregate amount available47Table of Contentsto us under the facility as of December 31, 2013, was limited to $222 million. The following summarizes our cash flow activity for the years ended December31, 2013, 2012 and 2011: Year ended December 31, 2013 2012 2011 (In thousands)Cash Flows provided by Operating Activities $64,898 $187,834 $173,869Cash Flows used in Investing Activities $(246,439) $(170,183) $(174,802)Cash Flows provided by (used in) Financing Activities $148,316 $(57,404) $(1,828)Operating ActivitiesTotal cash provided by operating activities for the year ended December 31, 2013, was $64.9 million, a decrease of $122.9 million compared withthe year ended December 31, 2012. The primary driver of this decline was lower sales volumes and a lower average net realized sales price for potash, asdiscussed previously, which, together, resulted in lower net income. Cash provided by operating activities for the year ended December 31, 2013, wasnegatively impacted by an increase in inventory of $51.7 million as inventory levels and per-ton production costs both increased.Total cash provided by operating activities increased by $14.0 million in 2012 compared to 2011. Inventory decreased $11.2 million as we increasedour sales levels ahead of production in 2012, which increased our operating cash flows. In addition, we experienced an increase in trade and other receivables,which is related to a refundable employment-related credit in the State of New Mexico.Investing ActivitiesTotal cash used in investing activities increased $76.3 million in 2013 compared with the comparable period in 2012 as a result of lower proceedsfrom the sale of investments, and a slight increase in capital investments. The decline in proceeds from investments was the result of the overall lower level ofinvestments as the investment portfolio was utilized to fund our capital projects. In 2013, we also received $6.1 million of proceeds from the sale of assets,most of which were received as we entered into a sale leaseback transaction for certain mining equipment purchased earlier in 2013. Total cash used ininvesting activities decreased in 2012 compared to 2011 due to an increase in the proceeds from the sale of investments and a reduction in purchases ofinvestments. These net proceeds were used to fund our increased activity associated with investments in property, plant, and equipment, mineral propertiesand development costs of $246.4 million in 2012, and the special dividend paid in December 2012. The level of capital investment in 2012 increased from the$137.1 million invested in 2011.Financing ActivitiesTotal cash provided by financing activities of $148.3 million primarily consisted of proceeds from long-term debt related to the funding of our Notesin April 2013, which have an aggregate principal amount of $150 million.For the year ended December 31, 2012, we declared and paid a special dividend of $0.75 per share or $56.5 million. We also paid $0.9 million foremployees' minimum statutory tax withholdings upon the vesting of certain restricted stock awards for employees who elected to net share settle their awards.In 2011, we paid $1.1 million for employees' minimum statutory tax withholdings upon the vesting of certain restricted stock awards for employeeswho elected to net share settle their awards. We also paid $1.5 million in debt issuance costs related to the unsecured credit facility.Unsecured Credit FacilityWe have an unsecured credit facility, led by U.S. Bank, as administrative agent, and Wells Fargo Bank, as syndication agent. This unsecuredcredit facility provides a total revolving credit facility of $250 million. The facility was amended in August 2013 to extend the maturity date by two years toAugust 2018, to decrease the applicable interest rates on any borrowings, to decrease our quarterly commitment fees, and to increase our maximum allowableleverage ratio to 3.5. Our minimum allowable fixed charge coverage ratio under the facility remains at 1.3. The facility is unsecured and is guaranteed by ourmaterial subsidiaries.48Table of ContentsUnder the facility, the leverage ratio is defined as the ratio of our total funded indebtedness to our adjusted EBITDA (earnings before interest, incometaxes, depreciation, amortization, and certain other expenses) for the prior four fiscal quarters. The minimum allowable fixed charge coverage ratio is definedas the ratio of adjusted EBITDA for the prior four fiscal quarters to fixed charges. Both ratios may operate to limit the total amount available under the facility.For example, if adjusted EBITDA decreased significantly over several quarters with no change to indebtedness, our leverage ratio could rise to the level wheresome or all of the $250 million would not be available to us.As of January 31, 2014, we had advances outstanding under the facility of $10 million and we expect to have advances outstanding under thefacility periodically during 2014. As a result of declines in our adjusted EBITDA over the last four fiscal quarters, the total amount available to us under thefacility was limited to approximately $222 million as of December 31, 2013. Based on current market conditions, we expect that the total amount available tous under the facility will be substantially reduced during 2014. We believe that the amounts available to us will be adequate to fund our operations and ourcapital investment projects. Outstanding balances under the unsecured credit facility bear interest at a floating rate, which, at our option, is either (1) the London InterbankOffered Rate (LIBOR), plus a margin of between 1.125% and 2.25%, depending upon our leverage ratio, as defined above; or (2) an alternative base rate, plusa margin of between 0.125% and 1.25%, depending upon our leverage ratio. We pay a quarterly commitment fee on the outstanding portion of the unusedrevolving unsecured credit facility amount of between 0.15% and 0.35%, depending on our leverage ratio. The interest rate paid under our unsecured creditfacility on any debt varies both with the change in the LIBOR rates and with our leverage ratio.Unsecured Senior NotesIn April 2013, we received net proceeds of $149.3 million from the issuance of $150 million aggregate principal amount of the Notes pursuant to a notepurchase agreement entered into in August 2012. The Notes consist of the following series:•$60 million of 3.23% Senior Notes, Series A, due April 16, 2020•$45 million of 4.13% Senior Notes, Series B, due April 14, 2023•$45 million of 4.28% Senior Notes, Series C, due April 16, 2025The Notes are senior unsecured obligations and rank equally in right of payment with any of our other unsubordinated unsecured indebtedness. Theobligations under the Notes are unconditionally guaranteed by our material subsidiaries. The note purchase agreement includes financial covenants requiring aminimum fixed charge ratio and a maximum leverage ratio. We are currently in compliance with each of these financial covenants. Interest on the Notes beganaccruing on April 16, 2013, and is paid semiannually on April 16 and October 16 of each year.Contractual ObligationsAs of December 31, 2013, we had contractual obligations totaling $294.4 million on an undiscounted basis, as indicated below. Contractualcommitments shown are for the full calendar year indicated unless otherwise indicated. Payments Due By Period Total 2014 2015 2016 2017 2018 More Than 5Years (In thousands)Long-term debt(1) $150,000 $— $— $— $— $— $150,000Fixed rate interest obligations onlong-term debt(2) 52,404 5,723 5,723 5,723 5,723 5,723 23,789Operating lease obligations(3) 19,251 4,045 3,906 3,478 3,332 3,256 1,234Purchase commitments(4) 1,047 912 135 — — — —Natural gas purchasecommitments(5) 6,998 6,998 — — — — —Asset retirement obligation(6) 54,878 1,088 3,356 1,656 1,705 1,031 46,042Minimum royalty payments(7) 9,800 392 392 392 392 392 7,840Total $294,378 $19,158 $13,512 $11,249 $11,152 $10,402 $228,905(1)Intrepid issued $150 million aggregate principal amount of the Notes on April 16, 2013. The Notes mature in three tranches in 2020, 2023, and2025.49Table of Contents(2)Interest on the Notes began accruing on April 16, 2013. Interest will be paid semiannually on April 16 and October 16 of each year, beginning onOctober 16, 2013. Interest expense will be recorded net of any capitalized interest associated with investments in capital projects.(3)Amounts include all operating lease payments, inclusive of sales tax, for leases for office space, an airplane, railcars and other equipment.(4)Purchase contractual commitments include the approximate amount due vendors for non-cancelable purchase commitments for materials andservices.(5)We have committed to purchase a minimum quantity of natural gas, which is priced at floating index‑dependent rates plus $0.01 to $0.13 perMMBtu, estimated based on forward rates. Amounts are based on spot rates inclusive of estimated transportation costs and sales tax.(6)We are obligated to reclaim and remediate lands that our operations have disturbed, but, because of the long-term nature of our reserves and facilities, we estimate thatthe majority of those expenditures will not be required until after 2018. Although our reclamation obligation activities are not required to begin until afterwe cease operations, we anticipate certain activities to occur prior to then related to reclamation of facilities that have been replaced with newly constructedassets, as well as certain shaft closure activities for shafts that are no longer in use. Commitments shown are in today’s dollars and are undiscounted.(7)Estimated annual minimum royalties due under mineral leases, assuming approximately a 25-year life, consistent with estimated useful lives ofplant assets.Off-Balance Sheet ArrangementsAs of December 31, 2013, we had no off-balance sheet arrangements aside from the operating leases described above under “ContractualObligations” and bonding obligations described in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.Results of Operations for the Years ended December 31, 2013, and 2012Net SalesNet sales of potash decreased $117.0 million, or 31%, from $381.0 million for the year ended December 31, 2012, to $264.0 million for the yearended December 31, 2013. This decrease was the result of an 18% decrease in sales volumes of potash in addition to a decrease in the average net realized salesprice of potash by $72 per ton, or 16%, in the comparable period. Our customers delayed purchases of potash in 2013 given downward pressure on potashprices driven by softness and uncertainty in the global potash market, as discussed previously.Net sales of Trio® increased from $41.2 million for the year ended December 31, 2012, to $43.4 million for the year ended December 31, 2013, dueto a 7% increase in the average net realized sales price of Trio® offset by a slight decrease of 2% in the volume of sales. We continue to see strong demand forour Trio® product, particularly the granular-sized and pelletized products. Trio® domestic pricing has historically tended to move in a relatively closecorrelation to potash pricing. Dealers' and farmers' recognition of the benefits of this low chloride product, however, coupled with the added value ofmagnesium and sulfate from this specialty product, translated into higher prices despite sequentially lower potash prices during 2013.Our production volume of potash in 2013 was 780,000 tons, or 16,000 tons less than in 2012. Our Trio® production increased 46,000 tons, or 35%,in 2013 as we continue to progress with operating our langbeinite facility more effectively and efficiently.Cost of Goods SoldThe following table presents our cost of goods sold for potash and Trio® for the subject periods: Year ended December 31, Change Between 2013 2012 Periods % ChangeCost of goods sold (in millions) $212.9 $236.5 $(23.6) (10)%Cost per ton of potash sold(1) $260 $240 $20 8 %Cost per ton of Trio® sold(2) $274 $286 $(12) (4)%(1)Depreciation and depletion expense for potash was $35.6 million and $35.8 million in 2013 and 2012, respectively, which equates to $52 and $43on a per-ton basis.(2)Depreciation and depletion expense for Trio® was $6.8 million and $7.6 million in 2013 and 2012, respectively, which equates to $55 and $61 ona per-ton basis.50Table of ContentsTotal cost of goods sold of potash, which includes royalties and depreciation, depletion and amortization, increased $20 per ton, or 8%, from $240per ton for the year ended December 31, 2012, to $260 per ton for the year ended December 31, 2013. We experienced higher cash operating costs per ton in2013 due to increased production costs per ton at our East and West facilities resulting from comparatively lower production levels as we work through morecomplex ore zones at our East facility and our recovery improvement projects at our West facility, each discussed previously.Total cost of goods sold of Trio® decreased $12 per ton, or 4%, from $286 per ton for the year ended December 31, 2012, to $274 per ton for theyear ended December 31, 2013. This decrease in cost of goods sold on a per-ton basis was primarily due to higher Trio® production volumes in 2013 overwhich production costs are allocated.In total, our cost of goods sold decreased $23.6 million, or 10%, from $236.5 million in 2012 to $212.9 million in 2013, as a result of fewer tonsof potash sold in 2013. As a percentage of sales, cost of goods sold increased as our production costs increased while our total production decreased, resultingin higher per ton inventory values. The increases in production costs were the result of increases in labor costs, natural gas, electricity, maintenance andprofessional services during the year ended December 31, 2013.On a comparative basis, and within our production costs, depreciation and depletion increased $12.4 million, or 29%, during 2013 as a result of thesignificant capital investments being placed into service during the last year. We expect depreciation expense to continue to increase into the early part of 2014on both an actual dollar basis and on a per-ton basis due to the assets placed in service in the latter half of 2013 and the first part of 2014 are completed. Wemanage capital investments to maintain the productivity of our mines and to increase production and generate incremental returns on invested capital. Selling and Administrative ExpenseSelling and administrative expenses were $33.8 million in both 2013 and in 2012.Other Operating ExpenseDuring 2013, we received notification that our application for certain New Mexico employment-related credits had been denied, as discussedpreviously. Although we plan to vigorously pursue all available means to recover these credits, we recorded a reserve of $2.8 million against previously filedclaims in "Other expense" included in Operating income in the consolidated statement of operations in 2013.Also in 2013, we received a refund from the State of New Mexico related to a compensating tax refund submitted in prior periods. The receipt of therefund removed uncertainty about the amount and collection of the refund and therefore, we recorded $1.7 million of income, which was also recorded in"Other expense" included in Operating income in the consolidated statement of operations in 2013.Other Income (Expense)In April 2013, we funded $2.0 million to settle all pension plan liabilities and recorded an additional expense of approximately $1.9 million to reflectthe termination of the pension plan. This amount is recorded as "Other income (expense)" in the consolidated statements of operations for the year endedDecember 31, 2013, and represents the difference between the final amount funded, and the sum of the recorded pension liability and the unrecognizedactuarial losses included in accumulated other comprehensive income.Results of Operations for the Years ended December 31, 2012, and 2011Net Sales and Freight CostsNet sales of potash increased $7.1 million, or 2%, from $373.9 million for the year ended December 31, 2011, to $381.0 million for the year endedDecember 31, 2012. This increase was primarily the result of a 6% increase in sales volumes of potash offset by a decrease in the average net realized salesprice of potash by $18 per ton, or 4%. We experienced higher potash demand from our customers during the year ended December 31, 2012, especially in thesecond half of the year when dealer demand increased to meet farmers' potash needs during the fall application season. Net sales of Trio® increased from $40.8million for the year ended December 31, 2011, to $41.2 million for the year ended December 31, 2012, due to a 39% increase in the average net realized salesprice offset by a 28% decrease in the volume of sales. The decrease in sales volumes was a function of availability of product for sale as demand wassignificantly greater than production.Our production volume of potash in 2012 was 796,000 tons, or 17,000 tons less than in 2011. Our decreased production in 2012 is the result of theproduction challenges we experienced at our East surface facility, as well as slightly lower production at our Moab facility due to the impact of the 2011evaporation season that was negatively impacted by cooler summer temperatures and increased levels of precipitation. Our Trio® production was alsonegatively impacted by the plant operations at the East plant and ongoing commissioning activities.51Table of ContentsCost of Goods SoldThe following table presents our cost of goods sold for potash and Trio® for the subject periods: Year ended December 31, Change Between 2012 2011 Periods % ChangeCost of goods sold (in millions) $236.5 $213.7 $22.8 11%Cost per ton of potash sold(1) $240 $223 $17.0 8%Cost per ton of Trio® sold(2) $286 $210 $76.0 36%(1)Depreciation, depletion, and amortizations expense for potash was $35.8 million and $25.9 million in 2012 and 2011, respectively, which equates to $43 and $33 on aper ton basis.(2)Depreciation, depletion, and amortizations expense for Trio® was $7.6 million and $3.8 million in 2012 and 2011, respectively, which equates to$61 and $22 on a per ton basis.Total cost of goods sold of potash, which includes royalties and depreciation, depletion and amortization, increased $17 per ton, or 8%, from $223per ton for the year ended December 31, 2011, to $240 per ton for the year ended December 31, 2012. We experienced higher cash operating costs per ton forthe year ended December 31, 2012, caused by higher per ton production costs at our East mine in 2012 as operating time and plant availability at our Eastmine, particularly during the first half of the year, was negatively impacted by the reliability of key elements of our production process. As a result, our perton carrying value of inventory at the East mine entering 2012 and in early 2012 was higher than we had experienced in 2011. As we sold through thatinventory, and produced higher cost tons during 2012, these higher cost tons were reflected as cost of goods sold in 2012. In addition, we realized higherdepreciation per ton for the year ended December 31, 2012, due to an increase in depreciation expense associated with the capital projects completed in 2011and 2012, combined with lower production during 2012.Total cost of goods sold of Trio® increased $76 per ton, or 36%, from $210 per ton for the year ended December 31, 2011, to $286 per ton for theyear ended December 31, 2012. This increase in cost of goods sold on a per ton basis was most significantly impacted by the commissioning of the densemedia component of our Langbeinite Recovery Improvement Project and the lower production volumes in 2012 over which production costs are allocated. As aresult, our per ton production costs increased over those in 2011.In total, our cost of goods sold increased $22.8 million, or 11%, from $213.7 million in the year ended December 31, 2011, to $236.5 million in theyear ended December 31, 2012. The increase in total cost of goods sold was driven primarily by the higher volumes of potash sold and increased depreciationdue to the capital investments in 2012 and 2011. Labor and benefit costs, as well as costs incurred for chemical usage at our East plant, also experiencednotable increases in 2012 compared to 2011.On a comparative basis and within our production costs, depreciation and depletion increased $11.6 million, or 37%, during 2012 as a result of thesignificant capital investments being brought on line over the last two years. We expect depreciation expense to continue to increase on both an actual dollarbasis and on a per ton basis as we continue to invest capital into our operations. We manage capital investments to maintain the productivity of our mines andto increase production and generate incremental returns on invested capital. Selling and Administrative ExpenseSelling and administrative expenses increased $2.0 million in 2012, as compared to 2011. The change represents a 6% increase from $31.8 millionfor the year ended December 31, 2011, to $33.8 million for the year ended December 31, 2012. This increase is primarily due to higher labor and benefit costsin 2012 as a result of additional headcount as we hired more staff to support our level of process improvements and general administrative support. Theseincreases were partially offset by a reduction in short-term incentive compensation expense in 2012 as the 2012 performance metrics resulted in lower thantarget payouts.Recognition of Income Associated With Deferred Insurance ProceedsWe had $12.5 million of deferred insurance proceeds recognized in 2011 as a result of the settlement of an insurance claim for damages to ourwarehouses. No such event impacted 2012.Other Operating Income52Table of ContentsDuring 2011, we recorded $7.9 million of other operating income from an employment-related credit in the state of New Mexico. Beginning in thethird quarter of 2011, the value of additional estimated credits have been recorded in the same period in which the credit was earned as a reduction to ourproduction costs, and is reflected in the associated cost of goods sold and in the remaining inventory cost base as of December 31, 2012, and 2011.Critical Accounting Policies and EstimatesOur discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which havebeen prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires management to makeestimates and assumptions that affect the amounts reported in our financial statements. Actual results could differ from such estimates and assumptions, andany such differences could result in material changes to our financial statements. The following discussion presents information about our most criticalaccounting policies and estimates. Our significant accounting policies are further described in Note 2 to our consolidated financial statements for the yearended December 31, 2013, included elsewhere in this Annual Report on Form 10-K.Revenue Recognition—Revenue is recognized when evidence of an arrangement exists, risks and rewards of ownership have been transferred tocustomers, which is generally when title passes, the selling price is fixed and determinable, and collection is reasonably assured. Title passes at the designatedshipping point for the majority of sales, but, in a few cases, title passes at the delivery destination. The shipping point may be the plant, a distributionwarehouse, a customer warehouse, or a port. Title passes for some international shipments upon payment by the purchaser; however, revenue is notrecognized for these transactions until shipment because the risks and rewards of ownership have transferred pursuant to a contractual arrangement. Prices aregenerally set at the time of, or prior to, shipment. In cases where the final price is determined upon resale of the product by the customer, revenue is deferreduntil the final sales price is known.Sales are reported on a gross basis. We quote prices to customers both on a delivered basis and on the basis of pick-up at our plants and warehouses.When a sale occurs on a delivered basis, we incur and, in turn, bill the customer and record as gross revenue the product sales value, freight, packaging, andcertain other distribution costs. Many customers, however, arrange and pay for these costs directly and, in these situations, only the product sales areincluded in gross revenues.Application of this policy requires that we make estimates regarding creditworthiness of the customer, which impacts the timing of revenuerecognition and, ultimately, the determination of allowance for doubtful accounts. We make those estimates based on the most recent information available andhistorical experience, but they may be affected by subsequent changes in market conditions.53Table of ContentsProperty, Plant, and Equipment—Property, plant, and equipment are stated at historical cost. Expenditures for property, plant, and equipmentrelating to new assets or improvements are capitalized, provided the expenditure extends the useful life of an asset or extends the asset’s functionality. Property,plant, and equipment are depreciated under the straight-line method using estimated useful lives. No depreciation is taken on assets classified as constructionin progress until the asset is placed into service. Gains or losses are recorded upon retirement, sale or disposal of assets. Maintenance and repair costs arerecognized as period costs when incurred. Capitalized interest, to the extent of debt outstanding, is calculated and assigned to assets that are being constructed,drilled, being built or otherwise are classified as construction in progress.Mineral Properties and Development Costs—Mineral properties and development costs, which are referred to collectively as mineral properties,include acquisition costs, the cost of drilling wells, and the cost of other development work, all of which are capitalized. Depletion of mineral properties iscalculated using the units-of-production method over the estimated life of the relevant ore body. The lives of reserves used for accounting purposes are shorterthan current reserve life determinations due to uncertainties inherent in long-term estimates. We have prepared these reserve life estimates and they have beenreviewed and independently determined by mine consultants. Tons of potash and langbeinite in the proven and probable reserves are expressed in terms ofexpected finished tons of product to be realized, net of estimated losses. Market price fluctuations of potash or Trio®, as well as increased production costs orreduced recovery rates, could render proven and probable reserves containing relatively lower grades of mineralization uneconomic to exploit and might resultin a reduction of reserves. In addition, the provisions of our mineral leases, including royalties payable, are subject to periodic readjustment by the state andfederal government, which could affect the economics of our reserve estimates. Significant changes in the estimated reserves could have a material impact onour results of operations and financial position.Inventory and Long-Term Parts Inventory—Inventory consists of product and by-product stocks which are ready for sale; mined ore; potash inevaporation ponds, which is considered work-in-process; and parts and supplies inventory. Product and by-product inventory cost is determined using thelower of weighted average cost or estimated net realizable value and include direct costs, maintenance, operational overhead, depreciation, depletion, andequipment lease costs applicable to the production process. Direct costs, maintenance, and operational overhead include labor and associated benefits.We evaluate production levels and costs to determine if any should be deemed abnormal and therefore excluded from inventory costs and expenseddirectly during the applicable period. The assessment of normal production levels is judgmental and is unique to each period. We model normal productionlevels and evaluate historical ranges of production by operating plant in assessing what is deemed to be normal.Parts inventory, including critical spares, that is not expected to be utilized within a period of one year is classified as non-current. Parts and supplyinventory cost is determined using the lower of average acquisition cost or estimated replacement cost. Detailed reviews are performed related to the netrealizable value of parts inventory, giving consideration to quality, slow-moving items, obsolescence, excessive levels, and other factors. Parts inventories thathave not turned over in more than a year, excluding parts classified as critical spares, are reviewed for obsolescence and, if deemed appropriate, are includedin the determination of an allowance for obsolescence.Recoverability of Long-Lived Assets—We evaluate our long-lived assets for impairment when events or changes in circumstances indicate that therelated carrying amount may not be recoverable. Impairment is considered to exist if an asset’s total estimated future cash flows on an undiscounted basis areless than the carrying amount of the related asset. An impairment loss is measured and recorded based on the discounted estimated future cash flows. Changesin significant assumptions underlying future cash flow estimates or fair values of assets may have a material effect on our financial position and results ofoperations.Factors we generally will consider important and which could trigger an impairment review of the carrying value of long-lived assets include thefollowing:•significant underperformance relative to expected operating results;•significant changes in the manner of use of assets or the strategy for our overall business;•the denial or delay of necessary permits or approvals that would affect the utilization of our tangible assets;•underutilization of our tangible assets;•discontinuance of certain products by us or our customers;•a decrease in estimated mineral reserves; and•significant negative industry or economic trends.54Table of ContentsAlthough we believe the carrying values of our long-lived assets were realizable as of the balance sheet dates, future events could cause us to concludeotherwise.Asset Retirement Obligation—All of our mining properties involve certain reclamation liabilities as required by the states in which they operate orby the BLM. Reclamation costs are initially recorded as a liability associated with the asset to be reclaimed or abandoned, based on applicable inflationassumptions and discount rates. The accretion of this discounted liability is recognized as expense over the life of the related assets, and the liability isperiodically adjusted to reflect changes in the estimates of either the time or the amount of the reclamation and abandonment costs. These asset retirementobligations are reviewed and updated at least annually with any changes in balances recorded as adjustments to the related assets and liabilities. The estimatesof amounts to be spent are subject to considerable uncertainty and long timeframes. Changes in these estimates could have a material impact on our results ofoperations and financial position.Planned Turnaround Maintenance—Each operation typically shuts down periodically for maintenance. The New Mexico operations havehistorically shut down for up to two weeks to perform turnaround maintenance. Generally, the Moab and Wendover operations cease harvesting potash fromour solar ponds during one or more summer months to make the most of the evaporation season. During these summer turnarounds, annual maintenance isperformed. The costs of maintenance turnarounds are considered part of production costs and are absorbed into inventory in the period incurred.Income Taxes—We are a subchapter C corporation and therefore are subject to U.S. federal and state income taxes. We recognize income taxes underthe asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between thefinancial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enactedtax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. We record a valuationallowance if it is deemed more likely than not that our deferred income tax assets will not be realized in full; such determinations are subject to ongoingassessment.Stock‑Based Compensation—We account for stock‑based compensation by recording expense using the fair value of the awards at the time ofgrant. We have recorded compensation expense associated with the issuance of non-vested restricted shares of common stock, non-vested performance units,and non-qualified stock options, all of which are subject to service conditions. The expense associated with such awards is recognized over the service periodassociated with each issuance. Performance units are also subject to operational performance or market based conditions.Non-GAAP Financial MeasuresTo supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use several non-GAAPfinancial measures to monitor and evaluate our performance. These non-GAAP financial measures include net sales, average net realized sales price, cashoperating costs and average potash and Trio® gross margin. These non-GAAP financial measures 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 these non-GAAP financialmeasures varies among companies, our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies.We believe these non-GAAP financial measures provide useful information to investors for analysis of our business. We also refer to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. We believe these non-GAAP financialmeasures are widely used by professional research analysts and others in the valuation, comparison and investment recommendations of companies in thepotash mining industry. Many investors use the published research reports of these professional research analysts and others in making investment decisions.Net sales and average net realized sales price are non-GAAP financial measures. Net sales are calculated as sales less freight costs. Average netrealized sales price is calculated as net sales, divided by the number of tons sold in the period. We consider net sales and average net realized sales price to beuseful because they remove the effect of transportation and delivery costs on sales and pricing. 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, many of our customers arrange for and pay theirown transportation and delivery costs, in which case these costs are not included in our revenue and freight costs. We use net sales and average net realizedsales price as key performance indicators to analyze sales and price trends. We also use net sales as one of the measures under our performance-basedcompensation programs for employees.Cash operating costs is a non-GAAP financial measure that is calculated as total of cost of goods sold divided by the number of tons sold in theperiod and then adjusted to exclude per-ton depreciation, depletion, and royalties. Total cost of goods sold is reported net of by-product credits and does notinclude warehouse and handling costs. We consider cash operating costs to be useful because it represents our core, per-ton costs to produce potash and Trio®.We use cash operating costs as an indicator of performance and operating efficiencies and as one of the measures under our performance-based compensationprograms for employees.Average potash and Trio® gross margin are non-GAAP financial measures and are calculated by subtracting the sum of total cost of goods sold andwarehousing and handling costs from the average net realized sales price. We believe the average55Table of Contentsgross margin for both potash and Trio® to be useful as they represent the average amount of margin we realize on each ton of potash and Trio® sold.Below is a reconciliation of these non-GAAP measures to the most directly comparable GAAP measure, for the years ended December 31, 2013,2012, and 2011:Net Sales and Average Net Realized Sales Price Year Ended December 31, 2013 Potash Trio® TotalSales $284,831 $51,481 $336,312Freight costs 20,796 8,060 28,856 Net sales $264,035 $43,421 $307,456 Divided by: Tons sold (in thousands) 692 123 Average net realized sales price per ton $382 $352 Year Ended December 31, 2012 Potash Trio® TotalSales $402,382 $48,934 $451,316Freight costs 21,396 7,768 29,164 Net sales $380,986 $41,166 $422,152 Divided by: Tons sold (in thousands) 839 125 Average net realized sales price per ton $454 $329 Year Ended December 31, 2011 Potash Trio® TotalSales $392,331 $50,623 $442,954Freight costs 18,470 9,869 28,339 Net sales $373,861 $40,754 $414,615 Divided by: Tons sold (in thousands) 793 173 Average net realized sales price per ton $472 $236 Cash Operating Costs56Table of Contents Year Ended December 31, 2013 Potash Trio® TotalCost of goods sold $179,207 $33,657 $212,864Divided by sales volume (in thousands of tons) 692 123 Cost of goods sold per ton $260 $274 Less per-ton adjustments Depreciation and depletion $52 $55 Royalties 13 18 Cash operating costs per ton $195 $201 Year Ended December 31, 2012 Potash Trio® TotalCost of goods sold $200,661 $35,819 $236,480Divided by sales volume (in thousands of tons) 839 125 Cost of goods sold per ton $240 $286 Less per-ton adjustments Depreciation and depletion $43 $61 Royalties 17 16 Cash operating costs per ton $180 $209 Year Ended December 31, 2011 Potash Trio® TotalCost of goods sold $176,652 $37,018 $213,670Divided by sales volume (in thousands of tons) 793 173 Cost of goods sold per ton $223 $214 Less per-ton adjustments Depreciation and depletion $33 $22 Royalties 17 12 Cash operating costs per ton $173 $180 Average Potash or Trio® Gross Margin Year Ended December 31, 2013 2012 2011Potash Average potash net realized sales price* $382 $454 $472Less total potash cost of goods sold 260 240 223Less potash warehousing and handling costs 16 15 14 Average potash gross margin per ton $106 $199 $23557Table of Contents Year Ended December 31, 2013 2012 2011Trio® Average Trio® net realized sales price* $352 $329 $236Less total Trio® cost of goods sold 274 286 214Less Trio® warehousing and handling costs 15 16 15 Average Trio® gross margin per ton $63 $27 $7* The reconciliations of average potash and Trio® net realized sales price to GAAP sales are set forth above.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKOur operations may be impacted by commodity prices, geographic concentration, changes in interest rates, and foreign currency exchange rates.Commodity PricesPotash and Trio®, our principal products, are commodities but are not traded on any commodity exchange. As such, direct hedging of the prices forfuture production cannot be undertaken. Generally, we do not enter into long-term sales contracts with customers, so prices vary with each particulartransaction and the individual bids that we receive. Our potash is marketed for sale into three primary markets: the agricultural market as a fertilizer; theindustrial market as a component in drilling fluids for oil and gas exploration; and the animal feed market as a nutrient. Prices will vary based upon thedemand from these different markets.Our net sales and profitability are determined principally by the price of potash and Trio® and, to a lesser extent, by the price of natural gas andother commodities used in the production of potash and langbeinite. The price of potash and Trio® is influenced by agricultural demand and the prices ofagricultural commodities. Decreases in agricultural demand or agricultural commodity prices could reduce our agricultural potash and Trio® sales. If naturalgas and oil prices were to decline enough to result in a reduction in drilling activity, our industrial potash sales would decline.Our costs and capital investments are subject to market movements in other commodities such as natural gas, electricity, steel, and chemicals. Wehave entered into derivative transactions for the purchase of natural gas in the past. As of December 31, 2013, we had no natural gas derivative contracts.Interest Rate FluctuationsWe have a $250.0 million unsecured credit facility, led by U.S. Bank, as administrative agent, and Wells Fargo Bank, as syndication agent, whichexpires in August 2018. Balances outstanding under the unsecured credit facility bear interest at a floating rate which, at our option, is either (1) the LondonInterbank Offered Rate (LIBOR) plus a margin of between 1.125% and 2.25%, depending upon our leverage ratio as defined in the facility; or (2) analternative base rate plus a margin of between 0.125% and 1.25%, depending upon our leverage ratio as defined in the facility. The interest rate paid under ourunsecured credit facility on any debt varies both with the change in LIBOR and with our leverage ratio. As of December 31, 2013, no amounts wereoutstanding on this facility.In April 2013, we received net proceeds of $149.3 million from the issuance of $150 million aggregate principal amount of the Notes pursuant to anote purchase agreement entered into in August 2012. The Notes consist of the following series:•$60 million of 3.23% Senior Notes, Series A, due April 16, 2020•$45 million of 4.13% Senior Notes, Series B, due April 14, 2023•$45 million of 4.28% Senior Notes, Series C, due April 16, 2025Because these Notes bear interest at a fixed rate, we do not bear interest rate risk on these Notes. The fair value of the notes does however fluctuatebased on the assessment of our credit and movements in market interest rates. As of December 31, 2013, the estimated fair value of these notes is $129million.Geographic ConcentrationWe primarily sell potash into the regions that include agricultural areas west of the Mississippi River, oil and gas exploration areas in the RockyMountains and the Permian Basin, and animal feed production throughout the United States. Our potash mines and many of our customers are concentratedin the western half of United States and are, therefore, affected by weather and other conditions in this region.Foreign Exchange Rate Fluctuations58Table of ContentsWe typically have low balances of accounts receivable denominated in Canadian dollars and, as a result, we have minimal direct foreign exchangerisk. We do, however, have an indirect foreign exchange risk due to the industry in which we operate. Specifically, the United States imports the majority ofits potash from Canada and Russia. If the Canadian dollar and the Russian ruble strengthen in comparison to the U.S. dollar, foreign suppliers realize asmaller margin as measured in their local currencies unless they increase their nominal U.S. dollar prices. Strengthening of the Canadian dollar and Russianruble therefore tend to support higher U.S. potash prices as Canadian and Russian potash producers attempt to maintain their margins. However, if theCanadian dollar and Russian ruble weaken in comparison to the U.S. dollar, foreign competitors may choose to lower prices significantly to increase salesvolumes while maintaining margins as measured in their local currencies. A decrease in the average net realized sales price of our potash would adverselyaffect our operating results.ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAThe consolidated financial statements that constitute Item 8 follow the text of this report. An index to the consolidated financial statements andfinancial statement Schedules appears in Item 15(a) of this report.ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A.CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresWe maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, that aredesigned 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 SEC rules and forms, and that such information is accumulated and communicated to ourmanagement, including our Executive Chairman of the Board and Chief Financial Officer, as appropriate, to allow timely decisions regarding requireddisclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matterhow well conceived and operated, can provide only reasonable, but not absolute, assurance that the objectives of the disclosure controls and procedures aremet. Additionally, in designing disclosure controls and procedures, our management was required to apply its judgment in evaluating the cost-benefitrelationship of possible disclosure controls and procedures. The design of any disclosure control and procedure also is based in part upon certain assumptionsabout the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential futureconditions.Based on their evaluation as of December 31, 2013, our Executive Chairman of the Board and Chief Financial Officer have concluded that ourdisclosure controls and procedures were effective at the reasonable assurance level.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate “internal control over financial reporting,” as such term is defined inExchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Executive Chairman of theBoard and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2013,based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in 1992. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the UnitedStates of America.Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31,2013.The effectiveness of our internal control over financial reporting as of December 31, 2013, has been audited by KPMG LLP, an independentregistered public accounting firm, as stated in their report which appears herein.Changes in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting that occurred during the fourth quarter ended December 31, 2013, thatmaterially affected, or are reasonably likely to materially affect, our internal control over financial reporting.59Table of ContentsInherent Limitations on Effectiveness of ControlsOur management, including our Executive Chairman of the Board and Chief Financial Officer, do not expect that our disclosure controls or ourinternal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide onlyreasonable, but not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that thereare resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Intrepid have been detected. These inherentlimitations 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 thecontrols. 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 noassurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because ofchanges in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective controlsystem, misstatements due to error or fraud may occur and not be detected.ITEM 9B.OTHER INFORMATIONOn February 11, 2014, we terminated the Amended and Restated Non-Exclusive Aircraft Dry-Lease Agreement (the “Dry Lease”), dated as ofJanuary 1, 2013, between BH Holdings LLC (“BH Holdings”) and us. The termination is effective as of January 1, 2014.BH Holdings is indirectly owned by Robert P. Jornayvaz III, our Executive Chairman of the Board, and Hugh E. Harvey, Jr., our Executive ViceChairman of the Board.Under the Dry Lease, we had agreed to lease an aircraft from BH Holdings for an initial one-year term, which term thereafter automatically renewedfor successive one-year terms. On a monthly basis, we paid $3,000 per flight hour and up to half of the fixed costs for the use of the aircraft. At the end ofeach calendar year, these amounts were adjusted upwards or downwards to reflect the actual costs attributable to our usage of the aircraft during that year. Wewere also responsible for certain taxes and any deductible amounts applicable to any claim under BH Holdings’ insurance policies with respect to the aircraftrelating to our use of the aircraft. We terminated the Dry Lease because we no longer intend to use the aircraft.60Table of ContentsPART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEBiographical information about our executive officers is set forth in "Item 1. Business—Executive Officers." Other information required by this itemwill be included in the proxy statement for our 2014 annual stockholders’ meeting and is incorporated by reference into this report.ITEM 11.EXECUTIVE COMPENSATIONInformation required by this item will be included in the proxy statement for our 2014 annual stockholders’ meeting and is incorporated by referenceinto this report.ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERSInformation required by this item will be included in the proxy statement for our 2014 annual stockholders’ meeting and is incorporated by referenceinto this report.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEInformation required by this item will be included in the proxy statement for our 2014 annual stockholders’ meeting and is incorporated by referenceinto this report.ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICESInformation required by this item will be included in the proxy statement for our 2014 annual stockholders’ meeting and is incorporated by referenceinto this report.61Table of ContentsPART IVITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a) (1) and (a)(2) Financial Statements and Financial Statement Schedules:Audit Reports of Independent Registered Public Accounting Firm62Consolidated Balance Sheets64Consolidated Statements of Operations65Consolidated Statements of Comprehensive Income66Consolidated Statements of Stockholders’ Equity67Consolidated Statements of Cash Flows68Notes to Consolidated Financial Statements69All other schedules are omitted because the required information is not applicable or is not present in amounts sufficient to require submission of theschedule or because the information required is included in the consolidated financial statements and notes thereto.(a)Exhibits. The following exhibits are filed or furnished with, or incorporated by reference into, this Annual Report on Form 10-K: Incorporated by Reference from the Below-Listed Form (Each Filed under SEC FileNumber 001-34025)ExhibitNumberExhibit DescriptionFormFiling Date3.1Restated Certificate of Incorporation of Intrepid Potash, Inc.8-KApril 25, 20083.2Amended and Restated Bylaws of Intrepid Potash, Inc.8-KNovember 19, 201010.1Form of Indemnification Agreement with each director and officer8-KApril 25, 200810.2Director Designation and Voting Agreement, dated as of April 25, 2008, by and amongIntrepid Potash, Inc., Harvey Operating and Production Company, Intrepid ProductionCorporation, and Potash Acquisition, LLC8-KMay 1, 200810.3Registration Rights Agreement, dated as of April 25, 2008, by and among IntrepidPotash, Inc., Harvey Operating & Production Company, Intrepid Production Corporation,and Potash Acquisition, LLC8-KMay 1, 200810.4Acknowledgment and Relinquishment, dated as of December 19, 2011, by and amongIntrepid Potash, Inc., Harvey Operating and Production Company, Intrepid ProductionCorporation, and Potash Acquisition, LLC10-K for the YearEnded December 31,2011February 16, 201210.5Credit Agreement, dated as of August 3, 2011, by and among Intrepid Potash, Inc., thelenders named therein, and U.S. Bank National Association, as administrative agent8-KAugust 8, 201110.6Amendment No. 1 to Credit Agreement and Amendment No. 1 to Guaranty, dated as ofAugust 5, 2013, by and among Intrepid Potash, Inc., the lenders named therein, and U.S.Bank National Association, as administrative agent8-KAugust 5, 201310.7Note Purchase Agreement, dated as of August 28, 2012, by and among Intrepid Potash,Inc. and the purchasers named therein8-KAugust 28, 201210.8Amended and Restated Employment Agreement, dated as of May 19, 2010, by andbetween Intrepid Potash, Inc. and Robert P. Jornayvaz III+8-KMay 19, 201010.9Amendment to Employment Agreement, dated February 23, 2011, by and between IntrepidPotash, Inc. and Robert P. Jornayvaz III+8-KMarch 1, 201162Table of Contents10.10Second Amendment to Employment Agreement, dated as of February 14, 2013, by andbetween Intrepid Potash, Inc. and Robert P. Jornayvaz III+8-KFebruary 19, 201310.11Amended and Restated Employment Agreement, dated as of May 19, 2010, by andbetween Intrepid Potash, Inc. and Hugh E. Harvey, Jr.+8-KMay 19, 201010.12Intrepid Potash, Inc. Equity Incentive Plan+8-KMay 30, 201210.132012 Form of Restricted Stock Agreement under Intrepid Potash, Inc. Equity IncentivePlan+8-KFebruary 7, 201110.142013 Form of Restricted Stock Agreement under Intrepid Potash, Inc. Equity IncentivePlan+10-K for the YearEnded December 31,2012February 14, 201310.152012 Form of Performance Unit Agreement (TSR) under Intrepid Potash, Inc. EquityIncentive Plan+8-KMarch 7, 201210.162013 Form of Performance Unit Agreement (TSR) under Intrepid Potash, Inc. EquityIncentive Plan+10-K for the YearEnded December 31,2012February 14, 201310.172012 Form of Performance Unit Agreement (Production) under Intrepid Potash, Inc. EquityIncentive Plan+8-KMarch 7, 201210.182013 Form of Performance Unit Agreement (Production) under Intrepid Potash, Inc. EquityIncentive Plan+10-K for the YearEnded December 31,2012February 14, 201310.19Form of Stock Option Agreement under Intrepid Potash, Inc. Equity Incentive Plan+8-KFebruary 7, 201110.20Intrepid Potash, Inc. Short-Term Incentive Plan+8-KMay 30, 201210.21Form of Change-of-Control Severance Agreement with each executive officer+10-Q for the QuarterEnded September 30,2011November 3, 201110.22Aircraft Dry Lease, dated as of January 9, 2009, by and between Intrepid Potash, Inc. andIntrepid Production Holdings LLC8-KJanuary 12, 200910.23Amended and Restated Non-Exclusive Aircraft Dry-Lease Agreement, dated as of January1, 2013, by and between Intrepid Potash, Inc. and BH Holdings LLC8-KJune 17, 201310.24Termination Letter, dated February 11, 2014, relating to the Amended and Restated Non-Exclusive Aircraft Dry-Lease Agreement, dated as of January 1, 2013, by and betweenIntrepid Potash, Inc. and BH Holdings LLC* 21.1List of Subsidiaries* 23.1Consent of KPMG LLP* 23.2Consent of Agapito Associates, Inc.* 31.1Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and15d-14(a)* 31.2Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and15d-14(a)* 32.1Certification of Executive Chairman of the Board pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** 32.2Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002** 95.1Mine Safety Disclosure Exhibit* 63Table of Contents99.1Transition Services Agreement, dated as of April 25, 2008, by and between IntrepidPotash, Inc., Intrepid Oil & Gas, LLC, and Intrepid Potash-Moab, LLC8-KMay 1, 200899.2Extension and Amendment to Transition Services Agreement dated July 14, 2009, to beeffective as of April 25, 2009, between Intrepid Potash, Inc. and Intrepid Oil & Gas, LLC10-Q for the QuarterEnded June 30, 2009August 7, 200999.3Third Amendment to Transition Services Agreement dated March 26, 2010, betweenIntrepid Potash, Inc. and Intrepid Oil & Gas, LLC10-Q for the QuarterEnded March 31, 2010May 5, 201099.4Fourth Amendment to Transition Services Agreement dated March 25, 2011, betweenIntrepid Potash, Inc. and Intrepid Oil and Gas, LLC10-Q for the QuarterEnded March 31,2011May 5, 201199.5Sixth Amendment to Transition Services Agreement dated April 3, 2013, between IntrepidPotash, Inc. and Intrepid Oil & Gas, LLC10-Q for the QuarterEnded March 31, 2013May 2, 2013101.INSXBRL Instance Document* 101.SCHXBRL Taxonomy Extension Schema* 101.CALXBRL Extension Calculation Linkbase* 101.DEFXBRL Extension Definition Linkbase* 101.LABXBRL Extension Label Linkbase* 101.PREXBRL Extension Presentation Linkbase* *Filed herewith.**Furnished herewith.+Management contract.64Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. INTREPID POTASH, INC. (Registrant) February 12, 2014 /s/ Robert P. Jornayvaz III Robert P. Jornayvaz III - Executive Chairman of the Board (Principal Executive Officer) February 12, 2014 /s/ David W. Honeyfield David W. Honeyfield - President and Chief Financial Officer (Principal Financial Officer) February 12, 2014 /s/ Brian D. Frantz Brian D. Frantz - Vice President-Finance, Controller, and Chief Accounting Officer (Principal Accounting Officer)Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.Signature Title Date /s/ Robert P. Jornayvaz III Executive Chairman of the Board February 12, 2014Robert P. Jornayvaz III /s/ Hugh E. Harvey, Jr. Executive Vice Chairman of the Board February 12, 2014Hugh E. Harvey, Jr. /s/ Terry Considine Director February 12, 2014Terry Considine /s/ Chris A. Elliott Director February 12, 2014Chris A. Elliott /s/ J. Landis Martin Lead Director February 12, 2014J. Landis Martin /s/ Barth E. Whitham Director February 12, 2014Barth E. Whitham 65Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and StockholdersIntrepid Potash, Inc.:We have audited the accompanying consolidated balance sheets of Intrepid Potash, Inc. and subsidiaries (the Company) as of December 31, 2013 and 2012,and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-yearperiod ended December 31, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these consolidated financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013,in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal controlover financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committeeof Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 12, 2014 expressed an unqualified opinion on theeffectiveness of the Company’s internal control over financial reporting./s/ KPMG LLPDenver, ColoradoFebruary 12, 201466Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and StockholdersIntrepid Potash, Inc.:We have audited Intrepid Potash, Inc.'s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Intrepid Potash Inc.’smanagement is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control overfinancial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting as presented within Item 9A. Controlsand Procedures. Our responsibility is to express an opinion on Intrepid Potash, Inc.'s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, andtesting and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control overfinancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In our opinion, Intrepid Potash, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based oncriteria established in Internal Control—Integrated Framework (1992) issued by the COSO.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsof Intrepid Potash, Inc. and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income,stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013, and our report dated February 12, 2014expressed an unqualified opinion on those consolidated financial statements./s/ KPMG LLPDenver, ColoradoFebruary 12, 201467Table of ContentsINTREPID POTASH, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except share and per share amounts) December 31, 2013 2012ASSETS Cash and cash equivalents $394 $33,619Short-term investments 15,214 24,128Accounts receivable: Trade, net 20,837 31,508Other receivables 7,457 9,122Refundable income taxes 15,722 3,306Inventory, net 105,011 53,275Prepaid expenses and other current assets 5,653 5,393Current deferred tax asset 8,341 2,005Total current assets 178,629 162,356 Property, plant, and equipment, net of accumulated depreciation of $197,108 and $142,137, respectively 689,662 543,169Mineral properties and development costs, net of accumulated depletion of $13,165 and $11,060, respectively 136,907 94,096Long-term parts inventory, net 12,469 10,208Long-term investments 9,505 —Other assets 4,252 4,246Non-current deferred tax asset 143,849 180,548Total Assets $1,175,273 $994,623 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable: Trade $27,552 $19,431Related parties 50 203Accrued liabilities 29,845 32,496Accrued employee compensation and benefits 9,122 11,680Other current liabilities 2,059 3,578Total current liabilities 68,628 67,388 Long-term debt 150,000 —Asset retirement obligation 19,959 19,344Other non-current liabilities 2,715 2,155Total Liabilities 241,302 88,887 Commitments and Contingencies Common stock, $0.001 par value; 100,000,000 shares authorized; and 75,405,410 and 75,312,805 shares outstanding at December 31, 2013, and 2012, respectively 75 75Additional paid-in capital 572,616 568,375Accumulated other comprehensive loss (10) (1,729)Retained earnings 361,290 339,015Total Stockholders' Equity 933,971 905,736Total Liabilities and Stockholders' Equity $1,175,273 $994,623See accompanying notes to these consolidated financial statements.68Table of ContentsINTREPID POTASH, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except share and per share amounts) Year Ended December 31, 2013 2012 2011Sales $336,312 $451,316 $442,954Less: Freight costs 28,856 29,164 28,339Warehousing and handling costs 13,027 14,966 14,027Cost of goods sold 212,864 236,480 213,670Lower of cost or market inventory adjustments 3,650 568 698Gross Margin 77,915 170,138 186,220 Selling and administrative 33,768 33,750 31,807Accretion of asset retirement obligation 1,499 724 750Insurance settlements income from property and business losses — — (12,500)Other expense (income) 1,806 263 (7,714)Operating Income 40,842 135,401 173,877 Other Income (Expense) Interest expense, including realized and unrealized derivative gains and losses (1,531) (905) (869)Interest income 524 1,843 1,730Other (expense) income (1,742) 588 523Income Before Income Taxes 38,093 136,927 175,261 Income Tax Expense (15,818) (49,484) (65,850)Net Income $22,275 $87,443 $109,411 Weighted Average Shares Outstanding: Basic 75,378,655 75,276,609 75,180,714Diluted 75,406,727 75,336,982 75,281,050Earnings Per Share: Basic $0.30 $1.16 $1.46Diluted $0.30 $1.16 $1.45See accompanying notes to these consolidated financial statements.69Table of ContentsINTREPID POTASH, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In thousands) Year Ended December 31, 2013 2012 2011Net Income $22,275 $87,443 $109,411Other Comprehensive Income (Loss): Pension liability adjustment (net of tax effect of $(1,115),$177, and $451, respectively) 1,700 (269) (698)Unrealized gain (loss) on investments available for sale (net oftax effect of $(12), $18, and $19, respectively) 19 (29) (31)Other Comprehensive Income (Loss) 1,719 (298) (729)Comprehensive Income $23,994 $87,145 $108,682See accompanying notes to these consolidated financial statements.70Table of ContentsINTREPID POTASH, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(In thousands, except share amounts) Common Stock Additional Paid-in Capital Accumulated OtherComprehensive Loss RetainedEarnings Total Stockholders'Equity Shares Amount Balance, December 31, 2010 75,110,875 $75 $559,675 $(702) $198,793 $757,841Pension liability adjustment — — — (698) — (698)Unrealized loss on investment available for sale — — — (31) — (31)Net income — — — — 109,411 109,411Stock-based compensation — — 4,984 — — 4,984Issuance of common stock upon exercise of stock options 14,739 — 330 — — 330Change in excess income tax benefit from stock-based compensation — — 413 — — 413Vesting of restricted common stock, netof restricted common stock used to fundemployee income tax withholding dueupon vesting 81,919 — (1,117) — — (1,117)Balance, December 31, 2011 75,207,533 75 564,285 (1,431) 308,204 871,133Pension liability adjustment — — — (269) — (269)Unrealized loss on investment available for sale — — — (29) — (29)Net income — — — — 87,443 87,443Stock-based compensation — — 5,116 — — 5,116Issuance of common stock upon exercise of stock options 1,649 — 34 — — 34Change in excess income tax benefit from stock-based compensation — — (182) — — (182)Vesting of restricted common stock, netof restricted common stock used to fundemployee income tax withholding dueupon vesting 103,623 — (878) — — (878)Common stock cash dividend ($0.75 per share) — — — — (56,632) (56,632)Balance, December 31, 2012 75,312,805 75 568,375 (1,729) 339,015 905,736Pension liability adjustment — — — 1,700 — 1,700Unrealized gain on investments available for sale — — — 19 — 19Net income — — — — 22,275 22,275Stock-based compensation — — 5,123 — — 5,123Change in excess income tax benefit from stock-based compensation — — (230) — — (230)Vesting of restricted common stock, netof restricted common stock used to fundemployee income tax withholding dueupon vesting 92,605 — (652) — — (652)Balance, December 31, 2013 75,405,410 $75 $572,616 $(10) $361,290 $933,971See accompanying notes to these consolidated financial statements.71Table of ContentsINTREPID POTASH, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) Year Ended December 31, 2013 2012 2011Cash Flows from Operating Activities: Reconciliation of net income to net cash provided by operating activities: Net income $22,275 $87,443 $109,411Deferred income taxes 30,092 38,011 49,028Insurance settlements income from property and business losses — — (12,500)Items not affecting cash: Depreciation, depletion, and accretion 61,303 47,599 35,787Stock-based compensation 5,123 5,116 4,984Loss on settlement of pension liabilities 1,872 — —Unrealized derivative gain — (1,049) (1,289)Lower of cost or market inventory adjustments 3,650 568 698Other 2,522 3,259 1,822Changes in operating assets and liabilities: Trade accounts receivable, net 10,671 (2,204) (5,537)Other receivables, net 1,668 (2,223) (5,743)Refundable income taxes (12,417) 1,187 2,051Inventory, net (57,647) 1,464 (9,734)Prepaid expenses and other assets (150) (378) 1,383Accounts payable, accrued liabilities, and accrued employeecompensation and benefits (2,752) 7,324 5,225Other liabilities (1,312) 1,717 (1,717)Net cash provided by operating activities 64,898 187,834 173,869 Cash Flows from Investing Activities: Additions to property, plant, and equipment (204,749) (192,949) (135,700)Additions to mineral properties and development costs (45,736) (53,457) (1,414)Proceeds from sale of property, plant, and equipment 6,088 2 —Proceeds from insurance settlements from property and business losses — — 806Purchases of investments (80,235) (85,359) (102,031)Proceeds from investments 78,193 161,580 63,537Net cash used in investing activities (246,439) (170,183) (174,802) Cash Flows from Financing Activities: Proceeds from long-term debt 150,000 — —Cash paid for common stock dividend — (56,474) —Debt issuance costs (1,032) (141) (1,454)Employee tax withholding paid for restricted stock upon vesting (652) (878) (1,117)Excess income tax benefit from stock-based compensation — 55 413Proceeds from exercise of stock options — 34 330Net cash provided by (used in) financing activities 148,316 (57,404) (1,828) Net Change in Cash and Cash Equivalents (33,225) (39,753) (2,761)Cash and Cash Equivalents, beginning of period 33,619 73,372 76,133Cash and Cash Equivalents, end of period $394 $33,619 $73,372 Supplemental disclosure of cash flow information Net cash paid during the period for: Interest, net of $2.6 million, $0 million, and $0 million of capitalized interest, includingsettlements on derivatives $772 $1,840 $1,348Income taxes $25 $8,379 $13,878Accrued purchases for property, plant, and equipment, and mineral properties and developmentcosts $29,692 $25,204 $17,350See accompanying notes to these consolidated financial statements.72Table of ContentsINTREPID POTASH, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNote 1— COMPANY BACKGROUNDIntrepid Potash, Inc. (individually or in any combination with its subsidiaries, “Intrepid”) produces muriate of potash (“potassium chloride” or“potash”) and langbeinite. Langbeinite, which is marketed for sale as Trio®, is a low-chloride potassium fertilizer with the additional benefits of sulfate andmagnesium. Intrepid sells potash and Trio® primarily into the agricultural market as a fertilizer. Intrepid also sells these products into the animal feed marketas a nutritional supplement and sells potash into the industrial market as a component in drilling and fracturing fluids for oil and gas wells and otherindustrial inputs. In addition, Intrepid sells by-products including salt and magnesium chloride.Intrepid owns six active potash production facilities: four in New Mexico, and two in Utah. In late 2013, Intrepid substantially completedconstruction of its HB Solar Solution mine, near Carlsbad, New Mexico. Intrepid has placed the majority of newly constructed assets into service from theHB Solar Solution mine project, including assets related to the solar evaporation ponds and major components of the processing plant as of December 31,2013. Intrepid successfully harvested ore and ran the plant in 2013 and has begun producing potash from the HB Solar Solution mine in early 2014.Production comes from two underground mines and the HB Solar Solution mine in the Carlsbad region of New Mexico; a solar evaporation solutionmine near Moab, Utah; and a solar evaporation shallow brine mine in Wendover, Utah. Production will be added from the HB Solar Solution mine in theCarlsbad region of New Mexico. Trio® production comes from mining the mixed ore body that contains both potash and langbeinite, which is mined andprocessed at the East facility near Carlsbad, New Mexico. Intrepid manages sales and marketing operations centrally. This allows Intrepid to evaluate theproduct needs of its customers and then centrally determine which of its production facilities to use to fill customers’ orders in a manner designed to realize thehighest average net realized sales price to Intrepid. Intrepid calculates average net realized sales price by deducting freight costs from gross revenues and thenby dividing this result by tons of product sold during the period. Intrepid also monitors product inventory levels and overall production costs centrally.Intrepid has one reporting segment being the extraction, production, and sale of potassium related products. Intrepid's extraction and production operations areconducted entirely in the continental United States.Note 2— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESPrinciples of Consolidation—The consolidated financial statements of Intrepid include the accounts of Intrepid and its wholly owned subsidiaries.All intercompany balances and transactions have been eliminated in consolidation.Use of Estimates—The preparation of financial statements requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts ofrevenues and expenses during the reporting period. Intrepid bases its estimates on historical experience and on various other assumptions that are believed to bereasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.Significant estimates include, but are not limited to, those for proven and probable mineral reserves, the related present value of estimated future netcash flows, useful lives of plant assets, asset retirement obligations, normal inventory production levels, inventory valuations, the valuation of equity awards,the valuation of receivables, valuation of our deferred tax assets, and estimated blended income tax rates utilized in the current and deferred income taxcalculations. There are numerous uncertainties inherent in estimating quantities of proven and probable reserves, projecting future rates of production, and thetiming of development expenditures. Future mineral prices may vary significantly from the prices in effect at the time the estimates are made, as may estimatesof future operating costs. The estimate of proven and probable mineral reserves, the related present value of estimated future cash flows, and useful lives ofplant assets can affect various other items including depletion, the net carrying value of Intrepid’s mineral properties, the useful lives of related property, plant,and equipment, estimates associated with asset retirement obligations, and depreciation expenses. Specific to income tax items, we experience fluctuations inthe valuation of the deferred tax assets and liabilities due to changing state income tax rates and the blend of state tax rates.73Table of ContentsRevenue Recognition—Revenue is recognized when evidence of an arrangement exists, risks and rewards of ownership have been transferred tocustomers, which is generally when title passes, the selling price is fixed and determinable, and collection is reasonably assured. Title passes at the designatedshipping point for the majority of sales, but, in a few cases, title passes at the delivery destination. The shipping point may be the plant, a distributionwarehouse, a customer warehouse, or a port. Title passes for some international shipments upon payment by the purchaser; however, revenue is notrecognized for these transactions until shipment because the risks and rewards of ownership have not transferred pursuant to a contractual arrangement. Pricesare generally set at the time of, or prior to, shipment. In cases where the final price is determined upon resale of the product by the customer, revenue isdeferred until the final sales price is known.Sales are reported on a gross basis. Intrepid quotes prices to customers both on a delivered basis and on the basis of pick-up at Intrepid’s plants andwarehouses. When a sale occurs on a delivered basis, Intrepid incurs and, in turn, bills the customer and records as gross revenue the product sales value,freight, packaging, and certain other distribution costs. Many customers, however, arrange and pay for these costs directly and, in these situations, only theproduct sales are included in gross revenues.By-product Credits—When by-product inventories are sold, Intrepid records the sale of by-products as a credit to cost of goods sold.Inventory and Long-Term Parts Inventory—Inventory consists of product and by-product stocks that are ready for sale; mined ore; potash inevaporation ponds, which is considered work-in-process; and parts and supplies inventory. Product and by-product inventory cost is determined using thelower of weighted average cost or estimated net realizable value and includes direct costs, maintenance, operational overhead, depreciation, depletion, andequipment lease costs applicable to the production process. Direct costs, maintenance, and operational overhead include labor and associated benefits.Intrepid evaluates its production levels and costs to determine if any should be deemed abnormal and therefore excluded from inventory costs andexpensed directly during the applicable period. The assessment of normal production levels is judgmental and is unique to each period. Intrepid models normalproduction levels and evaluates historical ranges of production by operating plant in assessing what is deemed to be normal.Parts inventory, including critical spares, that is not expected to be utilized within a period of one year is classified as non-current. Parts and supplyinventory cost is determined using the lower of average acquisition cost or estimated replacement cost. Detailed reviews are performed related to the netrealizable value of parts inventory, giving consideration to quality, slow-moving items, obsolescence, excessive levels, and other factors. Parts inventories thathave not turned over in more than a year, excluding parts classified as critical spares, are reviewed for obsolescence and, if deemed appropriate, are includedin the determination of an allowance for obsolescence.Property, Plant, and Equipment—Property, plant, and equipment are stated at historical cost. Expenditures for property, plant, and equipmentrelating to new assets or improvements are capitalized, provided the expenditure extends the useful life of an asset or extends the asset’s functionality. Property,plant, and equipment are depreciated under the straight-line method using estimated useful lives. No depreciation is taken on assets classified as constructionin progress until the asset is placed into service. Gains and losses are recorded upon retirement, sale, or disposal of assets. Maintenance and repair costs arerecognized as period costs when incurred. Capitalized interest, to the extent of debt outstanding, is calculated and capitalized on assets that are beingconstructed, drilled, or built or that are otherwise classified as construction in progress.Recoverability of Long-Lived Assets—Intrepid evaluates its long-lived assets for impairment when events or changes in circumstances indicate thatthe related carrying amount may not be recoverable. An impairment is considered to exist if an asset’s total estimated net future cash flows on an undiscountedbasis are less than the carrying amount of the related asset. An impairment loss is measured and recorded based on the discounted estimated future cash flows.Changes in significant assumptions underlying future cash flow estimates or fair values of assets may have a material effect on our financial position andresults of operations.Mineral Properties and Development Costs—Mineral properties and development costs, which are referred to collectively as mineral properties,include acquisition costs, the cost of drilling wells, and the cost of other development work, all of which are capitalized. Depletion of mineral properties iscalculated using the units-of-production method over the estimated life of the relevant ore body. The lives of reserves used for accounting purposes are shorterthan current reserve life determinations due to uncertainties inherent in long-term estimates. These reserve life estimates have been prepared by us and reviewedand independently determined by mine consultants. Tons of potash and langbeinite in the proven and probable reserves are expressed in terms of expectedfinished tons of product to be realized, net of estimated losses. Market price fluctuations of potash or Trio®, as well as increased production costs or reducedrecovery rates, could render proven and74Table of Contentsprobable reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of reserves. In addition, theprovisions of Intrepid’s mineral leases, including royalty provisions, are subject to periodic readjustment by the state and federal government, which couldaffect the economics of its reserve estimates. Significant changes in the estimated reserves could have a material impact on Intrepid’s results of operations andfinancial position.Exploration Costs—Exploration costs include geological and geophysical work performed on areas that do not yet have proven and probablereserves declared. These costs are expensed as incurred.Asset Retirement Obligation—Reclamation costs are initially recorded as a liability associated with the asset to be reclaimed or abandoned, basedon applicable inflation assumptions and discount rates. The accretion of this discounted liability is recognized as expense over the life of the related assets, andthe liability is periodically adjusted to reflect changes in the estimates of either the timing or amount of the reclamation and abandonment costs.Planned Turnaround Maintenance—Each production operation typically shuts down periodically for planned maintenance activities. The costsof maintenance turnarounds at Intrepid's facilities are considered part of production costs and are absorbed into inventory in the period incurred.Leases—Upon entering into leases, Intrepid evaluates whether leases are operating or capital leases. Operating lease expense is recognized as incurred.If lease payments change over the contractual term or involve contingent amounts, the total estimated cost over the term is recognized on a straight-line basis.Income Taxes—Intrepid is a subchapter C corporation and, therefore, is subject to U.S. federal and state income taxes. Intrepid recognizes incometaxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differencesbetween the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured usingthe 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. Intrepidrecords a valuation allowance if it is deemed more likely than not that its deferred income tax assets will not be realized in full. These determinations aresubject to ongoing assessment.Cash and Cash Equivalents—Cash and cash equivalents consist of cash and liquid investments with an original maturity of three months or less.Investments—Intrepid’s short-term and long-term investments consist of certificates of deposit with various banking institutions, municipal tax-exempt and corporate taxable bonds, and corporate convertible debentures, which have been classified as either held-to-maturity or available-for-sale securities.Short-term investments on the consolidated balance sheets have remaining maturities to Intrepid less than or equal to one year and investments classified aslong-term on the consolidated balance sheets have remaining maturities to Intrepid greater than one year. With regard to the financial instruments classified asheld-to-maturity investments, they are carried on the consolidated balance sheets at cost, net of amortized premiums or discounts paid. The available-for-salesecurities are carried at fair value, with changes in fair value recognized through "Accumulated other comprehensive income" on the consolidated balancesheets. Fair value is assessed using a market‑based approach.Fair Value of Financial Instruments—Intrepid's financial instruments include cash and cash equivalents, short-term and long-term investments,restricted cash, accounts receivable, refundable income taxes, and accounts payable. These instruments are carried at cost, which approximates fair value dueto the short-term maturities of the instruments. All available-for-sale investments are carried at fair value. Allowances for doubtful accounts are recordedagainst the accounts receivable balance to estimate net realizable value. The fair value of the long-term fixed-rate debt is estimated using discounted cash flowanalysis based on current borrowing rates for debt with similar remaining maturities and ratings. Although there are no amounts currently outstanding underIntrepid’s unsecured credit facility, any borrowings that become outstanding would bear interest at a floating rate and therefore be recorded at their estimatedfair value.Earnings per Share—Basic net income per common share of stock is calculated by dividing net income available to common stockholders by theweighted average basic common shares outstanding for the respective period.Diluted net income per common share of stock is calculated by dividing net income by the weighted average diluted common shares outstanding,which includes the effect of potentially dilutive securities. Potentially dilutive securities for the diluted earnings per share calculation consist of awards of non-vested restricted shares of common stock, non-vested performance units, and non-qualified stock options. The dilutive effect of stock based compensationarrangements are computed using the treasury stock method. Following the lapse of the vesting period of restricted shares of common stock, the shares areconsidered issued and therefore are included in the number of issued and outstanding shares for purposes of these calculations.75Table of ContentsStock‑Based Compensation—Intrepid accounts for stock-based compensation by recording expense using the fair value of the awards at the timeof grant. Intrepid has recorded compensation expense associated with the issuance of non-vested restricted shares of common stock, non-vested performanceunits, and non-qualified stock options, all of which are subject to service conditions. The expense associated with such awards is recognized over the serviceperiod associated with each issuance. Performance units are also subject to operational performance- or market-based conditions.Note 3— EARNINGS PER SHAREDilutive securities, including stock options, non-vested restricted stock and performance units, are excluded from the diluted weighted average sharesoutstanding computation in periods in which they have an anti-dilutive effect, such as when there is a net loss. The treasury stock method is used to measurethe dilutive impact of non-vested restricted shares of common stock and outstanding stock options. For the years ended December 31, 2013, 2012, and 2011,a weighted average of 142,968, 116,138 and 37,681 non-vested shares of restricted common stock and 317,433, 192,258 and 154,301 stock options,respectively, were anti-dilutive and therefore were not included in the diluted weighted average share calculation. For the years ended December 31, 2013, and2012, zero and 518 shares of common stock underlying non-vested performance units, respectively, were anti-dilutive and therefore were not included in thediluted weighted average share calculation. The following table sets forth the calculation of basic and diluted earnings per share (in thousands, except per shareamounts): Year Ended December 31, 2013 2012 2011Net income $22,275 $87,443 $109,411Basic weighted average common shares outstanding 75,379 75,277 75,181Add: Dilutive effect of non-vested restricted common stock 21 46 58Add: Dilutive effect of stock options outstanding 2 13 42Add: Dilutive effect of performance units 5 1 —Diluted weighted average common shares outstanding 75,407 75,337 75,281Earnings per share: Basic $0.30 $1.16 $1.46Diluted $0.30 $1.16 $1.45Note 4— CASH, CASH EQUIVALENTS, AND INVESTMENTSThe following table summarizes the fair value of the Company’s cash and investments held in its portfolio, recorded as cash and cash equivalents orshort-term or long-term investments as of December 31, 2013, and 2012 (in thousands): December 31, 2013 2012Cash$18 $6,063Commercial paper and money market accounts376 27,556Total cash and cash equivalents$394 $33,619 Corporate bonds$12,954 $17,462Certificates of deposit and time deposits2,260 6,666Total short-term investments$15,214 $24,128 Corporate bonds$9,505 $—Total long-term investments$9,505 $— Total cash, cash equivalents, and investments$25,113 $57,74776Table of ContentsThe following table summarizes the cost basis, unrealized gains and losses, and fair value of Intrepid's available-for-sale investments held in itsportfolio as of December 31, 2013, and 2012 (in thousands): December 31, 2013 Unrealized Cost Basis Gain Loss Fair ValueCorporate bonds$22,475 $3 $(19) $22,459Certificates of deposit and time deposits2,260 — — 2,260Total available-for-sale securities$24,735 $3 $(19) $24,719 December 31, 2012 Unrealized Cost Basis Gain Loss Fair ValueCorporate bonds$17,510 $14 $(62) $17,462Certificates of deposit and time deposits166 — — 166Total available-for-sale securities$17,676 $14 $(62) $17,628The fair values of Intrepid's investments in corporate bonds are below their respective costs due to recent increases in short-term interest rates.However, Intrepid considers the unrealized losses on these investments to be temporary given Intrepid's current plans to hold the investments to maturity,which are all within the next two years. For the years ended December 31, 2013, and 2012, Intrepid's available-for-sale investments had gross realized gains ofapproximately $53,000 and $128,000, respectively. For the years ended December 31, 2013, and 2012, Intrepid recognized gross realized losses ofapproximately $21,000 and zero, respectively, on investments classified as available-for-sale.Note 5— INVENTORY AND LONG-TERM PARTS INVENTORYThe following summarizes Intrepid’s inventory, recorded at the lower of weighted average cost or estimated net realizable value as of December 31,2013, and 2012, respectively (in thousands): December 31, 2013 2012Finished goods product inventory, net $66,565 $26,856In-process mineral inventory 17,841 9,110Total product inventory, net 84,406 35,966Current parts inventory 20,605 17,309Total current inventory, net 105,011 53,275Long-term parts inventory 12,469 10,208Total inventory, net $117,480 $63,483Parts inventories are shown net of any required reserves. During the years ended December 31, 2013, 2012, and 2011, Intrepid recorded charges ofapproximately $3.7 million, $0.6 million, and $0.7 million, respectively, as a result of routine lower of weighted average cost or estimated net realizable valueassessments on its finished goods product inventory.Note 6— PROPERTY, PLANT, EQUIPMENT AND MINERAL PROPERTIES“Property, plant, and equipment” and “Mineral properties and development costs” were comprised of the following (in thousands):77Table of Contents December 31, Range of usefullives (years) 2013 2012 Lower Limit Upper LimitBuildings and plant $248,017 $148,989 4 25Machinery and equipment 472,250 334,128 3 25Vehicles 13,455 11,868 3 7Office equipment and improvements 18,846 15,766 2 10Ponds and land improvements 74,166 15,835 5 25Construction in progress 59,538 158,422 Land 498 298 Accumulated depreciation (197,108) (142,137) $689,662 $543,169 Mineral properties and development costs $145,822 $74,712 10 25Construction in progress 4,250 30,444 Accumulated depletion (13,165) (11,060) $136,907 $94,096 Intrepid incurred the following costs for depreciation, depletion, amortization, and accretion, including costs capitalized into inventory, for thefollowing periods (in thousands): Year Ended December 31, 2013 2012 2011Depreciation $57,670 $45,559 $33,572Depletion 2,134 1,316 1,373Amortization — — 92Accretion 1,499 724 750Total incurred $61,303 $47,599 $35,787Note 7 — ACCRUED LIABILITIESThe components of "Accrued Liabilities" as of December 31, 2013, and 2012 were as follows: December 31, 2013 2012 (in thousands)Accrued construction in progress $21,152 $25,204Accrued property taxes 1,714 1,327Accrued utilities 1,868 1,768Other accrued liabilities 5,111 4,197Total Accrued Liabilities $29,845 $32,496Note 8 — DEBTUnsecured Credit Facility—Intrepid has an unsecured credit facility, led by U.S. Bank, as administrative agent, and Wells Fargo Bank, assyndication agent. This unsecured credit facility provides a total revolving credit facility of up to $250 million. The facility was amended in August 2013 toextend the maturity date by two years to August 2018, to decrease the applicable interest rates on any borrowings, to decrease the quarterly commitment fees,and to increase the maximum allowable leverage ratio to 3.5. The minimum allowable fixed charge coverage ratio under the facility remains at 1.3.78Table of ContentsUnder the facility, the leverage ratio is defined as the ratio of total funded indebtedness to adjusted EBITDA (earnings before interest, income taxes,depreciation, amortization, and certain other expenses) for the prior four fiscal quarters. The fixed charge coverage ratio is defined as the ratio of adjustedEBITDA for the prior four fiscal quarters to fixed charges. Both ratios may operate to limit the total amount available to Intrepid under the facility.The facility is unsecured and is guaranteed by Intrepid's material subsidiaries. As of December 31, 2013, and 2012, there were no amountsoutstanding under the facility. The amount available to Intrepid under the facility is calculated based on applying the financial covenants. As of December 31,2013, $222 million of the facility was available to Intrepid.Unsecured Senior Notes—In April 2013, Intrepid issued $150 million aggregate principal amount of unsecured senior notes ("the Notes") pursuantto a note purchase agreement entered into in August 2012. Intrepid received proceeds of $149.3 million, net of offering costs. The Notes consist of the followingseries:•$60 million of 3.23% Senior Notes, Series A, due April 16, 2020•$45 million of 4.13% Senior Notes, Series B, due April 14, 2023•$45 million of 4.28% Senior Notes, Series C, due April 16, 2025The Notes are senior unsecured obligations of Intrepid and rank equally in right of payment with any other unsubordinated unsecured indebtednessof Intrepid and share the same financial covenants. The obligations under the Notes are unconditionally guaranteed by Intrepid's material subsidiaries.Intrepid was in compliance with all covenants as of December 31, 2013.Interest on the Notes began accruing on April 16, 2013, the date the Notes were issued. Interest is paid semiannually on April 16 and October 16 ofeach year, beginning on October 16, 2013.Interest expense is recorded net of any capitalized interest associated with investments in capital projects. Intrepid incurred gross interest expense forthe years ended December 31, 2013, 2012, and 2011 of $4.9 million, $0.9 million, and $0.9 million, respectively. Intrepid capitalized $3.4 million of interestduring the year ended December 31, 2013. Intrepid had no capitalized interest in 2012 or 2011.Note 9 — ASSET RETIREMENT OBLIGATIONIntrepid recognizes an estimated liability for future costs associated with the abandonment and reclamation of its mining properties. A liability for thefair value of an asset retirement obligation and a corresponding increase to the carrying value of the related long-lived asset are recorded as the miningoperations occur or the assets are acquired.Intrepid’s 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 orwhen there are upward revisions to estimated costs. The credit adjusted risk-free rates used to discount Intrepid’s abandonment liabilities range from 6.9% to8.5%. Revisions to the liability occur due to construction of new or expanded facilities, changes in estimated abandonment costs or economic lives, or iffederal or state regulators enact new requirements regarding the abandonment or reclamation of mines.Following is a table of the changes to Intrepid’s asset retirement obligations for the following periods (in thousands): Year Ended December 31, 2013 2012 2011Asset retirement obligation, at beginning of period $20,579 $9,708 $9,478Liabilities settled (571) (173) —Liabilities incurred 351 2,114 222Changes in estimated obligations (811) 8,206 (742)Accretion of discount 1,499 724 750Total asset retirement obligation, at end of period $21,047 $20,579 $9,708The current portion of asset retirement obligations of $1.1 million and $1.2 million was included in "Other" current liabilities on the consolidatedbalance sheets as of December 31, 2013, and December 31, 2012. The undiscounted amount of79Table of Contentsasset retirement obligation is $54.9 million as of December 31, 2013, of which Intrepid estimates approximately $8.8 million in payments may occur in thenext five years.Note 10 — COMPENSATION PLANSCash Bonus Plan—Intrepid has cash bonus plans that allow participants to receive varying percentages of their aggregate base salary. Any awardsunder the cash bonus plans are based on a variety of elements related to Intrepid’s performance in certain production, operational, financial, and other areas,as well as the participants’ individual performance. Intrepid accrues cash bonus expense related to the current year’s performance.Equity Incentive Compensation Plan—Intrepid's Board of Directors and stockholders have adopted a long-term incentive compensation plancalled the Intrepid Potash, Inc. Equity Incentive Plan, as Amended and Restated (the "Plan"). Intrepid has issued common stock, restricted shares of commonstock, performance units, and non-qualified stock option awards under the Plan. As of December 31, 2013, the following awards were outstanding under theplan: 352,050 shares of non-vested restricted shares of common stock; 32,028 non-vested performance units representing shares of common stock; andoptions to purchase 337,587 shares of common stock. As of December 31, 2013, approximately 3.7 million shares of common stock remained available forissuance under the Plan.Common Stock—On an annual basis, under the Plan, the Compensation Committee of the Board of Directors (the "Compensation Committee")approves the award of shares of common stock to the non-employee members of the Board of Directors as compensation for service for the period ending onthe date of Intrepid’s annual stockholders’ meeting for the following year. During the years ended December 31, 2013, 2012 and 2011, the CompensationCommittee approved awards of 17,680, 14,812 and 9,616 shares of common stock, respectively. These shares of common stock were granted withoutrestrictions and vested immediately.Non-vested Restricted Shares of Common Stock—Under the Plan, grants of non-vested restricted shares of common stock have been awarded toexecutive officers, other key employees, and consultants. The awards contain service conditions associated with continued employment or service. There areno performance or market conditions associated with these awards. The terms of the non-vested restricted shares of common stock provide voting and regulardividend rights to the holders of the awards. Upon vesting, the restrictions on the restricted shares of common stock lapse and the shares are considered issuedand outstanding.Since 2009, the Compensation Committee has issued restricted shares of common stock under the Plan in the first quarter of each year to Intrepid'sexecutive management team and other selected employees as part of an annual equity award program. These awards vest ratably over three years. From time totime, the Compensation Committee grants restricted shares of common stock to newly hired or promoted employees or other employees or consultants whohave achieved extraordinary personal performance objectives. These restricted shares of common stock generally vest over one- to four-year periods.In measuring compensation expense associated with the grant of non-vested restricted shares of common stock, Intrepid uses the fair value of theaward, determined as the closing stock price for Intrepid’s common stock on the grant date. Compensation expense is recorded monthly over the vesting periodof the award. Total compensation expense related to the non-vested restricted shares of common stock awards was $3.5 million, $3.2 million and $3.2million, for the years ended December 31, 2013, 2012, and 2011, respectively. These amounts are net of estimated forfeiture adjustments. As of December 31,2013, there was $4.9 million of total remaining unrecognized compensation expense related to non-vested restricted common stock awards that will be expensedthrough 2015.A summary of activity relating to Intrepid’s non-vested restricted common stock activity for the year ended December 31, 2013, is presented below.80Table of Contents Weighted Average Grant-Date Fair Value Shares Non-vested restricted common stock, beginning of period 240,757 $26.04Granted 235,490 $19.25Vested (104,033) $26.27Forfeited (20,164) $22.13Non-vested restricted common stock, end of period 352,050 $21.65Performance Units—Since 2012, the Compensation Committee has granted performance units under the Plan to certain members of Intrepid'sexecutive management team as part of the annual equity award program. The Compensation Committee issued two types of performance units: an operationalperformance-based award and a market condition-based award. The awards contain service conditions associated with continued employment, as well as anoperational performance or market condition. The operational performance conditions are based on tons of potash and Trio® produced, and the marketconditions are based on Intrepid's stock performance relative to a peer group and a broad market index. Based on performance under these metrics for the yearended December 31, 2013, the Compensation Committee certified that a total of 23,139 shares of common stock were earned under these awards, subject tovesting requirements. These performance shares are subject to vesting conditions that provided for issuance over a three-year period assuming continuedemployment by the individual grantees through the vesting dates. For the years ended December 31, 2013, and 2012, Intrepid recognized stock‑basedcompensation related to performance units of approximately $0.7 million and $0.4 million.Non-qualified Stock Options—From 2009 to 2011, the Compensation Committee issued non-qualified stock options under the Plan in the firstquarter of each year to Intrepid’s executive management and other selected employees as part of its annual award program. These stock options generally vestratably over 3 years. In measuring compensation expense for this grant of options, Intrepid estimated the fair value of the award on the grant date using theBlack‑Scholes option valuation model. Option valuation models require the input of highly subjective assumptions, including the expected volatility of theprice of the underlying stock. No stock options were issued in the years ended December 31, 2013, and 2012.The following assumptions were used to compute the weighted average fair market value of options granted during the period presented. Year Ended December 31,2011Risk free interest rate 2.6%Dividend yield —Estimated volatility 56%Expected option life 6 yearsIntrepid’s computation of the estimated volatility was based on the historic volatility of its and selected peer companies' common stock over theexpected option life. The peer companies selected had volatility that was highly correlated to Intrepid’s common stock from the date of the initial public offeringto the dates of grant. This peer information was utilized because Intrepid had insufficient trading history to calculate a meaningful long-term volatility factor.The computation of expected option life was determined based on a reasonable expectation of the average life prior to being exercised or forfeited, givingconsideration to the overall vesting period and contractual terms of the awards. The risk-free interest rates for periods that matched the option award’s expectedlife was based on the U.S. Treasury constant maturity yield at the time of grant over the expected option life.For the years ended December 31, 2013, 2012, and 2011, Intrepid recognized stock-based compensation related to previously issued stock options ofapproximately $0.6 million, $1.2 million and $1.4 million, respectively. As of December 31, 2013, there was $0.1 million of total remaining unrecognizedcompensation expense related to unvested non-81Table of Contentsqualified stock options that will be expensed through 2013 and 2014. Realized tax benefits from tax deductions for exercised options in excess of the deferredtax asset attributable to stock compensation for such options are regarded as “excess tax benefits.”A summary of Intrepid’s stock option activity for the year ended December 31, 2013, is as follows: Shares Weighted AverageExercise Price Aggregate IntrinsicValue (1) Weighted AverageRemaining ContractualLife Weighted AverageGrant-Date Fair ValueOutstanding non-qualified stock options, beginning of period 344,691 $26.26 $13.13Exercised — —Forfeited (1,474) $35.69 $19.59Expired (5,630) $25.03 $12.27Outstanding non-qualified stock options, end of period 337,587 $26.24 $— 5.7 $13.12 Vested or expected to vest, end of period 337,186 $26.23 $— 5.7 $13.11 Exercisable non-qualified stock options, end of period 307,664 $25.32 $— 5.7 $12.50(1)The intrinsic value of a stock option is the amount by which the market value exceeds the exercise price as of the end of the period presented.The weighted average grant-date fair value per share of options granted during the year ended December 31, 2011, was $19.59.Note 11 — INCOME TAXESIntrepid’s income tax provision is comprised of the elements below. A summary of the provision for income taxes is as follows (in thousands): Year Ended December 31, 2013 2012 2011Current portion of income tax expense (benefit): Federal $(14,243) $10,224 $12,191 State (31) 1,237 4,631Deferred portion of income tax expense: Federal 25,050 32,451 38,133 State 5,042 5,572 10,895Total income tax expense $15,818 $49,484 $65,850As of December 31, 2013, and 2012, Intrepid had a net deferred tax asset. Intrepid believes that it is more likely than not that the results of futureoperations should generate sufficient taxable income to realize the deferred tax assets, except for certain capital loss and state carryforwards for which a $2.2million valuation allowance has been recorded, of which $1.8 million was incurred and recorded in 2013. As of December 31, 2013, Intrepid hadapproximately $30 million of federal net operating loss carryforwards which expire in 2033. Intrepid also has approximately $4.4 million in federal alternativeminimum tax credits, and $1.9 million of research and development credits which begin to expire in 2031. There are no items that require disclosure inaccordance with the Financial Accounting Standards Board’s (“FASB”) guidance on accounting for uncertainty in income taxes.82Table of Contents December 31, 2013 2012 (in thousands)Current deferred tax assets (liabilities): Prepaid expenses $(2,141) $(1,897)Inventory 6,864 1,649Accrued employee compensation and benefits 1,764 2,044Equity compensation 1,093 758Other 761 (549)Total current deferred tax assets 8,341 2,005Non-current deferred tax assets: Property, plant, equipment and mineral properties, net 108,049 156,415Asset retirement obligation 9,073 8,304AMT credits 4,417 6,811Net operating loss carryforward 10,600 —Other 11,710 9,018Total non-current deferred tax assets 143,849 180,548Total deferred tax asset $152,190 $182,553Intrepid is required to evaluate its deferred tax assets and liabilities each reporting period using the enacted tax rates expected to apply to taxableincome 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 toIntrepid’s current and deferred income tax calculations are impacted most significantly by the tax jurisdictions in which Intrepid is doing business. Changingbusiness conditions for normal business transactions and operations, as well as changes to state tax rates and apportionment laws, potentially alter theapportionment of income among the states for income among the states for income tax purposes. These changes to apportionment laws result in changes in thecalculation of Intrepid’s current and deferred income taxes, including the valuation of its deferred tax assets and liabilities. The effects of any such changes arerecorded in the period of the adjustment. Such adjustments can increase or decrease the net deferred tax asset on the balance sheet and impact the correspondingdeferred tax benefit or deferred tax expense on the income statement. As of December 31, 2013, Intrepid's estimate of our blended state tax rate increased,resulting in an increase of the value of the deferred tax asset by net $0.9 million to reflect changes in business conditions in concert with changes inapportionment rules of the states in which it operates, and a decrease in the state tax rate for the state of New Mexico.A decrease of Intrepid’s state tax rate decreases the value of its deferred tax asset, resulting in additional deferred tax expense being recorded in theincome statement. Conversely, an increase in Intrepid’s state income tax rate would increase the value of the deferred tax asset, resulting in an increase inIntrepid’s deferred tax benefit. Because of the magnitude of the temporary differences between book and tax basis in the assets of Intrepid, relatively smallchanges in the state tax rate may have a pronounced impact on the value of the net deferred tax asset.Income tax expense for Intrepid differs from the amount that would be provided by applying the statutory U.S. federal income tax rate to incomebefore income taxes. The difference is due to the impacts of percentage depletion, bonus depreciation, the effect of state income taxes, the estimated effect of thedomestic production activities deduction, and other temporary and permanent differences between the financial statement carrying amounts of assets andliabilities and their respective tax bases.A reconciliation of the statutory rate to the effective rate is as follows (in thousands, except percentages):83Table of Contents Year Ended December 31, 201320122011Federal taxes at statutory rate $13,333 $47,924 $61,341Add: State taxes, net of federal benefit 3,322 3,443 9,072Domestic production activities deduction 1,265 (191) (994)Change in valuation allowance 1,841 — 437Research and development credits (1,560) (326) —Change in state tax rate (948) 981 (3,699)Percentage depletion (1,841) (1,623) —Other 406 (724) (307)Net expense as calculated $15,818 $49,484 $65,850 Effective tax rate 41.5% 36.1% 37.6%Note 12 — COMMITMENTS AND CONTINGENCIESMarketing Agreements—Intrepid has a marketing agreement appointing PCS Sales (USA), Inc. (“PCS Sales”) as its exclusive sales representativefor potash export sales, with the exception of sales to Canada and Mexico, and appointing PCS Sales as non-exclusive sales representative for potash sales intoMexico. Trio® is also marketed under this arrangement. This agreement is cancelable with 30 days' written notice.Reclamation Deposits and Surety Bonds—As of December 31, 2013, and 2012, Intrepid had $17.3 million and $7.9 million, respectively, ofsecurity placed principally with the State of Utah and the BLM for eventual reclamation of its various facilities. Of this total requirement, as of December 31,2013, and 2012, $0.5 million and $0.5 million consisted of long-term restricted cash deposits reflected in “Other” long-term assets on the balance sheet, and$16.8 million and $7.4 million, respectively, was secured by surety bonds issued by an insurer. The surety bonds are held in place by an annual fee paid tothe issuer.Intrepid may be required to post additional security to fund future reclamation obligations as reclamation plans are updated or as governmentalentities change requirements.New Mexico Employment Credits—During 2011, based on an approval and payment of an application with the State of New Mexico, Intrepidrecorded $7.9 million of other operating income from the New Mexico High Wage Jobs Credit. Intrepid considered the approval and payment of these credits tobe confirmation that the criteria for recognition was deemed probable and reasonably estimable. Since that time, Intrepid has recorded, and continues to record,the value of estimated refundable employment-related credits for qualified wages paid in New Mexico. The estimated recoverable value of these credits hasbeen, and continues to be, reflected as a reduction to production costs and amounts yet to be collected are recorded in “Other receivables, net” in theconsolidated balance sheets in the same period in which the credit is earned.During 2013, the New Mexico Taxation and Revenue Department denied Intrepid's application to receive the New Mexico High Wage Jobs Credit forcertain prior years' filings. Intrepid believes the denial is improper and intends to vigorously pursue recovery of these credits. Nonetheless, in 2013, Intrepidrecorded a reserve of approximately $2.8 million for credits relating to the denied periods in order to reflect the denial of the claimed credits. As the productinventory associated with the denied credits for periods prior to 2012 has since been sold, Intrepid recorded the expense associated with recording the reserve asan "Other expense" in Operating income in 2013. The value of credits associated with 2013 and 2012 have been established as a net receivable as of December31, 2013, and is reflected in "Other receivables, net" in the consolidated balance sheets.Legal— Intrepid is subject to litigation. Intrepid has determined that there are no material claims outstanding as of December 31, 2013. However,Intrepid has established a legal reserve for loss contingencies that are considered probable and reasonably estimable.Future Operating Lease Commitments—Intrepid has certain operating leases for land, mining and other operating equipment, an airplane,offices, and railcars, with original terms ranging up to 20 years. The annual minimum lease payments for the next five years and thereafter are presentedbelow.84Table of ContentsYears Ending December 31, (In thousands)2014 $4,0452015 3,9062016 3,4782017 3,3322018 3,256Thereafter 1,234Total $19,251Rental and lease expenses follow for the indicated periods (in thousands):For the year ended December 31, 2013 $4,428For the year ended December 31, 2012 $4,175For the year ended December 31, 2011 $4,865Note 13 — DERIVATIVE FINANCIAL INSTRUMENTSIntrepid is exposed to global market risks, including the effect of changes in commodity prices and interest rates. From time to time, Intrepid usesderivatives to manage financial exposures that occur in the normal course of business. Intrepid does not enter into or hold derivatives for trading purposes.While all derivatives had been used for risk management purposes, and were originally entered into as economic hedges, they had not been designated ashedging instruments for accounting purposes.Interest RatesPrior to Intrepid's initial public offering in April 2008, Intrepid's predecessor historically managed a portion of its floating interest rate exposure onoutstanding debt through the use of interest rate derivative contracts, as required by its credit agreement. Intrepid repaid its assumed debt obligationsimmediately subsequent to the closing of its initial public offering and, in the year ended December 31, 2012, closed its positions in the derivative financialinstruments also assumed from its predecessor.Intrepid did not have any derivative instruments outstanding during the year ended December 31, 2013. The following table presents the amounts ofgain or (loss) recognized in income on derivatives affecting the consolidated statement of operations for the periods presented (in thousands): Location of gain (loss)recognized in income onderivative Year Ended December 31,Derivatives not designated as hedging instruments 2012 2011Interest rate contracts: Realized loss Interest expense $(1,103) $(1,436)Unrealized gain Interest expense 1,049 1,289Total loss Interest expense $(54) $(147)Note 14 — FAIR VALUE MEASUREMENTS85Table of ContentsIntrepid applies the provisions of the FASB’s Accounting Standards Codification™ (“ASC”) Topic 820, Fair Value Measurements andDisclosures, for all financial assets and liabilities measured at fair value on a recurring basis. The topic establishes a framework for measuring fair value andrequires disclosures about fair value measurements. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer aliability (an exit price) in an orderly transaction between market participants at the measurement date. The topic establishes market or observable inputs as thepreferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The topic also establishes ahierarchy for grouping these assets and liabilities based on the significance level of the following inputs, as follows:•Level 1—Quoted prices in active markets for identical assets and liabilities.•Level 2—Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active, andmodel‑derived valuations whose inputs are observable or whose significant value drivers are observable.•Level 3—Significant inputs to the valuation model are unobservable.The following is a listing of Intrepid’s assets and liabilities required to be measured at fair value on a recurring basis and where they are classifiedwithin the hierarchy as of December 31, 2013 (in thousands): Fair Value at Reporting Date Using December 31, 2013 Quoted Prices inActive Markets forIdentical Assets orLiabilities(Level 1) SignificantObservable Inputs(Level 2) Significant UnobservableInputs(Level 3)Investments Corporate bonds $22,459 $— $22,459 $— Fair Value at Reporting Date Using December 31, 2012 Quoted Prices inActive Markets forIdentical Assets orLiabilities(Level 1) SignificantObservable Inputs(Level 2) Significant UnobservableInputs(Level 3)Investments Corporate bonds $17,462 $— $17,462 $—Certificate of deposits $166 $— $166 $— Financial assets or liabilities are categorized within the hierarchy based upon the lowest level of input that is significant to the fair value measurement.Below is a general description of Intrepid’s valuation methodologies for financial assets and liabilities, which are measured at fair value and are included in theaccompanying consolidated balance sheets. Intrepid's available for sale investments consist of corporate bonds and certain certificate of deposits that arevalued using Level 2 inputs. Market pricing for these investments is obtained from an established financial markets data provider.The methods described above may result in a fair value estimate that may not be indicative of net realizable value or may not be reflective of futurefair values and cash flows. While Intrepid believes that the valuation methods utilized are appropriate and consistent with the requirements of ASC Topic 820and with other marketplace participants, Intrepid recognizes that third parties may use different methodologies or assumptions to determine the fair value ofcertain financial instruments that could result in a different estimate of fair value at the reporting date.86Table of ContentsFinancial Instruments—The carrying values and fair values of our financial instruments as of December 31, 2013, and December 31, 2012, are as follows(in thousands): December 31, 2013 December 31, 2012 Carrying Value Fair Value Carrying Value Fair ValueCash and cash equivalents $394 $394 $33,619 $33,619Certificate of deposits 2,260 2,260 6,666 6,666Accounts receivable 28,294 28,294 40,630 40,630Refundable income taxes 15,722 15,722 3,306 3,306Accounts payable 27,602 27,602 19,634 19,634Long-term debt $150,000 $129,000 $— $—For cash and cash equivalents, certificate of deposit investments, accounts receivable, refundable income taxes, and accounts payable, the carryingamount approximates fair value because of the short-term maturity of those instruments. As no established market for the long-term debt exists, the fair valueof the long-term debt is estimated using 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 betweenknowledgeable willing parties.Note 15 — EMPLOYEE BENEFITS401(k) PlanIntrepid maintains a savings plan qualified under Internal Revenue Code Sections 401(a) and 401(k). The 401(k) Plan is available to all eligibleemployees of all of the consolidated entities. Employees may contribute amounts as allowed by the U.S. Internal Revenue Service ("IRS") to the 401(k) Plan(subject to certain restrictions) in before-tax contributions. Intrepid matches employee contributions on a dollar-for-dollar basis up to a maximum of 5% andalso based on the employee’s base compensation. Intrepid’s contributions to the 401(k) Plan in the following periods were (in thousands): ContributionsFor the year ended December 31, 2013 $2,323For the year ended December 31, 2012 $2,022For the year ended December 31, 2011 $1,293Defined Benefit Pension PlanIn accordance with the terms of the Moab Purchase Agreement associated with the purchase of the Moab assets in 2000, Intrepid and its predecessorestablished the Moab Salt, L.L.C. Employees’ Pension Plan (“Pension Plan”), a defined benefit pension plan. Pursuant to the terms of the Moab PurchaseAgreement, employees transferring from the acquiree to Intrepid were granted credit under the Pension Plan for their prior service and for the benefits they hadaccrued under the acquiree’s pension plan, and approximately $1.5 million was transferred from the acquiree’s pension plan to the Pension Plan toaccommodate the recognition of such prior service and benefits. In February 2002, Intrepid “froze” the benefits to be paid under the Pension Plan by limitingparticipation in the Pension Plan solely to employees hired before February 22, 2002, and by including only pay and service through February 22, 2002, inthe calculation of benefits. However, Intrepid was required to maintain the Pension Plan for the existing participants and for the benefits they had accrued as ofthat date.In December 2011, Intrepid adopted resolutions to terminate the Pension Plan. After receiving the necessary regulatory approvals, plan amendments,and participant settlement elections, Intrepid funded $2.0 million to settle all pension plan liabilities in April 2013. Upon funding, Intrepid was released fromany further obligations under the pension plan. Accordingly, Intrepid recorded additional expense of approximately $1.9 million to reflect the termination of thepension plan in the year ended December 31, 2013. This amount is recorded as "Other income (expense)" in the consolidated statement of87Table of Contentsoperations and represents the difference between the final amount funded and the sum of the recorded pension liability and the unrecognized actuarial lossincluded in accumulated other comprehensive income.The following table (in thousands, except percentages) provides a reconciliation of the changes in the Pension Plan’s benefit obligations and fair valueof assets for the years ended December 31, 2013, 2012, and 2011, as measured on those dates, and a statement of the funded status as of December 31, 2013,2012, and 2011. The impact of the decision to terminate the plan is estimated in the amounts disclosed below. Year Ended December 31, 2013 2012 2011Obligations and funded status at period end: Change in benefit obligation: Projected benefit obligation at beginning of period $5,486 $4,870 $3,802 Interest cost 28 93 195 Benefit payments (5,721) (175) (143) Actuarial losses 207 698 1,146 Plan amendments — — (130) Projected benefit obligation at end of period — 5,486 4,870 Accumulated benefit obligation at end of period — 5,486 4,870Change in plan assets: Fair value of plan assets at beginning of period $3,702 $3,758 $2,789 Actual return on assets (net of expenses) (1) 26 (43) Employer contributions 2,020 93 1,155 Benefit payments (5,721) (175) (143) Fair value of plan assets at end of period — 3,702 3,758Unfunded status (1) — (1,784) (1,112)Items not yet recognized as a component of net periodic pension cost: Prior service cost arising during current period $— $(115) $(131) Unrecognized actuarial loss $— $2,930 $2,501Prepaid benefit cost $— $1,031 $1,258Accumulated other comprehensive income: Prior service credit $— $(115) $(131) Net loss $— $2,930 $2,501Components of net periodic benefit cost: Interest cost $28 $93 $195 Expected return on assets — — (195) Amortization of prior service cost (5) (16) — Amortization of actuarial loss 100 242 101 Settlement loss 2,928 — — Net period benefit cost $3,051 $319 $101Other comprehensive income $— $445 $1,153Amounts included in AOCI expected to be recognized during the next fiscal year: Actuarial loss $— $285 $22788Table of Contents(1)As of December 31, 2012, and 2011, amount is recognized on Intrepid's consolidated balance sheet in "Accrued employee compensation andbenefits."For December 31, 2012, projected benefit obligation and the accumulated benefit obligation final distribution of plan benefits in 2012 was assumed.The interest rates used were 2.7% for benefits currently in payment and 3.4% for all other annuity benefits. Lump sum benefits were valued using interest ratesof 1.0% for years zero to four, 3.5% for years five to 19 and 4.6% for years 20 and after.Prior to 2012, the basis used to determine the overall expected long-term rate of return on assets assumption was an analysis of the historical rate ofreturn for a portfolio with a similar asset allocation. The assumed long-term asset allocation for the plan was 47% equity securities, 43% fixed income, 5% realestate, and 5% cash. In 2013, Intrepid liquidated the investment positions and reinvested the proceeds in U.S. treasury bills or similar investments prior tosettling all pension plan liabilities.Asset Allocation Strategy: Prior to the determination to liquidate the plan, the plan’s investment policy strategy for pension plan assets is to seekrelatively stable growth in the value of investable assets supplemented by a low level of income. The main objective was to provide steady growth whilelimiting fluctuations to less than those of the overall stock market. As the Pension Plan had a long-term investment horizon, limited liquidity needs, highexposure to purchasing power risk, and little concern for income stability, Intrepid had set the following target asset allocations: 20% to 75% U.S. equitysecurities, 0% to 20% international equities, 0% to 30% absolute returns, 10% to 40% corporate bonds, 0% to 10% REITs, 0% to 10% commodities, and 5% to28% short-term Treasury bonds. Under the plan guidelines, there are no prohibited investment types.Fair Value Measurement of Plan Assets: The fair value of the major asset classes of the Pension Plan’s assets using the fair value hierarchy asdescribed in the footnote titled Fair Value Measurements and the inputs and valuation techniques used to measure fair value of such assets as ofDecember 31, 2012, is as follows (in thousands): Fair Value at Reporting Date UsingAsset Class December 31, 2012 Quoted Prices in ActiveMarkets for IdenticalAssets or Liabilities(Level 1) SignificantObservable Inputs(Level 2) SignificantUnobservableInputs(Level 3)Cash equivalents: Money market mutual fund $3,702 $3,702 $— $—Cash FlowsContributions: Intrepid contributed approximately $2.0 million to the Pension Plan in 2013.Note 16 — RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOMEThe components of "Accumulated other comprehensive loss," net of tax, as of December 31, 2013, were as follows (in thousands):89Table of Contents Unrealized Gainsand Losses onAvailable-for-SaleSecurities Defined BenefitPension Plan TotalBalance as of December 31, 2012$(29) $(1,700) $(1,729)Other comprehensive income before reclassifications(4) — (4)Amounts reclassified from accumulated othercomprehensive loss23 1,700 1,723Net current-period other comprehensive income$19 $1,700 $1,719Balance as of December 31, 2013$(10) $— $(10)The effects on net income of amounts reclassified from Accumulated other comprehensive loss for year ended December 31, 2013, were asfollows (in thousands):Details about Accumulated OtherComprehensive Loss ComponentsAmount Reclassifiedfrom AccumulatedOtherComprehensive Loss Affected Line Item in the ConsolidatedStatement of OperationsUnrealized losses on available-for-sale securities$38 Other income (expense)Total before tax38 Tax benefit(15) Net of tax$23 Pension liability adjustment Amortization of prior service cost andactuarial loss$71 Selling and administrativeTermination of pension plan expense2,744 Other income (expense)Total before tax2,815 Tax benefit(1,115) Net of tax$1,700 Total reclassification for the period, net of tax$1,723 Note 17 — RECOGNITION OF COMPENSATING TAX REFUNDIn the second quarter of 2013, Intrepid received a refund from the State of New Mexico related to a compensating tax refund submitted for the periodfrom December 2008 to October 2011. This refund consists of items for which Intrepid made compensating tax payments on behalf of vendors, as well ascompensating tax payments on construction-related and service items during a period when the law was deemed unconstitutional. Upon receipt of the refund,which removed uncertainty about the amount and collection of the refund, Intrepid recorded $1.7 million of income, which is reflected in "Other (expense)income" included in Operating income in the consolidated statements of operations for the year ended December 31, 2013.Note 18 — RECOGNITION OF INCOME ASSOCIATED WITH DEFERRED INSURANCE PROCEEDSIn the first quarter of 2011, Intrepid completed the reconstruction and commissioning for its product warehouses at its East facility and finalizedinsurance settlement amounts related to the associated product inventory warehouse insurance claim that resulted from a wind event that occurred in 2006. Asa result, the $11.7 million of deferred insurance proceeds that were recorded as of December 31, 2010, plus approximately $0.8 million of additionalinsurance proceeds, were recognized as income in the year ended December 31, 2011. The total of approximately $12.5 million has been recorded as“Insurance settlements income from property and business losses” on the consolidated statement of operations in the year ended December 31, 2011. Therewas no cash impact associated with this event in the year ended December 31, 2011, as the previously deferred insurance proceeds were paid to Intrepid priorto December 31, 2010, with the exception of the final insurance payment of approximately $0.8 million, which was paid to Intrepid in April 2011.90Table of ContentsNote 19 — CONCENTRATION OF CREDIT RISKCredit risk represents the loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted.Concentrations of credit risk, whether on or off balance sheet, that arise from financial instruments exist for counterparties when they have similar economiccharacteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.Intrepid’s products are marketed for sale into three primary markets. These markets are the agricultural market as a fertilizer, the industrial marketas a component in drilling fluids for oil and gas exploration, and the animal feed market as a nutrient. Credit risks associated with the collection of accountsreceivable are primarily related to the impact of external factors on our customers. Our customers are distributors and end-users whose credit worthiness andability to meet their payment obligations will be affected by factors in their industries and markets. Those factors include soil nutrient levels, crop prices,weather, the type of crops planted, changes in diets, growth in population, the amount of land under cultivation, fuel prices and consumption, oil and gasdrilling and completion activity, the demand for biofuels, government policy, and the relative value of currencies.In 2013, 2012, and 2011, one of our distributor customers accounted for approximately 11%, 22%, and 17%, respectively, of our sales, andanother distributor customer who accounted for 7%, 9%, and 12% of sales, respectively. Intrepid operates in a competitive industry, and although Intrepidconsiders its relationship with these customers to be very important, Intrepid does not believe that the loss of these customers or a significant decline in theirpurchases would have a material adverse long-term effect on its financial results due to the regional demands for Intrepid's product.In each of the last three years ended December 31, 2013, 2012, and 2011, approximately 96% of our sales were sold to customers located in theUnited States.Intrepid maintains cash accounts with several financial institutions. At times, the balances in the accounts may exceed the $250,000 balance insuredby the Federal Deposit Insurance Corporation.Note 20 — QUARTERLY FINANCIAL DATA (UNAUDITED) (in thousands, except per share amounts) Three Months Ended December 31, 2013 September 30, 2013 June 30, 2013 March 31, 2013Sales $73,806 $70,569 $92,680 $99,257Cost of Goods Sold $57,308 $46,780 $55,003 $53,773Gross Margin $3,159 $12,903 $28,053 $33,800Net (Loss) Income $(5,987) $2,026 $11,317 $14,919(Loss) Earnings Per Share, Basic $(0.08) $0.03 $0.15 $0.20(Loss) Earnings Per Share, Diluted $(0.08) $0.03 $0.15 $0.20 Three Months Ended December 31, 2012 September 30, 2012 June 30, 2012 March 31, 2012Sales $110,939 $129,350 $98,784 $112,243Cost of Goods Sold $61,453 $63,382 $51,064 $60,581Gross Margin $37,183 $51,854 $39,895 $41,206Net Income $14,537 $33,267 $19,013 $20,626Earnings Per Share, Basic $0.19 $0.44 $0.25 $0.27Earnings Per Share, Diluted $0.19 $0.44 $0.25 $0.2791Exhibit 10.24February 11, 2014Via Email and U.S. MailBH Holdings LLC700 17th Street, Suite 1750Denver, CO 80202Attention: Ginny SirhallRe: Amended and Restated Non-Exclusive Aircraft Dry-Lease Agreement Dear Ms. Sirhall:Intrepid Potash, Inc. (“Intrepid”) and BH Holdings LLC are parties to the referenced agreement, dated as of January 1, 2013, withrespect to the Canadair, Ltd. Model CL-600-2B16 aircraft U.S. registration number N518CL (the “Agreement”). Pursuant to Section3.1 of the Agreement, Intrepid hereby provides notice of its termination of the Agreement, effective January 1, 2014.Please contact me with any questions.Sincerely,Intrepid Potash, Inc./s/ Martin D. Litt__________________________Martin D. LittExecutive Vice President, General Counsel & Secretarycc: Robert P. Jornayvaz IIIHugh E. Harvey, Jr. Exhibit 21.1LIST OF SUBSIDIARIESAs of December 31, 2013NameState of OrganizationOwnership PercentageIntrepid Potash-Moab, LLCDelaware100%Intrepid Potash-New Mexico, LLCNew Mexico100%Intrepid Potash-Wendover, LLCColorado100%Moab Gas Pipeline, LLCColorado100%Intrepid Aviation LLCColorado100%203 E. Florence, LLCDelaware100% Exhibit 23.1Consent of Independent Registered Public Accounting FirmThe Board of Directors Intrepid Potash, Inc.:We consent to the incorporation by reference in the registration statements (No. 333‑150444) on Form S-8 and (No. 333-181135) on Form S-3ASR of Intrepid Potash, Inc. of our reports dated February 12, 2014, with respect to the consolidated balance sheets of Intrepid Potash, Inc. as ofDecember 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flowsfor each of the years in the three-year period ended December 31, 2013, and the effectiveness of internal control over financial reporting as ofDecember 31, 2013, which reports appear in the December 31, 2013 annual report on Form 10‑K of Intrepid Potash, Inc./s/ KPMG LLPDenver, Colorado February 12, 2014Exhibit 23.2CONSENT OF AGAPITO ASSOCIATES, INC.Agapito Associates, Inc. (“AAI”) hereby consents to the references to AAI in the form and context in which they appear in the Annual Report on Form10-K of Intrepid Potash, Inc. (“Intrepid”) for the fiscal year ended December 31, 2013 and to the use of the information supplied by AAI under the caption“Item 2. Properties - Proven and Probable Reserves.” AAI further consents to the incorporation by reference thereof into the Registration Statement on Form S-3(No. 333-181135) previously filed by Intrepid and the Registration Statement on Form S-8 (No. 333-150444) previously filed by Intrepid.Agapito Associates, Inc.By: /s/ Susan B. PattonName: Susan B. Patton, PhD, P.E.Title: Senior AssociateGrand Junction, ColoradoFebruary 12, 2014Exhibit 31.1CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERPURSUANT TO 15 U.S.C. SECTION 7241, ASADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Robert P. Jornayvaz III, certify that:1.I have reviewed this annual report on Form 10-K of Intrepid Potash, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Dated: February 12, 2014 /s/ Robert P. Jornayvaz III Robert P. Jornayvaz IIIExecutive Chairman of the BoardExhibit 31.2CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERPURSUANT TO 15 U.S.C. SECTION 7241, ASADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, David W. Honeyfield, certify that:1.I have reviewed this annual report on Form 10-K of Intrepid Potash, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Dated: February 12, 2014 /s/ David W. Honeyfield David W. HoneyfieldPresident and Chief Financial OfficerExhibit 32.1CERTIFICATION OFEXECUTIVE CHAIRMAN OF THE BOARDPURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the filing of the Annual Report on Form 10-K for the year ended December 31, 2013 (the "Report"), of Intrepid Potash, Inc. (the"Registrant") with the Securities and Exchange Commission and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Robert P. Jornayvaz III, Executive Chairman of the Board of the Registrant, certify that to the best of my knowledge:1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act");and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.Dated: February 12, 2014 /s/ Robert P. Jornayvaz III Robert P. Jornayvaz IIIExecutive Chairman of the Board This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and will not, except to the extent required bysuch Act, be deemed filed by the Registrant for purposes of Section 18 of the Exchange Act. This certification will not be deemed to be incorporated byreference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Registrant specifically incorporates itby reference.Exhibit 32.2CERTIFICATION OFCHIEF FINANCIAL OFFICERPURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the filing of the Annual Report on Form 10-K for the year ended December 31, 2013 (the "Report"), of Intrepid Potash, Inc. (the"Registrant") with the Securities and Exchange Commission and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, David W. Honeyfield, President and Chief Financial Officer of the Registrant, certify that to the best of my knowledge:1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act");and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.Dated: February 12, 2014 /s/ David W. Honeyfield David W. HoneyfieldPresident and Chief Financial OfficerThis certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and will not, except to the extent required by suchAct, be deemed filed by the Registrant for purposes of Section 18 of the Exchange Act. This certification will not be deemed to be incorporated by reference intoany filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.Exhibit 95.1The table below provides information for the year ended December 31, 2013, about certain mine safety and health citations issued to Intrepid or itssubsidiaries by the Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) and aboutcertain other regulatory matters.Mine Name andMSHA IdentificationNumberSection 104S&SCitationsSection104(b)OrdersSection104(d)Citationsand OrdersSection110(b)(2)ViolationsSection107(a)OrdersTotal DollarValue ofMSHAAssessmentsProposedTotalNumber ofMining-RelatedFatalitiesReceivedNotice ofPattern ofViolationsUnderSection 104(e)ReceivedNotice ofPotential toHavePatternunderSection104(e)LegalActionsPending asof the Endof thePeriodLegalActionsInitiatedDuring thePeriodLegalActionsResolvedDuring thePeriodIntrepid Potash East(29-00170)10————$83,364———773Intrepid Potash West(29-00175)12————$8,821———3——Intrepid Potash North(29-02028)—————$520—————1HB Potash(29-00173)(abandonedunderground mine)—————$———————Below are additional details about the information provided in the table above:•General - In general, the number of citations and orders will vary depending on the size of the mine, the individual inspector assigned to themine, and the specific mine characteristics. Citations and orders can be contested and appealed and, in that process, are often reduced inseverity and amount and are sometimes vacated.•MSHA Identification Numbers - MSHA assigns an identification number to each mine and may or may not assign separate identificationnumbers to related facilities. We provide the information in the table by MSHA identification number.•Section 104 Significant and Substantial (“S&S”) Citations - These citations are issued for alleged violations of a mining safety standard orregulation where there exists a reasonable likelihood that the hazard contributed to or will result in an injury or illness of a reasonably seriousnature.•Section 104(b) Orders - These orders are issued for alleged failure to totally abate the subject matter of a Section 104(a) citation within theperiod specified in the citation.•Section 104(d) Citations and Orders - These citations and orders are issued for an alleged unwarrantable failure (i.e., aggravated conductconstituting more than ordinary negligence) to comply with a mining safety standard or regulation.•Section 110(b)(2) Violations - These violations are issued, and penalties are assessed, for flagrant violations (i.e., a reckless or repeated failureto make reasonable efforts to eliminate a known violation that substantially and proximately caused, or reasonably could have been expected tocause, death or serious bodily injury).•Section 107(a) Orders - These orders are issued for an imminent danger to immediately remove miners.•Total Dollar Value of MSHA Assessments Proposed - Proposed assessments issued during the period do not necessarily relate to the citationsor orders issued by MSHA during that period or to the pending legal actions reported in the table.•Notice of Pattern of Violations Under Section 104(e); Notice of Potential to Have Pattern under Section 104(e) - These notices are issuedfor a pattern of violation of mandatory health or safety standards or for the potential to have such a pattern.•Legal Actions Pending, Initiated, and Resolved - The Federal Mine Safety and Health Review Commission (the “Commission”) is anindependent adjudicative agency that provides administrative trial and appellate review of legal disputes arising under the Mine Act. Each legalaction is assigned a docket number by the Commission and may have as its subject matter one or more citations, orders, penalties, orcomplaints. The table below summarizes the types of legal actions that were pending as of December 31, 2013:Mine Name and MSHAIdentification NumberContests of Citationsand OrdersContests ofProposedPenaltiesComplaints forCompensationComplaints ofDischarge,Discrimination orInterferenceApplications forTemporary ReliefAppeals ofJudges’Decisions orOrdersTotalIntrepid Potash East(29-00170)6——1——7Intrepid Potash West(29-00175)3—————3Intrepid Potash North(29-02028)———————HB Potash(29-00173)(abandoned undergroundmine)———————•Contests of Citations and Orders relate to challenges by operators, miners or miners' representatives to the issuance of a citation or orderissued by MSHA.•Contests of Proposed Penalties (Petitions for Assessment of Penalties) are administrative proceedings challenging a civil penalty thatMSHA has proposed for the violation contained in a citation or order.•Complaints for Compensation are filed by miners entitled to compensation when a mine is closed by certain withdrawal orders issued byMSHA for the purpose of determining the amount of compensation, if any, due miners idled by the orders.•Complaints of Discharge, Discrimination or Interference involve a miner's allegation that he or she has suffered a wrong by theoperator because he or she engaged in some type of activity protected under the Mine Act, such as making a safety complaint, or that he orshe has suffered discrimination and lost his or her position.

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