Intrepid Potash
Annual Report 2018

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, 2018or¨Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from toCommission 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.)1001 17th Street, Suite 1050, 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 ¨ No xIndicate 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 thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xNo ¨Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not becontained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10‑K. xIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growthcompany. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.Large accelerated filer ¨Accelerated filer xNon-accelerated filer ¨Smaller reporting company ¨Emerging growth company ¨ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes ¨ No xThe aggregate market value of the registrant's common stock held by non-affiliates of the registrant, based upon the closing sale price of the common stock on June 29,2018, the last trading day of the registrant's most recently completed second fiscal quarter, of $4.10 per share as reported on the New York Stock Exchange was $390 million. Sharesof 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 the registrantto 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 March 5, 2019, the registrant had 130,840,813 shares of common stock, par value $0.001, outstanding.DOCUMENTS INCORPORATED BY REFERENCECertain 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 its2019 annual meeting of stockholders to be filed within 120 days after December 31, 2018.Table of Contents Table of ContentsINTREPID POTASH, INC.TABLE OF CONTENTS Page PART I 1 Item 1. Business 2 Item 1A. Risk Factors 12 Item 1B. Unresolved Staff Comments 23 Item 2. Properties 23 Item 3. Legal Proceedings 33 Item 4. Mine Safety Disclosures 33 PART II 34 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 34 Item 6. Selected Financial Data 36 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 37 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 52 Item 8. Financial Statements and Supplementary Data 54 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 85 Item 9A. Controls and Procedures 85 Item 9B. Other Information 86 PART III 87 Item 10. Directors, Executive Officers and Corporate Governance 87 Item 11. Executive Compensation 87 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 87 Item 13. Certain Relationships and Related Transactions, and Director Independence 87 Item 14. Principal Accounting Fees and Services 87 PART IV 88 Item 15. Exhibits, Financial Statement Schedules 88 Item 16. Form 10-K Summary 90 Signatures 91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.•"East," "North," and "HB" mean our three operating facilities in Carlsbad, New Mexico. "Moab" means our operating facility in Moab, Utah."Wendover" means our operating facility in Wendover, Utah. "West" means our previous operating facility in Carlsbad, New Mexico, which wasplaced in care-and-maintenance mode in mid‑2016. You can find more information about our facilities in Item 2 of this Annual Report on Form10-K.•"Ton" means a short ton, or a measurement of mass equal to 2,000 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 generally accepted accounting principles ("GAAP"), we use "average net realized sales price per ton," which is a non‑GAAPfinancial measure to monitor and evaluate our performance. You can find more information about average net realized sales price per ton, including areconciliation of this measure to the most comparable GAAP measure, in Item 7. Management's Discussion and Analysis of Financial Condition and Resultsof Operations under the heading "Non-GAAP Financial Measure."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, as amended (the"Exchange Act"), and the Securities Act of 1933, as amended (the "Securities Act"). These forward‑looking statements are made pursuant to the safe harborprovisions of the Private Securities Litigation Reform Act of 1995. All statements in this Annual Report on Form 10-K other than statements of historical factare forward‑looking statements. Forward-looking statements include statements about our future results of operations and financial position, our businessstrategy and plans, and our objectives for future operations, among other things. In some cases, you can identify these statements by forward‑looking words,such as "estimate," "expect," "anticipate," "project," "plan," "intend," "believe," "forecast," "foresee," "likely," "may," "should," "goal," "target," "might," "will,""could," "predict," and "continue." Forward‑looking statements are only predictions based on our current knowledge, expectations, and projections aboutfuture events.These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, which are described in Item 1A. Risk Factors inthis 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 not occur andactual results could differ materially and adversely from those anticipated or implied in these forward-looking statements. As a result, you should not placeundue reliance on these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, except as required bylaw.1Table of ContentsITEM 1.BUSINESSGeneralWe are a diversified mineral company that delivers potassium, magnesium, sulfur, salt, and water products essential for customer success inagriculture, animal feed and the oil and gas industry. We are the only U.S. producer of muriate of potash (sometimes referred to as potassium chloride orpotash), which is applied as an essential nutrient for healthy crop development, utilized in several industrial applications, and used as an ingredient in animalfeed. In addition, we produce a specialty fertilizer, Trio®, which delivers three key nutrients, potassium, magnesium, and sulfate, in a single particle. We alsoprovide water, magnesium chloride, brine and various oilfield products and services.Our extraction and production operations are conducted entirely in the continental United States. We produce potash from three solution miningfacilities: our HB solution mine in Carlsbad, New Mexico, our solution mine in Moab, Utah and our brine recovery mine in Wendover, Utah. We also operateour North compaction facility in Carlsbad, New Mexico, which compacts and granulates product from the HB mine. We produce Trio® from our conventionalunderground East mine in Carlsbad, New Mexico. Until mid-2016, we also produced potash from our East and West mines in Carlsbad, New Mexico. In April2016, we converted our East facility from a mixed-ore facility that produced both potash and Trio® to a Trio®‑only facility. In addition, in early July 2016,we idled mining operations at our West facility and transitioned the facility into care and maintenance. These changes were designed to increase ourproduction of Trio®, a product that had traditionally shown more resilience to pricing pressure than potash, and to lower costs in a time of declining potashprices.We have water rights in New Mexico under which we sell water primarily to support oil and gas development in the Permian Basin near our Carlsbadfacilities. We continue to work to expand our sales of water. On February 5, 2019, we and Sherbrooke Partners (together, the "buyers") entered into a purchaseand sale agreement with Dinwiddie Cattle Company under which the buyers will purchase certain Dinwiddie Jal Ranch assets located in Lea County, NewMexico, consisting primarily of land, water rights and other related assets. The aggregate consideration for the purchase will be $65 million, subject tocustomary purchase price adjustments. Further, as additional consideration for the sale, buyers will grant certain royalties on saltwater disposal revenuerelating to the purchased assets or properties located near the assets. We and Sherbrooke will pay 51% and 49% of the purchase price, or approximately $33.2million and $31.8 million, respectively, for a 51% and 49% undivided interest in the assets, respectively. We expect to close the purchase in the first quarterof 2019, subject to the satisfaction of customary closing conditions. The buyers expect to enter into a joint development agreement with respect to the assets,pursuant to which the buyers will agree, among other things, that Intrepid will operate the assets.Our principal offices are located at 1001 17th Street, Suite 1050, Denver, Colorado 80202, and our telephone number is (303) 296-3006. Intrepid wasincorporated in Delaware in 2007.Our Products and ServicesOur three primary products are potash, Trio®, and water. We also sell salt, magnesium chloride, metal recovery salts, brines, and water that arederived as part of our mining processes. Product sales as a percentage of total sales for the last three years were as follows: Year Ended December 31, 2018 2017 2016Potash 52% 54% 70%Trio® 31% 36% 25%Water 10% 4% —%Salt 3% 3% 2%Magnesium Chloride 3% 3% 3%Brines 1% —% —%Total 100% 100% 100%We have three segments: potash, Trio®, and oilfield solutions. Prior to the fourth quarter of 2018, we had two reporting segments: potash and Trio®.As a result of the growth of our water business and other oilfield products and services, we reevaluated our segments and determined that, beginning in thefourth quarter of 2018, we have an additional segment for oilfield solutions. We account for the sale of byproducts as revenue in the potash or Trio® segmentbased on which segment generated the byproduct. Prior to the adoption of Accounting Standards Codification ("ASC") Topic 606 Revenue from Contractwith Customers (ASC 606"), we accounted for the sale of byproducts as a credit to cost of goods sold.Potash2Table of ContentsWe sell potash into three primary markets: the agricultural market as a fertilizer input, the industrial market as a component in drilling andfracturing fluids for oil and gas wells and an input to other industrial processes, and the animal feed market as a nutrient supplement. Potash is sold indifferent product sizes, such as granular, standard, and fine standard. The agricultural market predominately uses granular-sized potash, while the industrialand animal feed markets mostly use standard- and fine standard-sized product. We have the flexibility to produce all of our product in a granular form, whichdecreases our dependence on sales of any one particular size of potash and any particular market.We manage sales and marketing operations centrally. This allows us to evaluate the product needs of our customers and then centrally determinewhich of our production facilities is best suited, typically based on geographic location, to use to fill customer orders in a manner designed to realize thehighest average net realized sales price per ton. Average net realized sales price per ton is a non-GAAP measure that we calculate as sales less byproduct salesand freight costs and then divided by product sales tons. We also monitor product inventory levels and overall production costs centrally. During 2018, we supplied 0.5% of annual world potassium consumption and 3.6% of annual U.S. potassium consumption.Substantially all of our potash is sold in the United States, and many of our potash sales are geographically concentrated in the central and westernUnited States. Fertilizer sales are affected by weather and planting conditions in these regions, as well as farmer economics. For more information, please see"Seasonality." A significant portion of our industrial sales are derived from oil and gas customers and correlate to drilling rig counts in specific regions in theUnited States.Trio® Trio® is our specialty fertilizer that delivers potassium, sulfate, and magnesium in a single particle and has the added benefit of being low inchloride. This unique combination of nutrients makes Trio® an attractive fertilizer across diverse crops and geographies. We produce Trio® in premium,granular, standard, and fine standard sizes for sale both domestically and internationally.Oilfield SolutionsWe have water rights in New Mexico under which we sell water primarily for industrial uses such as in the oil and gas services industry. We alsooffer potassium chloride ("KCl") real-time mixing services on location for hydraulic fracturing operations and trucking services. We continue to work toexpand our sales of water, especially to support oil and gas development in the Permian Basin near our New Mexico facilities.ByproductsWe also sell salt, magnesium chloride, metal recovery salts, brines, and water that are derived as part of our mining processes. Our salt is used in avariety of markets including animal feed, industrial applications, pool salt, and the treatment of roads and walkways for ice melting or to manage roadconditions. Magnesium chloride is typically used as a road treatment agent for both deicing and dedusting. Our brines contain salt and potassium and areused primarily by the oil and gas industry to support well workover and completion activities. When the water that we sell was previously used in theproduction process for potash or Trio®, it is considered a byproduct of the underlying product. We continue to work to expand sales of byproducts,particularly to serve the oil and gas markets near our operating facilities. Sales of byproducts are accounted for within the segment that produced thebyproduct. In each of the last three years, the majority of our byproduct sales were accounted for in the potash segment.Production FacilitiesWe produce potash from three solar evaporation solution mining facilities: our HB solution mine in Carlsbad, New Mexico, a solution mine inMoab, Utah, and a brine recovery mine in Wendover, Utah. We also operate our North compaction facility in Carlsbad, New Mexico, which compacts andgranulates product from the HB mine. Solution mining is a process by which potash is extracted from mineralized beds by injecting a salt-saturated brine intoa potash ore body and recovering a brine that contains potash and other minerals. The brine is brought to the surface for mineral recovery through solarevaporation. For solar evaporation, the brine is placed in ponds and solar energy is used to evaporate water thus crystallizing out the potash and mineralscontained in the brine. The resulting mineral evaporates are then processed to separate the minerals for sale. Solution mining does not require employees ormachines to be underground.We produce Trio® from our conventional underground East mine in Carlsbad, New Mexico. A conventional underground mine uses a mechanicalmethod of extracting minerals from underground. Underground mining consists of multiple shafts or entry points and a network of tunnels to provide accessto minerals and conveyance systems to transport materials to the surface. Underground mining machines are used to remove the ore and a series of pillars areleft behind to provide the appropriate level of ground support to ensure safe access and mining.3Table of ContentsWe have a current estimated annual designed productive capacity of approximately 390,000 tons of potash from our solar evaporation solutionmines. We also have an estimated annual designed productive capacity of 400,000 tons of Trio®. Our annual production rates for potash and Trio® are less than our estimated productive capacity. Actual production is affected by operating rates,the grade of ore mined, recoveries, mining rates, evaporation rates, product pricing, and the amount of development work that we perform. Therefore, as withother producers in our industry, our production results tend to be lower than reported productive capacity.We also have pipelines and ponds that we use to deliver water to customers.Industry OverviewFertilizer 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. 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.In addition to the primary nutrients, which are required in the greatest quantities in crop nutrition, important secondary nutrients such as sulfur andmagnesium are also essential in crop nutrition. Intrepid's Trio® product contains the primary nutrient potassium and two secondary nutrients in its sulfur andmagnesium content.Long-term global fertilizer demand has historically been driven primarily by population growth and global economic conditions with annualdemand variations based on planted acreage, agricultural commodity yields and prices, inventories of grains and oilseeds, application rates of fertilizer,weather patterns, and farm sector income. We expect these key variables to continue to have an impact on global fertilizer demand for the foreseeable future.Sustained per capita income growth and agricultural policies in the developing world also affect global demand for fertilizer. Fertilizer demand is affected byother geopolitical factors such as temporary disruptions in fertilizer trade related to government intervention and changes in the buying patterns of keyconsuming countries. Volatility in agricultural commodity prices also may impact farmer fertilizer buying decisions.The world potash market has long been characterized by nameplate production capacities that exceed demand. A significant portion of this capacityis controlled by a few companies and this concentration increased in early 2018 with the merger of two Canadian producers. Historically, these largerproducers have managed production levels to approximate world demand. Several international brownfield and greenfield expansions have also recentlybegun production or are nearing completion in the next year. Due to the increased production, near-term potash pricing will likely depend on the largerproducers' ability to continue to manage this supply and demand balance through decreased utilization rates. Increases in world fertilizer demand, due mainlyto population growth and limitations on arable land, are expected to eventually lessen the burden on producers, although recent increases in productivecapacities make this unlikely for at least the next few years.The United States potash market is impacted by the volume of imports. A change in the volume of imports could result in a material change topotash prices in the United States.4Table of ContentsVirtually all of the world's potash is currently extracted from 18 commercial deposits. According to the International Fertilizer Industry Associationand data published by potash mining companies, six countries accounted for approximately 89% of the world's aggregate potash production during 2017.During this time period, the top nine potash producers supplied approximately 94% of world production. Two major Canadian producers participate in theCanpotex marketing group that supplied approximately 29% of the global potash production in 2017, one producer in Russia supplied approximately 17%of global potash production in 2017 and one producer in Belarus supplied approximately 16% of the global potash production in 2017. Hydraulically fractured horizontal wells account for the majority of oil and gas wells drilled in the United States today, and are responsible for therecord amount of fossil fuels produced in the United States in recent years. The use of horizontal drilling in oil and gas production allows a well to remain incontact with the targeted formation, increasing production compared to a vertically drilled well. This process has resulted in longer wells, with somehorizontal drilling sections reaching several miles long. The increase in horizontal drilling has also increased the use of fresh water, with a single fracpotentially using millions of gallons. In the frac process, water and sand are used to move proppant and other frac additives into the targeted rock formation.Fresh water is important in the fracking process, as impurities in the water can impact the overall effectiveness of the frac. The majority of water used infracking is transported by pipeline to the frac site, where it is stored in ponds or storage tanks.The most productive region in the United States for oil production is the Permian Basin, which spans from west Texas to southeastern New Mexico.As of January 2019, the Permian Basin produced over 3.8 million barrels of oil per day, or over 150% more oil per day than the next most productive regionin the United States. In addition to producing wells, the Permian Basin also had approximately 4,000 drilled but uncompleted wells as of December 2018.Competition and Competitive StrategyWe sell into commodity markets and compete based on delivered price, our ability to deliver product in a timely manner, and product quality. Wealso compete based on the durability, particle size, and potassium oxide content of our potash and Trio® products. For potash, we compete primarily withmuch larger potash producers, principally Canadian producers and, to a lesser extent, producers located in Russia, Belarus, Chile, Germany, and Israel. ForTrio®, we compete with one other producer of langbeinite as well as producers of other specialty nutrients and blended products. For water, we competeprimarily with water-specialty companies, farmers, and ranchers operating in or near the Permian Basin in New Mexico. Some of our competitors andpotential competitors may have significant advantages over us, including greater name recognition, longer operating histories, pre-existing relationshipswith current or potential customers, significantly greater financial, marketing and other resources, ownership of more diverse assets and products,geographically and/or access to less expensive mining assets, all of which could allow them to respond more quickly to new or changing opportunities.Our competitive strategy is focused on the following:•Maximize potash gross margin and optimize potash production. All of our potash production comes from solar solution mines, which carry alower cost structure than conventional potash mines. Our per-ton costs are lower for solution mining than conventional mining as solarsolution mining requires less labor, energy, and equipment. In addition, we have the advantage of being located close to the markets weserve, and the North American market is significantly larger than our production capacity. As a result, we are able to selectively participatein the markets that provide the highest average net realized sales price per ton. We also attempt to maximize our gross margin by leveragingour freight advantage to key geographies, our diverse customer and market base, and our flexible marketing approach. Long-term, we haveoptimization and expansion opportunities at our solution mining facilities, that, over time, could further reduce our per-ton costs andincrease our potash production. For example, we have potential expansion opportunities at our HB mine.•Expand Trio® sales and maximize gross margin. Over the long term, we believe demand for Trio® will exceed supply, providing anopportunity to increase our gross margin. We continue our efforts to expand our sales and marketing efforts for Trio®. Although we believethe domestic price of Trio® may have stabilized in 2018, this stabilization came after a sustained period of price declines. In order tomaximize gross margin, we are working to optimize our recovery techniques. In addition, given the current pricing and demandenvironment, we intend to continue to operate our Trio® facility at production levels that approximate expected demand and expect tocontinue to do so for the foreseeable future.•Expand offerings of oilfield solutions. We continue to implement initiatives designed to maximize the value of our existing assets and,diversify our sources of income. This includes working to expand sales of water,5Table of Contentsparticularly to service the oil and gas markets near our operating plants. We have a meaningful amount of water rights under which we sell waterprimarily for industrial uses such as in the oil and gas services industry. As a result of these efforts, our water sales increased significantly in2018. We also offer potassium chloride real-time mixing services on location for hydraulic fracturing operations. In addition, as describedabove, in February 2019, we entered into an agreement to purchase an undivided interest in additional land, water rights, and other assets in thePermian Basin. If completed, this purchase is designed to expand our revenue from water and other oilfield products and services. We also offertrucking services to deliver brines and other products to oil and gas exploration customers.•Diversification of products and services. We recover magnesium chloride, salt, brines, and water during the production of potash and Trio®.These byproducts offer additional diversity to our portfolio of product and service offerings. As we continue to look for opportunities todiversify our revenue sources, we may enter into new or complementary businesses that expand our product and service offerings. Forexample, we may expand into oil and natural gas exploration and production, or into new products or services in our current industry orother industries.Competitive Strengths•U.S.-based producer. We are the only producer of potash in the United States. We are located in a market that consumes significantly morepotash than we can currently produce on an annual basis. Our geographic location provides us with a transportation advantageover our competitors for shipping our product to our customers. In general, this allows us to obtain a higher average net realizedsales price per ton than our competitors, who must ship their products across longer distances to consuming markets, whichincreases their costs and reduces their gross margin. Our location allows us to target sales to the markets in which we have thegreatest transportation advantage, maximizing our average net realized sales price per ton. Our access to strategic rail destinationpoints and our location along major agricultural trucking routes support this advantage.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 mineral taxes,none of which are imposed on us as a U.S. producer. We currently pay an average royalty rate of approximately 4.6% of our potash and Trio®sales less their related freight costs, which compares favorably to that of our competitors in Canada. The relative tax and royalty advantage forU.S. producers becomes more pronounced when profits per ton increase due primarily to the profit tax component of the Saskatchewan potashmineral tax.•Solar evaporation operations. All of our potash production comes from solar solution mines. Solar evaporation is a cost-efficient productionmethod because it significantly reduces labor and energy consumption, which are two of the largest costs of production. Ourunderstanding and application of low-cost solution mining, combined with our reserves being located where a favorable climatefor evaporation exists, make solar solution mining difficult for other producers to replicate. We also have significant reserves forfuture expansion of our solution mining operations.•Participation in specialty markets. Given the greater scarcity of langbeinite relative to potash and its agronomic suitability for certain soils andcrops, we believe there is a market for Trio® outside of our core potash markets. We also believe that there is a market for Trio®beyond the United States, and we continue to attempt to capture and grow this market. Through our existing operations and assets,we also have the potential to grow our offerings of salt, water, and brine with low capital investments.•Water rights. We have water rights in New Mexico under which we sell water primarily for industrial uses such as in the oil and gas servicesindustry. We continue to work to expand sales of water, especially to support oil and gas development in the Permian Basin nearour Carlsbad facilities. In February 2019, we entered into an agreement to purchase an undivided interest in additional land, waterrights, and other assets in the Permian Basin. If completed, this purchase is designed to expand our revenue from water and otheroilfield products and services. As we expand our water sales, we gain additional relationships within the oil and gas industry,which we may be able to use to expand sales of our industrial potash products, byproducts, and services.•Diversity of potash markets. We sell potash into three different markets—the agricultural, industrial, and feed markets. During 2018, thesemarkets represented approximately 74%, 14%, and 12% of our potash sales, respectively. The agricultural market supplies farmersproducing a wide range of crops in different geographies. Because of our geographic proximity to areas that have seen recentincreases in oil and gas drilling activity, we believe that we have an opportunity to increase our industrial sales volumes.6Table of Contents•Marketing flexibility. We have the ability to convert all of our standard-sized potash product into granular-sized product as market conditionswarrant. We also produce Trio® in premium, granular, standard and fine standard sizes. This provides us with increased marketingflexibility as well as decreased dependence on any one particular market.•Significant reserve life. Our potash and langbeinite reserves each have substantial years of reserve life, with remaining reserve lives for ouractively mined areas ranging from 30 years to greater than 100 years, based on proven and probable reserve estimates. In additionto our reserves, we have water rights and access to additional mineralized areas of potash for potential future exploitation.•Existing facilities and infrastructure. Constructing a new potash production facility requires substantial time and extensive capital investmentin mining, milling, and infrastructure to extract, process, store, and ship product. Our operations already have significant facilitiesand infrastructure in place. We also have the ability to expand our business using existing installed infrastructure, in less time andwith lower expenditures than would be required to construct entirely new mines.SeasonalityThe sales pattern for potash sold into the agricultural market is seasonal. Over the last three years, our monthly potash sales volume has been highestin January through April and August through September when purchasers are looking to have product on hand in advance of the spring and fall applicationseasons in the United States. In turn, our monthly potash sales volume has been the lowest in July and December.The sales pattern for Trio® sold into the domestic agricultural market is also seasonal. Over the last three years, our Trio® sales volume has beenhighest in February and March, as Trio® products are typically applied to crops in the United States during the spring planting season. In turn, we generallysee fewer purchases and increased inventory levels in the third and fourth quarters in anticipation of expected demand for the spring application season. Aswe expand our Trio® sales efforts outside of the United States, we expect the seasonality of our Trio® sales to be impacted by the agricultural planting seasonsin the regions of the world where those products are delivered.The month-to-month seasonality of our agricultural sales is somewhat moderated due to the variety of crops, industries, distribution strategies andgeographies that we serve. Because all of our potash production comes from our solar solution mines, our potash production is also seasonal. Our solarsolution mines suspend potash production activities from early spring through late summer, the peak solar evaporation period. Accordingly, we manage ourinventories during the low demand periods of the year in order to ensure timely product availability during the peak sales seasons, as well as during thesummer evaporation period when we have no potash being produced. The seasonality of fertilizer demand results in our sales volumes and revenue being thehighest during the spring and our working capital requirements being the highest just before the start of the spring season. We have observed fertilizer dealersin North America instituting practices that are designed to reduce their risk of changes in the price of fertilizer products through consignment-type programs.These programs tend to make the timing of the spring and fall seasonal demand profile less predictable within the season. Further, through technologicaladvances, the farmers in the United States have gained efficiencies in planting and harvesting their crops, which has compressed the application seasons.Our quarterly financial results can also vary from one year to the next due to weather‑related shifts in planting schedules and purchasing patterns.Demand for our oilfield products and services can vary from quarter to quarter due to frac-schedule changes for a variety of reasons, such as weather-related events.Major CustomersWithin 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 in different geographies. We sell into the industrial and feed markets through sales to distributors and directly to endusers. For water, we have entered into multiple long-term supply agreements with a diverse set of customers aimed at generating a long-term recurring revenuestream from water sales.In each of 2018, 2017 and 2016, no customer accounted for more than 10% of our total sales.7Table of ContentsEnvironmental, Safety, and Health MattersWe are subject to an evolving set of federal, state, and local environmental, safety, and health laws that regulate (1) soil, air, and water qualitystandards for our facilities; (2) disposal, storage, and management of hazardous and solid wastes; (3) post-mining land reclamation and closure; (4) conditionsof mining and production operations; (5) employee and contractor safety and occupational health; and (6) product content and labeling. We employ andconsult with professionals who assist in monitoring our compliance with these laws and who work with management to ensure that appropriate strategies andprocesses are in place to promote a culture that prioritizes safety and environmental responsibility.In 2018, we had approximately $2.2 million of capital investments, and $0.3 million in other expenses, relating to environmental compliance,environmental studies, and remediation efforts. We expect to spend $4.0 million to $5.0 million for environmental related capital projects in both 2019 and2020. Future capital expenditures are subject to a number of uncertainties, including changes to environmental regulations and interpretations, andenforcement initiatives. If potential negative effects to the environment are discovered, or if the potential negative effects are of a greater magnitude thancurrently estimated, material expenditures could be required in the future to remediate the identified effects. We expect that continued emphasis onenvironmental issues will result in increased future investments for environmental controls at our operations.Product 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 jurisdiction. In most cases, theseproduct registrations impose specific requirements relating to guaranteed analysis, product labeling, and regular reporting of sales.Some states require similar registration and reporting for feed grade products. Industrial-grade products typically do not require registration orreporting.Operating Requirements and Government RegulationsPermitsWe are subject to numerous environmental laws and regulations, including laws and regulations regarding land use and reclamation; release ofemissions to the atmosphere or water; plant and animal life; and the generation, treatment, storage, disposal, and handling of hazardous substances andwastes. These laws include the Clean Air Act; the Clean Water Act; the Resource Conservation and Recovery Act; the Comprehensive EnvironmentalResponse, Compensation, and Liability Act ("CERCLA"); the Toxic Substances Control Act; and various other federal, state, and local laws and regulations.Violations can result in substantial penalties, court orders to install pollution‑control equipment, civil and criminal sanctions, permit revocations, and facilityshutdowns. In addition, environmental laws and regulations may impose joint and several liability, without regard to fault, for cleanup costs on potentiallyresponsible parties 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. Someof 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. In many cases,environmental permits and approvals are also required for an expansion of, or changes to, our operations. As a condition to procuring the necessary permitsand approvals, we may be required to comply with financial assurance regulatory requirements. The purpose of these requirements is to assure thegovernment 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. In 2016, the New Mexico Office of State Engineer ("OSE") determined that our East tailingimpoundment embankments are considered jurisdictional dams. We continue to work with the OSE to determine required dam modifications associated withthis determination. We may be required to spend a significant amount of capital to bring the impoundments into compliance with requirements forjurisdictional dams or modify our operations to no longer use impoundments that may qualify as jurisdictional dams.From time to time, we have received notices from governmental agencies that we are not in compliance with certain environmental laws, regulations,permits, or approvals. For example, although designated as zero discharge facilities under the8Table of Contentsapplicable water quality laws and regulations, our East, North, and Moab facilities at times may experience some water and brine discharges during periods ofsignificant rainfall or due to other circumstances. We have implemented several initiatives to address discharge issues, including the reconstruction ormodification of certain impoundments, increasing evaporation, and reducing process water usage and discharges and improved management systems. Stateand federal officials are aware of these issues and have visited the sites to review our corrective efforts and action plans.Air and Drinking WaterIn the ordinary course of our business, from time to time, we receive notices from the New Mexico Environment Department of alleged air ordrinking water quality control violations. Upon receipt of these notices, we evaluate the matter and take any required corrective actions. In some cases, wemay be required to pay civil penalties for these notices of violation.Safety and Health Regulation and ProgramsCertain of our facilities are subject to the Federal Mine Safety and Health Act of 1977, the Occupational Safety and Health Act, related state statutesand regulations, or a combination of these laws.The Mine Safety and Health Administration ("MSHA") is the governing agency for our conventional underground mines and related surfacefacilities in New Mexico. As required by MSHA, these operations are regularly inspected by MSHA personnel. Item 4 and Exhibit 95.1 to this Annual Reporton Form 10-K provide information concerning certain mine safety violations.Our New Mexico facilities participate in MSHA's Region 8 "Partnership Program." There is a formally signed document and plan, pursuant to whicheach party commits to specific actions and behaviors. Examples of principles include working for an open, cooperative environment; agreeing to citation andconflict processes; and improving training. Our New Mexico facilities are serviced by a trained mine rescue team, which is ready to respond to on-siteincidents or assist in local incidents, if needed. The team practices and participates at state and federal events and competitions. In addition, our New Mexicofacilities participate in a basin agreement with other natural resource and hazardous waste facilities to provide mine rescue support.The Occupational Safety and Health Administration ("OSHA") is the governing agency relating to the safety standards at our Utah facilities, as wellas our HB mine and plant. Training and other certifications are provided to employees as needed based upon their work duties.Remediation at Intrepid FacilitiesMany of our current facilities have been in operation for a number of years. Operations by us and our predecessors have involved the historical useand handling of potash, salt, related potash and salt byproducts, process tailings, hydrocarbons and other regulated substances. Some of these operationsresulted, or may have resulted, in soil, surface water, or groundwater contamination. At some locations, there are areas where process waste, building materials(including asbestos‑containing transite), and ordinary trash may have been disposed or buried, and have since been closed and covered with soil and othermaterials.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, buildingslocated at our facilities in both Utah and New Mexico have a type of siding that contains asbestos. We have adopted programs to encapsulate and stabilizeportions of the siding through use of an adhesive spray and to remove the siding, replacing it with an asbestos-free material. Also, we have trained asbestosabatement crews that handle and dispose of the asbestos‑containing siding and related materials. We have a permitted asbestos landfill in Utah and haveworked closely with Utah officials to address asbestos‑related issues at our Moab mine.9Table of ContentsReclamation 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 that remain after potash is removed from ore during processing, arestored in surface disposal sites. Some of these tailing materials may also include other contaminants, such as lead, that were introduced as reagents duringhistoric processing methods that may require additional management and could cause additional disposal and reclamation requirements to be imposed. Forexample, at least one of our New Mexico mining facilities may have legacy issues regarding lead in the tailings pile resulting from production methodsutilized prior to our acquisition of these assets. During the life of the tailings management areas, we have incurred, and will continue to incur, significantcosts to manage potash residual materials in accordance with environmental laws and regulations and with permit requirements. Additional legal and permitrequirements 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 estimatedreclamation costs for our facilities as of December 31, 2018, is approximately $23.1 million, which is reflected in our audited financial statements foundelsewhere in this Annual Report on Form 10-K. Various permits and authorization documents negotiated with or issued by the appropriate governmentalauthorities include these estimated reclamation costs on an undiscounted basis. The undiscounted amount of our estimated reclamation costs for our facilitiesas of December 31, 2018, is approximately $59.5 million.It 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.RoyaltiesThe potash, langbeinite, water, and byproducts we produce and sell from leased land may be subject to royalty payments. We produce and sell fromleased land owned by the U.S. government, the States of New Mexico and Utah, and private landowners. The terms of the royalty payments are determined atthe time of the issuance or renewal of the leases. Some royalties are determined as a fixed percentage of revenue and others vary based upon ore grade.Additionally, some of our leases are subject to overriding royalty interest payments paid to various owners. In 2018, we paid $6.3 million, or an average of4.6% of sales less freight, in royalties and other taxes. The royalty rates on our state and federal leases in New Mexico are currently set at various rates from2.0% to 5.0%. The royalty rates on our state and federal leases in Utah are currently set at rates from 3.0% to 5.0%. The royalty rates for the private leaseholdsare between 5.0% and 8.0%.EmployeesAs of January 31, 2019, we had 429 employees, the majority of which were full-time employees.We have a collective bargaining agreement with a labor organization representing our hourly employees in Wendover, Utah, which expires onMay 31, 2020. This is the seventh agreement negotiated between us and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, AlliedIndustrial and Service Workers International Union, Local 867. We consider our relationships with our employees to be good.Available InformationWe file or furnish with the U.S. Securities and Exchange Commission (the "SEC") reports, including our Annual Reports on Form 10-K, QuarterlyReports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and any amendments to these reports filed or furnished pursuant to Section 13(a) orSection 15(d) of the Exchange Act. These reports are available free of charge on our website at intrepidpotash.com as soon as reasonably practicable afterthey are electronically filed with or furnished to the SEC. These reports also can be obtained at sec.gov.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 ReallySimple Syndication (RSS) feeds regarding new postings. The information found on, or that can be accessed through, our website is not part of this or anyother report we file with, or furnish to, the SEC.10Table of ContentsExecutive OfficersThe following section includes biographical information for our executive officers:Name Age PositionRobert P. Jornayvaz III 60 Executive Chairman of the Board, President, and Chief Executive OfficerMargaret E. McCandless 46 Vice President, General Counsel, and SecretaryMark A. McDonald 54 Vice President of Sales and MarketingJoseph G. Montoya 52 Vice President and Chief Accounting OfficerAlex J. Wagner 45 Vice President of Business Development - Oilfield ServicesErica K. Wyatt 46 Chief Human Resources OfficerRobert P. Jornayvaz III has served as our Executive Chairman of the Board since 2010 and as our President and Chief Executive Officer since August 2014.Mr. Jornayvaz served as our Chairman of the Board and Chief Executive Officer from our formation in 2007 until 2010. Mr. Jornayvaz served, directly orindirectly, as a manager of our predecessor, Intrepid Mining LLC, from 2000 until its dissolution at the time of our initial public offering in 2008. Mr.Jornayvaz is the sole owner of Intrepid Production Corporation. Mr. Jornayvaz and Intrepid Production Corporation together beneficially own 14.9% of ourcommon stock.Margaret E. McCandless has served as our Vice President, General Counsel, and Secretary since January 2015. Ms. McCandless served as our AssistantGeneral Counsel and Assistant Secretary from 2012 to January 2015. From 2004 through 2011, Ms. McCandless served as Associate General Counsel-Securities, Disclosure and Corporate Governance for Qwest Communications International Inc., a telecommunications company, and then CenturyLink, Inc.,another telecommunications company that acquired Qwest. Prior to joining Qwest, Ms. McCandless was an associate at the law firms of Hogan Lovells LLPand Cooley LLP.Mark A. McDonald has served as our Vice President of Sales and Marketing since November 2017. Mr. McDonald previously served as our Director of U.S.Agricultural and Feed Sales from March 2017 to November 2017, Director of Industrial, Feed, and Midwest Agricultural Sales from July 2016 to March 2017,and National Accounts Manager from December 2013 to July 2016. Before joining Intrepid, Mr. McDonald worked at Agrium U.S. Inc. and Agrium Inc., amanufacturer, wholesaler, and retail supplier of agricultural products and services, for 17 years in various positions culminating with Director, Eastern SalesRegion. Before joining Agrium, Mr. McDonald held positions at Cargill Limited and Monsanto Company.Joseph G. Montoya has served as our Vice President and Chief Accounting Officer since April 2017. Mr. Montoya served as our Controller from May 2016to April 2017, and Divisional Controller of our New Mexico operations from April 2014 to May 2016. Prior to joining Intrepid, Mr. Montoya was ChiefFinancial Officer of Stoneside, LLC, a private company specializing in custom window coverings, from 2013 to 2014. From 2011 to 2013, Mr. Montoya wasVice President of Internal Audit for Molycorp Inc., a public company in the rare earths mining industry. Prior to joining Molycorp, Mr. Montoya served invarious senior financial leadership roles for Tomkins, plc and Cenveo, Inc. Prior to joining Cenveo, Mr. Montoya was a manager at the international publicaccounting firm of Arthur Andersen, LLP.Alex J. Wagner has served as our Vice President of Business Development-Oilfield Services since October 2018. From February 2017 to October 2018, Mr.Wagner was Managing Member of Phenix Energy Partners LLC, a private equity and management consulting company that he founded focused on oil andgas acquisitions. From September 2015 to February 2017, Mr. Wagner served as a consultant and region manager for Flotek Industries, Inc., a specialtychemicals company. From 2013 to September 2015, Mr. Wagner was Director of Business Development at Buckhorn Energy Services, LLC, a provider ofoilfield waste disposal solutions. Prior to joining Buckhorn, Mr. Wagner spent 15 years in various operations, business development, and sales roles atHalliburton Company and BJ Services.Erica K. Wyatt has served as our Chief Human Resources Officer since December 2018. Ms. Wyatt previously served as Vice President of Human Resourcesfrom June 2015 to December 2018, Senior Director of Human Resources from 2013 to June 2015, and Director of Human Resources from 2007 to 2013. Priorto joining Intrepid, Ms. Wyatt held various positions at DISH Network Corporation, a pay-TV provider, from 1999 to 2007, including most recently Directorof Human Resources supporting the field services division.11Table of ContentsITEM 1A.RISK FACTORSYou should carefully consider the following risk factors. Our future performance is subject to a variety of risks and uncertainties that couldmaterially and adversely affect our business, financial condition, and results of operations, and the trading price of our common stock. We may be subjectto other risks and uncertainties not presently known to us.Risks Related to Our BusinessOur acquisition of Dinwiddie assets may not achieve the intended results or may not be completed at all, which could negatively impact us.We recently announced that we have agreed to purchase water and real property assets from Dinwiddie Cattle Company in southeastern New Mexicoin an effort to expand our water sales and other revenue from the oil and gas industry. If completed, the acquisition may not produce the expected benefits, orwe may not realize the synergies that we expect to achieve. If the Dinwiddie acquisition is not completed, we would still need to pay certain legal and other expenses relating to the acquisition and the focus ofour management would have been diverted from seeking other potential strategic opportunities, in each case without realizing any benefits of a completedacquisition. We could also forfeit our deposit of $3.25 million if the acquisition is terminated under certain circumstances. In addition, the trading price ofour securities could be adversely affected to the extent that the current price reflects an assumption that the acquisition will be completed.Our potash sales are subject to price and demand volatility resulting from periodic imbalances of supply and demand, which could negatively affect ourresults of operations.The market for potash is cyclical, and the prices and demand for potash can fluctuate significantly. Periods of high demand, increasing profits, andhigh-capacity utilization lead to new plant investment and increased production. This growth continues until the market is over-saturated, leading todecreased prices and lower-capacity utilization until the cycle repeats. We are currently experiencing an oversupplied potash market and expect theseconditions to continue for several years. Also, individual potash producers have, at times, independently suspended production in response to marketoutlook. As a result of these factors, the prices and demand for potash can be volatile. This volatility can reduce profit margins and negatively affect ourresults of operations. We sell most of our potash into the spot market in the U.S. In addition, there is no active hedge market for potash as there is for manyother commodities. As a result, we do not have protection from this price and demand volatility.We are working to expand our sales of Trio®, and our sales and results of operations could be negatively impacted if we are unsuccessful in our plans.One of our strategies is to continue to expand our sales of Trio® both domestically and internationally. Our expansion efforts may not be successful,which would temper any Trio® sales growth. With respect to international sales, it is difficult to determine if or how international demand and pricing forTrio® may develop. Our international sales often result in lower gross margins than domestic sales due to higher costs. These costs could include highertransportation costs, importation costs, and costs associated with duties, trade requirements, or other import or export control laws and regulations. We alsoface price pressure and competition in some international markets where substitutes are more prevalent. Any of these items could negatively impact ourresults of operations. In addition, international sales may occur on an irregular basis, which could cause volatility in our inventories and our results ofoperations. See also "International sales could present risks to our business."We may not be successful in our efforts to sustain or expand water sales due to challenges to our water rights, changes in the demand for water in the areasaround our facilities, or other events, which could adversely impact our financial condition and results of operations.We have water rights in New Mexico under which we sell water primarily for industrial uses such as in the oil and gas services industry. Wecontinue to work to expand sales of water, especially to support oil and gas development in the Permian Basin near our New Mexico facilities. Third partiesregularly challenge our applications for permits to sell water under our water rights. We may not be successful in these efforts. In many cases, sales of waterrequire governmental permits or approvals. A decision to deny, delay, revoke, or modify a permit or approval could prevent us from selling water, increase thecost to provide water, or result in our having to refund prepayments that we have received for future water sales. If oil or gas prices decline, if oil and gasdevelopment in the Permian Basin decreases, or if demand for fresh water in the Permian Basin declines for other reasons, the demand for water under ourwater rights could be adversely affected. In addition, we could be required to expend capital to meet customer needs. Any of these events could adverselyimpact our financial condition and results of operations.Water rights in New Mexico are subject to a stated purpose and place of use, and our water rights were originally issued for uses relating to ourmining operations. To sell water under these rights for oil and gas development, we must apply for a permit from the OSE to change the purpose and/or placeof use of the underlying water rights. The OSE reviews and12Table of Contentsmakes a determination as to the validity of the right and if it determines the requested change will not negatively impact other valid interests, the OSE canissue a preliminary authorization for the change. The preliminary authorization allows for water sales to begin immediately, subject to repayment if theunderlying water rights were ultimately found to be invalid. Third parties may protest the preliminary authorization at minimal cost and frequently do so.Once protested, the OSE is required to hold a hearing to determine if the preliminary authorization was appropriate. Virtually all of our water sales are beingmade under preliminary authorizations issued by the OSE. Third parties have protested these preliminary authorizations, and we expect the OSE to hold ahearing on the protests in 2019. We continue to operate under the preliminary authorizations until the process is complete. We may face political andregulatory issues relating to the potential use of the maximum amount of our rights. However, we believe that our legal position with respect to the validity ofour water rights is solid and that we will be able to meet our water commitments.A decline in oil and gas drilling or a reduction in the use of potash in drilling fluids could increase our operating costs and decrease our revenue.A portion of our revenue comes from the sale of water and potassium chloride for use in oil and gas development. A decline in oil and gas drilling,especially in the Permian Basin, could reduce our sales of water and potassium chloride. In addition, oil and gas developers are regularly looking for ways touse more produced, or recycled, water instead of fresh water in oil and gas development. Also, there are other products available that have some of the sameclay-inhibiting properties as our potassium chloride. These alternative products could temporarily or permanently replace some of our sales of water orpotassium chloride. We also have other oilfield product and service offerings, such as trucking services and brine products, the sales of which could benegatively impacted if oil and gas development declined.We may alter or expand our operations or continue to pursue acquisitions, which could adversely affect our business if we are unable to manage anyexpansion or acquisition effectively.We continue to look for opportunities designed to maximize the value of our existing assets, such as through increased production and sales ofwater, salt, and brine. We recently announced that we have agreed to purchase water and real property assets in southeastern New Mexico in an effort toexpand our water sales and other revenue from the oil and gas industry. We are also exploring ways to potentially monetize the known but small lithiumresource in our Wendover ponds. In addition, we may enter into new or complementary businesses that expand our product offerings beyond our existingassets. For example, we may expand into oil and natural gas exploration and production or into new products or services in our current industry or otherindustries. We may not be able to successfully implement any alteration or expansion initiatives. Further, we may not be able to fully realize any anticipatedbenefits of these initiatives. Any expansion initiatives may require significant capital investments and those investments may not produce the expectedbenefits.As part of this growth strategy, we may consider the acquisition of other companies or assets that complement or expand our business. We may notbe able to successfully identify suitable acquisition opportunities, prevail against competing potential acquirers, negotiate appropriate acquisition terms,obtain necessary financing, complete proposed acquisitions, successfully integrate acquired businesses or assets into our existing operations, or expand intonew markets. An acquisition may require us to use a significant portion of available cash or may result in significant dilution to our stockholders. We may berequired to assume unanticipated liabilities or contingencies as part of an acquisition, or we may face substantial costs, delays, or other problems as part ofthe integration process. In addition, acquired businesses or assets may not achieve the desired effects or otherwise perform as we expect. We may not realizethe synergies that we expect to achieve. Additionally, while we execute these acquisitions and related integration activities, our attention may be divertedfrom our ongoing operations, which could have a negative impact on our business.Any of these items could negatively impact our financial condition and results of operations.Current and future indebtedness could adversely affect our financial condition and impair our ability to operate our business.As of December 31, 2018, we had outstanding $50 million aggregate principal amount of senior notes. We also have an asset-based revolving creditfacility that allows us to borrow up to an additional $50 million, as of December 31, 2018. We may incur additional indebtedness in the future. Theagreements governing the senior notes and credit facility restrict, but do not prohibit, us from incurring additional indebtedness.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 be more highly leveraged than some of our competitors, which could place us at a competitive disadvantage13Table of Contents•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 flows from operations to the repayment of our indebtedness, thereby reducing theavailability of our cash flows for other purposes•it could adversely affect our business and financial condition if we default on or are unable to service our indebtedness, are unable to refinancesuch indebtedness on favorable terms or are unable to obtain additional financing, as neededOur debt agreements contain financial and other restrictive covenants. For example, the agreements include financial covenants that require us tomaintain a minimum fixed charge coverage ratio and a maximum leverage ratio (as these ratios are defined under the agreements). Also, the interest ratesunder the notes may be adjusted quarterly subject to our financial performance and certain financial covenant levels and we may be subject to higher interestrates. For more information about these financial covenants, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results ofOperations - Liquidity and Capital Resources."These covenants could limit our ability to engage in activities that are in our long-term best interests. Our failure to comply with these covenantswould result in an event of default that, if not waived, could result in the acceleration of all outstanding indebtedness. The senior notes and credit facility arevariously secured by substantially all of our assets. As such, an event of default could also result in our lenders foreclosing on some or all of our assets.The credit facility expires in 2023 and the senior notes are due in 2020, 2023, and 2025. In the future, we may be unable to obtain new financing orrefinancing on acceptable terms.The proposed phase out of the London Interbank Offered Rate ("LIBOR") could adversely affect our financial results.In July 2017, the United Kingdom's Financial Conduct Authority announced that it intends to phase out LIBOR by the end of 2021. It is unclear ifLIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist. Borrowings under our asset-basedrevolving credit facility bear interest at LIBOR plus an applicable margin. As such, depending on the future of LIBOR, we may need to renegotiate certainterms of our credit facility to replace LIBOR with a new standard, which could increase the cost of borrowings under the credit facility and have an adverseeffect on our results of operations and cash flows.Aggressive pricing or operating strategies by our competitors could adversely affect our sales and results of operations.The potassium-fertilizer industry is concentrated, with a small number of producers accounting for the majority of global production. Many of theseproducers have significantly larger operations and more resources than we do. These larger producers may have greater leverage in pricing negotiations withcustomers and transportation providers. They also have a broader product portfolio, which may allow them to offer rebates or bundle products to offerdiscounts or incentives to gain a competitive advantage. They may also be able to mine their potash or langbeinite at a lower cost due to economies of scaleor other competitive advantages. In addition, they may decide to pursue aggressive pricing or operating strategies that disrupt the global and U.S. markets.These disruptions could cause lower prices or demand for our product, which would adversely affect our sales and results of operations.Changes in the agricultural industry could exacerbate the cyclical nature of the prices and demand for our products or adversely affect the markets for ourproducts.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 types, crop prices, weather patterns, fertilizer and other crop input costs, and the level of crop nutrients remaining in the soilfollowing the previous harvest. Farmers are more likely to increase application rates of fertilizers when crop prices are relatively high, fertilizer and other cropinput costs are relatively low, or the level of crop nutrients remaining in the soil is relatively low. Conversely, farmers are likely to reduce application offertilizers when farm economics are weak or declining or the level of crop nutrients remaining in the soil is relatively high. This variability in applicationrates can impact the cyclical nature of the prices and demand for our products. In addition, farmers may buy and apply potash or Trio® in excess of currentcrop needs, which results in a build-up of potassium in the soil that can be used by crops in subsequent crop years. If this occurs, demand for our productscould be delayed to future periods.State and federal governmental policies, including farm and ethanol subsidies and commodity support programs, may also influence the number ofacres planted, the mix of crops planted, and the use of fertilizers. In addition, there are various city, county, and state initiatives to regulate the use andapplication of fertilizers due to various environmental concerns. If U.S. agricultural production or fertilizer use decreased significantly due to one or more ofthese factors, our results of operations could be adversely affected.14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 on our results ofoperations and working capital requirements.The fertilizer business is seasonal. With respect to domestic sales, we typically experience increased sales during the North American spring and fallapplication seasons. The degree of seasonality can change significantly from one year to the next due to weather-related shifts in planting schedules andpurchasing patterns. We and our customers generally build inventories during low-demand periods of the year to ensure timely product availability duringhigh-demand periods, resulting in increased working capital requirements just before the start of these seasons. If we are unable to accurately predict thetiming of demand for our products due to variations in seasonality from year to year, our results of operations and working capital could be adverselyaffected. Similarly, if we do not have adequate storage capacity to manage varying inventory needs, we may need to reduce production or lower the price atwhich we sell product, either of which would adversely affect our results of operations.In mid-2016, we transitioned our East mine to Trio®-only, resulting in an increased supply of Trio®. Previously, Trio® was supply-constrained, whichmeant that we did not see as much seasonality with respect to purchases as we did for potash. As purchasers have gained increased confidence in our ability tosupply this product closer to the traditional spring application season in the U.S., these purchasers have moved to more of a just-in-time purchasing model. Asa result, we now experience more traditional seasonality with respect to our domestic Trio® sales, which exposes us to inventory and demand risks similar tothose with respect to our potash.We market Trio® in various countries around the world, all of which have different climates and fertilizer-application patterns. As a result,seasonality in our international Trio® sales may develop, which could cause volatility in our results of operations.Our Trio® profitability could be affected by market entrants or the introduction of langbeinite alternatives.Langbeinite is produced by us and one other company from a single resource located in Carlsbad, New Mexico. Additional competition in themarket for langbeinite and comparable products exists and could increase in the future. Other companies could seek to create and market chemically similaralternatives to langbeinite, some of which could be superior to langbeinite, or less costly to produce. In addition, companies sometimes blend severalnutrients to obtain a product with similar agronomic benefits as langbeinite. The market for langbeinite and our Trio® sales could be affected by the successof these and other products that are competitive with langbeinite, which could adversely affect the viability of our Trio® business and our results ofoperations and financial condition. Further, recent increases in the supply of langbeinite by us and the other producer may continue to pressure the sales priceof Trio®.International sales could present risks to our business.Sales of Trio® into international markets often require more resources and management attention than domestic sales and may subject us toeconomic, regulatory, and political risks that are different from those in the United States. These risks include accounts receivable collection; the need toadapt marketing and sales efforts for specific countries; new and different sources of competition; disputes and losses associated with overseas shipping;tariffs, export controls, and trade duties; additional time and effort to obtain product certifications; adverse tax consequences; restrictions on the transfer offunds; changes in legal and regulatory requirements or import policies; compliance with potentially unfamiliar local laws and customs; and political andeconomic instability. International sales may also be subject to fluctuations in currency exchange rates, which could increase the price of our productsoutside the United States and expose us to foreign currency exchange rate risk. Certain international markets require significant time and effort on the part ofmanagement to develop relationships and gain market acceptance for our products. Overall, there are additional logistical requirements associated withinternational sales, which may increase the time between production and our ability to recognize related revenue. Our failure to manage any of these riskssuccessfully could harm our future international operations and our overall business.If potash or Trio® prices decline, we could be required to record write-downs of our long-lived assets, which could adversely affect our results of operationsand financial condition.We evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not berecoverable. Impairment is considered to exist if an asset's total estimated future cash flows on an undiscounted basis are less than the carrying amount of therelated asset. An impairment loss is measured and recorded based on the discounted estimated future cash flows.Although we believe the carrying values of our long-lived assets were realizable as of the balance sheet dates, future events could cause us toconclude otherwise. These future events could include further significant and sustained declines in potash or Trio® prices or higher production and operatingcosts. Further, based on our analysis of the profitability of any of our15Table of Contentsfacilities, we may decide to terminate or suspend operations at additional facilities. These events could require a further write-down of the carrying value ofour assets, which would adversely affect our results of operations and financial condition.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 net realizable value. In periods when the market prices for our products fall below our cost to producethem and the lower prices are not expected to be temporary, we are required to write down the value of our inventories. Any write-down of our inventorywould adversely affect our financial condition and results of operations, possibly materially. For example, due to decreased pricing during the year endedDecember 31, 2018, we recorded lower of cost or net realizable value ("lower of cost or NRV") inventory adjustments totaling $1.7 million.The execution of strategic projects could require more time and money than we expect, which could adversely affect our results of operations and financialcondition.From time to time, we invest in strategic projects. The completion of these projects could require significantly more time and money than we expect.In some cases, the construction or commissioning processes could force us to slow or shut down normal operations at the affected facility for a period of time,which would cause lower production volume and higher production costs per ton. In addition, our management team and other employees may be required tospend a significant amount of time addressing strategic projects, which could mean that our normal operations receive less time and attention. As we proceedwith one or more of these strategic projects, we may not realize the expected benefits despite substantial investments, they may cost significantly more thanwe expect, or we may encounter additional risks that we did not initially anticipate.Mining is a complex process that frequently experiences production disruptions, 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. Furthermore, production is dependent upon the maintenance andgeotechnical structural integrity of our tailings and storage ponds. The amounts that we are required to spend on maintenance and repairs may be significant.Our East mine, surface, and support facilities are over 50 years old. As mining progresses at an underground mine, operations typically move furtheraway from the shafts and, despite modernization through sustaining capital, fixed assets may require increased repair or refurbishment. These conditionsincrease the exposure to higher operating costs or the increased probability of incidents.Mining is a hazardous process, and accidents could result in significant costs or production delays.The process of mining is hazardous and involves various risks and hazards that can result in serious accidents. If accidents or unforeseen 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 testour mines regularly for methane gas. However, unlike coal mines, our mines are not constructed or equipped to deal with methane gas. Any intrusion ofmethane gas into our mines could cause a fire or an explosion resulting in loss of life or significant property damage or could require the suspension of allmining operations until the completion of extensive modifications and re-equipping of the mine. The costs of modifying our mines and equipment couldmake it uneconomical to reopen our mines. You can find more information about the co-development of potash and oil and gas resources near our NewMexico facilities under the risk factor below entitled "Existing and further oil and gas development in the Designated Potash Area could impair our potashreserves, which could adversely affect 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 reserves, which could adversely affect ourproduction and our results of operations.Ore bodies have complex geology. Our production is affected by the mineral content and other mineralogy of the ore. Our projections of ore grademay not be accurate. There are numerous uncertainties inherent in estimating ore grade, including many factors beyond our control. As the grade of ourremaining ore reserves decreases over time, we need to process more ore to produce the same amount of saleable-grade product, increasing our costs andslowing our production. In addition, there are few opportunities to acquire more reserves in the areas around our current operations. If we are unable toprocess more ore to maintain current production levels, if the processing of more ore materially increases our costs, or if our ore grade projections are notaccurate, our results of operations would be adversely affected.16Table of ContentsIf the assumptions underlying our reserve estimates are inaccurate or if future events cause us to negatively adjust our previous assumptions, the quantitiesand value of our reserves, and in turn our financial condition and results of operations, could be adversely affected.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 in areaswhere we currently mine or operate•future potash and Trio® prices, operating costs, capital expenditures, royalties, severance and excise taxes, and development and reclamationcosts•future mining technology improvements•the effects of governmental regulation•variations in mineralogyIn addition, because reserves are estimates built on various assumptions, they cannot be audited for the purpose of verifying exactness. It is onlyafter extraction that reserve estimates can be compared to actual values to adjust estimates of the remaining reserves. If any of the assumptions that we makein connection with our reserve estimates are incorrect, the amounts of potash and langbeinite that we are able to economically recover from our mines couldbe significantly lower than our reserve estimates. In addition, we periodically review the assumptions underlying our reserve estimates. If future events causeus to negatively adjust our previous assumptions, our reserve estimates could be adversely affected. In any of these events, our financial condition and resultsof operations could be adversely affected.Weakening of foreign currencies against the U.S. dollar could lead to lower domestic potash prices, which would adversely affect our results of operations.Currency fluctuations could cause our results of operations to fluctuate.The U.S. imports the majority of its potash, including from Canada, Russia, and Belarus. If the local currencies for foreign suppliers strengthen incomparison to the U.S. dollar, foreign suppliers realize a smaller margin in their local currencies unless they increase their nominal U.S. dollar prices.Strengthening of these local currencies therefore tends to support higher U.S. potash prices as the foreign suppliers attempt to maintain their margins.However, if these local currencies weaken in comparison to the U.S. dollar, foreign suppliers may lower prices to increase sales volume while againmaintaining a margin in their local currency. Currently, the U.S. dollar is still relatively strong in comparison to many foreign currencies, which has led toincreased imports into the U.S. These activities could cause our sales prices and results of operations to decrease or fluctuate significantly.Adverse conditions in the global economy and disruptions in the financial markets could negatively affect our results of operations and financialcondition.Global economic volatility and uncertainty can create uncertainty for farmers and customers in the geographic areas where we sell our products. Iffarmers reduce, delay, or forgo 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 could limit our customers' ability to obtain adequate financing or credit to purchase and pay for ourproducts, which would decrease our sales volume and increase our risk of non-payment by customers. Changes in governmental banking, monetary, andfiscal policies to restore liquidity and increase credit availability may not be effective. It is difficult to determine the extent of economic and financial marketproblems and the many ways in which they could negatively affect our customers and business. In addition, if we are required to raise additional capital orobtain additional credit during an economic downturn, we could be unable to do so on favorable terms or at all.Changes in laws and regulations affecting our business, or changes in enforcement practices, could have an adverse effect on our financial condition orresults of operations.We are subject to numerous federal and state laws and regulations covering a wide variety of business practices. 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 impactour business.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.Physical effects of climate change, and climate change legislation, could have a negative effect on our operations and results of operations.17Table of ContentsThe physical effects of climate change could have an adverse effect on us and our customers. These effects could include changes in weather patternsincluding drought and rainfall levels, water availability, storm patterns and intensities, and temperature levels. These changes could have an adverse effect onour costs, production, or sales, especially with respect to our solar operations. These changes could also have an adverse effect on our agricultural customers,which in turn could reduce the demand or price for our products.In addition, federal and state legislators and regulators regularly consider ways to mitigate climate change. Any new rules could have a significantimpact on our operations and products and could result in substantial additional costs for us.Our business depends on skilled and experienced workers, and our inability to find and retain quality workers could have an adverse effect on ourdevelopment and results of operations.The success of our business depends on our ability to attract and retain skilled managers, engineers, and other workers. At times, we may not be ableto find or retain qualified workers. In particular, the labor market around Carlsbad, New Mexico, is competitive and employee turnover is generally high. Inthat market, we compete for experienced workers with several other employers, including natural resource and hazardous waste facilities, oil and gasproducers, and another producer of langbeinite. If we are not able to attract and retain quality workers, the development of our business could suffer, or wecould be required to raise wages to keep our employees, hire less qualified workers, or incur higher training costs. These risks may be exacerbated in timeswhen we need to reduce our workforce due to economic conditions. The occurrence of any of these events could have an adverse effect on our results ofoperations. For example, in mid-2016, we idled our West mine and transitioned our East mine to Trio®-only, resulting in our laying off a significant numberof skilled employees in New Mexico. This may make it more difficult for us to re-hire skilled employees in the future.Changes in the prices of energy and other important materials used in our business, or disruptions to their supply, could adversely impact our sales, resultsof operations, or financial condition.Natural gas, electricity, chemicals, diesel, and gasoline are key materials that we purchase and use in the production of our products. The prices ofthese 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 input costs for end-users of ourproducts, which could cause them to spend less on our products.Increased costs could affect our per-ton profitability.A substantial portion of our operating costs is comprised of fixed costs that do not vary based on production levels. These fixed costs include laborand benefits, base energy usage, property taxes, insurance, maintenance expenditures, and depreciation. Any increase in fixed costs or decrease in productiongenerally increases our per-ton costs and correspondingly decreases our per-ton operating margin. Beginning in December 2016, we curtailed our Trio®production to match expected demand and manage inventory levels. A significant increase in costs at any of our facilities could have an adverse effect on ourprofitability and cash flows, particularly during periods of lower potash and Trio® prices.A shortage of railcars or trucks for transporting our products, increased transit times, or interruptions in railcar or truck transportation could result incustomer 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. A shortage of trucks or railcars for carrying product or increased transit times due to accidents, highway or railwaydisruptions, congestion, high or compressed demand, labor disputes, adverse weather, natural disasters, changes to transportation systems, or other eventscould prevent us from making timely delivery to our customers or lead to higher transportation costs. As a result, we could experience customerdissatisfaction or a loss of sales. Similarly, disruption within the transportation systems could negatively affect our ability to obtain the supplies andequipment necessary to produce our products. We may also have difficulty obtaining access to vessels to deliver our products 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 important to our business. If we are unable to retain these individuals, ouroperations could be disrupted and we may be unable to achieve18Table of Contentsour business strategies and grow effectively. We do not currently maintain "key person" life insurance on any of our management personnel.Existing and further oil and gas development in the Designated Potash Area could impair our potash reserves, which could adversely affect our financialcondition 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 2012, theU.S. Department of the Interior issued an updated order that provides guidance to the U.S. Bureau of Land Management ("BLM") and industry on the co-development of these resources.It is possible that oil and gas drilling in this area could limit our ability to mine valuable potash and langbeinite reserves or mineralized depositsbecause 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 BLM coulddetermine that the size of these unminable buffer areas should be larger than they are currently, which could impact our ability to mine our reserves. Wereview applications for permits to drill oil and gas wells as they are publicly disclosed by the BLM and the State of New Mexico. When appropriate, weprotest applications for drilling permits that we believe should not be drilled consistent with the operative federal and state rules and that could impair ourability to mine our reserves or put at risk the safety of our employees. We may not prevail in these protests or be able to prevent wells from being drilled inthe vicinity of our reserves. If, notwithstanding our protests and appeals, a sufficient number of wells are drilled through or near our reserves, our reservescould be significantly impaired, which could adversely affect our financial condition or results of operations.If we are unable to obtain and maintain the required permits, governmental approvals, and leases necessary for our operations, our business could beadversely affected.We hold numerous environmental, mining, safety, and other permits and governmental approvals authorizing the operations at each of our facilities.A decision by a governmental agency to deny or delay 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. In addition, we could be required to expend significant amounts to obtain these permits, approvals, and leases, or wecould be required to make significant capital investments to modify or suspend our operations at one or more of our facilities.Any expansion of our existing operations would require us to secure the necessary environmental and other permits and approvals. We may not beable 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 or renew these leases on favorable terms or at all. In addition, our existing leases generally require us to commence miningoperations within a specified time frame and to continue mining in order to retain the lease. The loss or non-renewal of a lease could adversely affect ourability to mine the associated reserves.Also, certain of our existing leases require us to make royalty payments based on the revenue generated by the potash, langbeinite, water, orbyproducts that we extract from the leased land. The royalty rates are subject to change whenever we renew our leases, which could lead to significantincreases in these rates. As of December 31, 2018, approximately 26% of our state and federal lease acres at our New Mexico facilities (including leases at theHB and North mines) and 36% of our state and federal lease acres at our Utah operations will be up for renewal within the next five years. Increases in royaltyrates would reduce our profit margins and, if the increases were significant, would adversely affect our results of operations.We have less product diversification than nearly all of our competitors, which could have an adverse effect on our financial condition and results ofoperations.A significant portion of our revenue comes from the sale of potash and langbeinite, whereas nearly all of our competitors are diversified, primarilyinto nitrogen- or phosphate-based fertilizer businesses or other chemical or industrial businesses. In addition, a majority of our sales are to customers in theU.S., and generally these customers are concentrated in key geographies where we have a freight advantage. As a result, we could be impacted more acutelyby factors affecting our industry or the regions in which we operate than we would if our business was more diversified and our sales more global. A decreasein the demand for potash and langbeinite would have an adverse effect on our financial condition and results of operations. Similarly, in periods whenproduction exceeds demand, the price at which we sell our potash and langbeinite and our sales volumes would likely fall, which would adversely affect ourresults of operations and financial condition more than our diversified competitors.19Table of ContentsHeavy precipitation or low evaporation rates at our solar solution mines could impact our potash production at those facilities, which could adverselyaffect our sales and results of operations.All of our potash production comes from our solar solution mines. These facilities use solar evaporation ponds to form potash crystals from brines.Weather conditions at these facilities could negatively impact potash production. For example, heavy rainfall in September and October, just after theevaporation season ends, can reduce the amount of potash we produce in that year or the following year by causing the potash crystals to dissolve andconsume pond capacity. Similarly, lower‑than‑average temperatures or higher-than-average seasonal rainfall would reduce evaporation rates and thereforeimpact production. If we experience heavy rainfall or low evaporation rates at any of our solar solution mines, we would have less potash available for sale,and our sales and results of operations would be adversely affected.Inflows of water into our langbeinite mine from heavy rainfall or groundwater could result in increased costs and production downtime and could requireus to abandon the 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 underground, langbeinite mine. The presence of water-bearing stratain many underground mines carries the risk of water inflows into the mines. If we experience water inflows at our langbeinite mine, our employees could beinjured and our equipment and mine shafts could be seriously damaged. We could be forced to shut down the mine temporarily, potentially resulting insignificant 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 the mine.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, relatedpotash and salt byproducts, and process tailings. These operations resulted, or may have resulted, in soil, surface water, and groundwater contamination. Atsome locations, salt-processing waste, building materials (including asbestos-containing material), and ordinary trash may have been disposed of or buried inareas that have since been closed and covered with soil and other materials.We could incur significant liabilities under environmental remediation laws such as CERCLA with regard to our current or former facilities, adjacentor nearby third-party facilities, or off-site disposal locations. Under CERCLA and similar state laws, in some circumstances liability may be imposed withoutregard to fault or legality of conduct and one party may be required to bear more than its proportional share of cleanup costs at a site. Liability under theselaws involves inherent uncertainties.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 of environmental, safety, and health 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 equipmentThe mining and processing of potash and langbeinite also generate residual materials that must be managed both during the operation of the facilityand upon facility closure. For example, potash tailings, consisting primarily of salt, iron, and clay, are stored in surface disposal sites and requiremanagement. At least one of our New Mexico facilities, the HB mine, may have issues regarding lead in the tailings pile as a result of operations conductedby previous owners. During the life of the tailings management areas, we have incurred and will continue to incur significant costs to manage potash residualmaterials in accordance with environmental laws and regulations and permit requirements.20Table of ContentsAs 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, safety and health matters affecting our business, see "Business-Environmental, Safety, and HealthMatters."Anti-corruption laws and regulations could subject us to significant liability and require us to incur costs.As a result of our international sales, we are subject to the U.S. Foreign Corrupt Practices Act (the "FCPA") and other laws that prohibit improperpayments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business. Our international activitiescreate the risk of unauthorized payments or offers of payments in violation of the FCPA or other anti-corruption laws by one of our employees, consultants,sales agents, or distributors even though these persons are not always subject to our control. Although we have implemented policies and training designedto promote compliance with these laws, these persons may take actions in violation of our policies. Any violations of the FCPA or other anti-corruption lawscould result in significant civil or criminal penalties and have an adverse effect on our reputation.The mining business is capital intensive, and our inability to fund necessary or desirable capital expenditures could have an adverse effect on our growthand 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 and may not have, or have access to, the financial resources to pursue these expenditures. If costs associated with capitalexpenditures increase or if our earnings decrease significantly or we do not have access to the capital markets, we could have difficulty funding any necessaryor desirable capital expenditures at an acceptable rate or at all. This could limit the expansion of our production or make it difficult for us to sustain ourexisting operations at optimal levels. Increased costs for capital expenditures could also have an adverse effect on the profitability of our existing operationsand returns from our most recent strategic projects.Market upheavals due to global pandemics, military actions, terrorist attacks, or economic repercussions from those events could reduce our sales orincrease 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 potassium-based products. As a result, our competitors may increase their sales efforts in ourgeographic markets and pricing of our products 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 to terrorism or the potential use of certain fertilizers as explosives, local, state, and federal governments could implement newregulations impacting the production, transportation, sale, or use of potassium-based products. These new regulations could result in lower sales or highercosts.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 catastrophicevents, power outages, natural disasters, computer system or network failures, viruses or malware, physical or electronic break-ins, unauthorized access, andcyber-attacks. Although we take steps to secure our systems and electronic information, these cybersecurity measures may not be adequate. Any significantdisruption to our systems could adversely affect our business, reputation, 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 8% of our workforce. Ourcurrent collective bargaining agreement with the union expires on May 31, 2020. Although we believe that our relations with our unionized employees aregood, we may not be successful in negotiating a new collective bargaining agreement as a result of general economic, financial, competitive, legislative,political, and other factors beyond our control. Any new agreement could result in a significant increase in our labor costs. In addition, a breakdown innegotiations or failure to timely enter into a new collective bargaining agreement could materially disrupt 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 efforts21Table of Contentswere successful, we could experience increased labor costs, an increased risk of work stoppages, and limits on our flexibility to run our business in the mostefficient 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.The market price of our common stock has historically experienced, and may continue to experience, volatility. For example, during 2018, the marketprice of our common stock ranged between $2.54 and $5.31. These fluctuations may continue because of numerous factors, including, but not limited to, thefollowing:•our operating performance and the performance of our competitors•the public's reaction to our press releases, other public announcements, or filings with the SEC•changes in earnings estimates or recommendations by research analysts who follow us or other companies in our industry•variations in general economic, market, and political conditions•changes in commodity prices or foreign currency exchange rates•substantial sales of common stock by us under our at-the-market offering program or in connection with future acquisitions or capital raisingactivities•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 Annual Report on Form 10-KOur financial position, cash flows, results of operations, and stock price could be materially adversely affected if commodity prices decline. In addition,in recent years the stock market has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market prices ofsecurities issued by many companies for reasons unrelated to their operating performance. Our stock price may experience extreme volatility due touncertainty regarding, among other things, commodity prices. These market fluctuations, regardless of the cause, may materially and adversely affect ourstock price, regardless of our operating results.Our stock is currently listed on the New York Stock Exchange (“NYSE”). For continued listing, we are required to meet specified listing standards,including a minimum stock price, market capitalization, and stockholders’ equity. If we are unable to meet the NYSE’s listing standards, including therequirement that our common stock continue to trade at over $1.00 per share, the NYSE would delist our common stock. At that point, it is possible that ourcommon stock could be quoted on the over-the-counter bulletin board or the pink sheets. This could have negative consequences, including reducedliquidity for stockholders; reduced trading levels for our common stock; limited availability of market quotations or analyst coverage of our common stock;stricter trading rules for brokers trading our common stock; and reduced access to financing alternatives for us. We also would be subject to greater statesecurities regulation if our common stock was no longer listed on a national securities exchange. Volatility of our common stock may make it difficult foryou to resell shares of our common stock when you want or at attractive prices.The market price of our common stock may be adversely affected by the future issuance and sale of additional shares of our common stock, includingpursuant to our at-the-market offering program, or by our announcement that the issuances and sales may occur.We cannot predict the size of future issuances or sales of shares of our common stock, including those made pursuant to our at-the-market offeringprogram or in connection with future acquisitions or capital raising activities, or the effect, if any, that the issuances or sales may have on the market price ofour common stock. In addition, the sales agent for our at-the-market offering program will not engage in any transactions that stabilize the price of ourcommon stock. The issuance and sale of substantial amounts of shares of our common stock, including issuances and sales pursuant to our at-the-marketoffering program, or announcement that the issuances and sales may occur, could adversely affect the market price of our common stock.We do not anticipate paying cash dividends on our common stock.We currently intend to retain earnings to reinvest for future operations and growth of our business and do not anticipate paying any cash dividendson our common stock. Accordingly, realization of any gain on our common stock will depend on the appreciation of the price of the shares of our commonstock, which may never occur. However, our board of directors, in its discretion, may decide to declare a dividend at an appropriate time in the future, subjectto the terms of our debt22Table of Contentsagreements. A decision to pay a dividend would depend upon, among other factors, our results of operations, financial condition, and cash requirements andthe terms of our debt agreements at the time a payment is considered.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:•allow our board of directors to create and issue preferred stock with rights senior to those of our common stock without prior stockholder approval,except as may be required by NYSE rules•do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect directorcandidates•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 directors thenserving on the board•establish advance notice requirements for submitting nominations for election to the board of directors and for proposing matters that can be actedupon 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 resultin our stockholders receiving a premium over the market price of the common stock they own.We may issue additional securities, including securities that are senior in right of dividends, liquidation, and voting to our common stock, without yourapproval, 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 NYSE rules. Our board of directors may approve the issuance of preferred stock with terms that are senior to our common stock in right ofdividends, liquidation, or voting. Our issuance 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 diminish•the market price of the common stock may declineIf securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding ourstock, or if our operating results do not meet their expectations, our stock price could decline.The trading market for our common stock may be influenced by the research and reports that industry or securities analysts publish about us or ourbusiness. If one or more of these analysts cease coverage of Intrepid or fail to publish reports on us regularly, we could lose visibility in the financial markets,which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover Intrepid downgrade our stock or ifour operating results do not meet their expectations, our stock price could decline.ITEM 1B.UNRESOLVED STAFF COMMENTSNone.ITEM 2.PROPERTIESPropertiesWe produce potash at three solution mining facilities: our HB solution mine in Carlsbad, New Mexico, a solution mine in Moab, Utah, and a brinerecovery mine in Wendover, Utah. Additionally, we operate our North compaction facility in Carlsbad, New Mexico, which compacts and granulates productfrom the HB mine. We produce Trio® from our conventional23Table of Contentsunderground East mine in Carlsbad, New Mexico. We also have the West facility, which is a conventional underground potash mine that is not in operationand is in care-and-maintenance mode.24Table of ContentsWe control the rights to mine approximately 143,000 acres of land northeast of Carlsbad, New Mexico. We lease approximately 32,000 acres fromthe State of New Mexico, approximately 106,000 acres from the U.S. federal government through the BLM, and approximately 240 acres from privateleaseholders. We own approximately 4,700 surface acres in the vicinity of our mine sites and adjacent to federal and state mining leases.25Table of ContentsWe control the rights to mine approximately 14,100 acres of land west of Moab, Utah. We lease approximately 10,100 acres from the State of Utahand approximately 200 acres from the U.S. federal government through the BLM. We own approximately 3,800 surface acres overlying and adjacent toportions of our mining leases with the state of Utah.26Table of ContentsWe control the rights to mine approximately 90,000 acres of land near Wendover, Utah. We own approximately 57,000 acres, and we leaseapproximately 8,000 acres from the State of Utah and approximately 25,000 acres from the U.S. federal government through the BLM.27Table of ContentsWe conduct most of our mining operations on properties that we lease from states or the federal government. These leases generally containstipulations that 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 applicable state government and the federal government. The leasestipulations could change in the future, which could impact the economics of our operations. Our federal leases are for indefinite terms subject toreadjustment of the lease stipulations, including the royalty payable to the federal government, every 20 years. Our leases with the State of New Mexico areissued for terms of 10 years and for as long thereafter as potash is produced in commercial quantities and are subject to readjustment of the lease stipulations,including the royalty payable to the state. Our leases with the State of Utah are for terms of 10 years subject to extension and possible readjustment of thelease by the State of Utah. Our leases for our Moab mine are operated as a unit under a unit agreement with the State of Utah, which extends the terms of all ofthe leases as long as operations are conducted on any portion of the leases. The term of the state leases for our Moab mine is currently extended until 2024 orso long as potash is being produced. As of December 31, 2018, approximately 26% of our state, federal, and private lease acres at our New Mexico facilitieswill be up for renewal within the next five years, and 36% of our state and federal lease acres at our Utah operations will be up for renewal within the next fiveyears.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 "Our Proven andProbable Reserves" on the following pages (except for our West facility, which is currently in care-and-maintenance mode), and our mineral developmentassets, mills, and equipment have been acquired over the interval since these dates.As noted, we have relatively long-lived proven and probable reserves and consequently expect to conduct limited and focused additionalexploration in the coming five years. We plan to drill core holes in areas near our Carlsbad, New Mexico, facility, 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 andbrine evaporation operations is expected to be enhanced by the drilling of additional wells and flooding of new solution mine caverns. Although not in ourcurrent plans, we also have opportunities to rehabilitate the shafts at the currently idled North mine and additional surface infrastructure to accelerate miningof conventional reserves.Our leased office space in Denver, Colorado, is approximately 19,000 square feet and has a term expiring on April 29, 2022.We believe that all of our present facilities are adequate for our current needs and that additional space is available for future expansion onacceptable terms.Proven and Probable ReservesOur potash (produced from sylvite ore) and langbeinite (marketed as Trio®) reserves each have substantial life, with remaining reserve life rangingfrom three years to over 100 years, based on proven and probable reserves estimated in accordance with SEC requirements. This lasting reserve base is theresult of our past acquisition and development strategy. The estimates of our proven and probable reserves as of December 31, 2018, were prepared by us andwere reviewed and independently determined by Agapito Associates, Inc. ("Agapito") based on mine plans and other data furnished by us as described infootnote one below the table. The following table summarizes our proven and probable reserves, stated as product tons and associated percent ore grade, as ofDecember 31, 2018.28Table of ContentsOur Proven and Probable Reserves 1 (tons in thousands) Proven 4 Probable 7Product/Operations Date MineOpened 2 Current ExtractionMethod MinimumRemaining Life(years) 3 Recoverable OreTons 5 Ore Grade6 (% KCl) ProductTons as KCl Recoverable OreTons 5 Ore Grade6 (% KCl) Product Tonsas KClPotash West 2 1931 Underground 47 78,880 23.2% 14,640 31,750 22.4% 5,670East 1965 Underground 3 5,210 21.6% 880 3,700 22.6% 680HB Mine 2, 9 2012 Solution 38 18,000 36.0% 6,100 2,190 40.2% 790Moab 1965 Solution 100+ 29,720 44.4% 11,540 31,400 46.2% 14,760Wendover 10 1932 Brine Evaporation 30 — — — — 0.7% 3,190Total Potash 32.9% 33,160 34.2% 25,090(tons in thousands) Proven 4 Probable 7Product/Operations Date MineOpened 2 Current ExtractionMethod MinimumRemaining Life(years) 3 Recoverable OreTons 5 Ore Grade6 (% Lang) Product Tonsas Langbeinite Recoverable OreTons 5 Ore Grade6 (% Lang) Product Tonsas LangbeiniteLangbeinite East 8,11 1965 Underground 53 42,150 40.7% 16,620 33,550 34.7% 12,7901 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,financial and other data by Agapito, which is familiar with our mines. The most recent review performed by Agapito for the New Mexico East, West, andHB properties was in 2018. Agapito's analysis for the West, East and HB mines was based on detailed examination of our geologic site data and mine plan,which was updated with information from 2018, and 2017. As a result of the Agapito 2018 review, langbeinite reserves in the East mine and sylvitereserves in the West mine decreased compared to previously reported reserves. The change in reserves was primarily due to a 2018 mine plan update andadjustment of the breakeven cut-off grades for East mine langbeinite and West mine sylvite. The HB mine reserve estimate decreased due to depletion for2018 production from the HB mine. The Moab property reserves are based on Agapito's 2018 mine reserve estimate developed from detailed examinationof our geologic, solution mine and site data. The Wendover property reserves are based on Agapito's 2018 brine aquifer reserve estimate developed fromdetailed examination of our brine aquifer and site data. Depletion did not change the reserve life of 30 years as discussed in footnote 3 below. Becausereserves are estimates, they cannot be audited for the purpose of verifying exactness. Instead, reserve information was reviewed in sufficient detail todetermine if, in the aggregate, the data provided by us is reasonable and sufficient to estimate reserves in conformity with practices and standards generallyemployed by, and within the mining industry, and that are consistent with the requirements of U.S. securities laws.2 These mines, excluding the HB and West mines, have operated in a substantially continuous manner since the dates set forth in this table. The HB minewas originally opened in 1934 and operated continuously as an underground mine until 1996. In July 2016, we transitioned our West facility into care-and-maintenance mode due to the decline in potash prices.3 Minimum remaining lives are calculated by dividing reserves by annual effective capacity. Effective capacity is the estimated amount of production thatwill likely be achieved based on the amount and quality of ore that we estimate can be mined, milled, and/or processed, assuming an estimated averagereserve grade, potential future modifications to the systems, a normal amount of scheduled down time, average or typical mine development efforts andoperation of all of our mines and facilities at or near full capacity. Minimum remaining lives at the West, East, HB mine, and Moab mines are based onreserves (product tons) divided by annual effective capacity over the full expected life of the ore body, and corrections for purity: one ton of red muriate ofpotash equals 0.95 ton of KCl; one ton of HB and Moab white muriate of potash equals 0.96 ton of KCl; one ton of sulfate of potash magnesia equals 0.97ton of langbeinite. East langbeinite minimum remaining life was based on a langbeinite-only plant and associated plant capacity. Langbeinite-onlyproduction commenced in April 2016 at the East facility and the sylvite plant was shut down at that time. The West facility was shut down and placed intocare-and-maintenance mode in July 2016 due to low potash prices. If we decided to produce potash from our East and West mine sylvite ore reserves in thefuture, we expect that we would reopen the West facility and be required to construct a new plant to replace the East sylvite plant closed in 2016 to processthe remaining reserves. Calculated mine lives that exceed 100 years are reported at 100+ years to balance the reserve life with the uncertainties associatedwith those extended time frames. We29Table of Contentscurrently do not report more than 30 years mining life for Wendover due to the uncertainties associated with natural brine‑containing aquifers.4 Generally, "proven reserves" are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings, or drill holes; gradeand/or quality are computed from the results of detailed sampling, and (b) the sites for inspection, sampling, and measurement are spaced so closely and thegeologic character is so well-defined that the size, shape and depth, and mineral content of the reserves are well-established. Proven reserve tonnages arecomputed from projection of data using the inverse distance squared method taking into account mining dilution, mine extraction efficiency, ore bodyimpurities, metallurgical recovery factors, sales prices, and operating costs from potash ore zone measurements as observed and recorded either in drillholes using cores, or channel samples in mine workings. This classification has the highest degree of geologic assurance. The data points for measurementare 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 varies with the geologic nature of the ore zone being studied.5 Recovery is the percentage of valuable material in the ore that is beneficiated prior to further treatment to develop a saleable product. Recoverable ore tonsis defined as the hoisted ore for the conventionally mined ore in our East and West mines. This figure was derived from the in-place ore estimate that hasbeen adjusted for factors such as geologic impurities and mine extraction ratios. For the HB mine and the Moab property, recoverable ore tons are definedas the potassium that can be extracted from the underground workings and pumped to the surface. This figure was derived from the in-place ore estimatethat has been adjusted for factors such as geologic impurities, potash that dissolves but remains in the cavern (dissolution factor), and an extraction factorthat accounts for potash that may not be recovered because solution may be channeled away or stranded due to cavern geometry. We do not calculaterecoverable ore tons for the Wendover property as it is a lake brine resource, not an in-place ore deposit.6 Ore grade is expressed as expected mill feed grade to account for minimum mining height for the East and West mines. Potash ore grade is reported inpercent KCl and langbeinite ore grade is reported in percent langbeinite. The ore grade for the Moab and HB mines is the in-place KCl grade.7 "Probable reserves" are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured)reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance ofprobable (indicated) reserves, although lower than that for proven (measured) reserves, is high enough to assume geological continuity between points ofobservation. The classification of minerals as probable reserves requires that we believe with reasonable certainty that access to the reserves can beobtained, even though currently-issued permits are not required. Probable reserve tonnages are computed by projection of data using the inverse distancesquared method taking into account mining dilution, mine extraction efficiency, ore body impurities, metallurgical recovery factors, sales prices, andoperating costs from available ore zone measurements as observed either in drill holes using cores or in mine workings for a distance beyond potashclassified as proven reserves. This classification has a moderate 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. Ore reserves in the East5th ore zone contain both sylvite and langbeinite which we call mixed ore. We ceased processing sylvite at the East facility in April 2016, and only thelangbeinite ore contained in the East 5th ore zone is included in the mine reserve estimate. Additionally, the reserve amounts include West mine 3rd and4th ore zones which contain langbeinite that we anticipate will be processed at the East facility.9 The HB mine reserves were based on solution mining of old workings and recovery of potash from the residual pillars. Reserves are based on thicknesses,grades, and mine maps provided by us. The data presented here includes reserves available via the AMAX/Horizon mine as further described below underOur Development Assets.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 for theshallow aquifer was based on brine concentration, brine density, soil porosity within the aquifer, and aquifer thickness from historical reports. The brineconcentrations and brine density were confirmed by us recently, but values for the aquifer thickness and the porosity were obtained from literaturepublished by other sources. Probable reserves for the shallow brine at the Wendover facility were calculated from KCl contained in the shallow aquiferbased on estimates of porosity and thickness over the reserve area. The distance for projection of probable reserves is a radius of three‑quarters of a milefrom points of measurement of brine concentration. Probable reserves for the deep-brine aquifer were estimated based on historical draw-down and KClbrine concentrations. The ore grade (% KCl) for both the shallow and deep aquifer is the percentage by weight of 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.30Table of ContentsProductionOur facilities have a current estimated annual productive capacity of approximately 390,000 tons of potash, and approximately 400,000 tons oflangbeinite, based on current design. Our annual production rates are less than our estimated productive capacity. Actual production is affected by operatingrates, the grade of ore mined, recoveries, mining rates, evaporation rates, product pricing, and the amount of development work that we perform. Therefore, aswith other producers in our industry, our production results tend to be lower than reported productive capacity.Our production capabilities and capital improvements at our facilities are described in more detail below, along with our historical production of ourprimary products and byproducts for the years ended December 31, 2018, 2017, and 2016.Solution Mines•Potash ore at HB is mined from idled original mine workings in the Carlsbad, New Mexico, area.•The HB mine has a current estimated productive capacity of 180,000 tons annually. The productive capacity may vary between approximately160,000 and 200,000 tons of potash, primarily due to evaporation rates. Potash produced from our HB mine is shipped by truck tothe North facility for compaction.•Potash ore at Moab is mined from two stacked ore zones: the original mine workings in Potash 5 and the horizontal caverns in Potash 9.•The Moab mine has a current estimated productive capacity of approximately 110,000 tons of potash annually; evaporation rates havehistorically varied and, consequently, productive capacity may vary between approximately 75,000 and 120,000 tons of potash.•Potash at Wendover is produced primarily from brine containing salt, potash, and magnesium chloride that is collected in ditches from theshallow aquifers of the West Desert. 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 havehistorically varied resulting in actual annual production between approximately 65,000 and 100,000 tons of potash.Conventional Underground Mines•Sylvite and langbeinite ore at our Carlsbad locations occurs in a stacked ore body containing at least 10 different mineralized zones, seven ofwhich contain proven and probable reserves.•The East mine has a current estimated productive capacity of approximately 400,000 tons of Trio® annually, based on current design. The Eastmine was converted to a Trio®-only operation in April 2016 and potash is no longer produced from the East mine.•The West mine was idled in July 2016 and placed in care-and-maintenance mode. When operational, it has an estimated productive capacity ofapproximately 400,000 tons of red potash annually.Compaction Facility•The North facility receives compactor feed from the HB mine via truck and converts the compactor feed to finished granular-sized product andstandard-sized product.Our Development AssetsWe have development opportunities in our New Mexico facilities with the acceleration of production from our reserves and mineralized deposits ofpotash, and the potential construction of additional production facilities in the region. We also own the leases on two idled mines near Carlsbad: theAMAX/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 continuousoperation between 1952 and 1993. This mine, similar to the HB mine, is a viable candidate for solution mining in a manner that isconsistent with the HB mine.31Table of Contents•State and federal permits were obtained in 2015 to utilize these leases for solution mining. The AMAX/Horizon solution mine is expected toutilize the same evaporation ponds and processing mill as the HB mine. We have not yet made a determination to proceed with this potentialdevelopment project; however, future work may be performed to determine the ability to convert this idled underground mine to a solutionmining opportunity.•As noted in footnote 9 to Our Proven and Probable Reserves table, these tons are included in the data presented for the HB 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 negativelyimpacted mineral processing at the facilities. Although the mining and processing equipment has been removed, the mine shaftsremain open. The compaction facility at the North mine is where we granulate, store, and ship potash produced from the HB mine.Two abandoned mine shafts, rail access, storage facilities, water rights, utilities and leases covering potash deposits, are already inplace. As part of our long-term mine planning efforts, we may choose to evaluate our strategic development options with respect tothe shafts at the North mine and their access to mineralized deposits of potash.Our Production of Potash and Trio® One product ton of potash contains approximately 0.60 tons of K2O when produced at our Moab and Wendover facilities and approximately 0.60 or0.62 tons of K2O when produced at our HB facility. One product ton of langbeinite produced at our East facility contains approximately 0.22 tons of K2O.The following table summarizes production of our primary products at each of our facilities for each of the years ended December 31, 2018, 2017, and 2016:(tons in thousands) Year Ended December 31, 2018 2017 2016 OreProduction Mill FeedGrade1 FinishedProduct OreProduction Mill FeedGrade1 FinishedProduct OreProduction Mill FeedGrade1 FinishedProductPotash West — — — — 1,425 11.9% 191East 2 — — — — 1,935 7.9% 32HB 679 17.4% 150 728 18.0% 172 587 16.1% 124Moab 506 15.8% 105 472 16.7% 109 429 16.6% 97Wendover 404 17.3% 89 362 15.9% 78 239 16.3% 49 1,589 344 1,562 359 4,615 493Langbeinite East 2 935 9.1% 217 1,177 8.0% 243 1,935 6.2% 279Total Primary Products 561 602 7721 Mill feed grade shown is as percent of K2O. Mill freed grade is a measurement of the amount of mineral contained in an ore as a percentage of the total weight of the ore. For potashit is often represented as a percent of potassium oxide (K2O) or percent potassium chloride (KCl).2 Potash and langbeinite at our East mine were processed from the same ore until April 2016.Water and Byproduct ProductionWe have water rights in New Mexico under which we sell water primarily to support oil and gas development in the Permian Basin near our Carlsbadfacilities. During the extraction of potash and Trio®, we recover marketable salt, magnesium chloride, metal recovery salts, water, and brine containing saltand potassium from our mining processes. Our salt is used in a variety of markets including animal feed, industrial applications, pool salt, and the treatmentof roads and walkways for ice melting or to manage road conditions. Magnesium chloride is typically used as a road treatment agent for both deicing anddedusting. At our Wendover facility, we also produce metal recovery salt, which is potash mixed with salt, in ratios requested by our customers. Metalrecovery salt is a combination of potash and salt that chemically enhances the recovery of aluminum in aluminum recycling processing facilities. Our brinesare used primarily by the oil and gas industry to support well development and completion activities.32Table of ContentsITEM 3.LEGAL PROCEEDINGSIn February 2015, Mosaic Potash Carlsbad Inc. (“Mosaic”) filed a complaint and application for preliminary injunction and permanent injunctionagainst Steve Gamble and us in the Fifth Judicial District Court for the County of Eddy in the State of New Mexico. Mr. Gamble is a former employee ofIntrepid and Mosaic. In August 2015, the court denied Mosaic’s application for preliminary injunction. In July 2016, Mosaic filed a second complaintagainst Mr. Gamble and us in U.S. District Court for the District of New Mexico. In January 2018, the two lawsuits were consolidated into one lawsuitpending in the U.S. District Court for the District of New Mexico. Mosaic alleges against us violations of the New Mexico Uniform Trade Secrets Act, tortiousinterference with contract relating to Mr. Gamble’s separation of employment from Mosaic, violations of the Computer Fraud and Abuse Act, conversion, andcivil conspiracy relating to the alleged misappropriation of Mosaic’s confidential information and related actions. Mosaic seeks monetary relief, includingdamages for actual loss and unjust enrichment, exemplary damages, attorneys' fees, and injunctive relief and has alleged damages of at least $22 million to$28 million plus other uncalculated damages. The lawsuit is progressing through discovery. A trial date has been set for September 2019. We are vigorouslydefending against the lawsuit.We are subject to other claims and legal actions in the ordinary course of business. While there are uncertainties in predicting the outcome of anyclaim or legal action, we believe that the ultimate resolution of these other claims or actions is not reasonably likely to have a material adverse effect on ourfinancial condition, results of operations, or cash flows.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 accidentsand incidents, preserve employee health, and comply with all safety- and health-based regulations. We seek to achieve these objectives by trainingemployees in safe work practices; establishing, following, and improving safety standards; involving employees in safety processes; openly communicatingwith employees about safety matters; and recording, reporting, and investigating accidents, incidents, and losses to avoid recurrence. As part of our ongoingsafety programs, we collaborate with MSHA and the New Mexico Bureau of Mine Safety to identify and implement accident prevention techniques andpractices.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 andthe New Mexico Bureau of Mine Safety. MSHA inspects these facilities on a regular basis and issues various citations and orders when it believes a violationhas occurred under federal law. Exhibit 95.1 to this Annual Report on Form 10-K provides the information concerning mine safety violations and otherregulatory matters required by SEC rules. Our Utah and HB facilities are subject to regulation by OSHA and, therefore, are not required to be included in theinformation provided in Exhibit 95.1.33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". As of March 5, 2019, we had 63 record holders of our common stock based uponinformation provided by our transfer agent.Performance 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 U.S. Basic Materials Index, and a peer group for the period beginning on December 31, 2013, through December 31, 2018,assuming an initial investment of $100 and the reinvestment of dividends. The peer group consisted of Potash Corporation of Saskatchewan Inc., The MosaicCompany, and Agrium Inc. for the period beginning on December 31, 2013, through December 31, 2017, and The Mosaic Company and Nutrien Ltd. fromJanuary 1, 2018, through December 31, 2018. On January 1, 2018, Potash Corporation of Saskatchewan Inc. and Agrium Inc. merged to form Nutrien Ltd. IPI Peer Group S&P 500 Dow Jones U.S. BasicMaterialsDecember 31, 2013$100.00 $100.00 $100.00 $100.00December 31, 2014$87.63 $111.47 $113.69 $103.39December 31, 2015$18.62 $77.45 $115.26 $90.54December 31, 2016$13.13 $89.78 $129.05 $108.90December 31, 2017$30.05 $99.63 $157.22 $136.22December 31, 2018$16.41 $91.24 $150.33 $114.1934Table of ContentsDividendsWe currently intend to retain earnings to reinvest for future operations and growth of our business and do not anticipate paying any cash dividendson our common stock. However, our board of directors, in its discretion, may decide to declare a dividend at an appropriate time in the future, subject to theterms of our debt agreements. A decision to pay a dividend would depend upon, among other factors, our results of operations, financial condition, and cashrequirements and the terms of our debt agreements at the time a payment is considered.Unregistered Sales of Equity Securities and Use of ProceedsIssuer Purchases of Equity SecuritiesPeriod (a)Total Numberof SharesPurchased1 (b)Average PricePaid Per Share (c)Total Number ofShares Purchased asPart of PubliclyAnnounced Plans orPrograms (d)Maximum Number (orApproximate DollarValue) of Shares thatMay Yet Be PurchasedUnder the Plan orProgramsOctober 1, 2018, through October 31, 2018 – — – N/ANovember 1, 2018, through November 30, 2018 122,811 $4.34 – N/ADecember 1, 2018, through December 31, 2018 — — – N/ATotal 122,811 $4.34 — N/A1 Represents shares of common stock withheld by us as payment of withholding taxes due upon the vesting of restricted stock held by our employees.35Table of ContentsITEM 6.SELECTED FINANCIAL DATAThe following table sets forth our historical selected financial data for the periods indicated (in thousands, except per share data). The selectedfinancial data should be read together with the other information contained in this document, including "Item 7. Management's Discussion and Analysis ofFinancial Condition and Results of Operations" and the audited historical financial statements and notes in "Item 8. Financial Statements and SupplementalData." Year Ended December 31, 2018 2017 2016 2015 2014Sales $208,270 $177,915 $212,097 $287,183 $410,389Net income (loss) $11,783 $(22,567) $(64,183) $(524,776) $9,761Basic and diluted (loss) earnings per share: $0.09 $(0.20) $(0.85) $(6.94) $0.13 December 31, 2018 2017 2016 2015 2014Total assets $525,231 $510,592 $537,551 $639,969 $1,166,119Long-term debt, net $49,642 $49,437 $133,434 $149,485 $149,402 December 31, 2018 2017 2016 2015 2014Cash, cash equivalents, and investments $33,222 $1,068 $4,464 $63,629 $89,879Stockholders' equity $417,263 $402,090 $362,567 $426,526 $947,285We adopted Accounting Standards Codification ("ASC") Topic 606 Revenue from Contracts with Customers ("ASC 606") on January 1, 2018. As aresult, certain amounts reported for 2017 and 2016 have be recast due to the transition method applied. See Note 3 to the Consolidated Financial Statementsfor further information. 36Table of ContentsITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONSThis Management Discussion and Analysis should be read in conjunction with the accompanying consolidated financial statements and relatednotes contained elsewhere in this Annual Report on Form 10-K.This Management Discussion and Analysis contains forward‑looking statements that involve risks, uncertainties, and assumptions as describedunder the heading "Cautionary Note Regarding Forward‑Looking Statements," in Part I of this Annual Report on Form 10-K. Our actual results could differmaterially from those anticipated by these forward‑looking statements as a result of many factors, including those discussed under "Item 1A. Risk Factors"and elsewhere in this Annual Report on Form 10-K.OverviewWe are a diversified mineral company that delivers potassium, magnesium, sulfur, salt, and water products essential for customer success inagriculture, animal feed and the oil and gas industry. We are the only U.S. producer of muriate of potash (sometimes referred to as potassium chloride orpotash), which is applied as an essential nutrient for healthy crop development, utilized in several industrial applications, and used as an ingredient in animalfeed. In addition, we produce a specialty fertilizer, Trio®, which delivers three key nutrients, potassium, magnesium, and sulfate, in a single particle. We alsoprovide water, magnesium chloride, brine and various oilfield products and services.Our extraction and production operations are conducted entirely in the continental United States. We produce potash from three solution miningfacilities: our HB solution mine in Carlsbad, New Mexico, our solution mine in Moab, Utah and our brine recovery mine in Wendover, Utah. We also operateour North compaction facility in Carlsbad, New Mexico, which compacts and granulates product from the HB mine. We produce Trio® from our conventionalunderground East mine in Carlsbad, New Mexico. Until mid-2016, we also produced potash from our East and West mines in Carlsbad, New Mexico. In April2016, we converted our East facility from a mixed-ore facility that produced both potash and Trio® to a Trio®‑only facility. In addition, in early July 2016,we idled mining operations at our West facility and transitioned the facility into care and maintenance. These changes were designed to increase ourproduction of Trio®, a product that had traditionally shown more resilience to pricing pressure than potash, and to lower costs in a time of declining potashprices.We have water rights in New Mexico under which we sell water primarily to support oil and gas development in the Permian Basin near our Carlsbadfacilities. We continue to work to expand our sales of water. On February 5, 2019, we and Sherbrooke Partners (together, the "buyers") entered into a purchaseand sale agreement with Dinwiddie Cattle Company under which the buyers will purchase certain Dinwiddie Jal Ranch assets located in Lea County, NewMexico, consisting primarily of land, water rights and other related assets. The aggregate consideration for the purchase will be $65 million, subject tocustomary purchase price adjustments. Further, as additional consideration for the sale, buyers will grant certain royalties on saltwater disposal revenuerelating to the purchased assets or properties located near the assets. We and Sherbrooke will pay 51% and 49% of the purchase price, or approximately $33.2million and $31.8 million, respectively, for a 51% and 49% undivided interest in the assets, respectively. We expect to close the purchase in the first quarterof 2019, subject to the satisfaction of customary closing conditions. The buyers expect to enter into a joint development agreement with respect to the assets,pursuant to which the buyers will agree, among other things, that Intrepid will operate the assets.We have three segments: potash, Trio®, and oilfield solutions. Prior to the fourth quarter of 2018, we had two reporting segments: potash and Trio®.As a result of the growth of our water business and other oilfield products and services, we reevaluated our segments and determined that, beginning in thefourth quarter of 2018, we have an additional segment for oilfield solutions. We account for the sale of byproducts as revenue in the potash or Trio® segmentbased on which segment generated the byproduct. Prior to the adoption of ASC 606, we accounted for the sale of byproducts as a credit to cost of goods sold.For each of the years ended December 31, 2018, 2017, and 2016, a majority of our byproduct sales were accounted for in the potash segment. We have recastall financial information for our segments for prior periods to conform to the current period presentation.Significant Business Trends and ActivitiesOur financial results have been, or are expected to be, impacted by several significant trends and activities, which are described below. We expectthese trends to continue to impact our results of operations, cash flows, and financial position.•Potash pricing and demand. With potash sales comprising 60% of our total sales in 2018, potash prices are a significant driver of our profitability.Our average net realized sales price for potash increased in 2018 to $256 per ton compared to $238 per ton for 2017, and we sold slightly more tonsof potash in 2018 compared to 2017. During 2018, we increased our percentage of potash sales into the industrial and feed markets, which generallyhave higher average net realized sales prices than sales into the agricultural market.37Table of ContentsGlobal effective capacity continues to exceed demand, but production curtailments from us and other producers have reduced potash supply inNorth America. Domestic pricing of our potash is influenced principally by the price established by our competitors. The interaction of globalpotash supply and demand, ocean, land, and barge freight rates, and currency fluctuations also influence pricing.The specific timing of when farmers apply potash remains highly weather dependent and varies across the numerous growing regions within the U.S.The timing of potash sales is significantly influenced by the marketing programs of potash producers, as well as storage volumes closer to the farmgate. We experience seasonality in potash demand, with more purchases coming in January through April, and August through September inanticipation of expected demand for the spring and fall application seasons in the U.S. The combination of these items results in variability inpotash sales and shipments, thereby increasing volatility of sales volumes from quarter to quarter and season to season. Our sales volumes into theindustrial market are correlated to drilling activity in the oil and gas market.•Trio® pricing and demand. Trio® pricing rebounded in 2018, and our average net realized sales price per ton increased to $199 from $191 in 2017.Domestic Trio® pricing trended up in 2018, partially offset by increased freight rates. We instituted two domestic price increases in 2018, includingmost recently in the fourth quarter of 2018. We expect the domestic Trio® average net realized sales price per ton to continue to trend up slightlyduring the first half of 2019 as we see the impacts of the fourth quarter price increase.Internationally, competition from lower cost alternatives and freight costs have negatively impacted our average net realized sales price per ton. Wecontinued, and plan to continue, our efforts to implement a price-over-volume strategy by focusing on international markets where we obtain thehighest average net realized sales price per ton.We also experience seasonality in Trio® demand, similar to potash. Over the last three years, our Trio® sales volume has been highest in Februaryand March, as Trio® products are typically applied to crops in the United States during the spring planting season. In turn, we generally see fewerpurchases and increased inventory levels in the third and fourth quarters in anticipation of expected demand for the following year. We continue tooperate our facilities at production levels that approximate expected demand and allow us to manage inventory levels.•Water sales. We continued, and plan to continue, to diversify our sources of income by expanding sales of water, particularly to service the oil andgas markets near our facilities in Carlsbad, New Mexico. We have a meaningful amount of water rights under which we sell water primarily forindustrial uses such as in the oil and gas services industry. We have put in place a diverse set of arrangements aimed at generating a long-termrecurring revenue stream from water sales. We have contracts with various water customers from which we expect to receive cash of $25 million to$35 million in 2019 and revenue of between $20 million to $30 million.We have water rights in New Mexico under which we sell water primarily to support oil and gas development in the Permian Basin near our Carlsbadfacilities. Water rights in New Mexico are subject to a stated purpose and place of use, and our water rights were originally issued for uses relating toour mining operations. To sell water under these rights for oil and gas development, we must apply for a permit from the New Mexico Office of theState Engineer ("OSE") to change the purpose and/or place of use of the underlying water rights. The OSE reviews and makes a determination as tothe validity of the right and if it determines the requested change will not negatively impact other valid interests, the OSE can issue a preliminaryauthorization for the change. The preliminary authorization allows for water sales to begin immediately, subject to repayment if the underlyingwater rights were ultimately found to be invalid. Third parties may protest the preliminary authorization at minimal cost and frequently do so. Onceprotested, the OSE is required to hold a hearing to determine if the preliminary authorization was appropriate. Virtually all of our water sales arebeing made under preliminary authorizations issued by the OSE. Third parties have protested these preliminary authorizations, and we expect theOSE to hold a hearing on the protests in 2019. We continue to operate under the preliminary authorizations until the process is complete. We mayface political and regulatory issues relating to the potential use of the maximum amount of our rights. An unsuccessful outcome in these matterscould prevent us from selling water under some of our water rights, increase the cost to provide water, or result in our having to refund prepaymentsthat we have received for future water sales. However, we believe that our legal position with respect to the validity of our water rights is solid andthat we will be able to meet our water commitments.Demand for water has been increasing due to increasing oil and gas exploration activities in the Permian Basin near our facilities in New Mexico.•Byproduct sales. We sell byproducts such as salt, magnesium chloride, brines, and water that are derived from our potash and Trio® miningprocesses. Our salt is used in a variety of markets. Magnesium chloride is typically used as a road-treatment agent. Our brines and water are usedprimarily by the oil and gas industry to support well development and completion activities. Demand for our byproducts used by the oil and gasindustry was strong in 2018 due to38Table of Contentsincreased oil and gas drilling activities in the Permian Basin near our facilities in Carlsbad, New Mexico. We expect continued strong demand forour byproducts in 2019.•Weather impact. Our solar facilities continued to experience average evaporation rates during the 2017 evaporation season, while the 2016evaporation season was slightly above average. As a result, our potash production from our solar solution facilities for 2018 decreased slightlycompared to 2017.•Diversification of products and services. As we continue to diversify our portfolio, we may enter into new or complementary business that expandour product and service offerings beyond our existing assets or products through acquisition of companies or assets or otherwise. We recentlyannounced that we have agreed to purchase water and real property assets in southeastern New Mexico in an effort to expand our water sales andother revenue from the oil and gas industry. We are continuing to explore ways to potentially monetize the known but small lithium resource in ourWendover ponds. We now offer KCl real-time mixing services on location for hydraulic fracturing operations and trucking services. Additionally,we may expand into oil and natural gas exploration and production or into new products or services in our current industry or other industries.39Table of ContentsConsolidated Results(in thousands) Year Ended December 31, 2018 2017 2016Sales1 $208,270 $177,915 $212,097 Cost of Goods Sold $121,955 $117,962 $169,745 Gross Margin (Deficit) $38,271 $11,888 $(26,797) Net Income (Loss) $11,783 $(22,567) $(64,183) Average Net Realized Sales Price per Ton2 Potash $256 $238 $196 Trio® $199 $191 $2761Sales include sales of byproducts which were $19.3 million, $12.7 million and $9.9 million for the years ended December 31, 2018, 2017, and 2016, respectively.2Average net realized sales price per ton is a non-GAAP measure. More information about this non-GAAP measure is below under the heading "Non-GAAP Financial Measure."Consolidated Results for the Years Ended December 31, 2018, and 2017Our total sales in 2018 increased as compared to 2017 primarily due to an increase in potash tons sold, increases in both potash and Trio® pricing,and an increase in water sales, primarily due to oil and gas drilling activity near our facilities in New Mexico. Byproduct revenue increased $6.6 million aswe continue to execute on our strategy to grow sales of our byproducts.Cost of goods sold increased 3% in 2018, as compared to 2017, primarily due to increased sales discussed above.Our gross margin percentage increased to 18% in 2018 compared to 7% in 2017. The increase was driven the increase in average net realized salesprices for our products, coupled with an increase in sales of higher-margin products, such as fresh water and byproducts. We also recorded fewer lower of costor NRV inventory adjustments in 2018, as the average net realized sales price per ton for potash and Trio® improved.Net income increased in 2018 compared to 2017, primarily driven by higher gross margins, as discussed above, and the decrease in interest expensein 2018 compared to 2017, as discussed below.Selling and Administrative ExpenseIn 2018, selling and administrative expenses increased $1.5 million or 8% from 2017. The increase was primarily due to an increase in our share-based compensation expense in 2018 compared to 2017. The increase in share-based compensation was due to granting awards earlier in 2018 compared to2017, coupled with the 2018 grant vesting over a shorter time period as compared to the 2017 grant.Other Operating ExpenseIn 2018, we recognized other operating expense of $0.1 million compared to $3.5 million in 2017. In 2017, we recorded a loss on a sale of an assetof $1.7 million, recorded an additional $1.1 million increase in our stores inventory allowance, and recorded a one-time $0.6 million accrual related to landimpact issues on or adjacent to our property in New Mexico.Interest ExpenseInterest expense decreased $7.8 million in 2018 compared to 2017. Approximately $4.2 million of the decrease was due to our weighted-averageinterest rate on our senior notes declining to 4.32% in 2018 from 7.65% in 2017. Additionally, write-offs of deferred financing fees and make-wholepayments related to principal prepayments on our senior notes decreased approximately $3.3 million in 2018 compared to 2017.Consolidated Results for the Years Ended December 31, 2017, and 201640Table of ContentsTotal sales in 2017 decreased compared to 2016 due to significantly lower sales volume for potash as we had fewer tons to sell after the transition ofour East facility to Trio®-only in April 2016, and the idling of our West facility in July 2016. In addition, total sales were negatively impacted by a loweraverage net realized sales price per ton for Trio® due to pricing pressure from competitors and higher freight costs for international sales. These decreases werepartially offset by an increase in average net realized sales price per ton for potash and increased Trio® sales volume due to selling more tons internationally.Cost of goods sold decreased in 2017 as compared to 2016 mainly due to significantly lower sales volume for potash. After transitioning our Eastfacility to Trio®-only and idling our West facility in 2016, we no longer produced potash from our East and West conventional mining facilities, whichpreviously represented our highest cost production.Our gross margin percentage increased to 7% in 2017 compared to negative 13% in 2016. The gross margin increase was due to an increase in watersales and byproduct sales in 2017. Additionally, potash average net realized sales price per ton increased in 2017 compared to 2016 and we recorded fewerlower of cost or NRV inventory adjustments and less abnormal production expenses in 2017, partially offset by a decrease in Trio® average net realized salesprice per ton in 2017.Net loss decreased in 2017 as compared to 2016 primarily due to increased sales of higher margin products, such as water and byproducts, anddecreases in selling and administration expenses and debt restructuring expenses, as discussed below.Selling and Administrative ExpenseIn 2017, selling and administrative expenses decreased $1.1 million as compared to 2016, primarily due to reduced administrative salary expense.Debt Restructuring ExpenseIn 2016, we recorded debt restructuring expenses of $3.1 million relating to professional fees paid to third parties in connection with therestructuring of our senior notes and credit facility. We did not have debt restructuring expenses in 2017.Restructuring ExpenseIn 2017, we reduced our Trio® production to manage our product inventory levels. In connection with this action, we recorded $0.3 million inrestructuring expense, primarily for severance related activities, all of which was paid in 2017.In 2016, we recorded restructuring expenses of $2.7 million related to the conversion of our East facility to Trio®-only and the idling of our Westfacility.Other Operating (Income) ExpenseIn 2017, we recorded a loss on a sale of an asset of $1.7 million, recorded an additional $1.1 million increase in our stores inventory allowance, andrecorded a one-time $0.6 million accrual related to land impact issues on or adjacent to our property in New Mexico.For 2016, we recorded other operating income of $1.7 million primarily due to insurance proceeds received for damaged property during a December2015 snowstorm in New Mexico, and an adjustment for compensating taxes.Interest ExpenseInterest expense increased $0.1 million in 2017 as compared to 2016. Included in interest expense for 2017 was $3.0 million of expense relating tomake-whole payments in conjunction with principal prepayments of $75 million made on our senior notes, compared to $0.8 million relating to a make-whole payment in conjunction with a principal prepayment of $15 million made on our senior notes in 2016. This increase was offset by a decrease in intereston our senior secured notes of $2.2 million as our outstanding principal balance decreased throughout 2017. The weighted-average interest rates on thesenior notes decreased from 8.32% to 4.32% beginning November 1, 2017.Potash Segment Results41Table of Contents Year Ended December 31,(in thousands) 2018 2017 2016Sales1 $124,058 $107,917 $159,207Less: Freight costs 17,682 13,912 25,732Warehousing and handling costs 5,046 5,556 8,438Cost of goods sold 72,322 72,229 131,406Lower of cost or NRV inventory adjustments — 550 18,379Costs associated with abnormal production and other — — 650Gross Margin (Deficit) $29,008 $15,670 $(25,398)Depreciation and Depletion, Incurred2 $25,134 $26,485 $30,708Potash Sales Volumes (tons in thousands) 364 352 634Potash Production Volumes (tons in thousands) 344 359 493Average Potash Net Realized Sales Price per Ton3 $256 $238 $1961Potash segment sales include byproduct sales which were $16.6 million, $12.4 million and $9.9 million for the years ended December 31, 2018, 2017, and 2016, respectively.2Depreciation and depletion incurred excludes depreciation and depletion amounts absorbed in or (relieved from) inventory.3Average net realized sales price per ton is a non-GAAP measure. More information about this non-GAAP measure is below under the heading "Non-GAAP Financial Measure."Potash Segment Results for the Years Ended December 31, 2018, and 2017Potash segment sales comprised 60% of our total consolidated sales in 2018. Potash sales increased in 2018 compared to 2017 due to a 3% increasein potash tons sold and an 8% increase in potash pricing as price increases announced earlier in 2018 were realized. Increased demand from the oil and gasindustry drove the $4.2 million increase in our byproduct sales.Our potash segment gross margin represented 77% of our total consolidated gross margin. Our potash segment gross margin increased due toincreased sales and pricing partially offset by increased freight costs due to increased sales volumes and an increase in freight rates. Potash freight costs alsoare impacted by the proportion of customers paying for their own freight, the geographic distribution of our products and the freight rates of our carriers.Potash segment sales include sales of potash and sales of byproducts, such as magnesium chloride, salt, brines, and water used in the potash productionprocess.Our solar facilities experienced average evaporation rates during the 2017 evaporation season, while the 2016 evaporation season was slightlyabove average. As a result, our potash production from our solar solution facilities for 2018 decreased slightly compared to 2017.Potash Segment Results for the Years Ended December 31, 2017, and 2016The decrease in potash segment sales was mainly due to a 44% decrease in potash tons sold in 2017 compared to 2016. Potash sales decreased as wehad fewer tons to sell after the transition of our East facility to Trio®-only and the idling of our West facility.Our potash segment gross margin increased due to decreased expenses, partially offset by a decrease in sales. Sales and expense decreases were dueto the transition of our East facility to Trio®-only in April 2016 and the idling of our West facility in July 2016. Since July 2016, we have no longer producedpotash from our East and West conventional mining facilities, which previously represented our highest cost production.Potash segment freight costs decreased 56% in 2017, compared to 2016, as we sold fewer potash tons. In addition, we were more strategic aboutselling potash into areas where we had a geographic advantage, which positively impacted potash freight costs. Potash freight costs also are impacted by theproportion of customers paying for their own freight, the geographic distribution of our products and the freight rates of our carriers.Potash production volume decreased 27% in 2017, compared to 2016 as we stopped producing potash at our East and West facilities in 2016. All ofour potash production in 2017 came from solar solution mining facilities, as compared to 55%, or 270,000 tons in 2016.42Table of ContentsWe routinely evaluate our production levels and costs to determine if any costs are associated with abnormal production. The assessment of normalproduction levels is judgmental and unique to each period. We recorded costs associated with abnormal production and other costs of $0.7 million in 2016,as potash production was temporarily suspended at the East facility related to testing for the conversion to Trio®-only production.Potash Segment - Additional InformationThe table below shows our potash sales mix for 2018, 2017, and 2016. Year Ended December 31, 2018 2017 2016Agricultural 74% 77% 89%Industrial 14% 10% 5%Feed 12% 13% 6%Historically, sales into the industrial and feed markets have carried a higher average net realized sales price per ton compared to sales into theagricultural market. As a result, we continue to work to increase the percentage of potash sales into the industrial and feed markets, which had a positiveeffect on our average net realized sales price per ton in 2018. Because of our geographic proximity to areas with significant oil and gas drilling activity, webelieve that we have an opportunity to further increase our sales of potash into the industrial markets.Trio® Segment Results Year Ended December 31,(in thousands) 2018 2017 2016Sales1 $66,808 $63,686 $52,890Less: Freight costs 19,370 18,104 10,330Warehousing and handling costs 4,225 4,114 2,568Cost of goods sold 45,284 45,187 38,339Lower of cost or NRV inventory adjustments 1,711 5,829 1,995 Costs associated with abnormal production and other — — 1,057Gross (Deficit) Margin $(3,782) $(9,548) $(1,399)Depreciation and Depletion, Incurred2 $6,343 $6,576 $9,296Sales Volumes (tons in thousands) 225 237 154Production Volumes (tons in thousands) 217 243 279Average Net Realized Sales Price per Ton3 $199 $191 $2761Trio® segment sales include byproduct sales which were $2.7 million, $0.3 million and $0 million for the years ended December 31, 2018, 2017, and 2016, respectively.2Depreciation and depletion incurred excludes depreciation and depletion amounts absorbed in or (relieved from) inventory.3Average net realized sales price per ton is a non-GAAP measure. More information about this non-GAAP measure is below under the heading "Non-GAAP Financial Measure."Trio® Segment Results for the Years Ended December 31, 2018, and 2017Trio® segment sales include sales of Trio® and sales of byproducts that are generated or used in the Trio® production process. Trio® sales increased$0.8 million, or 1%, in 2018 compared to 2017. The average net realized sales price per ton increased 5% but was almost entirely offset by a similar decreasein Trio® tons sold. Our percentage of domestic tons of Trio® sold to total tons of Trio® sold was higher in 2018 compared to 2017, which had a positiveimpact on our average net realized sales price per ton. Internationally during 2018, we focused on a price over volume strategy. International sales of Trio®continue to be negatively affected by competition from lower-cost alternatives and higher freight costs to ship to international locations.Trio® segment gross deficit improved in 2018 compared to 2017, primarily due to a reduction in lower of cost or NRV inventory adjustments andincreased sales of byproducts generated from the Trio® production process.43Table of ContentsSales of byproducts increased $2.4 million in 2018 compared to 2017. The increase was driven by an increase in sales of water that was used in theTrio® production process. With the significant oil and gas drilling activities in areas near our facilities in New Mexico, demand for water has been strong.Trio® production decreased 11% in 2018 compared to 2017 as we curtailed production in the second half of 2017 to manage our product inventorylevels.Trio® Segment Results for the Years Ended December 31, 2017, and 2016Trio® segment sales increased 20% in 2017 compared to 2016 due to a 57% increase in sales volume, offset by a 32% decrease in the average netrealized sales price per ton of Trio®. The increase in sales volume was due to selling more tons internationally as we expanded our marketing reach for Trio®.Our average net realized sales price per ton of Trio® was negatively impacted by pricing pressure from competitors and higher freight costs for internationalsales.Trio® freight costs increased 79% for 2017 compared to 2016 due to the increase in sales volumes and an increase in international sales, which carryhigher freight costs. Trio® cost of goods sold increased 19% in 2017 compared to 2016 due to the increase in sales volume in 2017. For the years ending December 31,2017 and 2016, our Trio® cost of goods sold benefited from the direct expensing of lower or cost or NRV inventory adjustments of $5.8 million and $2.0million, respectively, which are excluded from our cost of goods sold. The lower of cost or NRV inventory adjustments related to the decreases in Trio®pricing as compared to our carrying cost of Trio® inventory.Trio® segment gross deficit increased in 2017 as compared to 2016 due to the items discussed above and recording more lower of cost or NRVinventory adjustments due to a 32% decrease in the average net realized sales price for Trio®, partially offset by the decrease in abnormal production charges.Trio® production increased 50% in 2017 compared to 2016 as we operated the East Trio®-only facility for the full year compared to eight months in2016.Trio® Segment - Additional InformationThe table below shows the percentage of total Trio® sales that were sold internationally in the past three years. United States ExportFor the year ended December 31, 2018 81% 19%For the year ended December 31, 2017 72% 28%For the year ended December 31, 2016 94% 6%Oilfield Solutions Segment Results Year Ended December 31,(in thousands) 2018 2017 2016Sales $17,404 $6,312 $—Less: Warehouse and handling 10 — — Cost of goods sold 4,349 546 —Gross Margin $13,045 $5,766 $—Depreciation incurred $343 $19 $—We offer a variety of products and services from our oilfield solutions segment, including water, high-speed potassium chloride mixing services, saltwater disposal services, and trucking services. In 2017, our only source of revenue in the oilfield solutions segment was from sales of water. In 2016, we hadan immaterial amount of water sales.Our sales in the oilfield solutions segment have grown rapidly during the last two years, mainly driven by an increase in water sales. Our segmentwater sales were $16.0 million in 2018, and $6.3 million in 2017. In 2016, we had an immaterial amount of water sales. The increase in demand for water andother service offerings is due to the oil and gas development in the Permian Basin near our facilities in New Mexico. Oil production from the Permian Basinof west Texas and southeastern New Mexico continues to expand.We have generated strong gross margins in the oilfield solutions segment, mainly due to the high demand for water and the relatively low costsassociated with selling water from our existing water rights. Our cost of goods sold increased in44Table of Contents2018 compared to 2017 due to the costs relating to our new service offerings in 2018 and increased legal expenses associated with defending our water rightsand obtaining water permits and approvals.Specific Factors Affecting Our ResultsSalesOur gross sales are derived from the sales of potash, Trio®, water and byproducts and are determined by the quantities of product we sell and the salesprices we realize. For potash and Trio®, 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 most of our potash and Trio® sales, but some customers arrange and pay for their own freight directly. When we arrange and payfor freight, our quotes and billings are based on expected freight costs to the points of delivery. When we calculate our potash and Trio® average net realizedsales price per ton, we deduct any byproduct sales and freight costs included in sales before dividing by the number of tons sold. We believe the deduction offreight costs provides a more representative measure of our performance in the market due to variations caused by ongoing changes in the proportion ofcustomers paying for their own freight, the geographic distribution of our products, and freight rates. Freight rates have been increasing, thereby negativelyinfluencing our average net realized sales price per ton. We manage our sales and marketing operations centrally and we work to achieve the highest averagenet realized sales price per ton we can by evaluating the product needs of our customers and associated logistics and then determining which of ourproduction facilities can best satisfy these needs.The volume of product we sell is determined by demand for our products and by our production capabilities. We operate our potash and Trio®facilities at production levels that approximate expected demand and take into account current inventory levels and expect to continue to do so for theforeseeable future.Our water sales are driven by demand from oil and gas exploration companies drilling in the Permian Basin. As such, demand for our water isgenerally stronger during a cyclical expansion of oil and gas drilling, which is currently occurring in the Permian Basin. Likewise, a cyclical contraction ofoil and gas drilling may decrease demand for our water.Cost of Goods SoldOur cost of goods sold reflects the costs to produce our products. Many of our production costs are largely fixed and, consequently, our cost of salesper ton on a facility-by-facility basis tends to move inversely with the number of tons we produce, within the context of normal production levels. Prior to2017, we experienced variability in our cost of goods sold due to the mix of potash products that we produced through conventional and solar solutionmining. Our potash cost of goods sold per ton for our solar solution facilities is less than it previously was for our conventional facilities. Since July 2016, allof our potash production comes from solar solution mining. 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, reagents, and royaltiesthat are variable, which make up a smaller component of our cost base. Our costs often vary from period to period based on the fluctuation of inventory, sales,and production levels at our facilities.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, and downtime. We expect that our labor and contract labor costs in Carlsbad, New Mexico,will continue to be influenced most directly by the demand for labor in the local region where we compete for labor with another fertilizer company,companies in the oil and gas industry, and a nuclear waste processing and storage facility. Prior to converting our East facility to a Trio®-only facility, wemined in a complex, mixed ore body comprised of both sylvite and langbeinite. This complex ore was processed through a singular product flow at thesurface facility. As a result of this complex ore body and the related complexities of processing the mixed ore at the surface, our cost structure at our Eastfacility was our highest cost facility. Subsequent to the transition to mining in langbeinite areas and the conversion of our East facility to Trio®‑only, our coststructure was reduced as the process flow was simplified.We pay royalties to federal, state, and private lessors under our mineral leases. These payments typically equal a percentage of sales (less freight) ofminerals extracted and sold under the applicable lease. In some cases, federal royalties for potash are paid on a sliding scale that vary with the grade of oreextracted. Our average royalty rate was 4.6%, 4.6%, and 4.2% in 2018, 2017, and 2016, respectively.Water rights in New Mexico are subject to a stated purpose and place of use, and our water rights were originally issued for uses relating to ourmining operations. To sell water under these rights for oil and gas development, we must apply for a permit from the OSE to change the purpose and/or placeof use of the underlying water rights. Third parties may protest decisions made by the OSE. Legal expenses associated with defending our water rights andobtaining water permits and approvals represent our largest cost of selling water.45Table of ContentsIncome TaxesWe are a subchapter C corporation and, therefore are subject to U.S. federal and state income taxes on our taxable income. We recognize deferred taxassets and liabilities for the tax effect of temporary differences between the financial statement and tax basis of recorded assets and liabilities at enacted taxrates in effect when the related taxes are expected to be settled or realized. We also reduce deferred tax assets by a valuation allowance if it is more likely thannot that some portion or all of the deferred tax assets will not be realized. Each reporting period we analyze if any additional valuation allowance is necessaryusing historical and anticipated earnings amounts to determine if it is more likely than not that amounts will not be recovered. We have concluded valuationallowances of $218.4 million and $221.7 million were required as of December 31, 2018 and 2017, respectively.The amount of valuation allowance decreased in 2018 as compared to 2017 as a result of recalculating our deferred tax assets at a lower effective taxrate due to changes in operations in the various states we conduct business. The resulting decrease in our deferred tax assets correlates to a correspondingdecrease in the valuation allowance. Our effective tax rate for the years ended December 31, 2018, 2017, and 2016 was 0.9%, 11.0%, and 2.1%, respectively.Our effective income tax rates are impacted primarily by changes in the underlying tax rates in jurisdictions in which we are subject to income tax, the needfor a valuation allowance, and permanent differences between book and tax income for the period, including the benefit associated with the estimated effectof the percentage depletion deduction.During the year ended December 31, 2018, our effective tax rate was primarily impacted by the decrease in our valuation allowance of $3.3 million.During the year ended December 31, 2017, our effective tax rate was primarily impacted by a $115.5 million decrease to our deferred tax assetsresulting from a rate change under the Tax Cuts and Jobs Act, and a net decrease to our valuation allowance of $104.7 million. We also recorded a receivableof $2.6 million related to the monetization of our alternative minimum tax carryforwards based on a carryback, and an election available to taxpayers for2017.During the year ended December 31, 2016, our effective tax rate was impacted primarily by the recording of an addition to our valuation allowanceof $24.5 million relating to deferred tax assets. This increase in valuation allowance primarily consisted of $34.6 million for federal and state net operatinglosses offset by reductions in the valuation allowance relating to deferred tax assets of $6.7 million for property, plant, equipment and mineral properties, and$5.6 million for inventory. We also recorded a receivable of $1.4 million related to the monetization of a portion of our alternative minimum taxcarryforwards based on an election made available to taxpayers for 2016.During the year ended December 31, 2018, we recognized income tax expense of $0.1 million. During the years ended December 31, 2017, and2016, we recognized an income tax benefit of $2.8 million and $1.4 million, respectively. In 2018 we generated net operating income. In 2017 and 2016, weincurred net operating losses for income tax purposes, which have been carried forward as a deferred tax asset.The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted most significantly by thestates in which we conduct business. Changing business conditions for normal business transactions and operations as well as changes to state tax rate andapportionment laws potentially alter our apportionment of income among the states for income tax purposes. These changes in apportionment laws result inchanges in the calculation of our current and deferred income taxes, including the valuation of our deferred tax assets and liabilities. The effects of any suchchanges are recorded in the period of the adjustment. These adjustments can increase or decrease the net deferred tax asset on the balance sheet and impactthe corresponding deferred tax benefit or deferred tax expense on the income statement.Liquidity and Capital ResourcesOur operations have primarily been funded from cash on hand, cash generated by operations, and proceeds from debt and equity offerings. During2018, we generated $64.2 million in cash flows from operating activities and we ended the year with $33.2 million of cash on hand, compared with cash onhand of $1.1 million at December 31, 2017. In December 2018, we repaid $10 million of the outstanding balance of our senior notes, leaving $50 million ofsenior notes outstanding at the end of the year. As of December 31, 2018, we had $49 million available under our credit facility and no outstandingborrowings.We continue to monitor our future sources and uses of cash and anticipate that we will adjust our capital allocation strategies when, and if,determined by our Board of Directors. We may, at any time we deem conditions favorable, attempt to improve our liquidity position by accessing debt orequity markets in accordance with our existing debt agreements. With the availability under our credit facility and expected future cash generated fromoperations, we believe that we have sufficient liquidity for the next twelve months.In February 2019, we entered into a purchase and sale agreement with Dinwiddie Cattle Company under which we will purchase a 51% undividedinterest in land, water rights, and other assets in southeastern New Mexico for approximately46Table of Contents$33.2 million. We expect to close the purchase in the first quarter of 2019, subject to the satisfaction of customary closing conditions. We expect to fund thepurchase price primarily from cash on hand.In March 2017, we issued 50.1 million shares of common stock in an underwritten public offering for net proceeds of $57.2 million, which was usedto partially repay indebtedness. In September 2017, we also issued 0.5 million shares of common stock under our at-the-market offering program for netproceeds of $1.9 million, which was used for general corporate purposes.The following summarizes our cash flow activity for the years ended December 31, 2018, 2017, and 2016: Year ended December 31, 2018 2017 2016 (In thousands)Cash flows provided by (used in) operating activities $64,237 $16,693 $(14,741)Cash flows (used in) provided by investing activities $(16,781) $(7,854) $32,510Cash flows used in financing activities $(15,301) $(15,760) $(19,083)Our debt agreements contain restrictions on our ability to declare and pay dividends. In general, the terms of our senior notes prohibit us fromdeclaring and paying a dividend unless our leverage ratio is less than 3.5 to 1, our fixed charge coverage ratio after giving effect to the dividend would begreater than 1.3 to 1, and our cash on hand and availability under our credit facility after giving effect to the dividend, would not be less than $15 million. Inaddition, the terms of our credit facility prohibit us from declaring and paying a dividend unless availability under the credit facility after giving effect to thedividend and during a specified period before the dividend is more than $10 million. More information about how the financial ratios are calculated underour debt agreements is provided below under the heading "Senior Notes."Operating ActivitiesTotal cash provided by operating activities for the year ended December 31, 2018, was $64.2 million, an increase of $47.5 million compared withthe year ended December 31, 2017. The primary drivers were an increase in net income of $34.4 million and an increase in our contract liability balance of$11.7 million related to prepayments from customers.Investing ActivitiesTotal cash used in investing activities increased $8.9 million in 2018, compared to 2017. In 2018, we increased capital expenditures to $16.9million from $13.5 million. In 2017, capital expenditures were offset by $5.7 million of cash proceeds we received from the sale of an asset.Financing ActivitiesTotal cash flows used in financing activities increased $0.5 million in 2018, as compared to 2017. In 2018, we made a $10 million prepayment onour senior notes, and net repayments under our credit facility of $3.9 million. In 2017, proceeds for the issuance of stock were $59.1 million and net proceedsfrom borrowings under our credit facility were $4.0 million, offset by $75 million in principal prepayments on our Notes and $3.0 million of debt prepaymentcosts.Senior NotesSenior Notes—As of December 31, 2018, we had outstanding $50 million of senior notes (the "Notes") consisting of the following series:•$20 million of Senior Notes, Series A, due April 16, 2020•$15 million of Senior Notes, Series B, due April 14, 2023•$15 million of Senior Notes, Series C, due April 16, 2025The agreement governing the Notes contains certain financial covenants including those discussed below:•We are required to maintain a minimum fixed charge coverage ratio of 0.25 to 1.0 for the quarter ended December 31, 2018. Our fixed chargecoverage ratio as of December 31, 2018, was 12.0 to 1.0, therefore we were in compliance with this covenant. Going forward we are required tomaintain a minimum fixed charge coverage ratio of 0.75 to 1.0 for the quarter ending March 31, 2019, 1.0 to 1.0 for the quarter ending June 30,2019, and 1.3 to 1.0 for each quarter ending on or after September 30, 2019.•For the quarter ended December 31, 2018, we were allowed a maximum leverage ratio of 7.0 to 1.0. Our leverage ratio was 0.9 to 1.0 as ofDecember 31, 2018, therefore we were in compliance with this covenant. Going forward,47Table of Contentswe are allowed a maximum leverage ratio of 5.5 to 1.0 for the quarter ending March 31, 2019, 4.5 to 1.0 for the quarter ending June 30, 2019,and 3.5 to 1.0 for each quarter ending on or after September 30, 2019.Fixed charge coverage ratio and leverage ratio are calculated in accordance with the agreement governing the Notes.For the year ended December 31, 2018, the interest rates on the Notes were 3.73% for the Series A Notes, 4.63% for the Series B Notes and 4.78% forthe Series C Notes. These rates represent the lowest interest rates available under the Notes. The interest rates may adjust upward if we do not continue to meetcertain financial covenants.For the ten months ended October 31, 2017, the interest rates on the Notes were 7.73% for the Series A Notes, 8.63% for the Series B Notes and8.78% for the Series C Notes. Beginning November 1, 2017, the interest rates on the Notes were reduced to 3.73% for the Series A Notes, 4.63% for the SeriesB Notes and 4.78% for the Series C Notes.We have granted to the collateral agent for the noteholders a first lien on substantially all of our non-current assets and a second lien onsubstantially all of our current assets. We are required to offer to prepay the Notes with proceeds of dispositions of certain specified property and with theproceeds of certain equity issuances, as set forth in the agreement. The obligations under the Notes are unconditionally guaranteed by several of oursubsidiaries.We were in compliance with the applicable covenants under the agreement governing the Notes as of December 31, 2018.Credit FacilityCredit Facility—We maintain an asset-based revolving credit facility with Bank of Montreal. In October 2018, we amended the credit facility toextend its maturity date from October 31, 2019, to October 31, 2023, to increase the amount available to be borrowed from $35 million to $50 million, and tomake certain other changes. The credit facility now allows us to borrow up to $50 million subject to monthly limits based on our inventory and receivables.Borrowings under the credit facility bear interest at LIBOR (London Interbank Offered Rate) plus an applicable margin of 1.50% to 2.00% perannum, based on average availability under the credit facility. We have granted to Bank of Montreal a first lien on substantially all of our current assets and asecond lien on substantially all of our non-current assets. The obligations under the credit facility are unconditionally guaranteed by several of oursubsidiaries.We occasionally borrow and repay amounts under the facility for near-term working capital needs or other purposes and may do so in the future. Forthe years ended December 31, 2018, and 2017, we borrowed $13.5 million and $22.0 million, respectively, and repaid $17.4 million and $18.1 million,respectively, under the facility. As of December 31, 2018, we had no borrowings outstanding and $1.0 million in an outstanding letter of credit under thefacility. As of December 31, 2017, we had $3.9 million of borrowings outstanding and $3.1 million in outstanding letters of credit under the facility. We have$49.0 million available under the facility as of December 31, 2018.We were in compliance with the applicable covenants under the facility as of December 31, 2018.At-the-Market Offering ProgramIn May 2017, we established an at-the-market offering program, which gives us the capacity to issue up to $40 million of our common stock. InSeptember 2017, we issued 539,110 shares of common stock under the at-the-market offering program for gross proceeds of $2.2 million. We paid salescommissions to our sales agent of $0.1 million and incurred other offering related expenses of $0.2 million. Net proceeds of $1.9 million were used forgeneral corporate purposes. After taking into account the gross proceeds received under the at-the-market offering program in September 2017, we haveremaining capacity to issue up to $37.8 million of additional shares of common stock under the program.Capital InvestmentsWe expect to make capital investments in 2019 of $15 million to $25 million. We anticipate our 2019 operating plans and capital programs will befunded out of operating cash flows and existing cash. We may also use our revolving credit facility, to the extent available, to fund capital investments.During 2018, we paid cash of $16.9 million for capital projects, the majority of which was sustaining capital.Contractual ObligationsAs of December 31, 2018, we had contractual obligations totaling $144.9 million on an undiscounted basis, as indicated below. Contractualcommitments shown are for the full calendar year indicated unless otherwise indicated.48Table of Contents Payments Due By Period Total 2019 2020 2021 2022 2023 More Than5 Years (In thousands)Long-term debt $50,000 $— $20,000 $— $— $15,000 $15,000Variable rate interest obligations on long-term debt1 8,905 2,158 1,785 1,412 1,412 1,064 1,074Operating lease obligations2 8,340 2,266 1,874 1,602 1,083 172 1,343Purchase commitments3 5,422 5,422 — — — — —Asset retirement obligation4 59,493 50 2,597 1,325 1,325 1,325 52,871Minimum royalty payments5 12,741 510 510 510 510 510 10,191Total $144,901 $10,406 $26,766 $4,849 $4,330 $18,071 $80,4791 See "Senior Notes" section above for more detail on the variable rate interest associated with our long-term debt. Amounts in the table above represent interest calculated at rates ineffect as of December 31, 2018.2 Amounts include all operating lease payments, inclusive of sales tax, for leases for office space, railcars, and other equipment.3 Purchase commitments include the approximate amount due to vendors for non-cancelable purchase commitments for materials and services.4 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 that the majorityof those expenditures will not be required until after 2023. Although our reclamation obligation activities are not required to begin until after we cease operations, we anticipatecertain activities to occur prior to then related to reclamation of facilities that have been replaced with newly constructed assets, as well as certain shaft closure activities for shafts thatare no longer in use. Commitments shown are in today's dollars and are undiscounted.5 Estimated annual minimum royalties due under mineral leases, assuming approximately a 25-year life, consistent with estimated useful lives of plant assets.Off-Balance Sheet ArrangementsAs of December 31, 2018, we had no material 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.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 our estimates and assumptions, andthese 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, 2018, included elsewhere in this Annual Report on Form 10-K.Revenue RecognitionWe account for revenue in accordance with Accounting Standards Codification ("ASC") Topic 606 Revenue from Contracts with Customers ("ASC606"), which we adopted on January 1, 2018, using the full retrospective method. See Note 3 "Recently Adopted Accounting Standards" for furtherdiscussion of the adoption of ASC 606, including the adjustments made to our previously reported 2017 and 2016 financial statements.A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. Thecontract's transaction price is allocated to the performance obligations and recognized as revenue when the performance obligations are satisfied.Substantially all of our contracts are of a short-term nature and contain a single performance obligation because the sale is for one type of product andshipping and handling charges are accounted for as a fulfillment cost and are not considered to be a separate performance obligation. The performanceobligation is satisfied when control of the product is transferred to the customer, which typically occurs when we ship mineral products or deliver water fromour facility to the customer. We account for substantially all of our revenue from sales to customers at a single point in time.Under ASC 606, we recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects theconsideration we expect to be entitled in exchange for those goods or services.49Table of ContentsIn certain circumstances, we may sell product to customers where the sales price is variable. For such sales, we estimate the sales price we expect torealize based on the facts and circumstances for each sale, including historical experience, and recognize revenue to the extent it is probable that asubsequent change in estimate will not result in a significant revenue reversal compared to the cumulative revenue recognized under the contract.Property, Plant, and EquipmentProperty, plant, and equipment are stated at historical cost. Expenditures for property, plant, and equipment relating to new assets or improvementsare capitalized, provided the expenditure extends the useful life of an asset or extends the asset's functionality. Property, plant, and equipment are depreciatedunder the straight-line method using estimated useful lives. No depreciation is taken on assets classified as construction in progress until the asset is placedinto service. Gains or losses are recorded upon retirement, sale or disposal of assets. Maintenance and repair costs are recognized as period costs whenincurred. Capitalized interest, to the extent of debt outstanding, is calculated and assigned to assets that are being constructed, drilled, being built orotherwise are classified as construction in progress.Mineral Properties and Development CostsMineral properties and development costs, which are referred to collectively as mineral properties, include acquisition costs, the cost of drillingwells, and the cost of other development work, all of which are capitalized. Depletion of mineral properties is calculated using the units-of-productionmethod over the estimated life of the relevant ore body. The lives of reserves used for accounting purposes are shorter than current reserve life determinationsdue to uncertainties inherent in long-term estimates. We have prepared these reserve life estimates and they have been reviewed and independentlydetermined by mine consultants. Tons of potash and langbeinite in the proven and probable reserves are expressed in terms of expected finished tons ofproduct to be realized, net of estimated losses. Market price fluctuations of potash or Trio®, as well as increased production costs or reduced recovery rates,could render proven and probable reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction ofreserves. In addition, the provisions of our mineral leases, including royalties payable, are subject to periodic readjustment by the state and federalgovernment, which could affect the economics of our reserve estimates. Significant changes in the estimated reserves could have a material impact on ourresults of operations and financial position.Inventory and Long-Term Parts InventoryInventory consists of product and byproduct stocks that are ready for sale; mined ore; potash in evaporation ponds, which is considered work-in-process; and parts and supplies inventory. Product and byproduct inventory cost is determined using the lower of weighted average cost or estimated netrealizable value and includes direct costs, maintenance, operational overhead, depreciation, depletion, and equipment lease costs applicable to theproduction 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 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 used 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 inventoriesthat have not turned over in more than a year, excluding parts classified as critical spares, are reviewed for obsolescence and, if deemed appropriate, areincluded in the determination of an allowance for obsolescence.Recoverability of Long-Lived AssetsWe evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not berecoverable. An impairment is considered to potentially exist if an asset group's total estimated future cash flows on an undiscounted basis are less than thecarrying amount of the related asset. An impairment loss is measured and recorded based on the excess of the carrying amount of long-lived assets over itsestimated fair value. Changes in significant assumptions underlying future cash flow estimates or fair values of asset groups may have a material effect on ourfinancial position and results of operations. Sales price is a significant element of any cash flow estimate, particularly for higher cost operations. Otherassumptions we estimate include, among other things, the economic life of the asset, sales volume, inflation, raw materials costs, cost of capital, tax rates, andcapital spending. These assumptions do not change in isolation; therefore, it is not practicable to present the impact of changing a single assumption.50Table of ContentsFactors 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 or operating losses•significant changes in the manner of use of assets or the strategy for our overall business•the denial or delay of necessary permits or approvals that would affect the utilization of our tangible assets•underutilization of our tangible assets•discontinuance of certain products by us or our customers•a decrease in estimated mineral reserves•significant negative industry or economic trendsAlthough we believe the carrying values of our long-lived assets were realizable as of the balance sheet dates, future events could cause us toconclude otherwise.Asset Retirement ObligationAll of our mining properties involve certain reclamation liabilities as required by the states in which they operate or by the BLM. Reclamation costsare initially recorded as a liability associated with the asset to be reclaimed or abandoned, based on applicable inflation assumptions and discount rates. Theaccretion of this discounted liability is recognized as expense over the life of the related assets, and the liability is periodically adjusted to reflect changes inthe estimates of the time or amount of the reclamation and abandonment costs. These asset retirement obligations are reviewed and updated at least annuallywith any changes in balances recorded as adjustments to the related assets and liabilities. The estimates of amounts to be spent are subject to considerableuncertainty and long timeframes. Changes in these estimates could have a material impact on our results of operations and financial position.Planned Turnaround MaintenanceEach production operation typically shuts down periodically for planned maintenance activities. Our New Mexico operations perform maintenanceactivities when not operating in conjunction with their reduced production schedule. Our HB, Moab, and Wendover operations cease harvesting potash fromour solar ponds during one or more summer months to maximize the evaporation season. During these summer turnarounds, annual maintenance is performed.The costs of maintenance turnarounds at our facilities are considered part of production costs and are absorbed into inventory in the period incurred.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 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 CompensationWe account for stock‑based compensation by recording expense using the fair value of the awards at the time of grant. We have recordedcompensation expense associated with the issuance of restricted common stock, performance units, and non‑qualified stock options, all of which are subjectto service conditions, and in some cases, are subject to performance- or market-based conditions. Expense associated with awards that contain both a servicecondition and a market condition is recognized using the accelerated recognition method over the requisite service period of the award, which is generallythe longest of the explicit service period or the derived service period (expected date the market condition is estimated to be achieved).Non-GAAP Financial MeasureTo supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, from time to time we use "averagenet realized sales price per ton," which is a non-GAAP financial measure. This non-GAAP financial measure should not be considered in isolation or as asubstitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, because the presentation of this non-GAAP financial measure varies among companies, our presentation of this non-GAAP financial measure may not be comparable to similarly titled measuresused by other companies.We believe average net realized sales price per ton provides useful information to investors for analysis of our business. We use this non-GAAPfinancial measure as one of our tools in comparing period-over-period performance on a51Table of Contentsconsistent basis and when planning, forecasting, and analyzing future periods. We believe this non-GAAP financial measure is used by professional researchanalysts and others in the valuation, comparison, and investment recommendations of companies in the potash mining industry. Many investors use thepublished research reports of these professional research analysts and others in making investment decisions.We calculate average net realized sales price per ton for each of potash and Trio®. Average net realized sales price per ton for potash is calculated aspotash segment sales less potash segment byproduct sales and potash freight costs and then dividing that difference by the number of tons of potash sold inthe period. Likewise, average net realized sales price per ton for Trio® is calculated as Trio® segment sales less Trio® segment byproduct sales and Trio®freight costs and then dividing that difference by Trio® tons sold. We consider average net realized sales price per ton to be useful, and believe it to be usefulfor investors, because it shows our potash and Trio® average per-ton pricing without the effect of certain transportation and delivery costs. When we arrangetransportation and delivery for a customer, we include in revenue and in freight costs the costs associated with transportation and delivery. However, some ofour customers arrange for and pay their own transportation and delivery costs, in which case these costs are not included in our revenue and freight costs. Weuse average net realized sales price per ton as a key performance indicator to analyze potash and Trio® sales and price trends.Below is a reconciliation of average net realized sales price per ton for potash Trio® and to the most directly comparable GAAP measure for the yearsended December 31, 2018, 2017, and 2016 (in thousands, except per ton amounts): Potash Segment 2018 2017 2016Total Segment Sales $124,058 $107,917 $159,207Less: Segment byproduct sales 16,586 12,377 9,872 Potash freight costs 14,194 11,818 24,839 Subtotal $93,278 $83,722 $124,496 Divided by: Potash tons sold (in thousands) 364 352 634 Average net realized sales price per ton $256 $238 $196 Trio® Segment 2018 2017 2016Total Segment Sales $66,808 $63,686 $52,890Less: Segment byproduct sales 2,669 348 6 Trio® freight costs 19,367 18,104 10,331 Subtotal $44,772 $45,235 $42,552 Divided by: Trio® Tons sold (in thousands) 225 237 154 Average net realized sales price per ton $199 $191 $276ITEM 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, Trio®, and water are commodities but are not traded on any commodity exchange. As such, direct hedging of future prices cannot beundertaken. For potash and Trio®, we generally do not enter into long-term sales contracts for these products, so prices vary for each particular transactiondepending on the market into which we are selling and the individual bids that we receive. For water sales, we have entered into a diverse set of long-termagreements, where the price per barrel of water is fixed. Generally, these agreements allow for the parties to periodically review and adjust the price per barrelof water to the prevailing market price.52Table of ContentsOur sales and profitability are determined principally by the price of potash, Trio®, and water. Potash and Trio® sales and profitability are alsoinfluenced, to a lesser extent, by the price of natural gas and other commodities used in production. The price of potash and Trio® is influenced byagricultural demand, global and domestic supply, competing specialty fertilizers, and the prices of agricultural commodities. Decreases in agriculturaldemand, increases in supply, or decreases in agricultural commodity prices could reduce our agricultural potash and Trio® sales. The price of water isinfluenced by demand from the oil and gas operators in the Permian Basin. Natural gas and oil price declines may result in a reduction in drilling activity,which could reduce our sales of water.Our costs and capital investments are subject to market movements in other commodities such as natural gas, electricity, steel, and chemicals.Interest Rate FluctuationsBalances outstanding under our $50 million credit facility bear interest at a floating rate of 1.50% to 2.00% above LIBOR (London InterbankOffered Rate), based on average availability under the credit facility. As of December 31, 2018, we had no borrowings outstanding on this facility. Weoccasionally borrow and repay amounts under the facility for near-term working capital needs.The $50 million aggregate principal amount of Notes bears interest based on a pricing grid set forth in the agreement governing the Notes. As ofDecember 31, 2018, the Series A Senior Notes bear interest at 3.73%, the Series B Senior Notes bear interest at 4.63%, and the Series C Senior Notes bearinterest at 4.78%, which reflect the lowest rates in the pricing grid. These interest rates may adjust quarterly based upon our financial performance and certainfinancial covenant levels. As of December 31, 2018, these financial covenant tests have been met. The fair value of the senior notes fluctuates based on theassessment of our credit and movements in market interest rates. As of December 31, 2018, the aggregate principal amount of Notes due was $50.0 millionand their estimated fair value was $48.1 million.A 1.0% increase or decrease in underlying interest rates for the Notes would increase or decrease interest expense by approximately $0.5 millionannually, assuming aggregate principal amount outstanding remains constant at December 31, 2018 levels.Geographic ConcentrationOur mines, facilities, and many of our customers are concentrated in the western half of United States and are, therefore, affected by weather andother conditions in this region.Foreign Exchange Rate FluctuationsWe typically do not have balances of accounts receivable denominated in currencies other than U.S. dollars and, as a result, we do not have a directforeign exchange risk. We do, however, have an indirect foreign exchange risk due to the industry in which we operate.Specifically, the U.S. imports the majority of its potash, including from Canada, Russia, and Belarus. If the local currencies for foreign suppliersstrengthen in comparison to the U.S. dollar, foreign suppliers realize a smaller margin in their local currencies unless they increase their nominal U.S. dollarprices. Strengthening of these local currencies therefore tends to support higher U.S. potash prices as the foreign suppliers attempt to maintain their margins.However, if local currencies weaken in comparison to the U.S. dollar, foreign suppliers may choose to lower prices proportionally to increase sales volumewhile again maintaining a margin in their local currency.53Table of ContentsITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAReport of Independent Registered Public Accounting FirmTo the Stockholders and Board of DirectorsIntrepid Potash, Inc.:Opinions on the Consolidated Financial Statements and Internal Control Over Financial ReportingWe have audited the accompanying consolidated balance sheets of Intrepid Potash, Inc. and subsidiaries (the "Company") as of December 31, 2018 and 2017,the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the three-yearperiod ended December 31, 2018, and the related notes and the financial statement schedule II (collectively, the "consolidated financial statements"). We alsohave audited the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2018, inconformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internalcontrol over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission.Change in Accounting PrincipleAs discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for revenue in the year ended December31, 2018 due to the adoption of ASC Topic 606, Revenue from Contracts with Customers.Basis for OpinionsThe Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting,and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on InternalControl over Financial Reporting. Our responsibility is to express an opinion on the Company's consolidated financial statements and an opinion on theCompany's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securitieslaws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internalcontrol over financial reporting was maintained in all material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internalcontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.Definition and Limitations of Internal Control Over Financial ReportingA company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial54Table of Contentsstatements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detectionof 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./s/ KPMG LLPWe have served as the Company's auditor since 2007.Denver, ColoradoMarch 12, 201955Table of ContentsINTREPID POTASH, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except share and per share amounts) December 31, 2018 2017ASSETS Cash and cash equivalents $33,222 $1,068Accounts receivable: Trade, net 25,161 17,777Other receivables, net 597 762Refundable income taxes — 2,663Inventory, net 82,046 83,126Other current assets 4,332 6,088Total current assets 145,358 111,484Property, plant, equipment, and mineral properties, net 346,209 364,542Long-term parts inventory, net 30,031 30,611Other assets, net 3,633 3,955Total Assets $525,231 $510,592 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable: Trade $9,107 $11,103Related parties 28 28Income taxes payable 914 —Accrued liabilities 8,717 8,074Accrued employee compensation and benefits 4,124 4,317Other current liabilities 11,891 65Advances on credit facility — 3,900Current portion of long-term debt — 10,000Total current liabilities 34,781 37,487 Long-term debt, net 49,642 49,437Asset retirement obligation 23,125 21,476Other non-current liabilities 420 102Total Liabilities 107,968 108,502 Commitments and Contingencies Common stock, $0.001 par value; 400,000,000 shares authorized: and 128,716,595 and 127,646,530 shares outstanding at December 31, 2018, and 2017, respectively 129 128Additional paid-in capital 649,202 645,813Accumulated other comprehensive loss — —Retained deficit (232,068) (243,851)Total Stockholders' Equity 417,263 402,090Total Liabilities and Stockholders' Equity $525,231 $510,592See accompanying notes to these consolidated financial statements.56Table of ContentsINTREPID POTASH, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except share and per share amounts) Year Ended December 31, 2018 2017 2016Sales $208,270 $177,915 $212,097Less: Freight costs 37,052 32,016 36,062Warehousing and handling costs 9,281 9,670 11,006Cost of goods sold 121,955 117,962 169,745Lower of cost or net realizable value inventory adjustments 1,711 6,379 20,374Costs associated with abnormal production and other — — 1,707Gross Margin (Deficit) 38,271 11,888 (26,797) Selling and administrative 20,438 18,915 20,034Debt restructuring expense — — 3,072Accretion of asset retirement obligation 1,668 1,558 1,768Restructuring expense — 266 2,723Care and maintenance expense 530 1,687 2,603Other operating expense (income) 141 3,523 (1,666)Operating Income (Loss) 15,494 (14,061) (55,331) Other Income (Expense) Interest expense, net (3,855) (11,692) (11,622)Interest income 110 6 286Other income 142 397 1,122Income (Loss) Before Income Taxes 11,891 (25,350) (65,545) Income Tax (Expense) Benefit (108) 2,783 1,362Net Income (Loss) $11,783 $(22,567) $(64,183) Weighted Average Shares Outstanding: Basic 128,070,702 115,708,859 75,818,735Diluted 130,985,919 115,708,859 75,818,735Income (Loss) Per Share: Basic $0.09 $(0.20) $(0.85)Diluted $0.09 $(0.20) $(0.85)See accompanying notes to these consolidated financial statements.57Table of ContentsINTREPID POTASH, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(In thousands) Year Ended December 31, 2018 2017 2016Net Income (Loss) $11,783 $(22,567) $(64,183)Other Comprehensive Income: Net change in unrealized gains on investments available forsale — — 52Other Comprehensive Income — — 52Comprehensive Income (Loss) $11,783 $(22,567) $(64,131)See accompanying notes to these consolidated financial statements.58Table of ContentsINTREPID POTASH, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(In thousands, except share amounts) Common Stock AdditionalPaid-in Capital Accumulated OtherComprehensive Loss Retained Deficit TotalStockholders'Equity Shares Amount Balance, December 31, 2015 75,702,700 $76 $580,227 $(52) $(153,726) $426,525Adoption of ASC Topic 606 — — — — (3,255) (3,255)Net change in other comprehensive loss — — — 52 — 52Net loss — — — — (64,183) (64,183)Stock-based compensation — — 3,599 — — 3,599Vesting of restricted shares, net of common stockused to fund employee income tax withholdingdue upon vesting 137,298 — (173) — — (173)Balance, December 31, 2016 75,839,998 76 583,653 — (221,164) 362,565Adjustment to opening balance — — 120 — (120) —Net loss — — — — (22,567) (22,567)Issuance of common stock 50,612,027 51 59,079 59,130Stock-based compensation — — 3,622 — — 3,622Vesting of restricted shares, net of common stockused to fund employee income tax withholdingdue upon vesting 1,077,292 1 (782) — — (781)Exercise of stock options 117,213 — 121 — — 121Balance, December 31, 2017 127,646,530 128 645,813 — (243,851) 402,090Net income — — — — 11,783 11,783Stock-based compensation — — 4,179 — — 4,179Vesting of restricted shares, net of common stockused to fund employee income tax withholdingdue upon vesting 975,061 1 (904) — — (903)Exercise of stock options 95,004 — 114 — — 114Balance, December 31, 2018 128,716,595 $129 $649,202 $— $(232,068) $417,263See accompanying notes to these consolidated financial statements.59Table of ContentsINTREPID POTASH, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) Year Ended December 31, 2018 2017 2016Cash Flows from Operating Activities: Adjustments to reconcile net income (loss) to net cash provided by operating activities: Net income (loss) $11,783 $(22,567) $(64,183)Depreciation and depletion 32,215 33,209 40,913Accretion of asset retirement obligation 1,668 1,558 1,768Amortization of deferred financing costs 732 1,778 2,113Stock-based compensation 4,179 3,622 3,598Reserve for obsolescence 15 1,073 349Allowance for doubtful accounts 100 865 —(Gain) loss on disposal of assets (87) 1,830 262Lower of cost or net realizable value inventory adjustments 1,711 6,379 20,374Other (19) — 481Changes in operating assets and liabilities: Trade accounts receivable, net (7,484) (6,870) 4,419Other receivables, net 165 (270) 977Refundable income taxes 2,663 (1,284) (1,163)Inventory, net (67) (1,263) (16,771)Other current assets 1,762 (3,207) 4,797Accounts payable, accrued liabilities, and accrued employeecompensation and benefits 1,740 1,738 (11,222)Income tax payable 914 — —Other liabilities 12,247 102 (1,453)Net cash provided by (used in) operating activities 64,237 16,693 (14,741) Cash Flows from Investing Activities: Additions to property, plant, equipment, and mineral properties (16,891) (13,505) (17,892)Proceeds from sale of property, plant, equipment, and mineral properties 110 5,651 —Purchases of investments — — (10,325)Proceeds from sale of investments — — 60,727Net cash (used in) provided by investing activities (16,781) (7,854) 32,510 Cash Flows from Financing Activities: Issuance of common stock, net of transaction expenses — 59,130 —Repayment of long-term debt (10,000) (75,000) (15,000)Debt prepayment costs (402) (3,001) —Proceeds from short-term borrowings on credit facility 13,500 22,000 —Repayments of short-term borrowings on credit facility (17,400) (18,100) —Debt issuance costs (210) (129) (3,910)Employee tax withholding paid for restricted shares upon vesting (903) (781) (173)Proceeds from exercise of stock options 114 121 —Net cash used in financing activities (15,301) (15,760) (19,083) Net Change in Cash, Cash Equivalents, and Restricted Cash 32,155 (6,921) (1,314)Cash, Cash Equivalents, and Restricted Cash, beginning of period 1,549 8,470 9,784Cash, Cash Equivalents, and Restricted Cash, end of period $33,704 $1,549 $8,470 Supplemental disclosure of cash flow information Net cash paid (received) during the period for: Interest, net of $0.1 million, $0.1 million, and $0.4 million of capitalized interest $3,470 $11,639 $8,966Income taxes $(3,469) $(1,499) $(100)Accrued purchases for property, plant, equipment, and mineral properties $1,082 $4,068 $79360Table of ContentsSee accompanying notes to these consolidated financial statements.61Table of ContentsINTREPID POTASH, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS"Intrepid," "our," "we," or "us" means Intrepid Potash, Inc. and its consolidated subsidiaries.Note 1— COMPANY BACKGROUNDWe are a diversified mineral company that delivers potassium, magnesium, sulfur, salt, and water products essential for customer success inagriculture, animal feed and the oil and gas industry. We are the only U.S. producer of muriate of potash (sometimes referred to as potassium chloride orpotash), which is applied as an essential nutrient for healthy crop development, utilized in several industrial applications, and used as an ingredient in animalfeed. In addition, we produce a specialty fertilizer, Trio®, which delivers three key nutrients, potassium, magnesium, and sulfate, in a single particle. We alsoprovide water, magnesium chloride, brine and various oilfield products and services.Our extraction and production operations are conducted entirely in the continental United States. We produce potash from three solution miningfacilities: our HB solution mine in Carlsbad, New Mexico, our solution mine in Moab, Utah and our brine recovery mine in Wendover, Utah. We also operateour North compaction facility in Carlsbad, New Mexico, which compacts and granulates product from the HB mine. We produce Trio® from our conventionalunderground East mine in Carlsbad, New Mexico. Until mid-2016, we also produced potash from our East and West mines in Carlsbad, New Mexico. In April2016, we converted our East facility from a mixed-ore facility that produced both potash and Trio® to a Trio®‑only facility. In addition, in early July 2016,we idled mining operations at our West facility and transitioned the facility into care and maintenance. These changes were designed to increase ourproduction of Trio®, a product that had traditionally shown more resilience to pricing pressure than potash, and to lower costs in a time of declining potashprices.We have water rights in New Mexico under which we sell water primarily to support oil and gas development in the Permian Basin near our Carlsbadfacilities. We continue to work to expand our sales of water. On February 5, 2019, we and Sherbrooke Partners (together, the "buyers") entered into a purchaseand sale agreement with Dinwiddie Cattle Company under which the buyers will purchase certain Dinwiddie Jal Ranch assets located in Lea County, NewMexico, consisting primarily of land, water rights and other related assets. The aggregate consideration for the purchase will be $65 million, subject tocustomary purchase price adjustments. Further, as additional consideration for the sale, buyers will grant certain royalties on saltwater disposal revenuerelating to the purchased assets or properties located near the assets. We and Sherbrooke will pay 51% and 49% of the purchase price, or approximately $33.2million and $31.8 million, respectively, for a 51% and 49% undivided interest in the assets, respectively. We expect to close the purchase in the first quarterof 2019, subject to the satisfaction of customary closing conditions. The buyers expect to enter into a joint development agreement with respect to the assets,pursuant to which the buyers will agree, among other things, that Intrepid will operate the assets.We have three segments: potash, Trio®, and oilfield solutions. Prior to the fourth quarter of 2018, we had two reporting segments; potash and Trio®.As a result of the growth of our water business and other oilfield products and services, we reevaluated our segments and determined that, beginning in thefourth quarter of 2018, we have an additional segment for oilfield solutions. We account for the sales of byproducts as revenue in the potash or Trio®segment, base on which segment generates the byproduct. Prior to the adoption of Accounting Standards Codification ("ASC") Topic 606 Revenue fromContract with Customers (ASC 606"), we accounted for the sale of byproducts as a credit to cost of goods sold. A majority of our byproduct sales wereaccounted for in the potash segment. We have recast the financial information for our segments for the years ended December 31, 2017, and 2016, to show theoilfield solutions segment and reclassification of byproduct sales to revenue.We manage sales and marketing operations centrally. This allows us to evaluate the product needs of our customers and then centrally determinewhich of our production facilities to use to fill customer orders in a manner designed to realize the highest average net realized sales price per ton. Averagenet realized sales price per ton is a non-GAAP measure that we calculate for each of potash and Trio as segment sales less segment byproduct sales andsegment freight costs, divided by the number of tons of product sold in the period. We also monitor product inventory levels and overall production costscentrally.Note 2— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of Presentation—Our consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompanybalances and transactions have been eliminated in consolidation.62Table of ContentsUse of Estimates—The preparation of financial statements requires management to make estimates and assumptions that affect the reported amountsof assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues andexpenses during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonableunder 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,revenue from products we sell to customers where the price is variable, the valuation of receivables, estimated future net cash flows used in long-lived assetsimpairment analysis, the related valuation of our long-lived assets, valuation of our deferred tax assets and estimated blended income tax rates utilized in thecurrent and deferred income tax calculations. There are numerous uncertainties inherent in estimating quantities of proven and probable reserves, projectingfuture rates of production, and the timing of development expenditures. Future mineral prices may vary significantly from the prices in effect at the time theestimates are made, as may estimates of future operating costs. The estimate of proven and probable mineral reserves, the related present value of estimatedfuture cash flows, and useful lives of plant assets can affect various other items including depletion, the net carrying value of our mineral properties, theuseful lives of related property, plant, and equipment, depreciation expense, and estimates associated with recoverability of long-lived assets and assetretirement obligations. Specific to income tax items, we experience fluctuations in the valuation of the deferred tax assets and liabilities due to changingincome tax rates and the blend of state tax rates.Revenue Recognition—We account for revenue in accordance with Accounting Standards Codification ("ASC") Topic 606 Revenue from Contractswith Customers ("ASC 606"), which we adopted on January 1, 2018 using the full retrospective method. See Note 3 "Recently Adopted AccountingStandards" for further discussion of the adoption of ASC 606, including the adjustments made to our previously reported 2017 and 2016 financial statements.Under ASC 606, we recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects theconsideration we expect to be entitled in exchange for those goods or services.Performance Obligations: A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit ofaccount in ASC 606. The contract's transaction price is allocated to the performance obligations and recognized as revenue when the performance obligationsare satisfied. Substantially all of our contracts are of a short-term nature and contain a single performance obligation because the sale is for one type ofproduct and shipping and handling charges are accounted for as a fulfillment cost and are not considered to be a separate performance obligation. Theperformance obligation is satisfied when control of the product is transferred to the customer, which typically occurs when we ship mineral products ordeliver water from our facility to the customer. We account for substantially all of our revenue from sales to customers at a single point in time.Contract Estimates: In certain circumstances, we may sell product to customers where the sales price is variable. For such sales, we estimate the salesprice we expect to realize based on the facts and circumstances for each sale, including historical experience, and recognize revenue to the extent it isprobable that a subsequent change in estimate will not result in a significant revenue reversal compared to the cumulative revenue recognized under thecontract.Contract Balances: The timing of revenue recognition, billings, and cash collection may result in contract assets or contract liabilities. For certaincontracts, the customer has agreed to pay us before we have satisfied our performance obligations. Customer payments received before we have satisfied ourperformance obligations are accounted for as a contract liability. As of December 31, 2018, we had $11.7 million of contract liabilities, which are included in"Other current liabilities" on the consolidated balance sheet. Our contract liability relates to payments received from customers for water purchases for whichwe have not yet delivered the water. Our contract liability activity for the year ended December 31, 2018, is shown below (in thousands): Year Ended December 31, 2018Beginning balance $—Additions 17,558Recognized as revenue during period (5,880)Ending Balance $11,67863Table of ContentsDisaggregation of Revenue: We generated revenue from the following products for the last three years. We believe the disaggregation of revenue byproducts best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic conditions. Amounts presented arein thousands: Year Ended December 31,Product 2018 2017 2016Potash $107,471 $95,540 $149,335Trio® 64,139 63,338 52,884Water 19,797 7,042 —Salt 6,877 6,334 2,947Magnesium Chloride 6,804 5,432 6,931Brines 1,777 229 —Other 1,405 — —Total Revenue $208,270 $177,915 $212,097Inventory and Long-Term Parts Inventory—Inventory consists of product and byproduct stocks that are ready for sale; mined ore; potash inevaporation ponds, which is considered work-in-process; and parts and supplies inventory. Product and byproduct 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.We evaluate our 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 unique to each period. We model normalproduction levels 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 used 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 inventoriesthat have not turned over in more than a year, excluding parts classified as critical spares, are reviewed for obsolescence and, if deemed appropriate, areincluded in the determination of an allowance for obsolescence.Property, Plant, Equipment, Mineral Properties, and Development Costs—Property, plant, and equipment are stated at historical cost. Expendituresfor property, plant, and equipment relating to new assets or improvements are capitalized, provided the expenditure extends the useful life of an asset orextends the asset's functionality. Property, plant, and equipment are depreciated under the straight-line method using estimated useful lives. The estimateduseful lives of property, plant, and equipment are evaluated periodically as changes in estimates occur. No depreciation is taken on assets classified asconstruction in progress until the asset is placed into service. Gains and losses are recorded upon retirement, sale, or disposal of assets. Maintenance andrepair costs are recognized as period costs when incurred. Capitalized interest, to the extent of debt outstanding, is calculated and capitalized on assets thatare being constructed, drilled, or built or that are otherwise classified as construction in progress.Mineral properties and development costs, which are referred to collectively as mineral properties, include acquisition costs, the cost of drillingproduction wells, and the cost of other development work, all of which are capitalized. Depletion of mineral properties is calculated using the units-of-production method over the estimated life of the relevant ore body. The lives of reserves used for accounting purposes are shorter than current reserve lifedeterminations due to uncertainties inherent in long-term estimates. These reserve life estimates have been prepared by us and reviewed and independentlydetermined by mine consultants. Tons of potash and langbeinite in the proven and probable reserves are expressed in terms of expected finished tons ofproduct to be realized, net of estimated losses. Market price fluctuations of potash or Trio®, as well as increased production costs or reduced recovery rates,could render proven and probable reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction ofreserves. In addition, the provisions of our mineral leases, including royalty provisions, are subject to periodic readjustment by the state and federalgovernment, which could affect the economics of our reserve estimates. Significant changes in the estimated reserves could have a material impact on ourresults of operations and financial position.64Table of ContentsRecoverability 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. An impairment is potentially considered to exist if an asset group's total estimated net future cash flows onan undiscounted basis are less than the carrying amount of the related asset. An impairment loss is measured and recorded based on the excess of the carryingamount of long-lived assets over its estimated fair value. Changes in significant assumptions underlying future cash flow estimates or fair values of assetgroups may have a material effect on our financial position and results of operations. Sales price is a significant element of any cash flow estimate,particularly for higher cost operations. Other assumptions we estimate include, among other things, the economic life of the asset, sales volume, inflation, rawmaterials costs, cost of capital, tax rates, and capital spending.Factors we generally will consider important and which could trigger an impairment review of the carrying value of long-lived assets include thefollowing:•significant underperformance relative to expected operating results or operating losses•significant changes in the manner of use of assets or the strategy for our overall business•the denial or delay of necessary permits or approvals that would affect the utilization of our tangible assets•underutilization of our tangible assets•discontinuance of certain products by us or our customers•a decrease in estimated mineral reserves•significant negative industry or economic trendsExploration 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,and the 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 costs ofmaintenance turnarounds at our facilities are considered part of production costs and are absorbed into inventory in the period incurred.Leases—Upon entering into leases, we evaluate whether leases are operating or capital leases. Operating lease expense is recognized as incurred. Iflease 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—We are a subchapter C corporation and, therefore, are subject to U.S. federal and state income taxes. We recognize income taxesunder 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. Werecord a valuation allowance if it is deemed more likely than not that our deferred income tax assets will not be realized in full. These determinations 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.Fair Value of Financial Instruments—Our financial instruments include cash and cash equivalents, restricted cash, accounts receivable, refundableincome taxes, accounts payable and current accrued liabilities. These instruments are carried at cost, which approximates fair value due to the short-termmaturities of the instruments. Allowances for doubtful accounts are recorded against the accounts receivable balance to estimate net realizable value. The fairvalue of the long-term debt is estimated using discounted cash flow analysis based on current borrowing rates for debt with similar remaining maturities andratings. Amounts outstanding under our secured credit facility are carried at cost, which approximates fair value, due to the short-term nature of theborrowings.Earnings per Share—Basic net income or loss per common share of stock is calculated by dividing net income or loss available to commonstockholders by the weighted average basic common shares outstanding for the respective period.Diluted net income per common share of stock is calculated by dividing net income by the weighted average diluted common shares outstanding,which includes the effect of potentially dilutive securities. Potentially dilutive securities for the diluted earnings or loss per share calculation consist ofawards of restricted shares, performance units, and non‑qualified stock options. The dilutive effect of stock-based compensation arrangements is computedusing the treasury‑stock method.65Table of ContentsFollowing the lapse of the vesting period of restricted shares, the shares are considered issued and therefore are included in the number of issued andoutstanding shares for purposes of these calculations. When we report a net loss, all potentially dilutive securities are considered anti-dilutive and areexcluded from the dilutive loss per share calculation.Stock‑Based Compensation—We account for stock-based compensation by recording expense using the fair value of the awards at the time of grant.We have recorded compensation expense associated with the issuance of restricted shares, performance units, and non-qualified stock options, all of whichare subject to service conditions and in some cases subject to operational performance or market-based conditions. The expense associated with such awardsis recognized over the service period associated with each grant. Expense associated with awards with service only conditions is recognized using thestraight-line recognition method over the requisite service period of the award, which is generally the vesting period of the award. Expense associated withawards that contain both a service condition and a market condition is recognized using the accelerated recognition method over the requisite service periodof the award, which is generally the longest of the explicit service period or the derived service period (expected date the market condition is estimated to beachieved).Reclassification of Prior Period Presentation—Certain prior period amounts have been reclassified in order to conform to the current periodpresentation. These reclassifications had no effect on the reported results of operations.Pronouncements Issued But Not Yet Adopted—In February 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-02, Leases(Topic 842), which requires, among other things, lessees to recognize lease assets and liabilities on their balance sheets for those leases classified as operatingleases under previous generally accepted accounting principles. These assets and liabilities must be recorded generally at the present value of the contractedlease payments, and the cost of the lease must be allocated over the lease term on a straight-line basis. This guidance is effective for us for annual and interimperiods in fiscal years beginning after December 15, 2018. A modified retrospective transition method is required, applying the new standard to all leasesexisting at the date of initial application. We will adopt the new standard on January 1, 2019, and use the effective date as our date of initial application.Consequently, financial information will not be updated, and disclosures required under the new standard will not be provided for dates before January 1,2019.The new standard provides a number of optional practical expedients in transition. We have elected the use the package of practical expedients,which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We haveelected not to use the hindsight practical expedient nor the practical expedient pertaining to land easements.On adoption, we will recognize additional lease liabilities and right-of-use ("ROU") assets of approximately $6.0 million.The new standard also provides practical expedients for our ongoing accounting. We have elected the short-term lease recognition exemption for allleases with an original term of 12 months or less. For leases that qualify for this exemption, we will not recognize ROU assets or lease liabilities. We have alsoelected the practical expedient which permits us to not separate lease and non-lease components for all our leases.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - (Topic 326): Measurement of Credit Losses on Financial Instruments,which changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected tooccur over their remaining life. This guidance is effective for us for annual and interim periods in fiscal years beginning after December 15, 2018. Because wehave historically experienced minimal bad debt expense related to our trade receivables, we do not believe the adoption of this new standard will have amaterial impact on our condensed consolidated financial statements.Note 3— RECENTLY ADOPTED ACCOUNTING STANDARDSIn May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, as amended by ASUNo. 2016-12, Revenue from Contracts with Customers (Topic 606), which requires revenue to be recognized based on the amount an entity is expected to beentitled to for promised goods or services provided to customers. Topic 606 also requires expanded disclosures regarding contracts with customers andbecame effective for us beginning January 1, 2018. We adopted the new standard using the full retrospective method, restating all prior periods, and recordeda $3.3 million increase to retained deficit as of January 1, 2016 due to the cumulative effect of adopting Topic 606. The transition adjustment is related toelecting the practical expedient for contracts that had variable consideration that were completed by the date of initial application. Under this practicalexpedient, we recorded revenue using the final transaction price from inception of the contract, rather than estimating and constraining the variableconsideration for contracts that were not complete at the end of a reporting period.66Table of ContentsOur revenue predominantly continues to be recognized when products are shipped from our manufacturing facilities. Under the new revenuestandard, for certain sales where revenue was previously deferred, such as sales in which the final price was not fixed and determinable, we now recognizerevenue when the product is shipped using the sales price we expect to realize.Adoption of ASC 606 also resulted in different income statement classification for sales of byproducts generated during the production of potashand Trio®. Prior to the fourth quarter of 2018, we accounted for byproduct sales as a credit to cost of goods sold. Our recast of comparative periods presentedreflects this change.In August 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-15, "Disclosure of Uncertainties about an Entity's Ability toContinue as a Going Concern," which describes how an entity should assess its ability to meet obligations and sets rules for how this information should bedisclosed in the financial statements. The new standard applies to all entities for the first annual period in fiscal years ending after December 15, 2016, withearly application permitted. We adopted this guidance in 2016 and it did not have a material impact on the disclosures included in our consolidated financialstatements.In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-BasedPayment Accounting," which became effective for us beginning January 1, 2017. This standard changes several aspects of how we account for share-basedpayment award transactions, including income tax consequences, classification of awards as either equity or liabilities, classification of excess tax benefits onthe statement of cash flows, forfeitures, minimum statutory tax withholding payments, and classification of employee taxes paid on the statement of cashflows when an employer withholds shares for tax-withholding purposes. In accordance with adoption of this standard share-based payment award forfeitureexpense will no longer be estimated and will be recorded as forfeitures occur and we have recorded a $0.1 million adjustment to beginning retained earningsfor the impact of this cumulative change.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) which is intended to clarify and align how certain cashreceipts and cash payments are presented and classified in the statement of cash flows where there is currently diversity in practice. ASU No. 2016-15specifically addresses eight classification issues within the statement of cash flows including debt prepayments or debt extinguishment costs; proceeds fromthe settlement of insurance claims; and separately identifiable cash flows and application of the predominance principle. This standard became effective forus beginning January 1, 2018. In accordance with the adoption of this standard, principal prepayment costs of $3.0 million for the year ended December 31,2017, which were previously included in Cash Flows from Operating Activities, are included in Cash Flows from Financing Activities in the statement ofcash flows. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740) which became effective for us beginning January 1, 2018. This standardrequires us to recognize at the transaction date the income tax consequences of intercompany asset transfers other than inventory. The adoption of thisstandard did not have a material impact on our condensed consolidated financial statements.In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18") which became effectivefor us beginning January 1, 2018. This standard requires us to show the changes in the total of cash, cash equivalents, restricted cash and restricted cashequivalents in the statement of cash flows and will no longer require transfers between cash and cash equivalents and restricted cash and restricted cashequivalents in the statement of cash flows. As a result of including restricted cash with cash and cash equivalents when reconciling the beginning-of-periodand end-of period total amounts presented on the condensed consolidated statements of cash flows, net cash flows for the year ended December 31, 2017,decreased by $3.5 million and increased by $3.5 million, for the year ended December 31, 2016.The impacts of adopting ASC 606 on the Consolidated Balance Sheet for the year ended December 31, 2017 are as follows (amounts in thousands): Balance as of December 31, 2017 As Previously Reported Adoption of ASC 606 As ReportedTrade receivables, net $15,076 $2,701 $17,777Prepaid expenses and other current assets 9,252 (3,164) 6,088Retained deficit $(243,388) $463 $(243,851)The impacts of adopting ASC 606, including accounting for byproduct sales as revenue instead of as a credit to cost of goods sold, on theConsolidated Statement of Operations for the years ended December 31, 2017 and 2016, are as follows (amounts in thousands):67Table of Contents Year ended December 31, 2017 As Previously Reported Adoption of ASC 606 As ReportedSales $163,919 $13,996 $177,915Freight costs 29,039 2,977 32,016Cost of goods sold 106,341 11,621 117,962Lower of cost or NRV adjustments inventoryadjustments 7,324 (945) 6,379Gross Margin 11,545 343 11,888Net Loss $(22,910) $343 $(22,567) Year ended December 31, 2016 As Previously Reported Adoption of ASC 606 As ReportedSales $210,948 $1,149 $212,097Freight costs 36,256 (194) 36,062Cost of goods sold 170,852 (1,107) 169,745Gross Deficit (29,247) 2,450 (26,797)Net Loss $(66,633) $2,450 $(64,183)The impacts of adopting ASC 606 and ASU 2016-18 on the Consolidated Statement of Cash Flows for the years ended December 31, 2017 and2016, are as follows: Year ended December 31, 2017 As PreviouslyReported Adoption of ASC606 Adoption of ASU2016-15 Adoption of ASU2016-18 As ReportedNet loss $(22,910) $343 $— $— $(22,567)Lower of cost or NRV inventory adjustments 7,324 (945) — — 6,379Changes in certain assets and liabilities (9,681) 602 3,001 (3,525) (9,603)Net cash provided by (used in) operatingactivities 17,217 — 3,001 (3,525) 16,693Debt prepayment costs — — (3,001) — (3,001)Net cash used in financing activities (12,759) — (3,001) — (15,760)Net decrease in cash, cash equivalents andrestricted cash (3,396) — — (3,525) (6,921)Cash, cash equivalents and restricted cash,beginning of the period 4,464 — — 4,006 8,470Cash, cash equivalents and restricted cash,end of the period $1,068 $— $— $481 $1,549 Year ended December 31, 2016 As PreviouslyReported Adoption of ASC606 Adoption of ASU2016-15 Adoption of ASU2016-18 As ReportedNet loss $(66,633) $2,450 $— $— $(64,183)Changes in certain assets and liabilities (19,856) (2,450) — 3,530 (18,776)Net cash (used in) provided by operatingactivities (18,271) — — 3,530 (14,741)Net (decrease) increase in cash, cashequivalents and restricted cash (4,844) — — 3,530 (1,314)Cash, cash equivalents and restricted cash,beginning of the period 9,308 — — 476 9,784Cash, cash equivalents and restricted cash,end of the period $4,464 $— $— $4,006 $8,47068Table of ContentsNote 4— EARNINGS PER SHAREBasic earnings per share is computed by dividing net income or loss by the weighted-average number of shares of common stock outstanding duringthe period. For purposes of determining diluted earnings per share, basic weighted-average common shares outstanding is adjusted to include potentiallydilutive securities, including restricted stock, stock options, and performance units. The treasury-stock method is used to measure the dilutive impact ofpotentially dilutive shares. Potentially dilutive shares are excluded from the diluted weighted-average shares outstanding computation in periods in whichthey have an anti-dilutive effect. The following table shows the calculation of basic and diluted earnings (loss) per share (in thousands, except per shareamounts): Year Ended December 31, 2018 2017 2016Net income (loss) $11,783 $(22,567) $(64,183) Basic weighted average common shares outstanding 128,071 115,709 75,819Add: Dilutive effect restricted common stock 1,982 — —Add: Dilutive effect of stock options outstanding 933 — —Diluted weighted average common shares outstanding 130,986 115,709 75,819 Earnings per share: Basic 0.09 $(0.20) $(0.85)Diluted 0.09 $(0.20) $(0.85)The following table shows anti-dilutive shares excluded from the calculation of diluted loss per share (in thousands): Year Ended December 31, 2018 2017 2016Anti-dilutive effect of restricted shares — 3,328 993Anti-dilutive effect of stock options outstanding 1,452 1,711 469Anti-dilutive effect of performance units — 63 12769Table of ContentsNote 5— CASH, CASH EQUIVALENTS AND RESTRICTED CASHTotal cash, cash equivalents and restricted cash, as shown on the consolidated statements of cash flows are included in the following accounts atDecember 31, 2018, 2017, and 2016 (in thousands): Year Ended December 31, 2018 2017 2016Cash and cash equivalents33,222 $1,068 $4,464Restricted cash included in "Other current assets"— — 525Restricted cash included in "Other assets, net"482 481 3,481Total cash, cash equivalents, and restricted cash shown in the statementof cash flows$33,704 $1,549 $8,470Restricted cash included in "Other assets, net" on the balance sheet at December 31, 2018, 2017, and 2016 represents amounts whose use is restrictedby contractual agreements with the Bureau of Land Management or the State of Utah as security to fund future reclamation obligations at our sites. Restrictedcash included in "Other current assets" on the balance sheet at December 31, 2016 was pledged as collateral for an outstanding letter of credit.Note 6— INVENTORY AND LONG-TERM PARTS INVENTORYThe following summarizes our inventory, recorded at the lower of weighted average cost or estimated net realizable value as of December 31, 2018,and 2017, respectively (in thousands): December 31, 2018 2017Finished goods product inventory $48,370 $54,577In-process mineral inventory 24,325 19,822Total product inventory 72,695 74,399Current parts inventory, net 9,351 8,727Total current inventory, net 82,046 83,126Long-term parts inventory, net 30,031 30,611Total inventory, net $112,077 $113,737Parts inventories are shown net of any required allowances. During the years ended December 31, 2018, 2017, and 2016, we recorded charges ofapproximately $1.7 million, $6.4 million, and $20.4 million, respectively, as a result of routine assessments of the lower of weighted average cost orestimated NRV on our finished goods product inventory.During the conversion of the East plant to a Trio®-only facility in 2016, we suspended potash production at our East facility for a total of sevendays. As a result, approximately $1.7 million of production costs at our East facility that would have been allocated to additional tons produced, wereexcluded from our inventory values and instead expensed as period production costs in the year ended December 31, 2016.70Table of ContentsNote 7— PROPERTY, PLANT, EQUIPMENT, AND MINERAL PROPERTIES"Property, plant, equipment, and mineral properties, net" were comprised of the following (in thousands): December 31, 2018 2017Buildings and plant $81,429 $79,757Machinery and equipment 241,977 234,861Vehicles 5,669 4,835Office equipment and improvements 13,779 12,637Ponds and land improvements 58,961 56,194Total depreciable assets 401,815 388,284Accumulated depreciation $(167,168) $(141,818)Total depreciable assets, net $234,647 $246,466 Mineral properties and development costs 139,418 138,841Accumulated depletion (31,197) (26,840)Total depletable assets, net 108,221 112,001 Land $519 $519Construction in progress 2,822 5,556Total property, plant, equipment, and mineral properties, net $346,209 $364,542We incurred the following expenses for depreciation and depletion, including expenses capitalized into inventory, for the following periods (inthousands): Year Ended December 31, 2018 2017 2016Depreciation $27,858 $28,323 $36,169Depletion 4,357 4,886 4,744Total incurred $32,215 $33,209 $40,913Note 8— DEBTSenior Notes—As of December 31, 2018, we had outstanding $50 million of senior notes (the "Notes") consisting of the following series:•$20 million of Senior Notes, Series A, due April 16, 2020•$15 million of Senior Notes, Series B, due April 14, 2023•$15 million of Senior Notes, Series C, due April 16, 2025The agreement governing the Notes contains certain financial covenants, including those discussed below:•We are required to maintain a minimum fixed charge coverage ratio of 0.25 to 1.0 for the quarter ending December 31, 2018. Our fixed chargecoverage ratio as of December 31, 2018, was 12.0 to 1.0, therefore we were in compliance with this covenant. Going forward we are required tomaintain a minimum fixed charge coverage ratio of 0.75 to 1.0 for the quarter ending March 31, 2019, 1.0 to 1.0 for the quarter ending June 30,2019, and 1.3 to 1.0 for each quarter ending on or after September 30, 2019.•For the quarter ended December 31, 2018, we were allowed a maximum leverage ratio of 7.0 to 1.0. Our leverage ratio was 0.9 to 1.0 as ofDecember 31, 2018, therefore we were in compliance with this covenant. Going71Table of Contentsforward, we are allowed a maximum leverage ratio of 5.5 to 1.0 for the quarter ending March 31, 2019, 4.5 to 1.0 for the quarter ending June 30,2019, and 3.5 to 1.0 for each quarter ending on or after September 30, 2019.Fixed charge coverage ratio and leverage ratio are calculated in accordance with the agreement governing the Notes.For the year ended December 31, 2018, the interest rates on the Notes were 3.73% for the Series A Notes, 4.63% for the Series B Notes and 4.78% forthe Series C Notes. These rates represent the lowest interest rates available under the Notes. The interest rates may adjust upward if we do not continue to meetcertain financial covenants.For the ten months ended October 31, 2017, the interest rates on the Notes were 7.73% for the Series A Notes, 8.63% for the Series B Notes and8.78% for the Series C Notes. Beginning November 1, 2017, the interest rates on the Notes were reduced to 3.73% for the Series A Notes, 4.63% for the SeriesB Notes and 4.78% for the Series C Notes.We have granted to the collateral agent for the noteholders a first lien on substantially all of our non-current assets and a second lien onsubstantially all of our current assets. We are required to offer to prepay the Notes with proceeds of dispositions of certain specified property and with theproceeds of certain equity issuances, as set forth in the agreement. The obligations under the Notes are unconditionally guaranteed by several of oursubsidiaries.We were in compliance with the applicable covenants under the agreement governing the Notes as of December 31, 2018.Our outstanding long-term debt, net, was as follows (in thousands): December 31, 2018 December 31, 2017Notes, at carrying value$50,000 $60,000Less current portion of Notes— (10,000)Less deferred financing costs(358) (563)Long-term portion of Notes, net$49,642 $49,437Credit Facility—We maintain an asset-based revolving credit facility with Bank of Montreal. In October 2018, we amended the credit facility toextend its maturity date from October 2019, to October 2023, to increase the amount available to be borrowed from $35 million to $50 million, and to makecertain other changes. The credit facility now allows us to borrow up to $50 million subject to monthly limits based on our inventory and receivables.Borrowings under the credit facility bear interest at LIBOR (London Interbank Offered Rate) plus an applicable margin of 1.50% to 2.00% perannum, based on average availability under the credit facility. We have granted to Bank of Montreal a first lien on substantially all of our current assets and asecond lien on substantially all of our non-current assets. The obligations under the credit facility are unconditionally guaranteed by several of oursubsidiaries.We occasionally borrow and repay amounts under the facility for near-term working capital needs or other purposes and may do so in the future. Forthe years ended December 31, 2018, and 2017, we borrowed $13.5 million and $22.0 million, respectively, and repaid $17.4 million and $18.1 million,respectively, under the facility. As of December 31, 2018, we had no borrowings outstanding and $1.0 million in an outstanding letter of credit under thefacility. As of December 31, 2017, we had $3.9 million of borrowings outstanding and $3.1 million in outstanding letters of credit under the facility. We have$49.0 million available under the facility as of December 31, 2018.We were in compliance with the applicable covenants under the facility as of December 31, 2018.Interest Expense—Interest expense is recorded net of any capitalized interest associated with investments in capital projects. We incurred grossinterest expense of $4.0 million, $11.8 million, and $12.1 million for the years ended December 31, 2018, 2017, and 2016, respectively.72Table of ContentsAmounts included in interest expense for the years ended December 31, 2018, 2017, and 2016 (in thousands) are as follows: Year ended December 31, 2018 20172016 Interest on notes and credit facility $2,849 $7,043$9,152 Make-whole payments 402 3,001806 Amortization of deferred financing costs 732 1,7782,113 Gross interest expense 3,983 11,82212,071 Less capitalized interest 128 130449 Interest expense, net $3,855 $11,692$11,622 Note 9— ASSET RETIREMENT OBLIGATIONWe recognize an estimated liability for future costs associated with the abandonment and reclamation of our 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.Our asset retirement obligation is based on the estimated cost to abandon and reclaim the mining operations, the economic life of the properties, andfederal and state regulatory requirements. The liability is discounted using credit adjusted risk-free rate estimates at the time the liability is incurred or whenthere are upward revisions to estimated costs. The credit adjusted risk-free rates used to discount our abandonment liabilities range from 6.9% to 9.7%.Revisions to the liability occur due to construction of new or expanded facilities, changes in estimated abandonment costs or economic lives, changes in theestimated timing of the reclamation activities or if federal or state regulators enact new requirements regarding the abandonment or reclamation of mines. Inthe fourth quarter of 2016, we extended our estimate of when the majority of our reclamation activities would occur by five years. This longer period of timeresulted in a decrease in our asset retirement obligation.Following is a table of the changes to our asset retirement obligations for the following periods (in thousands): Year Ended December 31, 2018 2017 2016Asset retirement obligation, at beginning of period $21,476 $19,976 $22,951Liabilities settled (19) — (3)Liabilities incurred — 29 —Changes in estimated obligations — (87) (4,740)Accretion of discount 1,668 1,558 1,768Total asset retirement obligation, at end of period $23,125 $21,476 $19,976The undiscounted amount of asset retirement obligation is $59.5 million as of December 31, 2018, of which we estimate approximately $6.6 millionin payments may occur in the next five years.Note 10— COMMON STOCKIn March 2017, we completed an underwritten public offering of our common stock and issued 50.1 million shares of common stock for net cashproceeds of $57.2 million. The net proceeds from the offering were used to partially repay indebtedness.In May 2017, we established an at-the-market offering program, which gives us the capacity to issue up to $40 million of our common stock. InSeptember 2017, we issued 0.5 million shares of common stock for net cash proceeds of $1.9 million. The net proceeds were used for general corporatepurposes. We may offer additional shares under the at-the-market offering program and we intend to use the net proceeds from any additional offerings underthis program for general corporate purposes, which may include, among other things, the repayment of indebtedness under our senior notes or revolvingcredit facility, acquisitions, and funding capital expenditures.73Table of ContentsNote 11— COMPENSATION PLANSCash Bonus Programs—At times, we use cash bonus programs under which employees may receive cash bonuses based on corporate, department,location, or individual performance or other events or accomplishments. We accrue cash bonus expense related to the current year's performance. We did notmeet our performance metrics related to the 2018 cash bonus program, and accordingly, we will not be paying cash bonuses for 2018 under the program. Wedid not implement a cash bonus program for 2017 or 2016.Equity Incentive Compensation Plan—Our Board of Directors and stockholders adopted a long-term incentive compensation plan called theIntrepid Potash, Inc. Amended and Restated Equity Incentive Plan (the "Plan"). We have issued restricted shares, common stock, performance units, and non-qualified stock option awards under the Plan. As of December 31, 2018, 1,953,305 restricted shares and options to purchase 3,351,684 shares of commonstock were outstanding. As of December 31, 2018, approximately 3.0 million shares of common stock remained available for issuance under the Plan. Totalcompensation expense related to the Plan was $4.2 million, $3.6 million, and $3.6 million, for the years ended December 31, 2018, 2017, and 2016,respectively. As of December 31, 2018, there was $5.0 million of total remaining unrecognized compensation expense that is expected to be recognizedthrough 2020 related to share-based awards. When restricted shares and performance units vest and when stock options are exercised, new shares are issuedand considered outstanding for financial statement purposes.Restricted Shares•Restricted Shares with Service Conditions—Under the Plan, the Compensation Committee of the Board of Directors (the "CompensationCommittee") has granted restricted shares of common stock to members of the Board of Directors, executive officers, and other key employees.The restricted shares contain service conditions associated with continued employment or service. The restricted shares provide voting andregular dividend rights to the holders of the awards.In 2018 the Compensation Committee granted 187,296 restricted shares to executives and key employees under the Plan as part of our annualequity award program. The awards vest over two years, subject to continued employment or service.In 2018, the Compensation Committee granted 90,615 restricted shares to non-employee members of the Board of Directors and one employeemember of the Board of Directors under the Plan for their annual service as directors. The restricted shares vest one year after the date of grant,subject to continued service.We use the closing price of our common stock on the grant date as the grant date fair value for these awards. We record compensation expensemonthly using the straight-line recognition method over the vesting period of the award. The weighted-average grant date fair value per sharefor restricted shares with service conditions issued in 2018, 2017, and 2016 was $4.16, $2.27, and $1.07, respectively.•Restricted Shares with Service and Market Conditions—In 2017 and 2016, the Compensation Committee granted restricted shares ofcommon stock to a member of our executive team as part of his annual compensation package. These restricted share grants contain service andmarket conditions, with the 2017 grant vesting over three years and the 2016 grant vesting over four years. The market condition for bothawards has been met.We used a Monte Carlo simulation valuation model to estimate the fair value of these awards on the grant date. We record compensationexpense monthly using the accelerated recognition method over the longer of the explicit or derived service period of the award. The weighted-average grant date fair value per share of restricted shares with service and market conditions issued in 2017, and 2016, was $2.10, and $0.91,respectively.Valuation models require the input of highly subjective assumptions, including the expected volatility of the price of the underlying stock. Weused the following assumptions to compute the weighted-average grant date fair market value of restricted stock with service and marketconditions granted in 2017 and 2016:74Table of Contents 2017 2016Closing stock price on grant date $2.29 $1.03Risk free interest rate 1.7% 1.3%Dividend yield —% —%Estimated volatility 81.7% 86.2%Expected life 5.00 years 5.00 yearsRestricted Shares with Service and Performance Conditions—In 2018 the Compensation Committee granted 187,296 restricted shares ofcommon stock to executive officers, and other key employees. These restricted share grants would have vested one year after the grant date,subject to continued service and the company meeting certain performance goals. We did not meet the performance goals and 187,296 restrictedshares were canceled.A summary of all activity relating to our restricted shares for the year ended December 31, 2018, is presented below: Weighted Average Grant-Date Fair Value Shares Restricted shares of common stock, beginning of period 3,163,903 $1.73Granted with service only condition 277,911 $4.16Granted with service and performance conditions 187,296 $3.91Vested, service only condition (1,112,256) $2.14Vested, service and market conditions (71,251) $2.10Forfeited, service only condition (305,002) $1.67Forfeited, service and market conditions — $—Forfeited, service and performance conditions (187,296) $3.91Restricted shares of common stock, end of period 1,953,305 $1.87Performance UnitsIn 2015, the Compensation Committee granted at-risk performance units under the Plan to a member of our executive team as part of his annualcompensation package. The performance units vested in February 2018, and payout, was based on market-based conditions relating to one-,two- and three-year performance periods beginning on the grant date. No shares were earned under the first one-year performance period, thesecond two-year performance period, or the third three-year performance period. The estimated fair value of the award was determined using aMonte Carlo simulation valuation model. Compensation cost was recognized monthly using the accelerated recognition method over thevesting period of the award. The weighted-average fair value per performance unit issued in 2015 was $13.84.Non-qualified Stock Options• Non-qualified Stock Options with Service-Based Vesting—In 2018, the Compensation Committee granted 623,274 non-qualified stockoptions under the Plan to a member of our executive team as part of his annual compensation package. The stock options have a ten-year termfrom the grant date and vest over three years.In measuring compensation expense for options, we estimated the fair value of the award on the grant date using the Black‑Scholes optionvaluation model. We record compensation expense monthly using the straight-line recognition method over the vesting period of the award.Option valuation models require the input of highly subjective assumptions, including the expected volatility of the price of the underlyingstock. We used the following assumptions to compute the weighted average fair market value of options with service-based vesting granted in2018, 2017 and 2016:75Table of Contents 2018 2017 2016Closing stock price on grant date $3.90 $2.29 $1.03Risk free interest rate 1.1% 1.6% 1.8%Dividend yield —% —% —%Estimated volatility 72.8% 71.5% 63.8%Expected option life 6.00 years 6.00 years 6.25 yearsOur estimate of volatility was based on the historic volatility of our common stock over a period comparable to the expected life of the option.The estimate of expected option life was determined based on the "simplified method," giving consideration to the overall vesting period andthe contractual terms of the award. This method was used because we have very little option exercise history for options issued under the Plan.The risk-free interest rate for the period that matched the option awards' expected life was based on the U.S. Treasury constant maturity yield atthe time of grant.•Non-qualified Stock Options with Service and Market Conditions—In 2018, the Compensation Committee granted 934,911 non-qualifiedstock options with service and market conditions under the Plan to a member of our executive team as part of his annual compensation package.The stock options vest in three equal annual installments, subject to continued employment; provided, however, that no vesting would occurunless and until the volume-weighted average closing market price or our common stock equals or exceeds $5.85 for 20 consecutive tradingdays on or before the five-year anniversary of the grant date. As of December 31, 2018, the market condition has not been met.We used a Monte Carlo simulation valuation model to estimate the fair value of these awards on their grant dates. We record compensationexpense monthly using the accelerated recognition method over the longer of the explicit or derived service period of the award.Valuation models require the input of highly subjective assumptions, including the expected volatility of the price of the underlying stock. Weused the following assumptions to compute the weighted average fair market value of options with service and market conditions granted in2018 and 2017: 2018 2017 2016Closing stock price on grant date $3.90 $2.29 $1.03Risk free interest rate 2.9% 2.2% 1.9%Dividend yield —% —% —%Estimated volatility 75.0% 81.7% 86.2%Expected life 10.00 years 10.00 years 10.00 years76Table of ContentsNon-Qualified Stock Option ActivityA summary of all stock option activity for the year ended December 31, 2018, is as follows: Shares Weighted AverageExercise Price Aggregate IntrinsicValue1 Weighted AverageRemainingContractual LifeOutstanding non-qualified stockoptions, beginning of period 2,075,821 $3.74 Granted 1,558,185 $3.90 Exercised (95,004) $1.20 Forfeited (174,025) $1.21 Expired (13,293) $30.49 Outstanding non-qualified stockoptions, end of period 3,351,684 $3.91 $1,810,165 8.2 Vested or expected to vest, end of period 3,351,684 $3.91 $1,810,165 8.2 Exercisable non-qualifiedstock options, end of period 876,084 $6.44 $845,691 6.41 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 fair value per share of options to purchase stock granted during 2018, 2017 and 2016 was $2.33, $1.38 and $0.61 pershare, respectively. The total intrinsic value of exercised options to purchase stock during 2018 and 2017 was $0.3 million. There were nooptions exercised to purchase stock in 2016.Note 12— INCOME TAXESWe account for income taxes in accordance with ASC 740, Income Taxes. This standard requires the recognition of deferred tax assets and liabilitiesfor the tax effect of temporary differences between the financial statement and tax basis of recorded assets and liabilities at enacted tax rates in effect when therelated taxes are expected to be settled or realized. We recognize income taxes in each of the tax jurisdictions where we conduct business. The effect ondeferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.A summary of the provision for income taxes is as follows (in thousands): Year Ended December 31, 2018 2017 2016Current portion of income tax expense (benefit): Federal $23 $(2,793) $(1,365) State 85 10 3Deferred portion of income tax expense: Federal — — — State — — —Total income tax expense (benefit) $108 $(2,783) $(1,362)77Table of ContentsA reconciliation of the federal statutory income tax rate of 21% for 2018 and 35% for 2017 and 2016 to our effective rate is as follows (in thousands,except percentages): Year Ended December 31, 2018 2017 2016Federal taxes at statutory rate $2,497 $(8,873) $(22,941)Add: State taxes, net of federal benefit 1,663 (1,414) (4,982)Change in valuation allowance (3,330) (104,710) 24,522Change in federal and state tax rates 634 115,545 —Percentage depletion (656) (598) (552)Other (700) (2,733) 2,591Net expense (benefit) as calculated $108 $(2,783) $(1,362) Effective tax rate 0.9% 11.0% 2.1%During the year ended December 31, 2018, our effective tax rate was impacted by the decrease in our valuation allowance of $3.3 million.During the year ended December 31, 2017, our effective tax rate was impacted by the decrease in our expected future rate at which our deferred taxassets will reverse due to newly enacted federal tax legislation, which reduced the value of our deferred tax assets by $115.5 million. Since we have a fullvaluation allowance against our deferred tax assets, a corresponding decrease in our valuation allowance was also required. The net decrease in our valuationallowance was $104.7 million for the year ended December 31, 2017. Finally, our effective tax rate was impacted by a benefit of $2.7 million related to ourability to monetize existing alternative minimum tax credits through a carryback as well as an election available to taxpayers in 2017.During the year ended December 31, 2016, our effective tax rate was impacted by the increase in our valuation allowance of $24.5 million, as well asan election to monetize a portion of our existing alternative minimum tax credits in the amount of $1.4 million.As of December 31, 2018, and 2017, we had gross deferred tax assets of $218.4 million and $221.7 million, respectively. During the year endedDecember 31, 2018, our deferred tax assets decreased primarily due to varying business conditions for normal business transactions and operations as well aschanges to state tax rates and apportionment laws. Included in gross deferred tax assets as of December 31, 2018 were approximately $240.0 million offederal net operating loss carryforwards, which expire beginning in 2033, and approximately $296.5 million of state net operating loss carry forwards, themajority of which begin to expire in 2033. Gross deferred tax assets also include $1.9 million of federal research and development credits which begin toexpire in 2031. The federal loss carryforward could be subject to examination by the tax authorities within three years after the carryforward is utilized, whilethe state net operating loss carry forwards could be subject to examination by the tax authorities generally within three and four years after the carry forwardis utilized, depending on jurisdiction.78Table of ContentsSignificant components of our deferred tax assets and liabilities were as follows (in thousands): December 31, 2018 2017Deferred tax assets (liabilities): Property, plant, equipment and mineral properties, net $138,855 $139,656Federal and state net operating loss carryforwards 65,779 68,733Other 2,888 5,976Asset retirement obligation 5,950 5,472R&D credits 1,870 1,870Deferred revenue 3,035 —Total deferred tax assets 218,377 221,707Valuation allowance (218,377) (221,707)Deferred tax asset, net $— $—In assessing the need for a valuation allowance, we consider whether it is more likely than not that some portion or all of the deferred tax assets willnot be realized. We evaluate our ability to realize the tax benefits associated with deferred tax assets by analyzing the relative impact of all the availablepositive and negative evidence regarding our forecasted taxable income using both historical and projected future operating results, the reversal of existingtaxable temporary differences, and the availability of tax planning strategies. The ultimate realization of deferred tax assets is dependent upon the generationof certain types of future taxable income during the periods in which those temporary differences become deductible. In making this assessment, we considerthe scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies.As of December 31, 2018, and 2017, we have a full valuation allowance against our deferred tax assets because we do not believe it is more likelythan not that we will fully realize the benefit of the deferred tax assets. During 2018, our valuation allowance decreased $3.3 million. The decrease wasmainly due to changes in operations in the various states we conduct business which decreased our expected future effective tax rate at which our deferred taxassets will reverse. Our deferred tax asset, net of the valuation allowance, at both December 31, 2018, and 2017, is zero.The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted most significantly by thetax jurisdictions in which we conduct business. Changing business conditions for normal business transactions and operations, as well as changes to state taxrates and apportionment laws, potentially alter the apportionment of income among the states for income tax purposes. These changes to apportionment lawsresult in changes in the calculation of our current and deferred income taxes, including the valuation of our deferred tax assets and liabilities. The effects ofany such changes are recorded in the period of the adjustment. Such adjustments can increase or decrease the net deferred tax asset on the balance sheet andimpact the corresponding deferred tax benefit or deferred tax expense on the statement of operations.A decrease of our state tax rate decreases the value of its deferred tax asset, resulting in additional deferred tax expense being recorded in the incomestatement. Conversely, an increase in our state income tax rate would increase the value of the deferred tax asset, resulting in an increase in our deferred taxbenefit. Because of the magnitude of the temporary differences between our book and tax basis in the assets, relatively small changes in the state tax rate mayhave a pronounced impact on the value of our net deferred tax asset.Each quarter we evaluate the need for a liability for uncertain tax positions. At December 31, 2018, and 2017, there were no items that requireddisclosure in accordance with FASB guidance on accounting for uncertainty in income taxes.We operate, and accordingly file income tax returns, in the U.S. federal jurisdiction and various U.S. state jurisdictions. With few exceptions, we areno longer subject to income tax examinations for years prior to 2015.The Tax Cuts and Jobs Act was enacted on December 22, 2017. Significant changes to the Internal Revenue Code including reducing the U.S.corporate tax rate were included in the legislation. As a result, the reduced tax rate caused a $115.5 million decrease to our deferred tax asset and relatedvaluation allowance. As the deferred tax asset is subject to a full valuation allowance, the change in rates had no financial statement impact.Note 13— COMMITMENTS AND CONTINGENCIES79Table of ContentsReclamation Deposits and Surety Bonds—As of December 31, 2018, and 2017, we had $19.0 million and $18.8 million, respectively, of securityplaced principally with the State of Utah and the Bureau of Land Management for eventual reclamation of its various facilities. Of this total requirement, as ofDecember 31, 2018, and 2017, $0.5 million and $0.5 million, respectively, consisted of long-term restricted cash deposits reflected in "Other" long-termassets on the balance sheet, and $18.5 million and $18.3 million, respectively, was secured by surety bonds issued by an insurer. The surety bonds are held inplace by an annual fee paid to the issuer.We may be required to post additional security to fund future reclamation obligations as reclamation plans are updated or as governmental entitieschange requirements.Legal—In February 2015, Mosaic Potash Carlsbad Inc. (“Mosaic”) filed a complaint and application for preliminary injunction and permanentinjunction against Steve Gamble and us in the Fifth Judicial District Court for the County of Eddy in the State of New Mexico. Mr. Gamble is a formeremployee of Intrepid and Mosaic. In August 2015, the court denied Mosaic’s application for preliminary injunction. In July 2016, Mosaic filed a secondcomplaint against Mr. Gamble and us in U.S. District Court for the District of New Mexico. In January 2018, the two lawsuits were consolidated into onelawsuit pending in the U.S. District Court for the District of New Mexico. Mosaic alleges against us violations of the New Mexico Uniform Trade Secrets Act,tortious interference with contract relating to Mr. Gamble’s separation of employment from Mosaic, violations of the Computer Fraud and Abuse Act,conversion, and civil conspiracy relating to the alleged misappropriation of Mosaic’s confidential information and related actions. Mosaic seeks monetaryrelief, including damages for actual loss and unjust enrichment, exemplary damages, attorneys' fees, and injunctive relief and has alleged damages of at least$22 million to $28 million plus other uncalculated damages. The lawsuit is progressing through discovery. A trial date has been set for September 2019. Weare vigorously defending against the lawsuit. We have recorded no loss contingency in our statements of operations related to this legal matter.We are subject to other claims and legal actions in the ordinary course of business. Legal costs are expensed as incurred. While there areuncertainties in predicting the outcome of any claim or legal action, we believe that the ultimate resolution of these other claims or actions is not reasonablylikely to have a material adverse effect on our financial condition, results of operations, or cash flows.Future Operating Lease Commitments—We have certain operating leases for land, mining and other operating equipment, offices, and railcars, withoriginal terms ranging up to 20 years. The annual minimum lease payments for the next five years and thereafter are presented below (in thousands):Years Ending December 31, 2019 $2,2662020 1,8742021 1,6022022 1,0832023 172Thereafter 1,343Total $8,340Rental and lease expenses follow for the indicated periods (in thousands):For the year ended December 31, 2018 $3,850For the year ended December 31, 2017 $5,693For the year ended December 31, 2016 $6,591Note 14— RESTRUCTURING EXPENSEDuring 2017 and 2016, in response to declining product prices, we undertook several cost saving actions that were intended to better align our coststructure with the business environment. These initiatives included workforce reductions, bonus plan curtailments, and temporary salary decreases for mostemployees. For the years ended December 31, 2017, and 2016 we recorded restructuring expense of $0.3 million and $2.7 million, respectively, related tothese initiatives. For the year ended December 31, 2018, we recorded no restructuring expenses. 80Table of ContentsNote 15— FAIR VALUE MEASUREMENTSWe measure our financial assets and liabilities in accordance with Accounting Standards Codification™ ("ASC") Topic 820, Fair ValueMeasurements and Disclosures. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exitprice) in an orderly transaction between market participants at the measurement date. The topic establishes market or observable inputs as the preferredsources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The topic also establishes a hierarchy forgrouping these assets and liabilities based upon the lowest level of input that is significant to the fair value measurement. The definition of each input isdescribed below:•Level 1—Quoted prices in active markets for identical assets and liabilities•Level 2—Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that arenot active, and model‑derived valuations whose inputs are observable or whose significant value drivers are observable•Level 3—Significant inputs to the valuation model are unobservableAs of December 31, 2018, and 2017, our cash consisted of bank deposits. Other financial assets and liabilities including, accounts receivable,refundable income taxes, accounts payable, accrued liabilities, and advances on credit facility are carried at cost which approximates fair value because of theshort-term nature of these instruments.As of December 31, 2018, and 2017, the estimated fair value of our outstanding Notes was $48.1 million and $58.8 million, respectively. The fairvalue of our Notes is estimated using a discounted cash flow analysis based on current borrowing rates for debt with similar remaining maturities and ratings(a Level 2 input) and is designed to approximate the amount at which the instruments could be exchanged in an arm's-length transaction betweenknowledgeable willing parties.Note 16— EMPLOYEE BENEFITS401(k) PlanWe maintain a savings plan qualified under Internal Revenue Code Sections 401(a) and 401(k). The 401(k) Plan is available to eligible employeesof our consolidated entities. Employees may contribute amounts as allowed by the U.S. Internal Revenue Service to the 401(k) Plan (subject to certainrestrictions) in before-tax contributions. In January 2016, we elected to suspend matching employee contributions to the 401(k) Plan and resumedcontributions to the 401(k) Plan in August 2016, matching employee contributions on a dollar-for-dollar basis up to a maximum of 2% of the employee'sbase compensation. In January 2018, we increased the matching contributions on a dollar-for-dollar basis up to a maximum of 5% of the employee's basecompensation. Our contributions to the 401(k) Plan in the following periods were (in thousands): ContributionsYear Ended December 31, 2018 $1,410Year Ended December 31, 2017 $685Year Ended December 31, 2016 $176Note 17— BUSINESS SEGMENTSOur operations are organized into three segments: potash, Trio® and oilfield solutions. The reportable segments are determined by managementbased on several factors including the types of products and services sold, production processes, markets served and the financial information available forour chief operating decision maker. We evaluate performance based on the gross margins of the respective business segments and do not allocate corporateselling and administrative expenses, among others, to the respective segments. Information for each segment is provided in the tables that follow (inthousands).81Table of ContentsYear Ended December 31, 2018 Potash Trio® Oilfield Solutions Other ConsolidatedSales1 $124,058 $66,808 $17,404 $— $208,270Less: Freight costs 17,682 19,370 — — 37,052Warehousing and handling costs 5,046 4,225 10 — 9,281Cost of goods sold 72,322 45,284 4,349 — 121,955Lower of cost or NRV inventoryadjustments — 1,711 — — 1,711Gross Margin (Deficit) $29,008 $(3,782) $13,045 $— $38,271Depreciation and depletion2 $25,134 $6,343 $343 $395 $32,215 Year Ended December 31, 2017 Potash Trio® Oilfield Solutions Other ConsolidatedSales1 $107,917 $63,686 $6,312 $— $177,915Less: Freight costs 13,912 18,104 — — 32,016Warehousing and handling costs 5,556 4,114 — — 9,670Cost of goods sold 72,229 45,187 546 — 117,962Lower of cost or NRV inventoryadjustments 550 5,829 — — 6,379Gross Margin (Deficit) $15,670 $(9,548) $5,766 $— $11,888Depreciation, depletion and accretion incurred2 $26,485 $6,576 $19 $129 $33,209 Year Ended December 31, 2016 Potash Trio® Oilfield Solutions Other ConsolidatedSales1 $159,207 $52,890 $— $— $212,097Less: Freight costs 25,732 10,330 — — 36,062Warehousing and handling costs 8,438 2,568 — — 11,006Cost of goods sold 131,406 38,339 — — 169,745Lower of cost or NRV inventoryadjustments 18,379 1,995 — — 20,374Costs associated with abnormalproduction and other 650 1,057 — — 1,707Gross (Deficit) Margin $(25,398) $(1,399) $— $— $(26,797)Depreciation, depletion and accretion incurred2 $30,708 $9,296 $— $909 $40,9131 Segment sales include the sales of byproducts generated during the production of potash and Trio®. Prior to the adoption of ASC 606, sales of byproducts were accounted for as acredit to cost of goods sold for potash and Trio®.2 Depreciation and depletion incurred for potash and Trio® excludes depreciation and depletion absorbed in or (relieved from) inventory.Total assets are not presented for each reportable segment as they are not reviewed by, nor otherwise regularly provided to, the chief operatingdecision maker. All segment sales are to external customers.During the year ended December 31, 2016, we recorded restructuring charges of $2.7 million, of which $2.1 million was attributable to the potashsegment, $0.4 million was attributable to the Trio® segment, and $0.2 million was attributable to other.82Table of ContentsNote 18— 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.Our products are marketed for sale into three primary markets. These markets are the agricultural market as a fertilizer, the industrial market as acomponent 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. Our industrial sales are significantlyinfluenced by oil and gas drilling activity.In 2018, 2017, and 2016, no customer accounted for more than 10% of our sales. Because of the size of our company compared to the overall size ofthe North American market and the regional demands for our products, we believe that a decline in a specific customer's purchases would not have a materialadverse long-term effect on our financial results.In each of the last three years ended December 31, 2018, 2017, and 2016, 95%, 88%, and 97%, respectively, of our total sales were sold to customerslocated in the United States. All of our long-lived assets are located in the United States.We maintain cash accounts with several financial institutions. At times, the balances in the accounts may exceed the $250,000 balance insured bythe Federal Deposit Insurance Corporation.Note 19— FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORSOF POSSIBLE FUTURE PUBLIC DEBTIntrepid Potash, Inc., as the parent company, has no independent assets or operations, and operations are conducted solely through itssubsidiaries. Cash generated from operations is held at the parent company level as cash on hand and short- and long-term investments. Cash on hand totaled$33.2 million and $1.1 million at December 31, 2018, and 2017, respectively. In the event that one or more of our wholly-owned operating subsidiariesguarantee public debt securities in the future, those guarantees will be full and unconditional and will constitute the joint and several obligations of thesubsidiary guarantors. Our other subsidiaries are minor. There are no restrictions on our ability to obtain cash dividends or other distributions of funds fromthe subsidiary guarantors, except those imposed by applicable law.Note 20— QUARTERLY FINANCIAL DATA (UNAUDITED) (in thousands, except per share amounts) Three Months Ended December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018Sales $54,364 $41,410 $55,176 $57,320Cost of Goods Sold $26,504 $23,370 $35,426 $36,655Lower of cost or NRV inventoryadjustments $930 $— $76 $705Gross Margin $14,826 $8,959 $7,286 $7,200Net Income (Loss) $7,634 $3,350 $(958) $1,757Basic and Diluted Earnings(Loss) Per Share $0.06 $0.03 $(0.01) $0.0183Table of Contents Three Months Ended December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017Sales $42,582 $36,484 $47,347 $51,502Cost of Goods Sold $26,481 $21,414 $31,735 $38,332Lower of cost or NRV inventoryadjustments $1,571 $666 $317 $3,825Gross Margin (Deficit) $3,628 $6,062 $4,803 $(2,605)Net Loss $(1,636) $(1,445) $(5,819) $(13,667)Basic and DilutedLoss Per Share $(0.01) $(0.01) $(0.05) $(0.17)Certain prior period amounts have been reclassified in order to conform to the current period presentation. These reclassifications had no effect on thereported gross margin (deficit) or net income (loss).84Table of ContentsSCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (In thousands)Description Balance atBeginning ofYear Charged toCosts andExpenses Deductions Balance at Endof YearFor the Year Ended December 31, 2016 Allowances deducted from assets Deferred tax assets - valuation allowance $301,896 $24,521 $— $326,417 Reserve for parts inventory obsolescence 2,760 349 — 3,109 Allowance for doubtful accounts and other receivables 407 — (407) —Total allowances deducted from assets $305,063 $24,870 $(407) $329,526 For the Year Ended December 31, 2017 Allowances deducted from assets Deferred tax assets - valuation allowance $326,417 $— $(104,710) $221,707 Reserve for parts inventory obsolescence 3,109 1,073 — 4,182 Allowance for doubtful accounts and other receivables — 865 — 865Total allowances deducted from assets $329,526 $1,938 $(104,710) $226,754 For the Year Ended December 31, 2018 Allowances deducted from assets Deferred tax assets - valuation allowance $221,707 $— $(3,330) $218,377 Reserve for parts inventory obsolescence 4,182 15 (2,454) 1,743 Allowance for doubtful accounts and other receivables 865 100 (500) 465Total allowances deducted from assets $226,754 $115 $(6,284) $220,585ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL DISCLOSURENone.ITEM 9A.CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresWe maintain "disclosure controls and procedures." Our disclosure controls and procedures are designed to ensure that information required to bedisclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified inSEC rules and forms. Our disclosure controls and procedures are also designed to ensure that this information is accumulated and communicated to ourmanagement, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conductedan evaluation of our disclosure controls and procedures as of December 31, 2018. Based on this evaluation, our principal executive officer and principalfinancial officer have concluded that our disclosure controls and procedures were effective as of December 31, 2018, 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." Our internal control overfinancial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with GAAP. Under the85Table of Contentssupervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted anevaluation of the effectiveness of our internal control over financial reporting as of December 31, 2018, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013.Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31,2018.The effectiveness of our internal control over financial reporting as of December 31, 2018, has been audited by KPMG LLP, our 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 three months ended December 31, 2018, thatmaterially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Inherent Limitations on Effectiveness of ControlsOur management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls or our internalcontrol over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide onlyreasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there areresource 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 becauseof changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effectivecontrol system, misstatements due to error or fraud may occur and not be detected.ITEM 9B.OTHER INFORMATIONNot applicable. 86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 2019 annual stockholders' meeting and is incorporated by reference into this Annual Report on Form 10-K.ITEM 11.EXECUTIVE COMPENSATIONInformation required by this item will be included in the proxy statement for our 2019 annual stockholders' meeting and is incorporated by referenceinto this Annual Report on Form 10-K.ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSInformation required by this item will be included in the proxy statement for our 2019 annual stockholders' meeting and is incorporated by referenceinto this Annual Report on Form 10-K.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,AND DIRECTOR INDEPENDENCEInformation required by this item will be included in the proxy statement for our 2019 annual stockholders' meeting and is incorporated by referenceinto this Annual Report on Form 10-K.ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICESInformation required by this item will be included in the proxy statement for our 2019 annual stockholders' meeting and is incorporated by referenceinto this Annual Report on Form 10-K.87Table of ContentsPART IVITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) Financial Statements, Financial Statement Schedules and ExhibitsThe following are filed as a part of this Annual Report on Form 10-K:(1) Financial StatementsManagement's Report on Internal Control over Financial ReportingReport of Independent Registered Accounting FirmConsolidated Balance Sheets as of December 31, 2018, and 2017Consolidated Statements of Operations for the years ended December 31, 2018, 2017, and 2016Consolidated Statements of Comprehensive Loss for the years ended December 31, 2018, 2017, and 2016Consolidated Statements of Stockholders' Equity for the years ended December 31, 2018, 2017, and 2016Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017, and 2016Notes to Consolidated Financial Statements(2) Financial Statement SchedulesSchedule Schedule DescriptionSchedule II Valuation and Qualifying AccountsSchedule II is filed as part of this Annual Report on Form 10-K and is set forth immediately following the Notes to the Consolidated FinancialStatements referred to above. All other financial statement schedules have been omitted because they are not required, are not applicable, or theinformation is included in the consolidated financial statements or notes thereto.(3) ExhibitsThe following exhibits are filed or incorporated by reference in this report: Incorporated by Reference from theBelow-Listed Form (Each Filed underSEC File Number 001-34025)ExhibitNumber Exhibit Description FormFiling Date3.1 Restated Certificate of Incorporation of Intrepid Potash, Inc. 8-KApril 25, 20083.2 Certificate of Amendment to Restated Certificate of Incorporation of Intrepid Potash, Inc. 8-KMay 26, 20163.3 Amended and Restated Bylaws of Intrepid Potash, Inc. 8-KJune 25, 201510.1 Form of Indemnification Agreement with each director and officer 8-KApril 25, 200810.2 Director Designation and Voting Agreement, dated as of April 25, 2008, by and among IntrepidPotash, Inc., Harvey Operating and Production Company, Intrepid Production Corporation, andPotash Acquisition, LLC 8-KMay 1, 200810.3 Registration Rights Agreement, dated as of April 25, 2008, by and among Intrepid Potash, Inc.,Harvey Operating & Production Company, Intrepid Production Corporation, and PotashAcquisition, LLC 8-KMay 1, 200810.4 Acknowledgment and Relinquishment, dated as of December 19, 2011, by and among IntrepidPotash, Inc., Harvey Operating and Production Company, Intrepid Production Corporation, andPotash Acquisition, LLC 10-KFebruary 16, 201210.5 Credit Agreement, dated as of October 31, 2016, by and among Intrepid Potash, Inc., thesubsidiaries named therein, Bank of Montreal, as administrative agent, and each of the lendersnamed therein 8-KNovember 1, 201688Table of Contents10.6 First Amendment to Credit Agreement, dated as of June 30, 2017, by and among IntrepidPotash, Inc., the subsidiaries named therein, Bank of Montreal, as administrative agent, andeach of the lenders named therein 8-KJune 30, 201710.7 Second Amendment to Credit Agreement, dated as of October 24, 2018, by and among IntrepidPotash, Inc., the subsidiaries named therein, Bank of Montreal, as administrative agent, andeach of the lenders named therein 8-KOctober 25, 201810.8 Amended and Restated Note Purchase Agreement, dated as of October 31, 2016, by and amongIntrepid Potash, Inc. and each of the purchasers named therein 8-KNovember 1, 201610.9 First Amendment to Amended and Restated Note Purchase Agreement, dated as of November 9,2016, by and among Intrepid Potash, Inc. and each of the purchasers named therein. 8-KNovember 14, 201610.10 Fourth Amendment to Amended and Restated Note Purchase Agreement, dated as of June 30,2017, by and among Intrepid Potash, Inc. and each of the purchasers named therein 8-KJune 30, 201710.11 Amended and Restated Employment Agreement, dated as of May 19, 2010, by and betweenIntrepid Potash, Inc. and Robert P. Jornayvaz III+ 8-KMay 19, 201010.12 Amendment to Employment Agreement, dated February 23, 2011, by and between IntrepidPotash, Inc. and Robert P. Jornayvaz III+ 8-KMarch 1, 201110.13 Second Amendment to Employment Agreement, dated as of February 14, 2013, by andbetween Intrepid Potash, Inc. and Robert P. Jornayvaz III+ 8-KFebruary 19, 201310.14 Third Amendment to Employment Agreement, dated as of March 22, 2016, by and betweenIntrepid Potash, Inc. and Robert P. Jornayvaz III+ 8-KMarch 23, 201610.15 Amended and Restated Employment Agreement, dated as of May 19, 2010, by and betweenIntrepid Potash, Inc. and Hugh E. Harvey, Jr.+ 8-KMay 19, 201010.16 Intrepid Potash, Inc. Amended and Restated Equity Incentive Plan+ 8-KJune 1, 201710.17 Form of Restricted Stock Agreement under Intrepid Potash, Inc. Amended and Restated EquityIncentive Plan+ 10-Q/AAugust 4, 201610.18 Form of Stock Option Agreement under Intrepid Potash, Inc. Amended and Restated EquityIncentive Plan+ 10-Q/AAugust 4, 201610.19 Intrepid Potash, Inc. Amended and Restated Short-Term Incentive Plan+ 8-KMay 26, 201610.20 Form of Change-of-Control Severance Agreement with Robert P. Jornayvaz III and Hugh E.Harvey, Jr.+ 10-QNovember 3, 201110.21 Form of Change-in-Control Severance Agreement with Margaret E. McCandless and Mark A.McDonald+ * 10.22 Form of Noncompete Agreement with executives other than Robert P. Jornayvaz III+ 10-KFebruary 28, 201710.23 Form of Retention Agreement+ * 10.24 Aircraft Dry Lease, dated as of January 9, 2009, by and between Intrepid Potash, Inc. andIntrepid Production Holdings LLC 8-KJanuary 12, 200910.25 First Amendment to Aircraft Dry Lease, dated as of September 1, 2014, by and between IntrepidPotash, Inc. and Intrepid Production Holdings LLC 8-KAugust 18, 201410.26 Aircraft Dry Lease, dated as of September 1, 2014, by and between Intrepid Potash, Inc. andOdyssey Adventures, LLC 8-KAugust 18, 201421.1 List of Subsidiaries * 23.1 Consent of KPMG LLP * 23.2 Consent of Agapito Associates, Inc. * 31.1 Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and15d-14(a) * 31.2 Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) * 32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ** 89Table of Contents32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ** 95.1 Mine Safety Disclosure Exhibit * 99.1 Transition Services Agreement, dated as of April 25, 2008, by and between IntrepidPotash, Inc., Intrepid Oil & Gas, LLC, and Intrepid Potash-Moab, LLC 8-KMay 1, 200899.2 Extension 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, LLC 10-QAugust 7, 200999.3 Third Amendment to Transition Services Agreement dated March 26, 2010, between IntrepidPotash, Inc. and Intrepid Oil & Gas, LLC 10-QMay 5, 201099.4 Fourth Amendment to Transition Services Agreement dated March 25, 2011, between IntrepidPotash, Inc. and Intrepid Oil and Gas, LLC 10-QMay 5, 201199.5 Sixth Amendment to Transition Services Agreement dated April 3, 2013, between IntrepidPotash, Inc. and Intrepid Oil & Gas, LLC 10-QMay 2, 201399.6 Seventh Amendment to Transition Services Agreement dated March 24, 2015, betweenIntrepid Potash, Inc. and Intrepid Oil & Gas, LLC 10-QApril 28, 201599.7 Eighth Amendment to Transition Services Agreement dated March 22, 2017, between IntrepidPotash, Inc. and Intrepid Oil & Gas, LLC 10-QMay 2, 201799.8 Ninth Amendment to Transition Services Agreement dated February 20, 2019, betweenIntrepid Potash, Inc. and Intrepid Oil & Gas, LLC. * 101.INS XBRL Instance Document * 101.SCH XBRL Taxonomy Extension Schema * 101.CAL XBRL Extension Calculation Linkbase * 101.DEF XBRL Extension Definition Linkbase * 101.LAB XBRL Extension Label Linkbase * 101.PRE XBRL Extension Presentation Linkbase * *Filed herewith**Furnished herewith+Management contract or compensatory plan or arrangementITEM 16.FORM 10-K SUMMARYNot applicable.90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) March 12, 2019 /s/ Robert P. Jornayvaz III Robert P. Jornayvaz III - Executive Chairman of the Board, President, and Chief Executive Officer (Principal Executive Officer and Duly Authorized 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, President, and Chief Executive Officer March 12, 2019Robert P. Jornayvaz III /s/ Joseph G. Montoya Vice President and Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer) March 12, 2019Joseph G. Montoya /s/ Hugh E. Harvey, Jr. Executive Vice Chairman of the Board March 12, 2019Hugh E. Harvey, Jr. /s/ Terry Considine Director March 12, 2019Terry Considine /s/ Chris A. Elliott Director March 12, 2019Chris A. Elliott /s/ J. Landis Martin Lead Director March 12, 2019J. Landis Martin /s/ Barth E. Whitham Director March 12, 2019Barth E. Whitham 91Exhibit 10.21CHANGE-IN-CONTROL SEVERANCE AGREEMENTThis CHANGE-IN-CONTROL SEVERANCE AGREEMENT (this “Agreement”) by and between Intrepid Potash, Inc.,a Delaware corporation (the “Company”), and ________ (the “Key Employee”), is entered into as of _______________ (the“Effective Date”).RECITALThe Company has determined that it is in the best interests of the Company and its stockholders to assure that the Companywill have the continued dedication of the Key Employee, notwithstanding the possibility, threat or occurrence of a Change in Control(as defined below) of the Company. The Company believes it is imperative to diminish the inevitable distraction of the Key Employeeby virtue of the personal uncertainties and risks created by a pending or threatened Change in Control and to encourage the KeyEmployee’s full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control,and to provide the Key Employee with compensation and benefits arrangements upon a Change in Control which ensure that thecompensation and benefits expectations of the Key Employee will be satisfied and which are competitive with those of othercorporations.AGREEMENTNOW, THEREFORE, it is hereby agreed as follows:1.Definitions. Unless the context or definitions elsewhere in this Agreement clearly indicate otherwise, the terms belowshall be defined as follows:a. “Average Annual Bonus/STI” means the average of the annual bonuses/short-term incentive actually received bythe Key Employee, if any, for the two (2) most recently completed fiscal years of the Company. In the event the Key Employee wasemployed, as of the Date of Termination, through only one completed fiscal year of the Company, the Average Annual Bonus/STIshall be equal to the average of the bonus/short-term incentive actually received by the Key Employee for such completed fiscal yearand his target bonus/short-term incentive in effect as of the Date of Termination. In the event that Key Employee was not, as of theDate of Termination, employed through at least one completed fiscal year of the Company, Key Employee’s Average AnnualBonus/STI shall be deemed to be his target annual bonus/short-term incentive in effect as of the Date of Termination.b. “Cause” means any one or more of the following events:(i) conviction of (or pleading nolo contendere to) a felony;(ii) engaging in theft, fraud, embezzlement, or willful misappropriation of the property of the Company;1(iii) violation of any Company policy or practice regarding discrimination or harassment that would begrounds for termination of a Company employee in general;(iv) Key Employee’s willful failure to perform substantially Key Employee’s material duties (other than suchfailure resulting from incapacity due to physical or mental illness), which, for avoidance of doubt, shall include KeyEmployee’s insubordination, after (1) a written demand for corrected performance is delivered to Key Employee by theCompany’s Board of Directors (the “Board”) or by the Company’s Chief Executive Officer (or principal executiveofficer if the Company does not have a Chief Executive Officer) (the “CEO”) that identifies specifically the manner inwhich the Board or the CEO believes Key Employee has not performed substantially Key Employee’s material duties,and (2) Key Employee fails to cure the matters identified in the written demand within 30 days. No act or failure to byKey Employee shall be deemed “willful” if done, or omitted to be done, by him in good faith and with the reasonablebelief that his action or omission was in the best interest of the Company.c. “Change in Control” means:(i) the acquisition by any individual, entity, or group (within the meaning of Sections 13(d)(3) or 14(d)(2) ofthe Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of “beneficial ownership”(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 30% of the combined votingpower of the Company’s then outstanding securities entitled to vote generally in the election of directors, other than anyacquisition (1) directly from, or by, the Company, (2) by a trustee or other fiduciary holding securities under anemployee benefit plan of the Company or any of its subsidiaries, or (3) by Robert P. Jornayvaz III or Hugh E. Harvey,Jr. (collectively the “Principals”), or by any “group” (within the meaning of Section 13(d)(3) of the Exchange Act) thatis controlled by one or more of the Principals; or(ii) the individual directors of the Board as of the Effective Date (the “Incumbent Directors”) cease toconstitute at least two-thirds of the Board; provided, however, that for purposes of this paragraph, any new directorwhose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of atleast a majority of the Incumbent Directors shall be considered an Incumbent Director; or(iii) consummation, in one transaction or a series or related transactions, of a reorganization, merger, orconsolidation of the Company or sale or other disposition, direct or indirect, of all or substantially all of the assets of theCompany (a “Business Combination”), in each case, unless, following such Business Combination, the Persons whowere the “beneficial owners” of outstanding voting securities of the Company immediately prior to such BusinessCombination2“beneficially own,” by reason of such ownership of the Company’s voting securities immediately before the BusinessCombination, more than 30% of the combined voting power of the company resulting from such Business Combination(including, without limitation, a company which as a result of such transaction owns the Company or all or substantiallyall of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions astheir ownership of the outstanding voting securities of the Company immediately prior to such Business Combination;or(iv) approval by those Persons holding the voting securities of the Company of a complete liquidation ordissolution of the Company.A Person will not be deemed to be a member of a “group” for purposes of this definition solely by virtue ofbecoming party to an agreement with one or more Principals that requires such Person to vote the voting stock of theCompany in a manner specified by the Principals. In no event shall the sale of the Company’s common stock to thepublic by the Company or the Principals pursuant to a registration statement filed with the Securities and ExchangeCommission constitute a Change in Control for purposes of this Agreement.d. “Code” means the Internal Revenue Code of 1986, as it may be amended or revised from time to time.e. “Date of Termination” means the date Key Employee terminates employment with the Company.f. “Disability” means any physical or mental condition which prevents Key Employee, for a period of 90 consecutivedays, from performing and carrying out Key Employee’s material duties and responsibilities with the Company, as determined by theBoard or the CEO.g. “Involuntary Termination” means:(i) Key Employee’s employment is terminated by the Company for any reason other than for Cause, death, orDisability; or(ii) Key Employee resigns as a result of any of the following events or conditions arising without the consentof Key Employee which remain in effect for at least thirty (30) days after notice has been provided by Key Employee tothe Company of the existence of such event or condition: (1) a material reduction in Key Employee’s base salary orannual bonus opportunity; (2) a material diminution in Key Employee’s responsibility or authority; (3) a change of morethan 30 miles in the location at which Key Employee primarily performs his services; or (4) any material failure by theCompany to comply with any material term of this Agreement. Key Employee shall notify the Company of such eventor condition within ninety (90) days of the initial existence of the event or condition.3It is the intent of the Company that a termination pursuant to this subparagraph 1g. shall meet the definition of“involuntary separation” set forth in Treasury Regulation Section 1.409A-1(n), and this Agreement shall be interpretedaccordingly.h. “Termination Protection Period” means the period of time commencing on the date of a Change in Control andending six (6) months after the date of such Change in Control.2. Term. The term of this Agreement shall extend from the Effective Date until the sooner of (a) the expiration of theTermination Protection Period, (b) the Key Employee’s Date of Termination, except in the case of a Qualified Termination (as definedin subparagraph 3a., below), or (c) the date on which the parties agree in writing to terminate this Agreement.3. Change in Control Benefits.a. Severance Payment and Benefits. In the event of an Involuntary Termination of Key Employee’s employmentwithin the Termination Protection Period (a “Qualified Termination”), Key Employee shall be entitled to the following payments andbenefits:(i) Cash Payments. The Company shall pay to the Key Employee in a lump sum in cash the aggregate of thefollowing amounts:(1) an amount equal to the sum of (A) any base salary earned but not yet paid to Key Employeethrough the Date of Termination, (B) any bonus/short-term incentive earned and payable in accordance with theterms of any applicable Company bonus/short-term incentive plan but not yet paid to Key Employee as of theDate of Termination, and (C) any other compensation earned through the Date of Termination but not yet paidto Key Employee (the “Accrued Obligations”);(2) an amount equal to the product of (A) one (1), multiplied by (B) the sum of (x) the Key Employee’sannual base salary in effect on the Date of Termination (which shall, in all events, be deemed to be at least asmuch as the Key Employee’s annual base salary in effect as of the Change in Control), and (y) the KeyEmployee’s Average Annual Bonus/STI; and(3) an amount equal to the product of (A) the Key Employee’s target annual bonus/short-term incentivefor the fiscal year in which the Date of Termination occurs, multiplied by (B) a fraction, the numerator of whichis the number of days in the current fiscal year through the Date of Termination, and the denominator of whichis 365.Except as may be required by subparagraph 3c., below, payment shall be made as soon as reasonablypracticable following the Date of Termination, but in all events within thirty (30) days thereof.4(ii) Health and Welfare Continuation. For one (1) year after the Key Employee’s Date of Termination, theCompany shall provide, at the expense of the Company (to the extent permitted under applicable law), health andwelfare benefits to the Key Employee and/or the Key Employee’s family which are at least equal to the benefits whichwould have been provided in accordance with the plans, programs, practices and policies in existence as of the KeyEmployee’s Date of Termination or, if more favorable to the Key Employee, as in effect generally at any time thereafterwith respect to other peer Key Employees of the Company and their families, provided, however, that if the KeyEmployee becomes reemployed with another employer and is eligible to receive health and welfare benefits underanother employer provided plan, program, or arrangement, the health and welfare benefits described herein shall bediscontinued effective immediately upon Key Employee’s eligibility for such other coverage. It is the intent of theparties that, to the maximum extent permitted, the continued health and welfare benefits provided pursuant to thissubparagraph shall be exempt from the application of Code Section 409A pursuant to Treasury Regulation Section1.409A-1(b)(9)(v)(B).(iii) Outplacement Services. The Company shall, at its sole expense as incurred, provide the Key Employeewith up to $5,000 of individual outplacement services during the one (1) year period following the Date of Termination.The scope and provider of such services shall be selected by the Key Employee. It is the intention of the parties that theoutplacement services provided pursuant to this subparagraph be exempt from the application of Code Section 409Apursuant to Treasury Regulation Section 1.409A-1(b)(9)(v)(A).b. Equity Acceleration. All outstanding equity incentive awards made under the Intrepid Potash, Inc. EquityIncentive Plan, as amended and restated, and under any other equity incentive plans sponsored or maintained by the Company shallvest in full immediately prior to the occurrence of a Qualified Termination.c. 409A Payment and Ordering Rules. Payments under this paragraph 3 are intended to qualify to the maximumextent possible as “short-term deferrals” exempt from the application of Code Section 409A. Any payments that do not so qualify areintended to qualify for the Code Section 409A exemption set forth in Treasury Regulation Section 1.409A-1(b)(9)(iii) (which exemptsfrom Code Section 409A certain payments made upon an “involuntary separation from service”). To the extent that payments madepursuant to this paragraph 3 are made upon an “involuntary separation from service” but exceed the exemption threshold set forth inTreasury Regulation Section 1.409A-1(b)(9)(iii), the exemption will first be applied to any continued health and welfare benefitspayable under this paragraph 3 (to the extent such benefits are subject to Code Section 409A and are payable within six (6) monthsfrom the Key Employee’s “separation from service,” as defined for purposes of Code Section 409A (the “Delayed Payment Date”))and thereafter to the cash payments that are payable closest in time to the Date of Termination, until the exemption has been applied infull. Any payments under this paragraph 3 that are not exempt from Code Section 409A and that are payable prior to the DelayedPayment Date shall be withheld by the Company and paid to Key Employee on the Delayed Payment Date or as soon thereafter as is5administratively feasible. For purposes of this paragraph, any payment or benefit to be made in installments or periodically shall bedeemed a series of separate payments pursuant to Treasury Regulation Section 1.409A-2(b)(2)(iii). Nothing in this paragraph shallprohibit the Company and Key Employee from making use of any other Code Section 409A exemption that may be applicable to apayment or benefit hereunder.4. Non-Exclusivity of Rights. Excepted as specifically provided otherwise herein, nothing in this Agreement shall prevent orlimit Key Employee’s continuing or future participation in any plan, program, practice, or policy provided by the Company for whichKey Employee is qualified or may qualify, nor shall anything in this Agreement limit or otherwise affect such rights as Key Employeemay have under any employee equity incentive, 401(k) plan, deferred compensation plan, health or life insurance plans, or otheremployee benefit plan of the Company. Except as explicitly modified by this Agreement, benefits which are vested or which KeyEmployee is otherwise entitled to receive under any plan, policy, practice, or program, or pursuant to any contract or agreement withthe Company shall be payable in accordance with such plan, policy, practice, program, contract, or agreement.5. Full Settlement. Except as specifically provided otherwise herein, the Company’s obligation to make the paymentsprovided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any setoff, counterclaim,recoupment, defense, or other claim, right, or action which the Company may have against Key Employee or others, unless such setoffor claim is based upon the fraud or intentional wrongdoing of Key Employee. In no event shall Key Employee be obligated to seekother employment or to take any other action by way of mitigation of the amounts payable to Key Employee under any of theprovisions of this Agreement, and, except as specifically provided otherwise herein, such amounts shall not be affected by whether ornot Key Employee obtains other employment.6. 280G Provisions. If it is determined that any payment or benefit provided to or for the benefit of Key Employee (a“Payment”), whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, would besubject to the excise tax imposed by Code Section 4999 or any interest or penalties with respect to such excise tax (such excise taxtogether with any such interest and penalties, shall be referred to as the “Excise Tax”), then a calculation shall first be made underwhich such payments or benefits provided to Key Employee are reduced to the extent necessary so that no portion thereof shall besubject to the Excise Tax (the “4999 Limit”). The Company shall then compare (a) Key Employee’s Net After-Tax Benefit (as definedbelow) assuming application of the 4999 Limit with (b) Key Employee’s Net After-Tax Benefit without application of the 4999 Limit.“Net After-Tax Benefit” shall mean the sum of (i) all payments that Key Employee receives or is entitled to receive that are contingenton a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of theCompany within the meaning of Code Section 280G(b)(2), less (ii) the amount of federal, state, local, employment, and Excise Tax (ifany) imposed with respect to such payments. In the event (a) is greater than (b), Key Employee shall receive Payments solely up to the4999 Limit, with cash Payments reduced or eliminated first and in the order that such Payments would be made to Key Employee,such that cash Payments that would be paid furthest in time from the date of the event triggering the payments would be reduced oreliminated last. In the event (b) is6greater than (a), then Key Employee shall be entitled to receive all such Payments, and shall be solely liable for any and all Excise Taxrelated thereto.7. Confidential Information; Non-Solicitation; Non-Disparagement.a. Confidential Information. Except as expressly authorized by the Board or the CEO, during the term of thisagreement or at any time thereafter, Key Employee shall not divulge, furnish, make accessible to anyone, lay claim to, attempt to layclaim to or use, or attempt to use, in any way (other than in the ordinary course of the business of the Company) any confidential orsecret knowledge or information of the Company or its subsidiaries (collectively the “Intrepid Parties”) that Key Employee hasacquired or become acquainted with or will acquire or become acquainted with during the period of Key Employee’s employment bythe Company, whether developed by himself or by others, concerning any pricing information, trade secrets, confidential or businessplans or material (whether or not patented or patentable) directly or indirectly useful in any aspect of the business of the IntrepidParties, any customer or dealer lists of the Intrepid Parties, any confidential or secret development of the Intrepid Parties, or any otherconfidential information or secret aspects of the business of the Intrepid Parties (collectively, “Confidential Information”). KeyEmployee acknowledges that the Confidential Information constitutes a unique and valuable asset of the Intrepid Parties and representsa substantial investment of time and expense by the Intrepid Parties, and that any disclosure or other use of the ConfidentialInformation other than for the sole benefit of the Intrepid Parties would be wrongful and would cause irreparable harm to the IntrepidParties. Both during and after the term of this Agreement, Key Employee shall refrain from any acts or omissions that would reduce thevalue of the Confidential Information. The foregoing obligations of confidentiality shall not apply to any knowledge or information (i)that is now published or that subsequently becomes generally publicly known in the form in which it was obtained from the IntrepidParties, other than as a direct or indirect result of the breach of this Agreement by Key Employee; or (ii) is lawfully obtained by KeyEmployee from a third party, provided that Key Employee did not have actual knowledge that such third party was restricted orprohibited from disclosing such information to Key Employee. At the time of the termination of Key Employee’s employment, or atsuch other time as the Company may request, Key Employee shall return all memoranda, notes, plans, records, computer tapes andsoftware and other documents and data (and copies thereof) relating to Confidential Information that Key Employee may then possessor have under his or her control.b. Non-Solicitation. In his capacity as an employee, Key Employee has met with and will continue to meet with theIntrepid Parties’ current or prospective customers, suppliers, partners, licensees or other business relations (collectively, “BusinessRelations”) on behalf of the Intrepid Parties, and, as a consequence of using or associating himself with the Intrepid Parties’ name,goodwill, and professional reputation, Key Employee has been placed in a position where he can develop personal and professionalrelationships with the Intrepid Parties’ current and prospective customers. In addition, during the course and as a result of KeyEmployee’s employment, Key Employee has been or may be provided certain specialized training or know-how. Key Employeeacknowledges that this goodwill and reputation, as well as Key Employee’s knowledge of Confidential Information and specializedtraining and know-how, could be used unfairly in competition against the Intrepid Parties. Accordingly, in consideration of theemployment7of Key Employee by the Company and the provision to Key Employee of this Agreement, Key Employee agrees that during the timeperiod commencing on the date hereof and terminating on the date that is one (1) year after the Date of Termination, Key Employeeshall not directly or indirectly through another entity or person (i) induce or attempt to induce any employee of the Intrepid Parties toleave the employ of the Intrepid Parties, (ii) hire any person who was employed by the Intrepid Parties at any time during the one-yearperiod immediately preceding the Date of Termination, or (iii) induce or attempt to induce any current or prospective Business Relationof the Intrepid Parties (including, without limitation, any business entity that the Intrepid Parties have contacted in order to make aproposal to enter into a business relationship) to withdraw, curtail or cease doing business with the Intrepid Parties.c. Non-Disparagement. Key Employee will refrain from making statements that criticize, disparage or ridicule theIntrepid Parties (which, for purposes of this subparagraph, shall include their directors, agents, officers, employees, members, orassigns) or that are detrimental to the reputation or image of any Intrepid Party. Key Employee agrees that if Key Employee receives aninquiry from a third party that seeks to elicit an opinion of Key Employee regarding any Intrepid Party, Key Employee shall respondby stating that there is no existing relationship between Key Employee and such Intrepid Party and that Key Employee is unable tocomment further. Such statements (or words to that effect) shall not constitute a statement that criticizes, disparages or ridicules anyIntrepid Party or that is detrimental to the reputation or image of any Intrepid Party. Key Employee shall reasonably cooperate with anyreasonable requests, from the Company or a party negotiating with the Company, for information concerning the Company inconnection with any transaction or proposed transaction involving the Company with respect to which the Board or the CEO requestsKey Employee’s cooperation, and shall, in the course of such cooperation, make no statement and take no action that could reasonablybe viewed as intending to impede or discourage the transaction or proposed transaction. Key Employee agrees and acknowledges thatthe foregoing provisions of this paragraph are reasonably designed to carry out the purposes of this Agreement, and do not constitutean unreasonable or overly broad limitation on Key Employee’s speech or action.d. Third-Party Beneficiaries. The provisions of this paragraph 7 may be enforced by any of the Intrepid Parties, andthe protections afforded herein shall inure to each such Intrepid Party as an intended third-party beneficiary.e. Severability. To the extent that any provision of this paragraph shall be determined to be invalid or unenforceable,the invalid or unenforceable portion of such provision shall be deleted from this Agreement, and the validity and enforceability of theremainder of such provision and of this paragraph shall be unaffected. In furtherance of and not in limitation of the foregoing, shouldthe duration of, or activities covered by the non-solicitation agreement contained in paragraph 7(b) be determined to be in excess of thatwhich is valid or enforceable under applicable law, then such provision shall be construed to cover only that duration, extent, or thoseactivities which may validly or enforceably be covered. Key Employee acknowledges the uncertainty of the law in this respect andexpressly stipulates that this paragraph shall be construed in a manner which renders its provisions valid and enforceable to themaximum extent (not exceeding its express terms) possible under applicable law.8f. Injunctive Relief. Key Employee agrees that it would be difficult to compensate the Intrepid Parties fully fordamages for any violation of the provisions of this paragraph 7. Accordingly, Key Employee specifically agrees that the IntrepidParties shall be entitled to temporary and permanent injunctive relief to enforce the provisions of this paragraph and that such relief maybe granted without the necessity of proving actual damages. This provision with respect to injunctive relief shall not, however,diminish the right of the Intrepid Parties to claim and recover damages in addition to injunctive relief.8. Resolution of Disputes. To the extent permitted by applicable law, and except as provided below, any dispute arising outof this Agreement shall be submitted to binding arbitration in Denver, Colorado pursuant to the rules of the American ArbitrationAssociation. In the event any dispute arising out of this Agreement may not be arbitrated under applicable law (which, for purposes ofthis Agreement, shall be deemed to include actions for temporary injunctive relief to enforce the provisions of paragraph 7 hereof),litigation concerning such dispute shall be brought and maintained only in the District Court for the City and County of Denver,Colorado, the County Court for the City and County of Denver, Colorado, or the U.S. District Court for the District of Colorado. Theprevailing party in any arbitration or litigation concerning this Agreement shall recover, in addition to any damages or other reliefawarded to that party, the prevailing party’s reasonable costs and attorneys fees.9. Successors and Assignment. This Agreement shall inure to the benefit of and be binding upon the Company and itssuccessors and permitted assigns and any such successor or permitted assignee shall be deemed substituted for the Company under theterms of this Agreement for all purposes. As used herein, “successor” and “assignee” shall be limited to any person, firm, corporation,or other business entity which at any time, whether by purchase, merger, reorganization, or otherwise, directly or indirectly acquires thestock of the Company or to which the Company assigns this Agreement by operation of law or otherwise in connection with any saleof all or substantially all of the assets of the Company, provided that any successor or permitted assignee promptly assumes in a writingdelivered to Key Employee this Agreement and, in no event, shall any such succession or assignment release the Company from itsobligations thereunder. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation orotherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform thisAgreement in the same manner and to the same extent that the Company would be required to perform it if no such succession hadtaken place. As used in this Agreement, “Company” shall mean the Company as herein before defined and any successor to itsbusiness and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise.10. 409A Savings Clause. The parties intend that payments or benefits payable under this Agreement not be subject to theadditional tax imposed pursuant to Code Section 409A, and the provisions of this Agreement shall be construed and administered inaccordance with such intent. To the extent such potential payments or benefits could become subject to Code Section 409A, the partiesshall cooperate to amend this Agreement with the goal of giving Key Employee the economic benefits described herein in a mannerthat does not result in such tax being imposed. If the parties are unable to agree on a mutually acceptable amendment, the Companymay, without Key9Employee’s consent and in such manner as it deems appropriate or desirable, amend or modify this Agreement or delay the payment ofany amounts hereunder to the minimum extent necessary to meet the requirements of Code Section 409A. To the extent required forcompliance with Code Section 409A, if the Key Employee is a “specified employee” as of the date of the Key Employee’s “separationfrom service” (each as defined under Code Section 409A), any non-exempt payment shall not be made before the date that is sixmonths after the date of “separation from service.”11. Miscellaneous.a. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State ofColorado.b. Amendment. Except as provided in Section 10, above, this Agreement may not be amended or modified otherwisethan by a written agreement executed by the parties hereto or their respective successors and legal representatives.c. Notices. All notices and other communications under this Agreement shall be in writing and shall be given to theother party by hand delivery or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:If to Key Employee:To the most recent home address on file with the Company.If to the Company:Intrepid Potash, Inc. Attn: Human Resources 1001 17th Street, Suite 1050 Denver, CO 80202or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communicationsshall be effective when actually received by the addressee.d. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity orenforceability of any other provision of this Agreement and the remaining provisions shall be enforced to the fullest extent permitted bylaw.e. Withholding Tax. The Company may withhold from any amounts payable under this Agreement such federal,state, and local taxes as shall be required to be withheld pursuant to applicable law or regulation.f. No Waiver. Key Employee’s or the Company’s failure to insist upon strict compliance with any provision of thisAgreement or the failure to assert any right Key Employee or the Company may have under this Agreement shall not be deemed to bea waiver of any other provision or right of this Agreement.g. At-Will Employment. Key Employee and the Company each acknowledge that the employment of Key Employeeby the Company is “at will,” and Key Employee’s10employment may be terminated at any time and without notice by either Key Employee or by the Company for any reason or for noreason.h. Other Agreements. This Agreement sets forth the entire understanding of the parties with regard to the subjectmatter hereto and the parties agree that the payments and benefits provided herein shall be the sole change in control severance benefitsto be provided to Key Employee. For avoidance of doubt, Key Employee understands and agrees (i) that Key Employee shall not beeligible to participate in the Intrepid Potash, Inc. Change in Control Severance Plan or any other change in control severance plan ofthe Company, as in effect from time to time, and (ii) that the terms of this Agreement shall supersede the terms of any prior agreementor understanding between the parties concerning the subject matter hereto.IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set forth below, to be effective as of theEffective Date.Date: [Key Employee Name] INTREPID POTASH, INC.Date: By: Title: _______________________________11Exhibit 10.23Date:__________________EmployeeRE: Retention AwardDear ______________,Intrepid recognizes all the hard work that you have demonstrated since joining Intrepid. To show our appreciation for your contributions and yourcontinued commitment to the company, Intrepid is rewarding you with a cash retention award totaling $_______. Details of the award are describedin this Letter Agreement.Your award will vest and be paid to you in two installments: (1) on or around [date], in the amount of $_______, and (2) on or around_____________, in the amount of $_______, less all applicable withholdings and deductions authorized by you or required by law.Payment is contingent on you satisfactorily performing your duties and remaining in continuous service with Intrepid or an affiliate from the date ofthis Letter Agreement through the applicable installment date (each, a “Vesting Date”). If your service with Intrepid ends for any reason before aVesting Date, any unpaid portion of the award will be forfeited immediately.Neither the offering of the retention award nor this Letter Agreement gives you the right to continued service with Intrepid or its affiliates in anycapacity. You remain an employee at will and Intrepid and its affiliates reserve the right to terminate your service at any time and for any reason notprohibited by law. This Letter Agreement may not be amended or modified except in writing and must be executed by both parties.To accept this Letter Agreement, please sign and date below and return this letter by ______________.Your continued service and commitment to Intrepid is greatly appreciated and we look forward to the future with you as a part of our organization.Sincerely, ______________________________ Erica Wyatt Chief Human Resources Officer Officer ______________________________Agreed to and accepted[Employee][Employee Job Title]Exhibit 21.1LIST OF SUBSIDIARIESAs of December 31, 2018NameState 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 statement (No. 333-209888) on Form S-3 and registrationstatement (No. 333-218423) on Form S-8 of Intrepid Potash, Inc. of our report dated March 12, 2019, with respect to the consolidatedbalance sheets of Intrepid Potash, Inc. as of December 31, 2018 and 2017, and the related consolidated statements of operations,comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31,2018, and the related notes and the financial statement schedule II (collectively, the "consolidated financial statements"), and theeffectiveness of internal control over financial reporting as of December 31, 2018, which report appears in the December 31, 2018annual report on Form 10-K of Intrepid Potash, Inc.Our report refers to a change to the accounting for revenue from contracts with customers./s/ KPMG LLPDenver, ColoradoMarch 12, 2019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 onForm 10-K of Intrepid Potash, Inc. (“Intrepid”) for the fiscal year ended December 31, 2018, and to the use of the information supplied by AAI under thecaption “Item 2. Properties - Proven and Probable Reserves.” AAI further consents to the incorporation by reference thereof into the Registration Statement onForm S-3 (No. 333-209888) previously filed by Intrepid and the Registration Statement on Form S-8 (No. 333-218423) previously filed by Intrepid.Agapito Associates, Inc.By: /s/ Susan B. PattonName: Susan B. Patton, PhD, P.E.Title: Senior AssociateGrand Junction, ColoradoMarch 12, 2019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 our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose 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 the 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: March 12, 2019 /s/ Robert P. Jornayvaz III Robert P. Jornayvaz IIIExecutive Chairman of the Board, President and Chief Executive Officer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, Joseph G. Montoya, 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 our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose 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 the 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: March 12, 2019 /s/ Joseph G. Montoya Joseph G. MontoyaVice President and Chief Accounting OfficerExhibit 32.1CERTIFICATION OFPRINCIPAL EXECUTIVE OFFICERPURSUANT 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, 2018 (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, President and Chief Executive Officer of the Registrant, certify that to thebest 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: March 12, 2019 /s/ Robert P. Jornayvaz III Robert P. Jornayvaz IIIExecutive Chairman of the Board, President and Chief Executive Officer 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 incorporatesit by reference.Exhibit 32.2CERTIFICATION OFPRINCIPAL 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, 2018 (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, Joseph G. Montoya, Vice President and Chief Accounting 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: March 12, 2019 /s/ Joseph G. Montoya Joseph G. MontoyaVice President and Chief Accounting 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 referenceinto any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Registrant specifically incorporates it byreference.Exhibit 95.1The table below provides information for the year ended December 31, 2018, 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 andMSHAIdentificationNumberSection104 S&SCitationsSection104(b)OrdersSection104(d)Citationsand OrdersSection 110(b)(2) ViolationsSection107(a)OrdersTotal DollarValue ofMSHAAssessmentsProposedTotalNumber ofMining-RelatedFatalitiesReceivedNotice ofPattern ofViolationsUnderSection104(e)ReceivedNotice ofPotentialto HavePatternunderSection104(e)LegalActionsPending asof the Endof thePeriodLegalActionsInitiatedDuring thePeriodLegalActionsResolvedDuring thePeriodIntrepid PotashEast(29-00170)5————$11,621———166Intrepid PotashWest(29-00175)—————$1,408————22Intrepid PotashNorth(29-02028)1————$5,317—————1Below 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 in severityand 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 failure tomake 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 citations ororders 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 issued for apattern 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. Eachlegal action 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, 2018:Mine Name and MSHAIdentification NumberContests ofCitations andOrdersContests ofProposedPenaltiesComplaints forCompensationComplaints ofDischarge,Discrimination orInterferenceApplications forTemporary ReliefAppeals ofJudges’Decisions orOrdersTotalIntrepid Potash East(29-00170)1—————1Intrepid Potash West(29-00175)———————Intrepid Potash North(29-02028)———————•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 the operatorbecause he or she engaged in some type of activity protected under the Mine Act, such as making a safety complaint, or that he or she hassuffered discrimination and lost his or her position.Exhibit 99.8NINTH AMENDMENT OF TRANSITION SERVICES AGREEMENTThis Ninth Amendment of Transition Services Agreement (this “Amendment”), dated as of February 20, 2019, is betweenIntrepid Potash, Inc., a Delaware corporation (“Intrepid Potash”), and Intrepid Oil & Gas, LLC, a Colorado limited liabilitycompany (“IOG”).RecitalsA. Pursuant to that certain Transition Services Agreement, dated as of April 25, 2008, as amended (the “Agreement”),Intrepid Potash agreed to provide certain services to IOG in connection with IOG’s oil and gas business. The Agreement expires by itsterms on April 24, 2019.B. IOG desires for Intrepid Potash to continue to provide such services to IOG after April 24, 2019. Accordingly, the partiesdesire to extend the term of the Agreement and to update Exhibit A to the Agreement.AgreementIn consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the partieshereto agree as follows:1.Extension. The Agreement will continue in full force and effect until April 24, 2021. IOG may terminate theAgreement, as amended, renewed and extended hereby, upon 30 days’ prior written notice to Intrepid Potash. Upon the termination ofthe Agreement, as amended, all rights and obligations of the parties under the Agreement will terminate, except that (a) each of IntrepidPotash and IOG will deliver any property belonging to the other party to that other party promptly upon termination, (b) IOG willcontinue to be responsible for, and will pay in accordance with Section 4 of the Agreement, any Services Fee and Reimbursements (asthose terms are defined in the Agreement) accrued prior to the date of termination, and (c) the rights and obligations of the parties setforth in Sections 7 through 16 of the Agreement will survive termination.2. Amendment of Exhibit A. Exhibit A to the Agreement is hereby amended and restated in its entirety as set forth in ExhibitA to this Amendment.3. Continuation of the Agreement. Except as set forth in this Amendment, the provisions of the Agreement will remain in fullforce and effect, and, if there is a conflict between the terms of this Amendment and the terms of the Agreement, the terms of thisAmendment will control.4. Counterparts. This Amendment may be executed in counterparts, all of which will be considered one and the sameagreement.The parties hereto have caused this Amendment to be executed on the day and year first above written.Intrepid Potash, Inc.By: /s/ Margaret E. McCandless Name: Margaret E. McCandless Title: Vice President, General Counsel and SecretaryIntrepid Oil & Gas, LLCBy: /s/ Robert P. Jornayvaz III Name: Robert P. Jornayvaz III Title: Manager EXHIBIT AService EmployeesEmployeePositionInitial Employee Cost Per Hour1Katie KellerManager Land Projects$114.68Dan TschoppManager Geologist$68.721In addition to the components of the Employee Cost Per Hour set forth in Section 3(b) of the Agreement, the calculation of theEmployee Cost Per Hour numbers set forth on this Exhibit A includes an additional amount equal to ten percent of the Employee CostPer Hour in order to ensure the fairness of such arrangements to Intrepid Potash.1#1416687 v3 den

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