Intrepid Potash, Inc. (IPI)

ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis should be read in conjunction with the accompanying consolidated financial statements and related notes contained in "Item 8. Financial Statements and Supplemental Data" of this Annual Report.

This Management's Discussion and Analysis contains forward‑looking statements that involve risks, uncertainties, and assumptions as described under the heading "Cautionary Note Regarding Forward‑Looking Statements," in Part I of this Annual Report. Our actual results could differ materially 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.

A discussion of the changes in our results of operations between the years ended December 31, 2023, and December 31, 2022, has been omitted from this Annual Report on Form 10-K but may be found in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 7, 2024, which is available free of charge on the SEC's website at www.sec.gov and our corporate website (www.intrepidpotash.com).

Overview

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

Our extraction and production operations are conducted entirely in the continental U.S. We produce potash from three solution mining facilities: our HB solution mine in Carlsbad, New Mexico, our solution mine in Moab, Utah, and our brine recovery mine in Wendover, Utah. We also operate our North compaction facility in Carlsbad, New Mexico, which compacts and granulates product from the HB mine. We produce Trio® from our conventional underground East mine in Carlsbad, New Mexico.

We also have certain land, water rights, federal grazing leases, and other related assets in southeast New Mexico. We refer to these assets and operations as "Intrepid South." Intrepid South generates revenue from sales of various oilfield related products and services, including but not limited to, water, brine, surface use and right-of-way agreements, a produced water royalty agreement, and caliche sales.

We have three segments: potash, Trio®, and oilfield solutions. We account for the sale of byproducts as revenue in the potash or Trio® segment based on which segment generated the byproduct. For each of the years ended December 31, 2024, 2023, and 2022, a majority of our byproduct sales were accounted for in the potash segment.

Recent Developments

In April 2024, our Board of Directors (the "Board") granted Robert P. Jornayvaz III, our Executive Chairman of the Board and Chief Executive Officer (the "CEO"), a medical leave of absence, while he recovered from a non-work related accident. Our Board appointed Matthew D. Preston, our Chief Financial Officer, as principal executive officer. Our Board also temporarily delegated all responsibilities of the Chairman of the Board to Barth Whitham, Lead Director. Our Board also appointed Hugh E. Harvey, our co-founder with Mr. Jornayvaz, to serve as a Class III director on the Board. On July 10, 2024, our Board announced that it was unlikely that Mr. Jornayvaz would return from his extended medical leave of absence and it had initiated a search process to identify a successor to Mr. Jornayvaz in the CEO role.

On September 30, 2024, Mr. Jornayvaz resigned as CEO and as a member of our Board. On November 26, 2024, our Board appointed Kevin S. Crutchfield as CEO of the Company and a member of the Board as a Class III director, in each case effective December 2, 2024.

On January 14, 2025, our Board increased the size of the Board from seven directors to eight directors, and the Board appointed Gonzalo Avendano as an additional independent director to the fill the vacancy created by the expansion of the Board and to serve as a Class I director of the Company.

Significant Business Trends and Activities

Our financial results have been, or are expected to be, impacted by several significant trends and activities, including impacts from global disruptions. Given the dynamic nature of such disruptions, we cannot reasonably estimate the impacts of

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such disruptions, if any, on our financial condition, results of operations, liquidity, or cash flows in the future. We expect that any such disruptions may have a material effect on revenue growth, financial condition, liquidity, and overall profitability in future reporting periods. Please see further discussion under "Item 1A. Risk Factors."

We expect that the trends described below may continue to impact our results of operations, cash flows, and financial position.

•Potash pricing and demand. Our average net realized sales price for potash decreased to $377 per ton in 2024 compared to $466 per ton in 2023 as global potash production improved back to 2021 levels leading to a more balanced global potash market. In January 2025, a winter-fill agricultural potash program was announced decreasing the list price for agricultural potash by $20 per ton to $315 per ton during a one-week order window, before the list price increased back to $340 per ton. Subscription under the fill program was generally positive, with most customers placing orders for the entirety of their first quarter needs. After the fill program and subsequent price increase, U.S potash prices are trading in line with global prices levels, supported by improving crop prices and a positive outlook on spring planting. Our price expectations could be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases and the price and availability of other potassium products. As a smaller producer relative to the overall market, domestic pricing of our potash is influenced principally by the price established by our competitors. The interaction of global potash supply and demand, ocean, land, and barge freight rates, currency fluctuations, tariffs, and crop commodity values and outlook, also influence pricing.

•Trio® pricing and demand. Our average net realized sales price for Trio® decreased to $311 per ton in 2024, compared to $321 per ton in 2023, as increasing sulfate values mostly offset declines in potassium pricing during the year. In January 2025, improving agricultural commodity prices led to strong early season demand and customers were willing to commit to the majority of their spring needs. Given the good demand and continued improvements in sulfate pricing, we increased our posted price for Trio® by $20 per ton in late January to $375 per ton, and expect to realize the higher price levels on tons shipped in the second quarter of 2025. Our ability to realize the increased prices may be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases, and the price and availability of other potassium products.

Overall average net realized sales price per ton for Trio® will continue to be impacted by the percentage of international sales, particularly to offshore markets. Competition from lower cost alternatives and freight costs continues to negatively impact our average net realized sales price per ton to offshore markets. We plan to continue a price-over-volume strategy internationally by focusing on those international markets where we obtain the highest average net realized sales price per ton and thus the highest margin.

We experience seasonality in domestic Trio® demand, with more purchases coming in the first and second quarters in advance of the spring application season in the U.S. In turn, we generally have increased inventory levels in the third and fourth quarters in anticipation of expected demand for the following year. We continue to operate our facilities at reduced production levels that approximate expected demand and allow us to manage inventory levels.

•Strategic Focus on our Solar Solution Mining Facilities. Key current and future projects include:

◦We successfully commissioned Phase Two of the HB Injection Pipeline Project in the third quarter of 2024. Since commissioning, our brine injection rates have averaged approximately 1,900 gallons per minute, which is 30% higher than the previous gallons per minute injection rate highs achieved in 2014.

◦We completed the construction of a new primary pond in Wendover in June 2024 and are in the process of filling the pond with brine. Similar to our caverns at the Moab and HB mines, the primary ponds at Wendover serve as the brine storage area, and adding another primary pond will help us meet our goals of maximizing brine availability, increasing brine grade, and improving production. We expect to see the production benefits of the new primary pond beginning in 2025 - 2026 production year.

◦HB AMAX Cavern - In the third quarter of 2024, we started the permitting process to drill a sample well into the AMAX Cavern at HB in order to measure the brine chemistry of the existing cavern. AMAX is the largest cavern in the HB system and is expected to serve as an expansion area to the original HB caverns which have been in service for over ten years. We are close to completing the permitting process and expect to drill the well in the second quarter of 2025.

•Water sales. Water sales decreased in 2024 to $13.6 million, compared to $15.2 million in 2023. The majority of our water sales are from Intrepid South, where we sell water through our truck station or directly to operators. In 2024, we supplied water for one drilling program during the third quarter which accounted for approximately $5.5 million, or 40%, of our total water sales. Due to the large drilling program, we purchased $3.6 million of water for resale during 2024, a $2.2 million increase compared to 2023. Overall, we have seen a trend towards larger frac operations on Intrepid South due to the increasing length and number of laterals drilled. These operations require significant amounts

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of water for a sustained period which has resulted in us relying more on third-party water to meet the needs of operators as we are unable to provide the volumes necessary with our own wells and pond infrastructure. While oil and gas activity remains strong in southeast New Mexico and on Intrepid South, we expect continued volatility in our water sales as the amount of water required varies between frac operations and the timing of operations is difficult to predict.

•Byproduct sales. Byproduct sales decreased to $25.3 million in 2024 compared to $30.6 million in 2023, driven primarily by a $5.6 million decrease in byproduct water sales as we increased the volume of water used for injection at our HB plant and we sold fewer barrels of water from our Caprock water rights. Magnesium chloride sales decreased $2.8 million compared to 2023, as limited snowfall events in the first half of 2024, combined with customers entering 2024 with high-levels of inventory of dust control magnesium chloride, reduced sales during the year. Byproduct brine sales into oil and gas markets in southeast New Mexico increased $2.6 million during 2024 as consistent oil and gas activity near our operations led to a 17% increase in barrels sold compared to the prior year.

•Other oilfield products and services. Our revenue from brine and other oilfield products and services, excluding water, recorded in our oilfield solutions segment decreased to $11.1 million in 2024, compared to $11.7 million in 2023, mainly driven by a $1.0 million decrease in surface use and right of way revenue at Intrepid South.

In the fourth quarter of 2024, we recorded impairment charges of $6.4 million mainly related to our frac sand opportunity and other oilfield related equipment as it is unlikely we will continue to pursue this opportunity as we focus on our core business. We still hold the necessary permits for the sand operation and believe the potential for a frac sand operation increases the overall value of Intrepid South.

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Consolidated Results

1Sales include sales of byproducts which were $25.3 million and $30.6 million for the years ended December 31, 2024, and 2023, 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, 2024, and 2023

Sales

Our total sales decreased $24.4 million, or 9% in 2024, compared to 2023, as potash segment sales decreased $31.1 million, partially offset by an increase of $3.2 million in Trio® segment sales and an increase of $3.4 million in oilfield solutions segment sales.

Our total potash segment sales decreased $31.1 million during 2024, compared to 2023, driven by a decrease of $30.9 million in potash sales. Our potash sales decreased as our potash average net realized sales price per ton decreased 19%, combined with a 7% decrease in tons of potash sold. Our average net realized sales price per potash ton decreased in 2024 compared to 2023, as the available supply of potash increased in 2024. We sold fewer tons of potash in 2024, compared to 2023, as we began 2024 with less inventory of potash to sell due to lower potash production from our HB and Wendover facilities during the second half of 2023. Potash production improved at our HB and Wendover facilities during 2024 compared to 2023, but annual production at our Wendover facility remains below its historical annual production level. Potash segment byproduct sales decreased $0.1 million in 2024 compared to 2023, as decreases in magnesium chloride and byproduct water sales were mostly offset by increases in brine water and salt sales.

Our total Trio® segment sales increased by $3.2 million during 2024 compared to 2023, driven by an increase of $8.4 million in Trio® sales, partially offset by a decrease of $5.2 million in Trio® segment byproduct sales. We sold 11% more tons of Trio® in 2024 compared to 2023, partially offset by a 3% decrease in our Trio® average net realized sales price per ton during 2024, compared to 2023. Our Trio® byproduct sales decreased as we did not sell any Trio® segment byproduct water in 2024, while we sold $5.3 million in Trio® segment byproduct water in 2023.

Our oilfield solutions segment sales increased by $3.4 million in 2024, compared to 2023, driven by an increase of $4.0 million in water sales, and an increase of $0.1 million in brine water sales, partially offset by a $0.7 million decrease in other products and services. Our oilfield solutions segment water revenues increased due to the completion of a large frac on Intrepid South during the third quarter of 2024. Demand for brine water sales remained strong in 2024 due to continued oil and gas activity in the Permian Basin near Intrepid South. Sales of our other products and services decreased in 2024, compared to

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2023, due to a decrease in surface use and easement sales. Surface use and easement sales fluctuate based on the time of recognizing sales from the various performance obligations contained in the underlying agreements.

Cost of Goods Sold

Our total cost of goods sold decreased $15.9 million, or 8%, in 2024, compared to 2023. Our potash segment cost of goods decreased $13.5 million, or 14%, and our Trio® segment cost of goods sold decreased $4.3 million, or 6%, partially offset by an increase of $1.9 million, or 13%, in our oilfield solutions segment cost of goods sold.

Our potash segment cost of goods sold decreased 14% in 2024 compared to 2023, due to selling 7% fewer tons of potash in 2024, compared to 2023. In addition to selling fewer tons of potash in 2024, we produced 32% more tons of potash in 2024 compared to 2023, which lowered our per ton production costs. A significant portion of our production costs are fixed and an increase in the number of potash tons produced decreases our per ton production costs.

Our Trio® segment cost of goods sold decreased 6% in 2024 compared to 2023. We sold 11% more tons of Trio® in 2024 compared to 2023, but our weighted average carrying cost per ton of Trio® decreased as we incurred less production labor, natural gas, and depreciation expenses in 2024 compared to 2023. Trio® segment labor costs decreased as we operated fewer shifts in 2024 compared to 2023. Trio® segment depreciation expense decreased in 2024 compared to 2023 due to the impairment that was recorded in December 2023 for our Trio® segment assets. Trio® segment natural gas expenses decreased in 2024 compared to 2023, as natural gas prices spiked in early 2023 due to supply constraints in the western U.S. In addition, we produced 16% more tons of Trio® in 2024 compared to 2023. Because a significant portion of our production costs are fixed, an increase in tons produced reduces our production costs per ton.

Our oilfield solutions segment cost of goods sold increased 13% in 2024 compared to 2023, as we purchased more third-party water for resale in 2024 compared to 2023, to meet the demand for a large frac on Intrepid South.

Lower of Cost or Net Realizable Value ("NRV") Inventory Adjustments

During 2024, we recorded lower of cost or NRV inventory adjustments of $4.0 million as our weighted average carrying costs for certain potash products exceeded our expected selling price for those products. During the year ended December 31, 2023, we recorded lower of cost or NRV adjustments of $6.5 million as our weighted average carrying costs for certain potash and Trio® products exceeded our expected selling price for those products. As discussed above, during 2024 compared to 2023, our average net realized sales price per ton for potash and Trio® decreased but the amount of lower of cost or NRV inventory adjustments recorded was less in 2024 compared to 2023 because our weighted average carrying costs for potash and Trio® also decreased.

Gross Margin

Our gross margin percentage decreased to 11% in 2024, compared to 13% in 2023. The decrease was driven primarily by a decrease in sales revenue due to decreases in our average net realized sales price per ton for both potash and Trio®.

Selling and Administrative Expense

Selling and administrative expenses increased $0.5 million or 2% in 2024 compared to 2023, as increases in severance and labor expenses were partially offset by decreases in stock compensation and legal expenses.

Impairment of Long-Lived Assets

During the year ended December 31, 2024, we recorded total impairment charges of $10.7 million. During the year ended December 31, 2023, we recorded total impairment charges of $43.3 million.

In 2023, we recorded an impairment related to our Trio® segment assets because the net book value exceeded the estimated fair value of the assets. We engaged a third-party valuation firm to determine the fair value of our Trio® segment assets. The fair value of our Trio® segment assets was primarily determined using the expected proceeds received in an orderly sale of the individual assets. The carrying value of our Trio® segment asset group exceeded its fair value, and we recorded an impairment charge of $31.9 million. For any Trio® segment capital spending during 2024, we also estimated the fair value of those assets using the expected proceeds received in an orderly sale of those new assets and recorded an impairment of $4.4 million.

In 2024, in our Oilfield Solutions Segment we recorded impairment charges of $6.4 million mainly related to our frac sand opportunity and other oilfield related equipment. Although we still hold the necessary permits for the sand operation, it is unlikely we will continue to pursue this opportunity as we focus on our core business. In 2023, we recorded impairment charges of $1.5 million related to certain assets in our Oilfield Solutions Segment, specifically certain water recycling equipment and an investment in a non-operating interest in an oil and gas investment.

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In 2023 in our potash segment, we recorded an impairment charge of $9.9 million related to the assets at the West facility, which were placed in care and maintenance in 2016, and given the length of time since the assets were placed in care and maintenance, we engaged a third-party valuation firm to determine the fair value of the West assets. The fair value of the West assets was determined using the expected proceeds received in an orderly sale of the individual assets.

Loss on Sale or Disposal of Assets

During 2024, we recorded a $2.0 million loss on the sale or disposal of assets in the normal course of business, compared to a loss of $0.8 million during 2023. Our loss on sale or disposal of assets in 2024 resulted from the sale of excess lay flat water tubing.

Other Operating Income

In 2024, we recognized other operating income of $5.2 million compared to $1.3 million in 2023. During 2024, we recognized $4.5 million in other operating income related to the Third Amendment to the Cooperative Development Agreement we signed with XTO in December 2023 that became effective in January 2024. As discussed in further detail in Note 9- Other Long-Term Deferred Income to the Consolidated Financial Statements, we are recognizing as other operating income the estimated transaction price associated with the Amendment on a straight-line basis over the term of the Amendment. Also in 2024, we recognized $0.7 million from various miscellaneous items as other operating income.

Other Operating Expense

Other operating expense increased $2.6 million in 2024 compared to 2023, mainly due to recording an additional $1.9 million related to the potential underpayment of federal mineral royalties from 2012 through 2016.

Income Tax

We recorded income tax expense of $194.3 million in 2024 as we increased our valuation allowance against our deferred tax assets by $199.0 million as we have concluded that it is more likely than not that our deferred tax assets will not be realized. The expense associated with increasing the valuation allowance was partially offset by the income tax benefit associated with our loss before income taxes. In 2023, we recorded an income tax benefit of $8.4 million as we incurred a loss before income taxes, which was partially offset by a $1.1 million increase in our valuation allowance.

Net Income

Our 2024 net income decreased $177.2 million to a net loss of $212.8 million. The decrease is due to the increase in the deferred tax assets valuation allowance, partially offset by decreased impairment expense recorded in 2024 compared to 2023.

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Potash Segment Results

1Potash segment sales include byproduct sales which were $24.6 million and $24.7 million for the years ended December 31, 2024, and 2023, respectively.

2Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization 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, 2024, and 2023

Our total potash segment sales in 2024 decreased $31.1 million, or 20%, compared to 2023, as potash sales recorded in the potash segment decreased 24% while potash segment byproduct sales were essentially unchanged.

Potash sales recorded in the potash segment decreased $31.0 million, or 24%, in 2024 compared to 2023, as our potash average net realized sales price per ton decreased 19%, combined with a 7% decrease in potash tons sold. Potash prices declined during 2024 as available global inventory increased compared to 2023. We sold fewer tons of potash in 2024 compared to 2023, as we began 2024 with less inventory of potash to sell due to lower potash production from our HB and Wendover facilities during the second half of 2023. Potash production improved at our HB and Wendover facilities in 2024 compared to 2023, but 2024 production from our Wendover facility remained below its historical production level.

Potash segment byproduct sales decreased $0.1 million, in 2024 compared to 2023, due to a $2.8 million decrease in byproduct magnesium chloride sales, partially offset by a $2.6 million increase in byproduct brine sales. Our byproduct magnesium chloride sales decreased in 2024 compared to 2023, due to mild winter weather which decreased demand for our deicing product in the first and fourth quarters of 2024, and we saw less demand from the dedust market impacting sales in the second and third quarters of 2024. Our byproduct brine sales increased due to continuing strong oil and gas activities near our facilities in New Mexico during 2024.

Potash cost of goods sold decreased $13.5 million, or 14%, in 2024, compared to 2023, due to a 7% decrease in potash tons sold and a decrease in our per ton production costs. Our per ton production costs decreased in 2024 compared to 2023, as we produced 32% more tons of potash during 2024 compared to 2023. A significant portion of our production costs are fixed and an increase in tons produced results in lower per ton production costs.

Potash segment freight expenses decreased 11% in 2024 compared to 2023, as we sold 7% fewer tons of potash. Our freight expense is impacted by the rates charged by carriers, geographic distribution of our products and by the proportion of customers arranging for and paying their own freight costs.

We produced 32% more tons of potash during 2024 compared to 2023, as production increased at all of our facilities, with the largest increase at our HB facility. The new extraction well placed in-service in June 2024 allowed us to extract high-grade brine from the Eddy Cavern of the HB mine, improving our overall brine grade into our pond system.

During 2024, we recorded $4.0 million in lower of cost or net realizable value inventory adjustments for certain potash products as our weighted average carry cost per ton exceeded our expected net realizable value per potash ton. While our

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weighted average carrying cost per ton decreased in 2024, average potash prices also declined in 2024. We recorded $2.7 million in lower of cost or net realizable value inventory adjustments for certain potash products during 2023.

Our potash segment gross margin decreased $17.6 million in 2024, compared to 2023, due to the $31.1 million decrease in potash segment sales.

Potash Segment - Additional Information

The table below shows our potash sales mix for 2024 and 2023.

Trio® Segment Results

1Trio® segment sales include byproduct sales which were $0.7 million and $5.8 million for the years ended December 31, 2024, and 2023, respectively.

2Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization 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, 2024, and 2023

Our total Trio® segment sales increased $3.2 million, or 3%, in 2024 compared to 2023, as Trio® sales increased $8.4 million, or 9%, partially offset by a $5.2 million decrease, or 89%, in Trio® segment byproduct sales.

Our Trio® sales increased $8.4 million, or 9%, in 2024 compared to 2023, as we sold 11% more tons partially offset by a 3% decrease in our average net realized sales price per ton. Sales volumes increased in 2024 compared to 2023, as we sold more Trio® tons into row crop markets, particularly driven by the sulfate value of Trio®. Similar to potash prices discussed above, Trio® average net realized sales price per ton decreased in 2024 as potassium fertilizer supplies improved in 2024 compared to 2023.

Our Trio® segment byproduct sales decreased $5.2 million in 2024 compared to 2023, due to a decrease in Trio® segment byproduct water sales. We sold less Trio® segment byproduct water in 2024 compared to 2023, as we increased the volume of water used for injection at our HB plant and we sold fewer barrels of water from our Caprock water rights.

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Trio® freight costs increased 11% in 2024 compared to 2023, related to an 11% increase in Trio® tons sold. Our freight expense is impacted by the geographic distribution of our Trio® sales and by the proportion of customers arranging for and paying their own freight costs. Generally, our Trio® freight expense is higher than our potash freight expense because we sell potash to regional customers located closer to our production facilities.

Our Trio® segment cost of goods sold decreased 6% in 2024 compared to 2023. We sold 11% more tons of Trio® in 2024 compared to 2023, but our weighted average carrying cost per ton of Trio® decreased as we incurred less production labor, natural gas, and depreciation expenses in 2024 compared to 2023. Trio® segment labor costs decreased as we operated fewer shifts in 2024 compared to 2023. Trio® segment depreciation expense decreased in 2024 compared to 2023 due to the impairment that was recorded in December 2023 for our Trio® segment assets. Trio® segment natural gas expenses decreased in 2024 compared to 2023, as natural gas prices spiked in early 2023 due to supply constraints in the western U.S. In addition, we produced 16% more tons of Trio® in 2024 compared to 2023. Because a significant portion of our production costs are fixed, an increase in tons produced reduces our production costs per ton.

In 2024, we did not record any lower of cost or net realizable value inventory adjustments. In 2023, we recorded $3.8 million in lower of cost or net realizable value inventory adjustments.

Our Trio® segment gross margin increased by $8.4 million in 2024 compared to 2023, due to the factors discussed above.

In the fourth quarter of 2023, given the decrease in our gross margin for our Trio® segment we determined that sufficient indicators of potential impairment of our Trio® segment long-lived assets existed. We performed a recoverability test and determined that the carrying value of our Trio® segment long-lived assets was not recoverable. We engaged a third-party valuation firm to determine the fair value of our Trio® segment assets. The fair value of our Trio® segment assets was primarily determined using the expected proceeds received in an orderly sale of the individual assets. The carrying value of our Trio® segment asset group exceeded its fair value of those assets, and we recorded an impairment charge of $31.9 million.

For any Trio® segment capital spending in 2024, we also estimated the fair value of those assets using the expected proceeds received in an orderly sale of those new assets and recorded impairment charges of $4.4 million.

Trio® Segment - Additional Information

The table below shows the percentage of total Trio® sales that were sold internationally in the past three years.

Oilfield Solutions Segment Results

Oilfield Solutions Segment Results for the Years Ended December 31, 2024, and 2023

Our oilfield solutions segment sales increased 16% in 2024 compared to 2023, driven by an increase of $4.0 million in water sales, and an increase of $0.1 million in brine water sales, partially offset by a $0.7 million decrease in sales of other products and services. Our oilfield solutions segment water sales increased due to the completion of a large frac on Intrepid South during the third quarter of 2024. Demand for brine water sales remained strong in 2024 due to continued oil and gas activity in the Permian Basin near Intrepid South. Our other products and services sales decreased in 2024 compared to 2023, due to a decrease in surface use and easement sales. Surface use and easement sales fluctuate based on the timing of recognizing sales from the various performance obligations contained in the underlying agreements.

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Cost of goods sold increased 13% in 2024 compared to 2023, as we purchased more third-party water for resale to meet the demand for the large frac completed on Intrepid South.

Gross margin increased $1.4 million, or 25%, in 2024 compared to 2023, due to the factors described above.

Specific Factors Affecting Our Results

Sales

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

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

Our water sales and other products and services offered through our oilfield solutions segment are driven by demand from oil and gas exploration companies drilling in the Permian Basin. As such, demand for our water and other products and services is generally stronger during a cyclical expansion of oil and gas drilling. Likewise, a cyclical contraction of oil and gas drilling may decrease demand for our water.

Cost of Goods Sold

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

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

We pay royalties to federal, state, and private lessors under our mineral leases. These payments typically equal a percentage of sales (less freight) of minerals extracted and sold under the applicable lease. In some cases, federal royalties for potash are paid on a sliding scale that varies with the grade of ore extracted. Our average royalty rate was 4.9%, 4.9%, and 4.8% in 2024, 2023, and 2022, respectively. In addition to royalties, we are also subject to resource and severance taxes in the state of New Mexico.

We incur costs to transfer water from our water source to our customers' facilities. Our operating costs depend on the distance and amount of water we must transfer. Additionally, water rights in New Mexico are subject to a stated point of diversion, purpose and place of use, and many of our water rights were originally issued for uses relating to our mining operations, or in the case of the water rights at Intrepid South, for agricultural uses. To sell water commercially under these rights, we must apply for a permit from the OSE to change point of diversion, purpose and/or place of use of the underlying water rights. Third parties often protest our applications and the decisions made by the OSE concerning the changes to our

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water rights permits. As we have worked to sell more water commercially, we have incurred significant legal expenses associated with defending our water rights as they proceed through adjudication and obtaining water permits and approvals.

Income Taxes

We are a subchapter C corporation and are therefore, subject to U.S. federal and state income taxes on our taxable income. We recognize deferred tax assets and liabilities for the tax effect of temporary differences between the financial statement and tax basis of recorded assets and liabilities at enacted tax rates in effect when the related taxes are expected to be settled or realized. We also reduce deferred tax assets by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. As of December 31, 2024, we were in a cumulative three-year income position as a result of income generated during the year ended December 31, 2022. Since the 2022 income year will cease to be part of the cumulative three-year test in the next twelve months, we forecast that by the end of 2025, we will be in a three-year cumulative loss position which is significant negative evidence that is difficult to overcome when evaluating the realizability of our deferred tax assets. As a result, we have concluded a valuation allowance against our deferred tax assets of $202.2 million was required as of December 31, 2024. Our valuation allowance against our deferred tax assets was $3.2 million as of December 31, 2023.

Our effective tax rate for the years ended December 31, 2024, 2023, and 2022 was (1,049.8)%, 19.0%, and 25.2%, respectively. Our effective income tax rates are impacted primarily by changes in the underlying tax rates in jurisdictions in which we are subject to income tax, the need for a valuation allowance or release, and permanent differences between book and tax income for the period, including the benefit associated with the estimated effect of the percentage depletion deduction and the expense for the estimated effect of the disallowed deduction for officers' compensation.

The effective tax rate for the year ended December 31, 2024, differs from the U.S. federal statutory rate primarily due to the change in the valuation allowance. The effective tax rate for the year ended December 31, 2023, differs from the U.S. federal statutory rate primarily due to the change in the valuation allowance.

During the year ended December 31, 2024, we recognized $146.5 million of deferred federal tax expense, $47.8 million of deferred state tax expense, and $0.1 million of current state income tax expense. During the year ended December 31, 2023, we recognized $8.5 million of deferred federal tax benefit, $0.1 million of deferred state tax expense and $0.1 million of current state income tax expense. For the year ended December 31, 2022, we recognized $19.4 million of deferred federal tax expense, $3.9 million of deferred state tax expense and $1.0 million of current state income tax expense.

The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted most significantly by the states in which we conduct business. Changing business conditions for normal business transactions and operations as well as changes to state tax rate and apportionment laws potentially alter our apportionment of income among the states for income tax purposes. These changes in apportionment laws result in changes in the calculation of our current and deferred income taxes, including the valuation of our deferred tax assets and liabilities. The effects of any such changes are recorded in the period of the adjustment. These adjustments can increase or decrease the net deferred tax asset on the balance sheet and impact the corresponding deferred tax benefit or deferred tax expense on the income statement.

Liquidity and Capital Resources

Our operations have primarily been funded from cash on hand, cash generated by operations, and proceeds from financing activities, primarily debt offerings. During 2024, we generated $72.5 million in cash flows from operating activities, which included a $45 million cash payment received in January 2024 under the Third Amendment to the Cooperative Development Agreement with XTO, and we ended the year with $41.3 million of cash and cash equivalents, compared with $4.1 million at December 31, 2023.

As of December 31, 2024, we had $150.0 million available to borrow under our credit facility, no outstanding borrowings, and no outstanding letters of credit. With the remaining availability under our credit facility and expected cash generated from operations, we believe we have sufficient liquidity to meet our obligations for the next twelve months.

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We continue to monitor our future sources and uses of cash and anticipate that we will adjust our capital allocation strategies, as determined by our Board of Directors. We may, at any time we deem conditions favorable, attempt to improve our liquidity position by accessing debt or equity markets in accordance with our existing revolving credit agreement. We may also raise capital in the future through the issuance of additional equity or debt securities, subject to prevailing market conditions. However, there is no assurance that we will be able to successfully raise additional capital on acceptable terms or at all.

The following summarizes our cash flow activity for the years ended December 31, 2024, and 2023:

Our revolving credit agreement contains restrictions on our ability to declare and pay dividends. The terms of our credit facility prohibit us from declaring and paying a dividend unless availability under the credit facility after giving effect to the dividend and during a specified period before the dividend is more than $15 million.

Operating Activities

Total cash provided by operating activities for the year ended December 31, 2024, was $72.5 million, an increase of $29.3 million compared with the year ended December 31, 2023. The increase was mainly driven by a $45 million cash payment received in January 2024 under the Third Amendment to the Cooperative Development Agreement with XTO, partially offset by decreased potash and Trio® net realized sales prices.

Investing Activities

Total cash used in investing activities decreased $30.0 million in 2024, compared to 2023, primarily a result of a $26.4 million decrease in additions to property, plant, equipment, and mineral properties compared to the prior year. Proceeds from the sale of property, plant, and equipment increased $4.7 million primarily due to proceeds received from the sale of water recycling equipment. Proceeds from the redemption/maturity of investments decreased $3.0 million in 2024, compared to 2023. In 2023, we invested $1.4 million of cash in investment grade, short-term debt instruments.

Financing Activities

Total cash used in financing activities increased $7.6 million in 2024, as compared to 2023. Payments on borrowings on the credit facility (net of borrowings) increased $8.0 million compared to the prior year. Payments on financing lease obligations increased $0.3 million in 2024 compared to the prior year. Employee tax withholding paid for restricted shares upon vesting decreased $0.7 million in 2024 compared to the prior year.

Share Repurchase Program

In February 2022, our Board of Directors approved a $35 million share repurchase program. Under the share repurchase program, we may repurchase shares from time to time in the open market or in privately negotiated transactions. The timing, volume and nature of share repurchases is at our sole discretion and is dependent on market conditions, liquidity, applicable securities laws, and other factors. We may suspend or discontinue the share repurchase program at any time. We made no repurchases of shares for the twelve months ended December 31, 2024, and 2023. For the twelve months ended December 31, 2022, we repurchased 608,657 shares with a total cost of $22.0 million, or a weighted average price per share of $36.17. As of December 31, 2024, we have approximately $13.0 million of remaining availability under the share repurchase program.

Credit Facility

In August 2022, we and certain of our subsidiaries entered into the Second Amended and Restated Credit Agreement with a syndicate of lenders with the Bank of Montreal, as administrative agent, which provides for a revolving credit facility. The agreement amended our existing revolving credit facility to, among other things, increase the amount available under the facility from $75 million to $150 million, extend the maturity date to August 4, 2027, and transition from LIBOR (London Interbank Offered Rate) to SOFR (Secured Overnight Financing Rate) as a reference rate for borrowings under the credit agreement. Borrowings under the amended credit facility bear interest at SOFR plus an applicable margin of 1.50% to 2.25% per annum, based on our leverage ratio as calculated in accordance with the amended agreement governing the revolving credit

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facility. Borrowings under the revolving credit facility are secured by substantially all of our current and non-current assets, and the obligations under the credit facility are unconditionally guaranteed by several of our subsidiaries.

We occasionally borrow and repay amounts under the facility for near-term working capital needs or other purposes and may do so in the future. For the year ended December 31, 2024, we made no borrowings and $4.0 million in repayments under the facility. For the year ended December 31, 2023, we made $9.0 million in borrowings and made $5.0 million in repayments under the facility. As of December 31, 2024, we had no borrowings outstanding and no outstanding letters of credit under the facility. As of December 31, 2023, we had $4.0 million in borrowings outstanding and no outstanding letters of credit under the facility. We had $150.0 million available under the facility as of December 31, 2024.

We were in compliance with the applicable covenants under the facility as of December 31, 2024.

Capital Investments

During 2024, we paid cash of $38.7 million to acquire property, plant, equipment, and mineral properties.

We expect to make capital investments in 2025 of $36 million to $42 million with the majority of this spending being sustaining capital projects. We anticipate our 2025 operating plans and capital programs will be funded out of operating cash flows and existing cash. We may also use our revolving credit facility, to the extent available, to fund capital investments.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements. Actual results could differ from our estimates and assumptions, and these differences could result in material changes to our financial statements.

Our significant accounting policies are further described in Note 2 to our audited consolidated financial statements included in "Item 8. Financial Statements and Supplemental Data" of this Annual Report. We believe the following accounting policies include a higher degree of subjective and complex judgments in their application and are most critical to aid in fully understanding and evaluating our reported financial condition and results of operations.

Recoverability of Long-Lived Assets

We evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable. An impairment is potentially considered to exist if an asset group's total estimated net future cash flows on an undiscounted basis are less than the carrying amount of the related asset. An impairment loss is measured and recorded based on the excess of the carrying amount of long-lived assets over its estimated fair value.

In 2024, we recorded impairment charges for long-lived assets in our Trio® and oilfield solutions segments. The impairment charge equals the difference between the carrying value of the assets or asset group and the estimated fair value of the assets or asset group. We estimated the fair value of the assets using estimated proceeds received in an orderly sale of these assets. Estimated proceeds received in an orderly sale of an asset have a high degree of subjectivity and actual proceeds received in an orderly sale of assets may vary from the estimates used, which may result in further impairment charges.

Reserves and Resources

We prepare our reserves and resources estimates in accordance with SEC requirements. We have prepared these reserve and resources estimates and they have been reviewed and independently determined by mine consultants. We express tons of potash and langbeinite in resources and reserves in terms of expected finished tons of product to be realized, net of estimated losses. Market price fluctuations of potash or Trio®, as well as increased production costs or reduced recovery rates, could render resources and reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of resources and reserves. We updated our mineral reserves and resources as of December 31, 2024, for our HB facility and we updated our mineral reserves and resources as of December 31, 2023, for all our other facilities. We determined we do not have any mineral reserves at our East facility because the mineral deposit could not be economically extracted. All mineral deposits at our East facility are categorized as a mineral resource. A mineral reserve is defined as that part of a mineral deposit which can be economically and legally extracted. A mineral resource refers to a concentration or occurrence of material deposits of economic interest.

We deplete our mineral properties using the units-of-production method. Under this method, we determine a depletion rate for one ton of finished product by dividing the total mineral properties net balance by the number expected finished tons of product, which is obtained from the resources and reserve estimates. Depletion expense is calculated by multiplying the number of tons of product produced by the depletion rate per ton.

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Income Taxes

We are a subchapter C corporation and therefore are subject to U.S. federal and state income taxes. We recognize income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. We record a valuation allowance if it is deemed more likely than not that our deferred income tax assets will not be realized in full; such determinations are subject to ongoing assessment.

Non-GAAP Financial Measure

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

We believe average net realized sales price per ton provides useful information to investors for analysis of our business. We use this non-GAAP financial measure as one of our tools in comparing period-over-period performance on a consistent basis and when planning, forecasting, and analyzing future periods. We believe this non-GAAP financial measure is used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the potash mining industry. Many investors use the published research reports of these professional research analysts and others in making investment decisions.

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

Below is a reconciliation of average net realized sales price per ton for potash and Trio® to the most directly comparable GAAP measure for the years ended December 31, 2024, and 2023 (in thousands, except per ton amounts):

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ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis should be read in conjunction with the accompanying consolidated financial statements and related notes contained in "Item 8. Financial Statements and Supplemental Data" of this Annual Report.

This Management's Discussion and Analysis contains forward‑looking statements that involve risks, uncertainties, and assumptions as described under the heading "Cautionary Note Regarding Forward‑Looking Statements," in Part I of this Annual Report. Our actual results could differ materially 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.

A discussion of the changes in our results of operations between the years ended December 31, 2022 and December 31, 2021 has been omitted from this Annual Report on Form 10-K but may be found in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 7, 2023, which is available free of charge on the SEC's website at www.sec.gov and our corporate website (www.intrepidpotash.com).

Overview

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

Our extraction and production operations are conducted entirely in the continental United States. We produce potash from three solution mining facilities: our HB solution mine in Carlsbad, New Mexico, our solution mine in Moab, Utah and our brine recovery mine in Wendover, Utah. We also operate our North compaction facility in Carlsbad, New Mexico, which compacts and granulates product from the HB mine. We produce Trio® from our conventional underground East mine in Carlsbad, New Mexico. Until mid-2016, we also produced potash from our East and West mines in Carlsbad, New Mexico.

We have permitted, licensed, declared and partially adjudicated water rights in New Mexico. We sell a portion of water from these water rights to support oil and gas operations and development in the Permian Basin. We continually work to expand our sales of water.

In May 2019, we acquired certain land, water rights, federal and state grazing leases for cattle, and other related assets from Dinwiddie Cattle Company. We refer to these assets and operations as "Intrepid South." Due to the strategic location of Intrepid South, part of our long-term operating strategy is selling small parcels of land to other companies, where such sales provide a solution to a company's need.

We have three segments: potash, Trio®, and oilfield solutions. We account for the sale of byproducts as revenue in the potash or Trio® segment based on which segment generated the byproduct. For each of the years ended December 31, 2023, 2022, and 2021, a majority of our byproduct sales were accounted for in the potash segment.

Significant Business Trends and Activities

Our financial results have been, or are expected to be, impacted by several significant trends and activities, including impacts from global health issues, such as the COVID-19 pandemic, and other global disruptions. Given the dynamic nature of such disruptions, we cannot reasonably estimate the impacts of such disruptions, if any, on our financial condition, results of operations, liquidity or cash flows in the future. We expect that any such disruptions may have a material effect on revenue growth, financial condition, liquidity, and overall profitability in future reporting periods. Please see further discussion under "Item 1A. Risk Factors."

We expect that the trends described below may continue to impact our results of operations, cash flows, and financial position.

•Potash pricing and demand. In 2023, potash remained a significant driver of our profitability, comprising 47% of our total sales. Our average net realized sales price for potash decreased in 2023 to $466 per ton compared to $713 per ton for 2022. Agricultural pricing peaked at $800 per ton in April 2022 as a result of sanctions on Belarusian potash and concerns about global potash supply due to Russia's invasion of Ukraine. Prices started to decrease in the fall of 2022 as global potash production rates improved. Agricultural potash pricing was $480 per ton at the beginning of 2023 and decreased from there. Despite the declining potash price, demand remained strong throughout 2023 with two good

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application seasons in the spring and fall supported by above average commodity prices. In January 2024, a winter-fill agricultural potash program was announced decreasing the list price to $385 per ton in January 2024 during a ten-day order window, before the list price increased by $30 per ton. We saw a good response to the program and expect distributors will continue to layer in tons as the 2024 spring season continues, with most distributors targeting minimal carryover inventory to end the spring. We expect to realize the increased price after the order window on certain spot sales in the first quarter of 2024. Our price expectations could be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases and the price and availability of other potassium products. As a smaller producer relative to the overall market, domestic pricing of our potash is influenced principally by the price established by our competitors. The interaction of global potash supply and demand, ocean, land, and barge freight rates, currency fluctuations, and crop commodity values and outlook, also influence pricing.

•Trio® pricing and demand. Our average net realized sales price for Trio® decreased to $321 per ton in 2023, compared to $479 per ton in 2022, as Trio® price generally followed price decreases in potash. After the January 2024 price announcement for potash, we maintained our posted Trio® price of $330 per ton for premium Trio®, $320 per ton for granular and $290 per ton for standard Trio®, which is approximately $75 per ton below the price levels in January 2023. We've seen good subscription for the 2024 spring season and similar to past years we expect distributors to target minimal carryover inventory into summer. Our ability to realize the increased prices may be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases, and the price and availability of other potassium products.

Overall average net realized sales price per ton for Trio® will continue to be impacted by the percentage of international sales, particularly to offshore markets. Competition from lower cost alternatives and freight costs continue to negatively impact our average net realized sales price per ton to offshore markets. We plan to continue a price-over-volume strategy internationally by focusing on those international markets where we obtain the highest average net realized sales price per ton and thus the highest margin.

We experience seasonality in domestic Trio® demand, with more purchases coming in the first and second quarters in advance of the spring application season in the U.S. In turn, we generally have increased inventory levels in the third and fourth quarters in anticipation of expected demand for the following year. We continue to operate our facilities at reduced production levels that approximate expected demand and allow us to manage inventory levels.

•Water sales. Water sales decreased in 2023 to $15.2 million, compared to $22.4 million in 2022. The decrease is attributable to fewer fracs on our South Ranch and more fresh water used at our HB facility to improve injection rates while we complete the second phase of our new HB injection pipeline. In addition to fewer fracs on our South Ranch in 2023, we purchased less water for resale resulting in fewer sales but also a corresponding decrease in costs. In 2023, we purchased $1.4 million of water for resale compared to $6.4 million in 2022. We continue to see certain operators switch to using exclusively recycled water or a combination of fresh water and recycled water when completing wells. We believe this change is due to the growing focus on water conservation efforts, environmentally responsible operations and the large amounts of produced water that is present in certain basins and formations, such as the Delaware Basin in southeast New Mexico. By recycling and reusing produced water, operators are able to reduce freshwater purchases and decrease the cost of transporting and disposing of produced water into disposal wells.

An update to legal proceedings concerning our water rights is contained in Note 14 to our audited consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report.

•Byproduct sales. Byproduct sales increased to $30.6 million in 2023 compared to $26.7 million in 2022, driven primarily by a $1.7 million increase in magnesium chloride sales at our Wendover facility due to increased pricing. Byproduct brine sales into oil and gas markets in southeast New Mexico increased $0.9 million during 2023 as we successfully implemented multiple per-barrel price increases in 2023 while continuing to grow sales volumes. Byproduct water and salt sales both increased $0.7 million compared to the prior year.

•Strategic Focus on our Solar Solution Mining Facilities. Key current and future projects include:

◦We successfully commissioned the Eddy Shaft Brine Extraction Project in October 2023 at our HB Solar Solution Mine. This project targets a significant, high-grade brine pool in the Eddy Cavern that is estimated to contain approximately 270 million gallons of brine at an expected grade of over 9% potassium chloride (“KCl”). Access to this brine pool immediately increases the brine available to our pond system and we expect to see incremental production contributions starting in the second half of 2024.

◦We continue to work through the permitting and contracting processes for the replacement extraction well at our HB Solar Solution Mine and expect the well will be commissioned in the second quarter of 2024. This new extraction well is designed to have a long-term operational life and will initially target approximately

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

◦Phase Two of the HB Injection Pipeline Project is the installation of an in-line pigging system to clean the pipeline and remove scaling to help ensure more consistent flow rates. We continue to work through the permitting requirements with commissioning expected in the first half of 2024, assuming we have no further delays in permitting. Upon Phase 2 commissioning, we expect our brine injection rates to be the highest in company history, which is key for maximizing brine availability and residence time.

◦We started construction on a new primary pond in Wendover to increase the brine evaporative area, which will result in two primary ponds when complete. Similar to our caverns at Moab and HB, the primary ponds at Wendover serve as the brine storage area, and adding another primary pond will help us meet our goals of maximizing brine availability, increasing our brine grade, and improving our production. We expect this project to be commissioned in the third quarter of 2024.

•Diversification of products and services. Our revenue from brine and other oilfield products and services recorded in our oilfield solutions segment increased by $0.6 million in 2023, compared to 2022, mainly driven by an increase in brine sales at Intrepid South. Brine sales from our HB facility are recorded as byproduct revenue in our potash segment. Our total brine sales and byproduct brine sales were $8.3 million during 2023, compared to $6.1 million during 2022.

We continue to progress on a sand mine opportunity at Intrepid South and have received all necessary permits to begin construction and full operation. We are currently evaluating the market and our options, including the potential to add a strategic partner.

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Consolidated Results

1Sales include sales of byproducts which were $30.6 million and $26.7 million for the years ended December 31, 2023 and 2022, 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, 2023, and 2022

Sales

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

Our total potash segment sales decreased $35.5 million during 2023, compared to 2022, driven by a decrease of $37.4 million in potash sales. Our potash sales decreased as our potash average net realized sales price per ton decreased 35%, partially offset by a 16% increase in tons of potash sold. Generally strong crop prices supported good potash demand during 2023. Potash prices peaked during the second quarter of 2022 and have steadily declined in each succeeding quarter as global production rates and product availability improved. The decrease in potash sales during 2023 was partially offset by an increase of $1.9 million in potash segment byproduct sales. The increase in potash segment byproduct sales was due to increased byproduct magnesium chloride sales and increased byproduct brine sales. Our byproduct magnesium chloride sales increased as we realized higher prices during 2023, compared to 2022. Our byproduct brine sales increased due to continuing strong oil and gas activities near our facilities in New Mexico during 2023.

Our total Trio® segment sales decreased by $15.6 million during 2023, compared to 2022, driven by a decrease of $17.6 million in Trio® sales. Our Trio® average net realized sales price per ton decreased 33% during 2023, partially offset by a 16% increase in tons of Trio® sold. Similar to potash, Trio® prices have declined in each succeeding quarter after peaking during the second quarter of 2022. Generally strong crop prices and lower Trio® prices drove good demand for Trio®. The decrease in Trio® sales was partially offset by an increase of $2.0 million in Trio® segment byproduct sales during 2023, as our Trio® byproduct water sales increased as a larger portion of our total water sales was byproduct water used in our Trio® production process.

Our oilfield solutions segment sales decreased by $7.4 million in 2023, compared to 2022, mainly driven by a decrease of $7.9 million in water sales during 2023. Water sales decreased as we purchased $5.0 million less in third-party water for resale in 2023, compared to 2022, and we used more water at our HB facility to improve injection rates while we complete the second phase of our new HB injection pipeline.

Cost of Goods Sold

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Our total cost of goods sold increased $35.0 million, or 23%, in 2023, compared to 2022. Our potash segment cost of goods increased $20.9 million, or 27%, and our Trio® segment cost of goods sold increased $19.7 million, or 36%, partially offset by a decrease of $5.6 million, or 27%, in our oilfield solutions segment cost of goods sold.

Our potash segment cost of goods sold mainly increased due to selling 16% more tons of potash in 2023, compared to 2022. In addition to selling more tons of potash in 2023, our weighted average carrying cost per ton increased as production labor costs, including contract labor and benefits, increased in 2023. We also produced fewer tons of potash during 2023 compared to 2022 and, because most of our production costs are fixed, a decrease in tons produced causes our weighted average price per ton to increase.

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

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

Lower of Cost or Net Realizable Value Inventory Adjustments

During 2023, we recorded lower of cost or net realizable value inventory adjustments of $6.5 million as our weighted average carrying costs for certain potash and Trio® products exceeded our expected selling price for those products. As discussed above, our average net realized sales price per ton for potash and Trio® declined during 2023, and our weighted average carrying costs for potash and Trio® increased during 2023. We did not record any lower of cost or net realizable value inventory adjustments during 2022.

Gross Margin

Our gross margin percentage decreased to 13% in 2023, compared to 42% in 2022. The decrease was driven primarily by a decrease in sales revenue due to decreases in our average net realized sales price per ton for both potash and Trio®, increases in both potash and Trio® cost of goods sold, and recording lower of cost or net realizable value inventory adjustments during 2023.

Selling and Administrative Expense

In 2023, selling and administrative expenses increased $0.6 million or 2% from 2023. The increase in 2023 was due mainly to increases in labor and benefits expense as a result of salary increases given to employees in April 2023.

Impairment of Long-Lived Assets

During the year ended December 31, 2023, we recorded total impairment charges of $43.3 million. During the year ended December 31, 2022, we recorded no impairment charges.

In the fourth quarter of 2023, given the decrease in our gross margin for our Trio® segment we determined that sufficient indicators of potential impairment of our Trio® segment long-lived assets existed. We performed a recoverability test and determined that the carrying value of our Trio® segment long-lived assets was not recoverable. We engaged a third-party valuation firm to determine the fair value of our Trio® segment assets. The fair value of our Trio® segment assets was primarily determined using the expected proceeds received in an orderly sale of the individual assets. The carrying value of our Trio® segment asset group exceeded its fair value, and we recorded an impairment charge of $31.9 million.

Our long-lived assets at our West facility have been in care and maintenance since July 2016. Given the length of time since the assets were placed in care and maintenance, we engaged a third-party valuation firm to determine if the fair value of the West assets supports the carrying value of those assets. The fair value of the West assets was determined using the expected proceeds received in an orderly sale of the individual assets. The carrying value of the West assets exceeded the fair value of those assets, and we recorded an impairment charge of $9.9 million during the fourth quarter of 2023.

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

Loss on Sale or Disposal of Assets

During 2023, we recorded a $0.8 million loss on the sale or disposal of assets in the normal course of business, compared to a loss of $7.5 million during 2022. During the fourth quarter of 2022, we worked on drilling a new extraction well for our HB solar solution mine. During the drilling process, the planned well failed and we expensed approximately $6.2

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

Other Operating Expense

In 2023, we recognized other operating expense of $2.2 million compared to $4.7 million in 2022. During 2023, we recorded an additional $1.0 million for fines and penalties related to a trespass on federal surface minerals at Intrepid South. We settled this trespass issue with the BLM during 2023, and the matter is now closed. We also recorded $0.5 million of additions in our allowance for obsolete inventory, $0.5 million in care and maintenance expenses and we accrued $0.4 million related to a potential violation of one of our environmental permits.

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

Income Tax

During 2023 we recorded income tax benefit of $8.4 million compared to an income tax expense of $24.3 million in 2022. During 2023, we recorded a $1.1 million valuation allowance against certain state net operating loss carryforwards due to a change in the forecast of the amount of the loss carryforwards that may be used before expiration.

Net Income

Our 2023 net income decreased $107.9 million to a net loss of $35.7 million. The decrease was primarily due to the decreased gross margins in our potash and Trio® segments and the impairment expense recorded in 2023.

Potash Segment Results

1Potash segment sales include byproduct sales which were $24.7 million and $22.8 million for the years ended December 31, 2023, and 2022, respectively.

2Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization 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, 2023, and 2022

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

Potash sales recorded in the potash segment decreased $37.4 million, or 22%, in 2023 compared to 2022, as our potash average net realized sales price per ton decreased 35%, partially offset by a 16% increase in potash tons sold. Potash prices peaked during the second quarter of 2022 and steadily declined in each succeeding quarter as global production rates and

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

Potash segment byproduct sales increased $1.9 million, or 8%, in 2023 compared to 2022, due to a $1.7 million increase in byproduct magnesium chloride sales, a $0.9 million increase in byproduct brine sales, a $0.7 million increase in potash byproduct salt sales, partially offset by a decrease of $1.3 million in potash byproduct water sales. Our byproduct magnesium chloride sales increased as we realized higher prices during 2023, compared to 2022. Our byproduct brine sales increased due to continuing strong oil and gas activities near our facilities in New Mexico during 2023. Our byproduct salt sales increased due to strong demand from feed and industrial salt customers and higher realized pricing during 2023. Our potash byproduct water sales decreased as we had less byproduct water to sell because we used more water at our HB facility to improve injection rates as we work to complete the second phase of our new HB injection pipeline.

Potash cost of goods sold increased $20.9 million, or 27%, in 2023, compared to 2022, mainly due to a 16% increase in potash tons sold. In addition, our weighted average carrying cost per ton increased mainly due to a 15%, or $3.8 million increase in production labor, contract labor, and benefits expenses in 2023. Our total tons of potash produced decreased 17% in 2023, compared to 2022, which also increased our per ton production costs. Because most of our production costs are fixed, decreases in tons produced result in higher per ton costs.

Potash segment freight expenses were virtually unchanged in 2023, compared to 2022, even though we sold 16% more tons of potash. Increases in potash freight expense from selling more tons of potash in 2023 were offset by a decrease in freight expense associated with our potash byproduct salt sales. Our freight expense is impacted by the rates charged by carriers, geographic distribution of our products and by the proportion of customers arranging for and paying their own freight costs.

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

During 2023, we recorded $2.7 million in lower of cost or net realizable value inventory adjustments as our weighted average carry cost per ton exceeded our expected net realizable value per potash ton. As discussed above, our potash average net realized sales price per ton decreased during 2023 while our weighted average carrying cost per ton increased in 2023. We did not record any lower of cost or net realizable value inventory adjustments during 2022.

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

Our long-lived assets at our West facility have been in care and maintenance since July 2016. Given the length of time since the assets were placed in care and maintenance, we engaged a third-party valuation firm to determine if the fair value of the West assets supports the carrying value of those assets. The fair value of the West assets was determined using the expected proceeds received in an orderly sale of the individual assets. The carrying value of the West assets exceeded the fair value of those assets, and we recorded an impairment charge of $9.9 million during the fourth quarter of 2023.

Potash Segment - Additional Information

The table below shows our potash sales mix for 2023, and 2022.

Trio® Segment Results

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1Trio® segment sales include byproduct sales which were $5.8 million and $3.9 million for the years ended December 31, 2023, and 2022, respectively.

2Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization 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, 2023, and 2022

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

Our 2023 Trio® sales decreased $17.6 million, or 15%, in 2023, as compared to 2022, as our average net realized sales price per ton decreased 33%, partially offset by a 16% increase in Trio® tons sold. Similar to potash, Trio® prices peaked during the second quarter of 2022, and steadily declined in each succeeding quarter as global production rates and product availability of potassium fertilizers improved. Our increase in tons sold in 2023 benefited from the reduced sales volumes we experienced in the second half of 2022, as customers delayed purchases in anticipation of lower price levels combined with overall strong commodity prices throughout 2023. Our Trio® byproduct sales increased $2.0 million in 2023 due to an increase in byproduct water sales.

Trio® freight costs increased 18% in 2023, compared to 2022, mainly related to a 16% increase in Trio® tons sold. Our freight expense is impacted by the geographic distribution of our Trio® sales and by the proportion of customers arranging for and paying their own freight costs. Generally, our Trio® freight expense is higher than our potash freight expense because we sell potash to regional customers located closer to our production facilities.

Our Trio® segment cost of goods sold increased 36% in 2023, compared to 2022, driven by a 16% increase in Trio® tons sold combined with an increase in our per-ton production costs. We also began 2023 with a higher average cost per ton of inventory compared to 2022. Our Trio® production costs increased in 2023, compared to the prior year, due to a 6%, or $1.8 million, increase in labor and benefits, a 12%, or $1.8 million, increase in operating and maintenance supplies, a 49%, or $1.8 million increase in depreciation due to increased capital investments, and a 61%, or $1.0 million increase in property taxes and insurance, partially offset by a 22%, or $1.0 million decrease in royalty expense due to decreased sales revenue.

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

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

In the fourth quarter of 2023, given the decrease in our gross margin for our Trio® segment we determined that sufficient indicators of potential impairment of our Trio® segment long-lived assets existed. We performed a recoverability test and determined that the carrying value of our Trio® segment long-lived assets was not recoverable. We engaged a third-party valuation firm to determine the fair value of our Trio® segment assets. The fair value of our Trio® segment assets was primarily determined using the expected proceeds received in an orderly sale of the individual assets. The carrying value of our Trio® segment asset group exceeded its fair value of those assets, and we recorded an impairment charge of $31.9 million.

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Trio® Segment - Additional Information

The table below shows the percentage of total Trio® sales that were sold internationally in the past three years.

Oilfield Solutions Segment Results

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

Our oilfield solutions segment sales decreased 26% in 2023, compared to 2022. Water sales decreased $7.9 million in 2023 to $9.6 million, and revenue from right-of-way agreements, surface damages and easements decreased $0.7 million. Brine sales increased $1.4 million, and produced water disposal royalties increased $0.1 million during 2023, compared to 2022.

Water sales decreased as we purchased $5.0 million less in third-party water for resale in 2023, compared to 2022 and we used more water at our HB facility to improve injection rates while we complete the second phase of our new HB injection pipeline. Brine sales increased $1.4 million as we sold increased volumes of brine at a higher per-barrel price in 2023, compared to 2022. Oilfield solutions sales are highly correlated to oil and gas activities near our facilities in New Mexico and oil prices continued to support oil and gas exploration activities in the Permian Basin near our Intrepid South property in southeast New Mexico during 2023.

Cost of goods sold decreased 27% in 2023, compared to 2022, primarily due to a $5.0 million decrease in third-party water purchased for resale. We incurred $0.6 million in increased labor and benefits expenses and a $0.6 million increase in depreciation related to new infrastructure placed in service in 2023, compared to 2022. These increased costs were partially offset by a $0.5 million decrease in royalty expense in 2023, compared to 2022, due to reduced water sales.

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

Specific Factors Affecting Our Results

Sales

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

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

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Our water sales and other products and services offered through our oilfield solutions segment are driven by demand from oil and gas exploration companies drilling in the Permian Basin. As such, demand for our water and other products and services is generally stronger during a cyclical expansion of oil and gas drilling. Likewise, a cyclical contraction of oil and gas drilling may decrease demand for our water.

Cost of Goods Sold

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

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

We pay royalties to federal, state, and private lessors under our mineral leases. These payments typically equal a percentage of sales (less freight) of minerals extracted and sold under the applicable lease. In some cases, federal royalties for potash are paid on a sliding scale that varies with the grade of ore extracted. Our average royalty rate was 4.9%, 4.8%, and 4.7% in 2023, 2022, and 2021, respectively.

We incur costs to transfer water from our water source to our customers' facilities. Our operating costs depend on the distance and amount of water we must transfer. For water sold from certain of our water sources, we pay the State of New Mexico $0.11 per barrel of water sold. Additionally, water rights in New Mexico are subject to a stated point of diversion, purpose and place of use, and many of our water rights were originally issued for uses relating to our mining operations, or in the case of the water rights at Intrepid South, for agricultural uses. To sell water commercially under these rights, we must apply for a permit from the OSE to change point of diversion, purpose and/or place of use of the underlying water rights. Third parties often protest our applications and the decisions made by the OSE concerning the changes to our water rights permits. As we have worked to sell more water commercially, we have incurred significant legal expenses associated with defending our water rights as they proceed through adjudication and obtaining water permits and approvals.

Income Taxes

We are a subchapter C corporation and are therefore, subject to U.S. federal and state income taxes on our taxable income. We recognize deferred tax assets and liabilities for the tax effect of temporary differences between the financial statement and tax basis of recorded assets and liabilities at enacted tax rates in effect when the related taxes are expected to be settled or realized. We also reduce deferred tax assets by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining how much of a valuation allowance to recognize we consider our projections of future taxable income. All available evidence, both positive and negative, that may affect the realizability of deferred tax assets is identified and considered in determining the appropriate amount of the valuation allowance. We have concluded a valuation allowance of $3.2 million was required as of December 31, 2023, and $2.0 million as of December 31, 2022.

The amount of valuation allowance increased in 2023 as compared to 2022, due to a change in the forecast of the amount of state net operating losses that may be used before expiration. Our effective tax rate for the years ended December 31, 2023, 2022, and 2021 was 19.0%, 25.2%, and (509.9)%, respectively. Our effective income tax rates are impacted primarily by changes in the underlying tax rates in jurisdictions in which we are subject to income tax, the need for a valuation allowance or release, and permanent differences between book and tax income for the period, including the benefit associated with the estimated effect of the percentage depletion deduction and the expense for the estimated effect of the disallowed deduction for officers' compensation.

The effective tax rate for the year ended December 31, 2023, differs from the U.S. federal statutory rate primarily due to the change in the valuation allowance. The effective tax rate for the years ended December 31, 2022, and 2021, differs from the U.S. federal statutory rate due to state income taxes, and the change in valuation allowance, respectively.

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During the year ended December 31, 2023, we recognized $8.5 million of deferred federal tax benefit, $0.1 million of deferred state tax expense, and $0.1 million of current state income tax expense. During the year ended December 31, 2022, we recognized $19.4 million of deferred federal tax expense, $3.9 million of deferred state tax expense and $1.0 million of current state income tax expense. For the year ended December 31, 2021, we recognized $157.3 million deferred federal tax benefit, $51.7 million of deferred state tax benefit and $0.2 million of current state income tax expense.

The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted most significantly by the states in which we conduct business. Changing business conditions for normal business transactions and operations as well as changes to state tax rate and apportionment laws potentially alter our apportionment of income among the states for income tax purposes. These changes in apportionment laws result in changes in the calculation of our current and deferred income taxes, including the valuation of our deferred tax assets and liabilities. The effects of any such changes are recorded in the period of the adjustment. These adjustments can increase or decrease the net deferred tax asset on the balance sheet and impact the corresponding deferred tax benefit or deferred tax expense on the income statement.

A valuation allowance is recognized for deferred tax assets if it is more likely than not that a portion or all of the net deferred tax assets will not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. As of December 31, 2023, we were in a cumulative three-year income position. The cumulative three-year income position is significant positive evidence when evaluating the realizability of our deferred tax assets. Additionally, industry trends and forecasts as well as internal forecasts of future business show sustained amounts of taxable income. Thus, we have concluded it is more likely than not that most of our $197.4 million of deferred tax assets will be realized.

Liquidity and Capital Resources

Our operations have primarily been funded from cash on hand, cash generated by operations, and proceeds from debt and equity offerings. During 2023, we generated $43.2 million in cash flows from operating activities and we ended the year with $4.1 million of cash and cash equivalents, compared with $18.5 million at December 31, 2022.

As of December 31, 2023, we had $146.0 million available to borrow under our credit facility, $4.0 million in outstanding borrowings, and no outstanding letters of credit. With the remaining availability under our credit facility and expected cash generated from operations, we believe we have sufficient liquidity to meet our obligations for the next twelve months.

We continue to monitor our future sources and uses of cash and anticipate that we will adjust our capital allocation strategies, as determined by our Board of Directors. We may, at any time we deem conditions favorable, attempt to improve our liquidity position by accessing debt or equity markets in accordance with our existing revolving credit agreement. We may also raise capital in the future through the issuance of additional equity or debt securities, subject to prevailing market conditions. However, there is no assurance that we will be able to successfully raise additional capital on acceptable terms or at all.

The following summarizes our cash flow activity for the years ended December 31, 2023, and 2022:

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Our revolving credit agreement contains restrictions on our ability to declare and pay dividends. The terms of our credit facility prohibit us from declaring and paying a dividend unless availability under the credit facility after giving effect to the dividend and during a specified period before the dividend is more than $15 million.

Operating Activities

Total cash provided by operating activities for the year ended December 31, 2023, was $43.2 million, a decrease of $45.6 million compared with the year ended December 31, 2022. The decrease was mainly driven by decreased potash and Trio® net realized sales prices. Prior year operating cash flows included a $32.6 million refund paid in September 2022 of a customer's prepayment for future water deliveries.

Investing Activities

Total cash used in investing activities decreased $19.6 million in 2023, compared to 2022, primarily a result of an $11.6 million decrease in purchases of investments compared to the prior year. In 2022, we invested $13.0 million of cash in investment grade, short-term debt instruments. Additions to property, plant, equipment, and mineral properties also decreased $3.5 million in 2023, compared to the prior year. Proceeds from the redemption/maturity of investments increased $3.5 million in 2023, compared to 2022.

Financing Activities

Total cash flows provided by financing activities increased $29.6 million in 2023, as compared to 2022. During 2022, we paid $22.0 million under a share repurchase program. We did not repurchase any shares in 2023. Proceeds from borrowings on the credit facility (net of repayments) increased $4.0 million and employee tax withholding paid for restricted shares upon vesting decreased $3.3 million in 2023, compared to the prior year. We did not have any outstanding borrowings under our credit facility in 2022.

Share Repurchase Program

In February 2022, our Board of Directors approved a $35 million share repurchase program. Under the share repurchase program, we may repurchase shares from time to time in the open market or in privately negotiated transactions. The timing, volume and nature of share repurchases is at our sole discretion and is dependent on market conditions, liquidity, applicable securities laws, and other factors. We may suspend or discontinue the share repurchase program at any time. We made no repurchases of shares for the twelve months ended December 31, 2023. For the twelve months ended December 31, 2022, we repurchased 608,657 shares with a total cost of $22.0 million, or a weighted average price per share of $36.17. As of December 31, 2023, we have approximately $13.0 million of remaining availability under the share repurchase program.

Credit Facility

In August 2022, we and certain of our subsidiaries entered into the Second Amended and Restated Credit Agreement with a syndicate of lenders with the Bank of Montreal, as administrative agent, which provides for a revolving credit facility. The agreement amended our existing revolving credit facility to, among other things, increase the amount available under the facility from $75 million to $150 million, extend the maturity date to August 4, 2027, and transition from LIBOR (London Interbank Offered Rate) to SOFR (Secured Overnight Financing Rate) as a reference rate for borrowings under the credit agreement. Borrowings under the amended credit facility bear interest at SOFR plus an applicable margin of 1.50% to 2.25% per annum, based on our leverage ratio as calculated in accordance with the amended agreement governing the revolving credit facility. Borrowings under the revolving credit facility are secured by substantially all of our current and non-current assets, and the obligations under the credit facility are unconditionally guaranteed by several of our subsidiaries.

We occasionally borrow and repay amounts under the facility for near-term working capital needs or other purposes and may do so in the future. For the year ended December 31, 2023, we made $9.0 million in borrowings and $5.0 million in repayments under the facility. For the year ended December 31, 2022, we made no borrowings and made no repayments under the facility. As of December 31, 2023, we had $4.0 million in borrowings outstanding and no outstanding letters of credit under the facility. As of December 31, 2022, we had no borrowings outstanding and $1.0 million in an outstanding letter of credit under the facility. We had $146.0 million available under the facility as of December 31, 2023.

We were in compliance with the applicable covenants under the facility as of December 31, 2023.

Capital Investments

During 2023, we paid cash of $65.1 million to acquire property, plant, equipment, and mineral properties.

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We expect to make capital investments in 2024 of $40 million to $50 million. We anticipate spending approximately $20 million to $25 million on sustaining capital projects in 2024, with the remainder of our estimated spending on opportunity projects, which include the completion of phase two of our new HB injection pipeline project, a new extraction well at our HB mine, and a new primary pond at our Wendover facility. We may adjust our investment plans as our expectations for 2024 change. We anticipate our 2024 operating plans and capital programs will be funded out of operating cash flows and existing cash. We may also use our revolving credit facility, to the extent available, to fund capital investments.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements. Actual results could differ from our estimates and assumptions, and these differences could result in material changes to our financial statements.

Our significant accounting policies are further described in Note 2 to our audited consolidated financial statements included in "Item 8. Financial Statements and Supplemental Data" of this Annual Report. We believe the following accounting policies include a higher degree of subjective and complex judgments in their application and are most critical to aid in fully understanding and evaluating our reported financial condition and results of operations.

Recoverability of Long-Lived Assets

We evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable. An impairment is potentially considered to exist if an asset group's total estimated net future cash flows on an undiscounted basis are less than the carrying amount of the related asset. An impairment loss is measured and recorded based on the excess of the carrying amount of long-lived assets over its estimated fair value.

In 2023, we recorded an impairment charge for long-lived assets and mineral properties at two of our facilities in New Mexico. The impairment charge equals the difference between the carrying value of the assets or asset group and the estimated fair value of the assets or asset group. We estimated the fair value of mineral properties using a discounted cash flow technique and we used the estimated fair value of the other assets using estimated proceeds received in an orderly sale of these assets. Significant estimates used in the estimated fair values include inputs to arrive at estimated net cash flows, such as product selling prices, volumes of product sold, and production costs. Estimated proceeds received in an orderly sale of an asset have a high degree of subjectivity and actual proceeds received in an orderly sale of assets may vary from the estimates used, which may result in further impairment charges.

Reserves and Resources

We prepare our reserves and resources estimates in accordance with SEC requirements. We have prepared these reserve and resources estimates and they have been reviewed and independently determined by mine consultants. We express tons of potash and langbeinite in resources and reserves in terms of expected finished tons of product to be realized, net of estimated losses. Market price fluctuations of potash or Trio®, as well as increased production costs or reduced recovery rates, could render resources and reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of resources and reserves. We updated our mineral reserves and resources as of December 31, 2023, and we determined we do not have any mineral reserves at our East facility because the mineral deposit could not be economically extracted. All mineral deposits at our East facility are categorized as a mineral resource. A mineral reserve is defined as that part of a mineral deposit which can be economically and legally extracted. A mineral resource refers to a concentration or occurrence of material deposits of economic interest.

We deplete our mineral properties using the units-of-production method. Under this method, we determine a depletion rate for one ton of finished product by dividing the total mineral properties net balance by the number expected finished tons of product, which is obtained from the resources and reserve estimates. Depletion expense is calculated by multiplying the number of tons of product produced by the depletion rate per ton.

Income Taxes

We are a subchapter C corporation and therefore are subject to U.S. federal and state income taxes. We recognize income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. We record a valuation allowance if it is deemed more likely than not that our deferred income tax assets will not be realized in full; such determinations are subject to ongoing assessment.

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Non-GAAP Financial Measure

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

We believe average net realized sales price per ton provides useful information to investors for analysis of our business. We use this non-GAAP financial measure as one of our tools in comparing period-over-period performance on a consistent basis and when planning, forecasting, and analyzing future periods. We believe this non-GAAP financial measure is used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the potash mining industry. Many investors use the published research reports of these professional research analysts and others in making investment decisions.

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

Below is a reconciliation of average net realized sales price per ton for potash and Trio® to the most directly comparable GAAP measure for the years ended December 31, 2023, and 2022 (in thousands, except per ton amounts):

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ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis should be read in conjunction with the accompanying consolidated financial statements and related notes contained in "Item 8. Financial Statements and Supplemental Data" of this Annual Report.

This Management's Discussion and Analysis contains forward‑looking statements that involve risks, uncertainties, and assumptions as described under the heading "Cautionary Note Regarding Forward‑Looking Statements," in Part I of this Annual Report. Our actual results could differ materially 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.

A discussion of the changes in our results of operations between the years ended December 31, 2021 and December 31, 2020 has been omitted from this Annual Report on Form 10-K but may be found in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 8, 2022, which is available free of charge on the SEC's website at www.sec.gov and our corporate website (www.intrepidpotash.com).

Overview

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

Our extraction and production operations are conducted entirely in the continental United States. We produce potash from three solution mining facilities: our HB solution mine in Carlsbad, New Mexico, our solution mine in Moab, Utah and our brine recovery mine in Wendover, Utah. We also operate our North compaction facility in Carlsbad, New Mexico, which compacts and granulates product from the HB mine. We produce Trio® from our conventional underground East mine in Carlsbad, New Mexico. Until mid-2016, we also produced potash from our East and West mines in Carlsbad, New Mexico.

We have permitted, licensed, declared and partially adjudicated water rights in New Mexico under which we sell water primarily to support oil and gas operations and development in the Permian Basin near our Carlsbad facilities. We continue to work to expand our sales of water. In May 2019, we acquired certain land, water rights, state grazing leases for cattle, and other related assets from Dinwiddie Cattle Company. We refer to these assets and operations as "Intrepid South." Due to the strategic location of Intrepid South, part of our long-term operating strategy is selling small parcels of land to other companies, where such sales provide a solution to a company's need.

We have three segments: potash, Trio®, and oilfield solutions. We account for the sale of byproducts as revenue in the potash or Trio® segment based on which segment generated the byproduct. For each of the years ended December 31, 2022, 2021, and 2020, a majority of our byproduct sales were accounted for in the potash segment.

Significant Business Trends and Activities

Our financial results have been, or are expected to be, impacted by several significant trends and activities, including impacts from global health issues, such as the COVID-19 pandemic, and other global disruptions. Given the dynamic nature of such disruptions, we cannot reasonably estimate the impacts of such disruptions, if any, on our financial condition, results of operations, liquidity or cash flows in the future. We expect that any such disruptions may have a material effect on revenue growth, financial condition, liquidity, and overall profitability in future reporting periods. Please see further discussion under "Item 1A. Risk Factors."

We expect that the trends described below may continue to impact our results of operations, cash flows, and financial position.

•Potash pricing and demand. Potash remained a significant driver of our profitability, comprising 50% of our total sales in 2022. Our average net realized sales price for potash increased in 2022 to $713 per ton compared to $353 per ton for 2021. Throughout 2021, strong commodity pricing led to good application rates and multiple price increases during 2021 and the first half of 2022. Agricultural potash pricing started 2022 at $725 per ton and increased to $800 per ton in April 2022 as Belarusian sanctions and increasing concerns about global potash supply due to Russia's invasion of Ukraine drove further price appreciation. As a result of the higher pricing and good application rates for potash over the prior year, our customers were reluctant to carry over inventory after the spring season and demand slowed down

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considerably in second half of 2022 compared to 2021. Global demand for potash followed a similar trend in the second half of 2022 leading to ample supply of potash in most markets to end 2022 despite continued strong commodity pricing and favorable farmer economics. Agricultural potash pricing declined to $480 per ton in January 2023, a price level that has spurred an initial round of orders to start the spring season, although most customers remain cautious to purchase potash for their full spring needs immediately as sufficient supply continues to pressure spot pricing. Despite the near-term inventory levels, global potash production remains below normal levels due to sanctions on Belarusian potash and reduced production rates. Canadian producers responded with production increases at existing operations, but we still expect total potash production in 2023 to be below 2021 levels. Our price expectations could be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases and the price and availability of other potassium products. As a smaller producer relative to the overall market, domestic pricing of our potash is influenced principally by the price established by our competitors. The interaction of global potash supply and demand, ocean, land, and barge freight rates, currency fluctuations, and crop commodity values and outlook, also influence pricing.

•Trio® pricing and demand. Our average net realized sales price for Trio® increased to $479 per ton in 2022, compared to $295 per ton in 2021, as Trio® price followed price increases in potash. Similar to potash trends, buyers were reluctant to hold carryover inventory after the spring season and as potash supply increased in the second half of the year and pricing began to decrease, buyers were reluctant to purchase Trio® during the fourth quarter of 2022. In January 2023, we announced an updated Trio® price of $405 per ton for premium Trio®, $395 per ton for granular and $365 per ton for standard Trio®, but supply remains sufficient in most regions and pressure on potash spot prices continues to limit our customers' desire to hold significant inventory that is not committed for immediate application. Our ability to realize the increased prices may be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases as a result of the COVID-19 pandemic, and the price and availability of other potassium products.

Overall average net realized sales price per ton for Trio® will continue to be impacted by the percentage of international sales, particularly to offshore markets. Competition from lower cost alternatives and freight costs continue to negatively impact our average net realized sales price per ton to offshore markets. We plan to continue a price-over-volume strategy internationally, by focusing on those international markets where we obtain the highest average net realized sales price per ton and thus the highest margin.

We experience seasonality in domestic Trio® demand, with more purchases coming in the first and second quarters in advance of the spring application season in the U.S. In turn, we generally have increased inventory levels in the third and fourth quarters in anticipation of expected demand for the following year. We continue to operate our facilities at reduced production levels that approximate expected demand and allow us to manage inventory levels.

•Water sales. Water sales increased in 2022 to $22.4 million, compared to $22.0 million in 2021 as oilfield activity in the Delaware Basin continued to be supported by strong oil prices. Although water sales have improved compared to previous years, some operators have switched to using exclusively recycled water or a combination of fresh water and recycled water when completing wells. We believe this change is due to the growing focus on environmentally responsible operations and a response to the large amounts of produced water that is present in certain basins and formations, such as the Delaware Basin in southeast New Mexico. By recycling and reusing produced water, operators are able to reduce freshwater purchases and decrease the cost of transporting and disposing of produced water into disposal wells. We believe operators are also more focused on reducing the initial capital investment for each well and are switching to lower-cost recycled water despite the potential long-term production advantages of fresh water.

An update to legal proceedings concerning our water rights is contained in Note 14 to our audited consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report.

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

•Weather impact. Evaporation rates in 2021 were below average across our facilities which led to decreased potash production in the second half of 2021 and in the spring of 2022 when compared to the prior year. We received a significant amount of rainfall at our HB facility in Carlsbad, New Mexico late in the summer of 2021, which limited the amount of solids available in our ponds. As a result of the reduced potash production, we recorded abnormal production costs of $3.6 million and $2.4 million in the third and fourth quarters of 2021, respectively.

•Diversification of products and services. We increased our revenue from other oilfield products and services in 2022, compared to 2021. As oilfield activity increased in the Delaware Basin throughout 2022, we saw a corresponding

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increase in revenue from right-of-way agreements, caliche sales, brine sales, and a produced water royalty. These sales generated revenue of $11.2 million in 2022, compared to $7.2 million in 2021, and with the exception of our brine sales, incur either minimal or no operating expense.

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Consolidated Results

1Sales include sales of byproducts which were $26.7 million and $26.2 million for the years ended December 31, 2022 and 2021, 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, 2022, and 2021

Sales

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

Our potash sales increased $38.1 million in 2022, compared to 2021, primarily as our potash average net realized sales price per ton increased 102%, partially offset by a 33% decrease in tons of potash sold. Generally strong crop prices supported good potash demand and combined with global potash supply concerns due to the uncertainty of potash supplied from Eastern Europe, drove the increase in our average net realized sales price per ton. Potash tons sold declined in 2022 compared to 2021, as we had fewer tons of potash available to sell during the first half of 2022, and we sold fewer tons during the second half of 2022 as customers were reluctant to purchase tons for the upcoming spring application season due to anticipated price declines. Our potash segment byproduct sales increased $1.5 million in 2022, due mainly to an increase in byproduct salt and brine water sales, partially offset by a decrease in byproduct magnesium chloride sales.

Our Trio® sales increased $22.8 million in 2022, compared to 2021, as our Trio® average net realized sales price per ton increased 62%, partially offset by a 18% decrease in tons of Trio® sold. Generally strong crop prices and the relative value of Trio® compared to potash drove good demand for Trio®. Our Trio® tons sold decreased as we sold fewer tons during the second half of 2022 as, like potash customers, Trio® customers were reluctant to purchase tons for the upcoming spring application season due to anticipated price declines. Our Trio® byproduct sales decreased $1.1 million in 2022, due to a decrease in byproduct water sales. Our Trio® byproduct water sales decreased as a larger portion of our total water sales were sourced from our oilfield solution segment.

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

Cost of Goods Sold

Our total cost of goods sold decreased $9.1 million, or 6%, in 2022, as compared to 2021. Our potash segment cost of goods decreased $10.8 million, or 12%, and our Trio® segment cost of goods sold decreased $0.2 million, partially offset by an increase $1.9 million in our oilfield solutions segment cost of goods sold.

Our potash cost of goods sold mainly decreased due to selling 33% fewer tons of potash in 2022 compared to 2021. While we sold fewer tons in 2022, our weighted average carrying cost per ton increased as various production costs increased

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due to inflationary pressures. In addition, we produced fewer tons of potash and, because most of our production costs are fixed, a decrease in tons produced causes our weighted average price per ton to increase. We also incurred increased royalty expense as our potash sales revenue increased during 2022.

Our Trio® segment cost of goods sold decreased slightly in 2022 compared to 2021. While we sold 18% fewer tons of Trio® in 2022, our weighted average carrying costs increased due to operating an additional shift during 2022 and increases in various production costs due to inflationary pressures. We also incurred increased royalty expense as our Trio® revenues increased.

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

Abnormal Production Costs

During the third quarter of 2021, the Carlsbad, New Mexico area where our HB solar solution mining facility is located, received significant rainfall, well above the historical rainfall average during this period, along with higher than normal humidity and cooler than average temperatures, all of which reduced our pond production and our ability to extract brine. Because of the wet, humid weather and cooler temperatures, we had fewer harvestable tons of potash from our HB solution ponds. Accordingly, we recorded abnormal production costs of $6.0 million in 2021. We did not incur any abnormal production costs in 2022.

Gross Margin

Our gross margin percentage increased to 42% in 2022, compared to 21% in 2021. The increase was driven primarily by an increase in sales revenue due to an increase in our average net realized sales price per ton for both potash and Trio®, and not incurring any abnormal production costs during 2022.

Selling and Administrative Expense

In 2022, selling and administrative expenses increased $7.8 million or 33% from 2021. The increase in 2022 was due several factors including a $3.1

million increase in equity compensation expense primarily related to certain market-condition awards that had accelerated expense recognition in 2022 because the market-condition for those awards was met sooner than originally estimated. We incurred increased wages and benefits expense due to generally a company-wide salary increase in early 2022, and we hired additional employees in 2022. We incurred increased legal expenses primarily relating to continuing legal issues concerning our water rights and other legal issues. We also saw increased travel and related expenses because our 2021 travel expenses were lower than average due to the continued COVID-19 concerns. Finally, we incurred an increase in lease expense, as we leased additional office space in 2022.

Gain (Loss) on Sale or Disposal of Assets

During 2022, we recorded a $7.5 million loss on the sale or disposal of assets compared to a gain of $2.5 million during 2021. During the fourth quarter of 2022, we worked on drilling a new extraction well for our HB solar solution mine. During the drilling process, the planned well failed and we expensed approximately $6.2 million of costs related to the project. In addition, we also incurred approximately $1.2 million in losses related to the disposal of various other assets in the normal course of business

In May 2021, we sold 326 acres of land in Texas for $6.0 million and recognized a gain on the sale of the land of $2.8 million. We purchased this land in May 2019 for the development of a produced water disposal facility and had permitted two disposal wells on the property.

Other Operating Expense

In 2022, we recognized other operating expense of $4.7 million compared to $0.2 million in 2021. During 2022, we recorded $1.8 million of additions in our allowance for obsolete inventory, accrued $1.7 million for fines and penalties related to an encroachment of surface minerals at Intrepid South, $1.6 million related to potential underpayment of royalties found during an ongoing royalty audit by the Department of the Interior's Office of Natural Resources Revenue ("ONRR") and care and maintenance expenses of $0.6 million. During 2021, we recorded care and maintenance expenses of $0.6 million that were partially offset by other operating income of $0.4 million related to earning certain contractual bonuses on a project to modify the tailings pond at our West facility. We modified our West tailings pond to allow for the construction of an underground natural gas pipeline near our West facility.

Interest Expense

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Interest expense decreased $1.4 million in 2022, compared to 2021, as we repaid the outstanding balance of our Series B Senior Notes in June 2021, and we repaid the outstanding balance on our credit facility in early August 2021. We had no outstanding long-term debt or an outstanding balance on our credit facility during 2022.

Gain on Extinguishment of Debt

In April 2020, we received a $10 million loan under the CARES Act Paycheck Protection Program (the "PPP"). In June 2021, we received notice that the SBA had remitted funds to our bank to fully repay our PPP loan and accrued interest. Accordingly, we recognized a gain of $10.1 million related to the forgiveness of the PPP loan and the associated accrued interest on the loan.

Income Tax

During 2022 we recorded income tax expense of $24.3 million compared to an income tax benefit of $208.9 million in 2021. During 2021, our valuation allowance for deferred tax assets decreased as we released $215.9 million from the valuation allowance during the fourth quarter. We released the valuation allowance because our long-term projection of future taxable income indicated that we will be able to realize the value of most of our deferred tax assets in the future.

Net Income

Our 2022 net income decreased $177.6 million to $72.2 million. The decrease was primarily due to the income tax benefit recorded in 2021 of $208.9 million related to releasing $215.9 million of our valuation allowance for deferred taxes, and recording a $10.1 million gain related to the forgiveness of the PPP loan, partially offset by the improvement in our 2022 gross margin, as discussed above. Excluding the release of our valuation allowance for deferred taxes and the gain related to the forgiveness of our PPP loan, our net income would have been approximately $30.9

million in 2021.

Potash Segment Results

1Potash segment sales include byproduct sales which were $22.8 million and $21.3 million for the years ended December 31, 2022, and 2021, respectively.

2Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization 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, 2022, and 2021

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

Potash sales recorded in the potash segment increased $38.1 million, or 29%, in 2022 compared to 2021, as the average potash net realized sales price per ton increased 102%, partially offset by a 33% decrease in potash tons sold. Generally strong crop commodity prices combined with global potash supply concerns due to the uncertainty of potash supplied from Eastern Europe drove the increase in our average potash net realized sales price per ton. We sold 33% fewer tons of potash in

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

Potash segment byproduct sales increased $1.5 million, or 7%, in 2022 compared to 2021, due to a $3.4 million increase in byproduct salt sales, a $1.6 million increase in byproduct brine water sales, partially offset by a $3.1 million decrease in byproduct magnesium chloride sales and a $0.4 million decrease in byproduct water sales. Our salt sales increased as we increased sales in the industrial salt market in 2022. Our byproduct brine water sales increased due to increased oil and gas activities near our facilities in New Mexico during 2022. Our magnesium chloride sales decreased as mild winter weather in various parts of the U.S. in the early part of 2022, followed by wet spring weather reduced demand for magnesium chloride used as a deicing agent in the winter months and as a dedusting agent in the spring and summer months. Our potash byproduct water sales decreased as a larger percentage of our water sales were from our Intrepid South property. Water that is used in the production of potash is recorded as byproduct revenue in our potash segment and water sold from our Intrepid South property is recorded as revenue in our oilfield solutions segment. Generally, the source from where we sell water is based on the location that is nearest to the location where a customer needs the water.

Potash cost of goods sold decreased $10.8 million, or 12%, in 2022, compared to 2021, mainly due to a 33% decrease in potash tons sold. While our potash tons sold decreased 33% in 2022, our weighted average carrying cost per ton increased due to increased royalties as our sales revenue increased, an increase in labor and benefits expense due to a company-wide salary increase in early 2022, and increased utility expenses due to inflationary pressures and we incurred increased property taxes, and insurance expenses. Additionally, reduced production at our HB facility also increased our per ton of cost of goods sold because most of our production costs are fixed.

Potash segment freight expense decreased 15%, in 2022, compared to 2021, mainly related to selling 33% fewer tons of potash, partially offset by increased freight rates. Our freight expense is also impacted by the rates charged by carriers, geographic distribution of our products and by the proportion of customers arranging for and paying their own freight costs.

We produced 6% fewer tons of potash during 2022 compared to 2021, as our potash production declined during the first half of 2022, because we had fewer harvestable tons of potash in our HB solution ponds after the abnormally wet weather in the Carlsbad, New Mexico area during the summer of 2021. Because of the abnormally wet weather during the summer of 2021, we recorded $6.0 million of abnormal production costs in 2021. We did not record any abnormal production costs in 2022.

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

Potash Segment - Additional Information

The table below shows our potash sales mix for 2022, and 2021.

Trio® Segment Results

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1Trio® segment sales include byproduct sales which were $3.9 million and $4.9 million for the years ended December 31, 2022, and 2021, respectively.

2Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization 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, 2022, and 2021

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

Our 2022 Trio® sales increased $22.8 million, or 25%, in 2022, as compared to 2021, as our average net realized sales price per ton increased 62%, partially offset by an 18% decrease in Trio® tons sold. Our Trio® average net realized sales price per ton increased as generally strong crop prices and the relative value of Trio® compared to potash drove good demand for Trio®. Our Trio® tons sold decreased as we sold fewer tons during the second half of 2022 as, like potash customers, Trio® customers were reluctant to purchase tons for the upcoming spring application season due to anticipated price declines. Our Trio® byproduct sales decreased $1.1 million in 2022, due to a decrease in byproduct water sales. Our Trio® byproduct water sales decreased as a larger portion of our total water sales were sourced from our Intrepid South property and recorded in our oilfield solution segment.

Trio® freight costs decreased 5% in 2022, compared to 2021, mainly related to selling 18% fewer tons of Trio®, partially offset by increased international sales and increased freight rates. We incur more freight expense on our international Trio® sales compared to our domestic Trio® sales. Our freight expense is impacted by the geographic distribution of our Trio® sales and by the proportion of customers arranging for and paying their own freight costs. Generally, our Trio® freight expense is higher than our potash freight expense because we generally sell potash to regional customers located closer to our production facilities.

Our Trio® cost of goods sold decreased slightly in 2022, as compared to 2021. While we sold 18% fewer Trio® tons in 2022, our weighted average carrying cost per ton of Trio® increased as we incurred increased contract labor expenses to operate an additional shift in 2022. We also incurred higher labor and benefits expenses due to a company-wide salary increase in early 2022, increased royalty expense due to increased sales revenues, increased utility expenses due to inflationary pressures, and we incurred increased property taxes and insurance expenses.

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

Trio® Segment - Additional Information

The table below shows the percentage of total Trio® sales that were sold internationally in the past three years.

Oilfield Solutions Segment Results

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Oilfield Solutions Segment Results for the Years Ended December 31, 2022, and 2021

Our oilfield solutions segment sales increased 26% in 2022, compared to 2021. Water sales increased $1.9 million in 2022 to $17.5 million. Sales from right-of-way agreements, surface damages and easements increased $1.9 million, brine water sales increased $1.5 million, and produced water disposal royalties increased $0.5 million.

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

Cost of goods sold increased 10% in 2022, compared to 2021, as we incurred increased contract labor expenses to meet the additional demand for our oilfield solution segment products and services. We also incurred increased utility costs due to inflationary pressures, increased depreciation related to new infrastructure placed in service in 2022, and increased royalty expense due to increased water revenue.

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

Specific Factors Affecting Our Results

Sales

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

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

Our water sales and other products and services offered through our oilfield solutions segment are driven by demand from oil and gas exploration companies drilling in the Permian Basin. As such, demand for our water and other products and services is generally stronger during a cyclical expansion of oil and gas drilling. Likewise, a cyclical contraction of oil and gas drilling may decrease demand for our water.

Cost of Goods Sold

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

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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 the plant, 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.

We pay royalties to federal, state, and private lessors under our mineral leases. These payments typically equal a percentage of sales (less freight) of minerals extracted and sold under the applicable lease. In some cases, federal royalties for potash are paid on a sliding scale that vary with the grade of ore extracted. Our average royalty rate was 4.8%, 4.7%, and 5.0% in 2022, 2021, and 2020, respectively.

We incur costs to transfer water from our water source to our customers' facilities. Our operating costs depend on the distance and amount of water we must transfer. For water sold from certain of our water sources, we pay the State of New Mexico $0.11 per barrel of water sold. Additionally, water rights in New Mexico are subject to a stated point of diversion, purpose and place of use, and many of our water rights were originally issued for uses relating to our mining operations, or in the case of the water rights at Intrepid South, for agricultural uses. To sell water commercially under these rights, we must apply for a permit from the OSE to change point of diversion, purpose and/or place of use of the underlying water rights. Third parties often protest our applications and the decisions made by the OSE concerning the changes to our water rights permits. As we have worked to sell more water commercially, we have incurred significant legal expenses associated with defending our water rights as they proceed through adjudication and obtaining water permits and approvals.

Income Taxes

We are a subchapter C corporation and are therefore, subject to U.S. federal and state income taxes on our taxable income. We recognize deferred tax assets and liabilities for the tax effect of temporary differences between the financial statement and tax basis of recorded assets and liabilities at enacted tax rates in effect when the related taxes are expected to be settled or realized. We also reduce deferred tax assets by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining how much of a valuation allowance to recognize we consider our projections of future taxable income. All available evidence, both positive and negative, that may affect the realizability of deferred tax assets is identified and considered in determining the appropriate amount of the valuation allowance. We have concluded a valuation allowance of $2.0 million was required as of December 31, 2022, and December 31, 2021.

The amount of valuation allowance was the same in 2022 as compared to 2021. Our effective tax rate for the years ended December 31, 2022, 2021, and 2020 was 25.2%, (509.9)%, and 0.0%, respectively. Our effective income tax rates are impacted primarily by changes in the underlying tax rates in jurisdictions in which we are subject to income tax, the need for a valuation allowance or release, and permanent differences between book and tax income for the period, including the benefit associated with the estimated effect of the percentage depletion deduction.

The effective tax rate for the year ended December 31, 2022, differs from the U.S. federal statutory rate primarily due to state income taxes, while the effective tax rate for the years ended December 31, 2021, and 2020, differs from the U.S. federal statutory rate due to the change in valuation allowance.

During the year ended December 31, 2022, we recognized $19.4 million of deferred federal tax expense, $3.9 million of deferred state tax expense, and $1.0 million of current state income tax expense. During the year ended December 31, 2021, we recognized $157.3 million of deferred federal tax benefit, $51.7 million of deferred state tax benefit and $0.2 million of current state income tax expense. For the year ended December 31, 2020, we recognized an immaterial amount of income tax expense.

The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted most significantly by the states in which we conduct business. Changing business conditions for normal business transactions and operations as well as changes to state tax rate and apportionment laws potentially alter our apportionment of income among the states for income tax purposes. These changes in apportionment laws result in changes in the calculation of our current and deferred income taxes, including the valuation of our deferred tax assets and liabilities. The effects of any such changes are recorded in the period of the adjustment. These adjustments can increase or decrease the net deferred tax asset on the balance sheet and impact the corresponding deferred tax benefit or deferred tax expense on the income statement.

A valuation allowance is recognized for deferred tax assets if it is more likely than not that a portion or all of the net deferred tax assets will not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning

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strategies, and results of recent operations. As of December 31, 2022, we were in a cumulative three-year income position. The cumulative three-year income position is significant positive evidence when evaluating the realizability of our deferred tax assets. Additionally, industry trends and forecasts as well as internal forecasts of future business show sustained amounts of taxable income. Thus, we have concluded it is more likely than not that most of our $187.8 million of deferred tax assets will be realized.

Liquidity and Capital Resources

Our operations have primarily been funded from cash on hand, cash generated by operations, and proceeds from debt and equity offerings. During 2022, we generated $88.8 million in cash flows from operating activities and we ended the year with $18.5 million of cash and cash equivalents, compared with cash on hand of $36.5 million at December 31, 2021.

As of December 31, 2022, we had $149.0 million available to borrow under our credit facility, no outstanding borrowings, and $1.0 million outstanding in a letter of credit. With the remaining availability under our credit facility and expected cash generated from operations, we believe we have sufficient liquidity to meet our obligations for the next twelve months.

We continue to monitor our future sources and uses of cash and anticipate that we will adjust our capital allocation strategies, as determined by our Board of Directors. We may, at any time we deem conditions favorable, attempt to improve our liquidity position by accessing debt or equity markets in accordance with our existing revolving credit agreement. We also may raise capital in the future through the issuance of additional equity or debt securities, subject to prevailing market conditions. However, there is no assurance that we will be able to successfully raise additional capital on acceptable terms or at all.

The following summarizes our cash flow activity for the years ended December 31, 2022, and 2021:

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Our revolving credit agreement contains restrictions on our ability to declare and pay dividends. The terms of our credit facility prohibit us from declaring and paying a dividend unless availability under the credit facility after giving effect to the dividend and during a specified period before the dividend is more than $15 million.

Operating Activities

Total cash provided by operating activities for the year ended December 31, 2022, was $88.8 million, an increase of $9.8 million compared with the year ended December 31, 2021. The increase was mainly driven by an increased potash and Trio® net realized sales price partially offset by reduced sales volumes of both potash and Trio®. Operating cash flows included a $32.6 million refund paid in September 2022 of a customer's prepayment for future water deliveries.

Investing Activities

Total cash used in investing activities increased $64.4 million in 2022, compared to 2021, primarily related to a $48.9 million increase in additions to property, plant, equipment, and mineral properties. Purchases of investments increased $12.0 million compared to the prior year primarily due to investments in investment grade, short-term debt instruments. In May 2021, we sold 326 acres of land in Texas that was adjacent to our South ranch for $6.0 million. This land was originally purchased in May 2019 for the potential development of a produced water disposal facility. Proceeds from the sale of property, plant, equipment, and mineral properties totaled $4.8 million during 2020 due primarily to a strategic sale of land on our Intrepid South property.

Financing Activities

Total cash flows used in financing activities decreased $19.6 million in 2022, as compared to 2021. During 2022, we paid $22.0 million under a share repurchase program. We did not repurchase any shares in 2021. During 2021, we made payments under our credit facility of $29.8 million and in June 2021, we paid $15.6 million, including the make-whole payment, to retire our Series B Senior Notes. We did not have any outstanding borrowings under our credit facility in 2022.

Share Repurchase Program

In February 2022, our Board of Directors approved a $35 million share repurchase program. Under the share repurchase program, we may repurchase shares from time to time in the open market or in privately negotiated transactions. The timing, volume and nature of share repurchases, is at our sole discretion and is dependent on market conditions, liquidity, applicable securities laws, and other factors. We may suspend or discontinue the share repurchase program at any time. For the twelve months ended December 31, 2022, we repurchased 608,657 shares with a total cost of $22.0 million, or a weighted average price per share of $36.17. As of December 31, 2022, we have approximately $13.0 million of remaining availability under the share repurchase program.

Senior Notes

In June 2021 we repaid the remaining $15.0 million of principal outstanding on our Series B Senior Notes and satisfied all obligations under the related Note Purchase Agreement. In connection with this repayment, the Company paid in aggregate approximately $15.6 million, which consisted of (i) $15.0 million of remaining aggregate principal amount of Series B Senior Notes, (ii) approximately $0.1 million of accrued interest and (iii) a "make-whole" premium of $0.5 million. As a result of the repayment, the Note Purchase Agreement was terminated.

Credit Facility

In August 2022, we and certain of our subsidiaries entered into the Second Amended and Restated Credit Agreement with a syndicate of lenders with the Bank of Montreal, as administrative agent, which provides for a revolving credit facility. The agreement amended our existing revolving credit facility to, among other things, increase the amount available under the facility from $75 million to $150 million, extend the maturity date to August 4, 2027, and transition from LIBOR (London Interbank Offered Rate) to SOFR (Secured Overnight Financing Rate) as a reference rate for borrowings under the credit agreement. Borrowings under the amended credit facility bear interest at SOFR plus an applicable margin of 1.50% to 2.25% per annum, based on our leverage ratio as calculated in accordance with the amended agreement governing the revolving credit facility. Borrowings under the revolving credit facility are secured by substantially all of our current and non-current assets, and the obligations under the credit facility are unconditionally guaranteed by several of our subsidiaries.

We occasionally borrow and repay amounts under the facility for near-term working capital needs or other purposes and may do so in the future. For the year ended December 31, 2022, we made no borrowings or repayments under the facility. For the year ended December 31, 2021, we made no borrowings and made $29.8 million repayments, under the facility. As of December 31, 2022, and 2021, we had no borrowings outstanding and $1.0 million in an outstanding letter of credit under the facility. We had $149.0 million available under the facility as of December 31, 2022.

We were in compliance with the applicable covenants under the facility as of December 31, 2022.

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Capital Investments

During 2022, we paid cash of $68.7 million to acquire property, plant, equipment, and mineral properties.

We expect to make capital investments in 2023 of $60 million to $75 million. We anticipate spending approximately $25 million to $35 million on sustaining capital projects in 2023, with the remainder of our estimated spending on opportunity projects. We have significant discretion over our opportunity capital investments in 2023 and we may adjust our investment plans as our expectations for 2023 change. We anticipate our 2023 operating plans and capital programs will be funded out of operating cash flows and existing cash. We may also use our revolving credit facility, to the extent available, to fund capital investments.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements. Actual results could differ from our estimates and assumptions, and these differences could result in material changes to our financial statements.

Our significant accounting policies are further described in Note 2 to our audited consolidated financial statements included in "Item 8. Financial Statements and Supplemental Data" of this Annual Report. We believe the following accounting policies include a higher degree of subjective and complex judgments in their application and are most critical to aid in fully understanding and evaluating our reported financial condition and results of operations.

Reserves and Resources

We prepare our reserves and resources estimates in accordance with SEC requirements. We have prepared these reserve and resources estimates and they have been reviewed and independently determined by mine consultants. We express tons of potash and langbeinite in resources and reserves in terms of expected finished tons of product to be realized, net of estimated losses. Market price fluctuations of potash or Trio®, as well as increased production costs or reduced recovery rates, could render resources and reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of resources and reserves.

We deplete our mineral properties using the units-of production method. Under this method, we determine a depletion rate for one ton of finished product by dividing the total mineral properties net balance by the number expected finished tons of product, which is obtained from the resources and reserve estimates. Depletion expense is calculated by multiplying the number of tons of product produced by the depletion rate per ton.

Income Taxes

We are a subchapter C corporation and therefore are subject to U.S. federal and state income taxes. We recognize income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. We record a valuation allowance if it is deemed more likely than not that our deferred income tax assets will not be realized in full; such determinations are subject to ongoing assessment.

Non-GAAP Financial Measure

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

We believe average net realized sales price per ton provides useful information to investors for analysis of our business. We use this non-GAAP financial measure as one of our tools in comparing period-over-period performance on a consistent basis and when planning, forecasting, and analyzing future periods. We believe this non-GAAP financial measure is used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the potash mining industry. Many investors use the published research reports of these professional research analysts and others in making investment decisions.

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

Below is a reconciliation of average net realized sales price per ton for potash and Trio® to the most directly comparable GAAP measure for the years ended December 31, 2022, and 2021 (in thousands, except per ton amounts):

ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis should be read in conjunction with the accompanying consolidated financial statements and related notes contained in "Item 8. Financial Statements and Supplemental Data" of this Annual Report on Form 10-K.

This Management's Discussion and Analysis contains forward‑looking statements that involve risks, uncertainties, and assumptions as described under the heading "Cautionary Note Regarding Forward‑Looking Statements," in Part I of this Annual Report on Form 10-K. Our actual results could differ materially 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.

A discussion of the changes in our results of operations between the years ended December 31, 2020 and December 31, 2019 has been omitted from this Annual Report on Form 10-K but may be found in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 2, 2021, which is available free of charge on the SEC's website at www.sec.gov and our corporate website (www.intrepidpotash.com).

Overview

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

Our extraction and production operations are conducted entirely in the continental United States. We produce potash from three solution mining facilities: our HB solution mine in Carlsbad, New Mexico, our solution mine in Moab, Utah and our brine recovery mine in Wendover, Utah. We also operate our North compaction facility in Carlsbad, New Mexico, which compacts and granulates product from the HB mine. We produce Trio® from our conventional underground East mine in Carlsbad, New Mexico. Until mid-2016, we also produced potash from our East and West mines in Carlsbad, New Mexico.

We have permitted, licensed, declared and partially adjudicated water rights in New Mexico under which we sell water primarily to support oil and gas development in the Permian Basin near our Carlsbad facilities. We continue to work to expand our sales of water. In May 2019, we acquired certain land, water rights, state grazing leases for cattle, and other related assets from Dinwiddie Cattle Company. We refer to these assets and operations as "Intrepid South." Due to the strategic location of Intrepid South, part of our long-term operating strategy is selling small parcels of land to other companies, where such sales provide a solution to a company's need.

We have three segments: potash, Trio®, and oilfield solutions. We account for the sale of byproducts as revenue in the potash or Trio® segment based on which segment generated the byproduct. For each of the years ended December 31, 2021, 2020, and 2019, a majority of our byproduct sales were accounted for in the potash segment.

Significant Business Trends and Activities

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

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

Economic activity and our financial results improved in 2021 as most cities and states reduced restrictions when compared to 2020. Given the dynamic nature of the COVID-19 pandemic, we cannot reasonably estimate the impacts of COVID-19, if any, on our financial condition, results of operations, liquidity or cash flows in the future. We expect that if governmental authorities increase restrictive orders, such actions may have a material effect on revenue growth, financial

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condition, liquidity, and overall profitability in future reporting periods. Please see further discussion under "Item 1A. Risk Factors."

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

•Potash pricing and demand. Potash remained a significant driver of our profitability, comprising 48% of our total sales in 2021. Our average net realized sales price for potash increased in 2021 to $353 per ton compared to $250 per ton for 2020 due to multiple price increases since the summer of 2020. The posted price for agricultural potash, announced in December 2021, was $725 per ton or $480 per ton above the 2020 summer fill program. After this announcement, we booked orders for first quarter 2022 delivery and continue to fill orders as the spring season begins. Another price increase of $25 per ton was announced in February 2022 for second quarter deliveries. Strong commodity prices continue to support application rates across our markets and we believe customers see good value in potash in today's market. Our price expectations could be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases as a result of the COVID-19 pandemic or other reasons, and the price and availability of other potassium products.

Our sales volumes into industrial markets improved in 2021 compared to the prior year as oilfield activity rebounded from 2020. The majority of our industrial potash sales are into oil and gas markets and correlate to drilling and completion activity, which slowed significantly during 2020 due to the containment actions taken to help reduce the spread of COVID-19. Oil price remains supportive of drilling and completion activity although additional or renewed restrictions enacted in response to the COVID-19 pandemic may impact our sales if such actions affect available labor, transportation logistics, or cause supply disruptions.

Global effective production capacity continues to exceed demand and larger producers have worked to balance the market through production curtailments. Sanctions on Belarusian potash imports were recently announced and are expected to take effect in April 2022. Belarusian potash has historically supplied approximately 7% of the annual potash consumption in the United States. We expect other suppliers will increase their volume of imports in response to the sanctions although timing of these changes and the overall effect of the sanctions on the potash market are uncertain. As a small producer, domestic pricing of our potash is influenced principally by the price established by our competitors. The interaction of global potash supply and demand, ocean, land, and barge freight rates, currency fluctuations, and crop commodity values and outlook, also influence pricing.

•Trio® pricing and demand. Our average net realized sales price for Trio® increased to $295 per ton in 2021, compared to $195 per ton in 2020 as we announced multiple Trio® price increases over the past 18 months. In December 2021, we announced a $30 to $40 per ton price increase depending on grade, bringing our posted price to $480 per ton for Trio® granular and $505 per ton for Trio® premium. Similar to potash, after the price announcement, we saw good subscription from our historic customers and committed a majority of our first quarter volumes. We announced a $35 per ton price increase in February 2022, effective immediately, and we are starting to book sales at the higher price levels. Our ability to realize the increased prices may be affected by, among other things, weather, planting decisions, rail car availability, commodity price decreases as a result of the COVID-19 pandemic, and the price and availability of other potassium products.

Overall average net realized sales price per ton for Trio® will continue to be impacted by the percentage of international sales, particularly to offshore markets. Competition from lower cost alternatives and freight costs continue to negatively impact our average net realized sales price per ton to offshore markets. Limited supply of containers and vessels in recent quarters has also increased the cost of international shipments compared to previous years, further pressuring our margins into international markets. We plan to continue a price-over-volume strategy internationally, by focusing on those international markets where we obtain the highest average net realized sales price per ton and thus the highest margin.

We experience seasonality in domestic Trio® demand, with more purchases coming in the first and second quarters in advance of the spring application season in the U.S. In turn, we generally have increased inventory levels in the third and fourth quarters in anticipation of expected demand for the following year. We continue to operate our facilities at reduced production levels that approximate expected demand and allow us to manage inventory levels. If we experience reduced demand for Trio® due to warehouse closures or other effects from the COVID-19 pandemic, we may need to further reduce production rates to manage inventory levels.

•Water sales. Water sales increased in 2021 to $22.0 million, compared to $20.4 million in 2020 as oilfield activity in the Delaware Basin improved throughout 2021, supported by increasing oil prices. Compared to previous years, fracs

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are requiring more total water and higher daily refresh rates which required us to purchase more third party water than in previous years. Although water sales have improved compared to previous years, some operators have switched to using exclusively recycled water or a combination of fresh water and recycled water when completing wells. We believe this change is due to the growing focus on environmentally friendly operations and a response to the large amounts of produced water that is present in certain basins and formations, such as the Delaware Basin in southeast New Mexico. By recycling and reusing produced water, operators are able to reduce fresh water purchases and decrease the cost of transporting and disposing of produced water into disposal wells.

An update to legal proceedings concerning our water rights is contained in Note 14 to our audited consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

•Byproduct sales. Byproduct sales increased to $26.2 million in 2021 compared to $20.5 million in 2020, primarily due to a $3.0 million increase in magnesium chloride sales. Record wet weather in the summer of 2019 in Wendover limited our production of magnesium chloride, reducing sales in the first half of 2020. Our 2021 sales of magnesium chloride were near historic averages. Salt sales increased $1.6 million in 2021 compared to the prior year due mainly to growth in the pool salt market. Byproduct water sales increased $0.7 million compared to 2020 as we saw increased oilfield activity, particularly in the second half of 2021.

•Weather impact. Evaporation rates in 2021 were below average across our facilities which led to decreased potash production in the second half of 2021 and will lead to decreased potash production in the spring of 2022 when compared to the prior year. We received a significant amount of rainfall at our HB facility in Carlsbad, New Mexico late in the summer which limited the amount of solids available in our ponds. As a result of the reduced potash production, we recorded abnormal production costs of $3.6 million and $2.4 million in the third and fourth quarters of 2021 respectively.

•Diversification of products and services. We increased our revenue from byproducts and other oilfield products and services in 2021 when compared to the prior year. As oilfield activity increased in the Delaware Basin throughout 2021, we saw a corresponding increase in revenue from right-of-way agreements, surface damages and easements, caliche sales, brine sales, and a produced water royalty. These sales generated revenue of $7.2 million in 2021 compared to $4.2 million in 2020, and with the exception of our brine sales, incur either minimal or no operating expense. As operators increase the use of recycled water in their completion activity we acquired multiple mobile recycling units in the second half of 2021 with the intent of adding produced water recycling services in 2022.

We announced in the first quarter of 2022 a joint feasibility study alongside the New Mexico Water Consortium and the New Mexico Environment Department to evaluate the potential of using treated produced water from oil and gas operations as injectate for our HB solar solution mine. Recycling and treatment technology have improved considerably over the last few years and the potential to convert a waste stream into a sustainable source for producing potash is a unique opportunity for the basin and we look forward to the pilot project beginning as early as the third quarter of 2022.

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

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

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Consolidated Results

1Sales include sales of byproducts which were $26.2 million, $20.5 million and $26.5 million for the years ended December 31, 2021, 2020, and 2019, 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, 2021, and 2020

Sales

Our total sales increased $73.4 million, or 37% in 2021, compared to 2020, as potash sales increased $38.0 million, Trio® sales increased $25.8 million, magnesium chloride sales increased $3.0 million, salt sales increased $1.6 million, water sales increased $1.6 million, brine water sales increased $1.2 million and sales of our other products and services from our oilfield solutions segment increased $2.2 million.

Our combined potash and Trio® sales increased $63.8 million in 2021, compared to 2020. Our potash average net realized sales price per ton increased 41% and our Trio® average net realized sales price per ton increased 51% in 2021 compared to 2020. Rising crop prices have driven strong demand for potash and Trio® which, combined with tight supplies have driven the significant increases in both our potash and Trio® average net realized sales prices per ton during 2021.

Our total water sales, including byproduct water sales increased 8% in 2021 compared to 2020, as oil and gas activities near our facilities in New Mexico continued to rebound from the negative economic effects caused by the COVID-19 pandemic.

Our total byproduct sales, excluding byproduct water sales, increased $5.0 million during 2021 compared to 2020. Our magnesium chloride sales increased 62% as we had more product to sell during 2021, as compared to 2020, as above average evaporation at our Wendover facility during the summer of 2020 resulted in more product available to sell during 2021. Our byproduct brine water sales increased 34% as oil and gas activities increased as discussed above. Our byproduct salt sales increased 18% due mainly to an increase in sales to the pool salt market.

Cost of Goods Sold

Our cost of goods sold increased $25.6 million, or 19%, in 2021, as compared to 2020 due to a $6.0 million increase in labor and benefits expense, a $5.2 million increase in third party water purchases on our South ranch to meet daily frac requirements, and a $3.3 million increase in royalty expense as a result of higher fertilizer prices. Inflationary pressures and rising commodity prices led to a $3.0 million increase in energy expense across our facilities and a $2.2 million increase in maintenance and operating supplies. Reduced production at our HB facility also increased our per ton of cost of goods sold compared to the prior year.

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Abnormal Production Costs

The Carlsbad, New Mexico area where our HB solar solution mining facility is located, received significant rainfall, well above the historical rainfall average during this period. Additionally, humidity was higher than normal and temperatures were cooler than average during this period which reduced our pond production and our ability to extract brine. Because of the wet, humid weather and cooler temperatures, we have fewer harvestable tons of potash from our HB solution ponds. Accordingly, we recorded abnormal production costs of $6.0 million, and we may incur additional abnormal production costs in future periods. We did not incur any abnormal production costs in 2020.

Gross Margin

Our gross margin percentage increased to 21% in 2021, compared to 5% in 2020. The increase was driven primarily by an increase in sales driven by an increase in our average net realized sales price per ton for both potash and Trio®, partially offset by the increase in abnormal production costs and our cost of goods sold, as discussed above.

Selling and Administrative Expense

In 2021, selling and administrative expenses decreased $1.5 million or 6% from 2020. This was due mainly to a $1.6 million decrease in legal and other professional services expenses in 2021, as compared to 2020. During 2020, we incurred increased legal and other professional services expenses relating to the settlement of outstanding litigation during 2020, and defending various protests to our water rights. The decrease in legal and other professional services expenses was partially offset by increased bonus expense for administrative labor.

Litigation Settlement

A settlement conference was held with Mosaic in late March 2020 related to ongoing litigation. Intrepid and Mosaic agreed to settle the matter and we paid Mosaic an aggregate of $10 million to dismiss all claims against us in this litigation, and the matter is now closed. Please see further information in Note 14 to our audited consolidated financial statements included in "Item 8. Financial Statements and Supplemental Data" of this Annual Report on Form 10-K.

Gain on Sale of an Asset

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

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

Other Operating Expense

In 2021, we recognized other operating expense of $0.2 million compared to $0.7 million in 2020. In 2021, care and maintenance expenses increased $0.6 million that were partially offset by other operating income recorded related to earning certain contractual bonuses on a project to modify the tailings pond at our West facility. We modified our West tailings pond to allow for the construction of an underground natural gas pipeline near our West facility. During 2020, we recorded $0.4 million in care and maintenance expense and $0.3 million in other expenses.

Interest Expense

Interest expense decreased $2.8 million in 2021 compared to 2020, as we repaid the outstanding balance of our Series B Senior Notes in June 2021, and we repaid the outstanding balance on our credit facility in early August 2021.

Gain on Extinguishment of Debt

In April 2020, we received a $10 million loan under the CARES Act Paycheck Protection Program (the "PPP"). In June 2021, we received notice that the SBA had remitted funds to our bank to fully repay our PPP loan and accrued interest. Accordingly, we recognized a gain of $10.1 million related to the forgiveness of the PPP loan and the associated accrued interest on the loan.

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Income Tax Benefit

During 2021, our valuation allowance for deferred tax assets decreased as we released $215.9 million from the valuation allowance during the fourth quarter. We released the valuation allowance because our long-term projection of future taxable income indicates that we will be able to realize the value of most of our deferred tax assets in the future. The release of our valuation allowance allowed us to record a tax benefit of $208.9 million during 2021.

Net Income

Net income increased from a net loss of $27.2 million in 2020 to net income of $249.3 million in 2021. The increase was primarily due to releasing $215.9 million of our valuation allowance for deferred taxes, a $10.1 million gain related to the forgiveness of the PPP loan and the improvement in our gross margin, as discussed above. Excluding the release of our valuation allowance for deferred taxes, our net income would have been $33.9 million.

Potash Segment Results

1Potash segment sales include byproduct sales which were $21.3 million, $15.6 million and $21.2 million for the years ended December 31, 2021, 2020, and 2019, respectively.

2Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization 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, 2021, and 2020

Our total potash segment sales in 2021 increased $43.7 million, or 40%, as compared to 2020, as potash sales recorded in the potash segment increased 41% and potash segment byproduct sales increased 37%.

Potash sales recorded in the potash segment increased $38.0 million, or 41%, in 2021 compared to 2020, as the average potash net realized sales price per ton increased 41%, and we sold 4% more tons of potash. Strong crop commodity prices and tight near-term inventory levels led to multiple potash price increases during 2021. We saw increased potash tons sold into the agricultural and industrial markets, while potash tons sold into the animal feed market were similar to prior year.

Potash segment byproduct sales increased $5.7 million, or 37%, in 2021 compared to 2020, due to a $3.0 million increase in byproduct magnesium chloride sales, a $1.5 million increase in byproduct salt sales, an $0.8 million increase in byproduct water sales and a $0.4 million increase in byproduct brine water sales. Our magnesium chloride sales increased as we had more product to sell in 2021, due to good evaporation during the summer of 2020. Our salt sales increased as we increased sales in the pool salt market in 2021. Byproduct water and byproduct brine water sales increased in 2021 as oilfield activities increased as many of the containment measures that were adopted during 2020 in response to the COVID-19 pandemic were relaxed in 2021.

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Potash cost of goods sold increased $13.8 million, or 19%, in 2021, as compared to 2020, due to a $2.6 million increase in labor and benefits expense, a $1.6 million increase in energy expense, a $1.1 million increase in contract labor for various maintenance projects, and a $2.1 million increase in royalty expense as a result of higher fertilizer prices. Reduced production at our HB facility also increased our per ton of cost of goods sold compared to the prior year.

Potash segment freight expense increased $0.5 million, or 3%, in 2021, as compared to 2020, mainly driven by an increase in freight expense related to selling 4% more tons of potash. Our freight expense is also impacted by the rates charged by carriers, geographic distribution of our products and by the proportion of customers arranging for and paying their own freight costs.

We produced 7% fewer tons of potash during 2021 compared to 2020, mainly due to the wet weather and reduced evaporation rates at our HB solar solution facility. We recorded abnormal production expenses of $6.0 million in 2021, as we had fewer harvestable tons of potash in our HB solution ponds. We did not record any abnormal production costs during 2020. We expect our near-term potash production from our HB facility will be lower than average, and we may incur additional abnormal production costs in future periods.

Our potash segment gross margin increased $24.3 million in 2021, compared to 2020, due mainly to the $43.7 million increase in potash segment sales, as discussed above.

Potash Segment - Additional Information

The table below shows our potash sales mix for 2021, 2020, and 2019.

Trio® Segment Results

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1Trio® segment sales include byproduct sales which were $4.9 million, $4.9 million and $5.3 million for the years ended December 31, 2021, 2020, and 2019, respectively.

2Depreciation, depletion, and amortization incurred excludes depreciation, depletion, and amortization 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, 2021, and 2020

Our total Trio® segment sales increased $25.8 million, or 37%, in 2021, as compared to 2020, as Trio® sales increased 39%, while Trio® segment byproduct sales were flat.

Our 2021 Trio® sales increased $25.8 million, or 39%, in 2021, as compared to 2020, as our average net realized sales price per ton increased 52% and we sold 4% more Trio® tons. Our Trio® average net realized sales price per ton increased as rising crop prices and the continued economic rebound from the COVID-19 pandemic drove an increase in demand. Trio® tons sold domestically increased 13% in 2021, as compared to 2020. The 2021 increase in domestic tons of Trio® sold was partially offset by a decrease in international tons sold, as we continue to focus our Trio® sales on the domestic market, which has a higher average net realized sales price per ton due to lower freight costs incurred for domestic sales as compared to international sales

Trio® freight costs increased 1% in 2021, compared to 2020. While we sold 4% more tons in 2021, we sold more tons of Trio® domestically and fewer tons of Trio® internationally. We incur less freight expense on our domestic Trio® sales compared to international Trio® sales. Our freight expense is impacted by the geographic distribution of our Trio® sales and by the proportion of customers arranging for and paying their own freight costs.

Our Trio® cost of goods sold increased 8% in 2021, as compared to 2020, primarily due to a 4% increase in Trio® tons sold during 2021. We also incurred higher labor and benefits expense, royalty expense, and increased energy expense compared to the prior year, which increased our per ton costs of goods sold.

We recorded lower of cost or net realized value inventory adjustments of $2.9 million in 2020, as our weighted average price per ton was higher than our average net realized sales price per ton. As our average net realized sales price per ton increased 52% during 2021, we did not record any lower of cost or net realized value inventory adjustments during 2021.

Our Trio® segment generated a gross margin of $16.4 million in 2021, compared to a gross deficit of $8.5 million in 2020, due to the factors discussed above.

Trio® Segment - Additional Information

The table below shows the percentage of total Trio® sales that were sold internationally in the past three years.

Oilfield Solutions Segment Results

Oilfield Solutions Segment Results for the Years Ended December 31, 2021, and 2020

Our oilfield solutions segment sales increased 20% in 2021, compared to 2020. Water sales increased $0.9 million in 2021 to $15.6 million. Sales from right-of-way agreements, surface damages and easements increased $1.2 million, produced water disposal royalties increased $0.9 million and brine water sales increased $0.7 million. Other sales in our oilfield solutions segment, such as sales of caliche and other oilfield services increased $0.2 million.

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Our oilfield solutions sales are highly correlated to oil and gas activities near our facilities in New Mexico. Overall sales increased due to increased oil and gas activities in 2021 as compared to 2020 as oil prices continued to improve from the lows made in April 2020 due to the negative economic effects from the COVID-19 pandemic.

Cost of goods sold increased 69% in 2021, compared to 2020, primarily due to a $3.9 million increase in third-party water purchases to meet the significant daily refresh rates for certain fracs on our South ranch. Additionally, rental, lease, contract labor and depreciation expenses increased in 2021 as compared to 2020.

Gross margin decreased $4.0 million, or 54%, in 2021 compared to 2020, due to the factors described above.

Specific Factors Affecting Our Results

Sales

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

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

Our water sales and other products and services offered through our oilfield solutions segment are driven by demand from oil and gas exploration companies drilling in the Permian Basin. As such, demand for our water is generally stronger during a cyclical expansion of oil and gas drilling. Likewise, a cyclical contraction of oil and gas drilling may decrease demand for our water.

Cost of Goods Sold

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

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

We pay royalties to federal, state, and private lessors under our mineral leases. These payments typically equal a percentage of sales (less freight) of minerals extracted and sold under the applicable lease. In some cases, federal royalties for potash are paid on a sliding scale that vary with the grade of ore extracted. Our average royalty rate was 4.7%, 5.0%, and 5.0% in 2021, 2020, and 2019, respectively.

We incur costs to transfer water from our water source to our customers' facilities. Our operating costs depend on the distance and amount of water we must transfer. For water sold from certain of our water sources, we pay the State of New Mexico $0.11 per barrel of water sold. Additionally, water rights in New Mexico are subject to a stated point of diversion, purpose and place of use, and many of our water rights were originally issued for uses relating to our mining operations, or in

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the case of the water rights at Intrepid South, for agricultural uses. To sell water commercially under these rights, we must apply for a permit from the OSE to change point of diversion, purpose and/or place of use of the underlying water rights. Third parties often protest our applications and the decisions made by the OSE concerning the changes to our water rights permits. As we have worked to sell more water commercially, we have incurred significant legal expenses associated with defending our water rights as they proceed through adjudication and obtaining water permits and approvals.

Income Taxes

We are a subchapter C corporation and, therefore are subject to U.S. federal and state income taxes on our taxable income. We recognize deferred tax assets and liabilities for the tax effect of temporary differences between the financial statement and tax basis of recorded assets and liabilities at enacted tax rates in effect when the related taxes are expected to be settled or realized. We also reduce deferred tax assets by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining how much of a valuation allowance to recognize we consider our projections of future taxable income. All available evidence, both positive and negative, that may affect the realizability of deferred tax assets is identified and considered in determining the appropriate amount of the valuation allowance. We have concluded valuation allowances of $2.0 million and $217.9 million were required as of December 31, 2021, and 2020, respectively.

The amount of valuation allowance decreased in 2021 as compared to 2020 primarily from a release of $215.9 million of valuation allowance. Our effective tax rate for the years ended December 31, 2021, 2020, and 2019 was (509.9)%, 0.0%, and 0.4%, respectively. Our effective income tax rates are impacted primarily by changes in the underlying tax rates in jurisdictions in which we are subject to income tax, the need for a valuation allowance or release, and permanent differences between book and tax income for the period, including the benefit associated with the estimated effect of the percentage depletion deduction.

The effective tax rate for the years ended December 31, 2021, 2020, and 2019, respectively, differs from the U.S. federal statutory rate due to the change in valuation allowance.

During the year ended December 31, 2021, we recognized $157.3 million of deferred federal tax benefit, $51.7 million of deferred state tax benefit, and $0.2 million of current state income tax expense. During the years ended December 31, 2020, and 2019, we recognized an immaterial amount of income tax expense.

The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted most significantly by the states in which we conduct business. Changing business conditions for normal business transactions and operations as well as changes to state tax rate and apportionment laws potentially alter our apportionment of income among the states for income tax purposes. These changes in apportionment laws result in changes in the calculation of our current and deferred income taxes, including the valuation of our deferred tax assets and liabilities. The effects of any such changes are recorded in the period of the adjustment. These adjustments can increase or decrease the net deferred tax asset on the balance sheet and impact the corresponding deferred tax benefit or deferred tax expense on the income statement.

A valuation allowance is recognized for deferred tax assets if it is more likely than not that a portion or all of the net deferred tax assets will not be realized. In making such a determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. As of December 31, 2021, we were in a cumulative three-year income position. The cumulative three-year income position is significant positive evidence when evaluating the realizability of our deferred tax assets. Additionally, industry trends and forecasts as well as internal forecasts of future business show sustained amounts of taxable income. Thus, we have concluded it is more likely than not that most of our $211.1 million of deferred tax assets will be realized.

Liquidity and Capital Resources

Our operations have primarily been funded from cash on hand, cash generated by operations, and proceeds from debt and equity offerings. During 2021, we generated $79.1 million in cash flows from operating activities and we ended the year with $36.5 million of cash on hand, compared with cash on hand of $19.5 million at December 31, 2020.

In June 2021, we repaid the remaining $15.0 million of principal outstanding on our Series B Senior Notes and satisfied all obligations under the related Note Purchase Agreement. In connection with this repayment, the Company paid in aggregate approximately $15.6 million, which consisted of (i) $15.0 million of remaining aggregate principal amount of Series B Senior Notes, (ii) approximately $0.1 million of accrued interest and (iii) a "make-whole" premium of $0.5 million. As a result of the repayment, the Note Purchase Agreement was terminated.

In April 2020, we received a $10 million loan under the CARES Act Paycheck Protection Program (the "PPP"). In June 2021, we received notice that the SBA had remitted funds to our bank to fully repay our PPP loan and accrued interest.

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Accordingly, we recognized a gain of $10.1 million related to the forgiveness of the PPP loan and the associated accrued interest on the loan.

As of December 31, 2021, we had $74.0 million available to borrow under our credit facility, no outstanding borrowings, and $1.0 million outstanding in a letter of credit. With the remaining availability under our credit facility and expected cash generated from operations, we believe we have sufficient liquidity to meet our obligations for the next twelve months.

We continue to monitor our future sources and uses of cash and anticipate that we will adjust our capital allocation strategies when, and if, determined by our Board of Directors. We may, at any time we deem conditions favorable, attempt to improve our liquidity position by accessing debt or equity markets in accordance with our existing revolving credit agreement. We also may raise capital in the future through the issuance of additional equity or debt securities, subject to prevailing market conditions. However, there is no assurance that we will be able to successfully raise additional capital on acceptable terms or at all.

The following summarizes our cash flow activity for the years ended December 31, 2021, 2020, and 2019:

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Our revolving credit agreement contains restrictions on our ability to declare and pay dividends. The terms of our credit facility prohibit us from declaring and paying a dividend unless availability under the credit facility after giving effect to the dividend and during a specified period before the dividend is more than $15 million.

Operating Activities

Total cash provided by operating activities for the year ended December 31, 2021, was $79.1 million, an increase of $47.9 million compared with the year ended December 31, 2020. The increase was mainly driven by an increased potash and Trio® net realized sales price.

Investing Activities

Total cash used in investing activities decreased $0.3 million in 2021, compared to 2020, primarily related to a $2.4 million decrease in cash paid for investments and a $1.3 million increase in cash proceeds from the sale of property, plant, equipment, and mineral properties. Other additions to property, plant, equipment, and mineral properties increased $3.3 million in 2021 compared to 2020. In May 2021, we sold 326 acres of land in Texas that was adjacent to our South ranch for $6.0 million. This land was originally purchased in May 2019 for the potential development of a produced water disposal facility. Proceeds from the sale of property, plant, equipment, and mineral properties totaled $4.8 million during 2020 due primarily to a strategic sale of land on our Intrepid South property.

In the second quarter of 2020, we invested $3.5 million for an 11% equity stake in W.D. Von Gonten Laboratories ("WDVGL"). WDVGL is an industry leader in drilling and completion chemistry and a strong supporter of the use of potassium chloride in oil and gas drilling and completion activity.

Financing Activities

Total cash flows used in financing activities increased $30.2 million in 2021, as compared to 2020. During the third quarter of 2021, we made payments under our credit facility of $29.8 million. In June 2021, we paid $15.6 million, including the make-whole payment, to retire our Series B Senior Notes. In April 2020, we paid $20.0 million to retire our Series A Senior Notes at maturity. In July 2020, we paid $16.9 million, including the make-whole payment, to retire our Series C Senior Notes. During 2020, we borrowed an additional $10.0 million under our credit facility and received $10.0 million under the CARES Act Paycheck Protection Program.

We routinely review the creditworthiness of our customers and make decisions to limit our exposure whenever possible. As economic activities improved in 2021, our delinquencies declined as compared to 2020. During 2020, we saw an increase in delinquencies from our smaller customers that purchase water and brine at our truck stations. These smaller customers mainly serve oil and gas exploration companies and the COVID-19 pandemic had dramatically decreased oil and gas drilling activity.

Senior Notes

In June 2021 we repaid the remaining $15.0 million of principal outstanding on our Series B Senior Notes and satisfied all obligations under the related Note Purchase Agreement. In connection with this repayment, the Company paid in aggregate approximately $15.6 million, which consisted of (i) $15.0 million of remaining aggregate principal amount of Series B Senior Notes, (ii) approximately $0.1 million of accrued interest and (iii) a "make-whole" premium of $0.5 million. As a result of the repayment, the Note Purchase Agreement was terminated.

Credit Facility

We maintain a secured revolving credit facility with Bank of Montreal. As of December 31, 2021, borrowings under the credit facility bore interest at LIBOR (London Interbank Offered Rate) plus an applicable margin of 1.25% to 2.00% per annum, based on our leverage ratio. We have granted to Bank of Montreal a first lien on substantially all of our assets. The obligations under the credit facility are unconditionally guaranteed by several of our subsidiaries.

We occasionally borrow and repay amounts under the facility for near-term working capital needs or other purposes and may do so in the future. For the year ended December 31, 2021, we made no borrowings and repaid $29.8 million under the facility. For the year ended December 31, 2020, we borrowed $10.0 million and made no repayments, under the facility. As of December 31, 2021, we had no borrowings outstanding and $1.0 million in an outstanding letter of credit under the facility. As of December 31, 2020, we had $29.8 million of borrowings outstanding and $1.0 million in an outstanding letter of credit under the facility. We had $74.0 million available under the facility as of December 31, 2021.

We were in compliance with the applicable covenants under the facility as of December 31, 2021.

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PPP Loan

In April 2020, we received a $10 million loan under the CARES Act Paycheck Protection Program (the "PPP"). In June 2021, we received notice that the SBA had remitted funds to our bank to fully repay our PPP loan and accrued interest. Accordingly, we recognized a gain of $10.1 million related to the forgiveness of the PPP loan and the associated accrued interest on the loan.

Capital Investments

During 2021, we paid cash of $19.8 million to acquire property, plant, equipment, and mineral properties. Due to the economic uncertainty as a result of the COVID-19 pandemic, particularly in oil and gas markets near our operations, we limited our 2021 capital program to mostly sustaining capital projects.

We expect to make capital investments in 2022 of $40 million to $60 million. We anticipate spending approximately $25 million to $35 million on sustaining capital projects in 2022, with the remainder of our estimated spending on opportunity projects. We have significant discretion over our opportunity capital investments in 2022 and we may adjust our investment plans as our expectations for 2022 change. We anticipate our 2022 operating plans and capital programs will be funded out of operating cash flows and existing cash. We may also use our revolving credit facility, to the extent available, to fund capital investments.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements. Actual results could differ from our estimates and assumptions, and these differences could result in material changes to our financial statements.

Our significant accounting policies are further described in Note 2 to our audited consolidated financial statements included in "Item 8. Financial Statements and Supplemental Data" of this Annual Report on Form 10-K. We believe the following accounting policies include a higher degree of subjective and complex judgments in their application and are most critical to aid in fully understanding and evaluating our reported financial condition and results of operations.

Reserves and Resources

We prepare our reserves and resources estimates in accordance with SEC requirements. We have prepared these reserve and resources estimates and they have been reviewed and independently determined by mine consultants. We express tons of potash and langbeinite in resources and reserves in terms of expected finished tons of product to be realized, net of estimated losses. Market price fluctuations of potash or Trio®, as well as increased production costs or reduced recovery rates, could render resources and reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of resources and reserves.

We deplete our mineral properties using the units-of production method. Under this method, we determine a depletion rate for one ton of finished product by dividing the total mineral properties net balance by the number expected finished tons of product, which is obtained from the resources and reserve estimates. Depletion expense is calculated by multiplying the number of tons of product produced by the depletion rate per ton.

Indefinite-lived Intangible Assets

Water rights are accounted for as indefinite-lived intangible assets and are not amortized. We test indefinite-lived intangible assets for impairment at least annually on October 1, and more frequently if circumstances require. We use a qualitative assessment to determine whether it is more likely than not that the fair value of the intangible is less than its carrying value. If our qualitative assessment indicates it is more likely than not that the fair value of the intangible asset is less than its carrying value, we estimate the fair value of the intangible asset and record an impairment loss based on the excess of the carrying amount of the intangible asset over its estimated fair value. Fair value is estimated using quoted market prices, if available. If quoted market prices are not available, the estimated fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. Changes in significant assumptions underlying fair value estimates may have a material effect on our financial position and results of operations.

Asset Retirement Obligations

All of our mining properties involve certain reclamation liabilities as required by the states in which they operate or by the BLM. Reclamation costs are initially recorded as a liability associated with the asset to be reclaimed or abandoned, based on

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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 the time or amount of the reclamation and abandonment costs. These asset retirement obligations are reviewed and updated at least annually with any changes in balances recorded as adjustments to the related assets and liabilities. The estimates of amounts to be spent are subject to considerable uncertainty and long timeframes. Changes in these estimates could have a material impact on our results of operations and financial position.

Income Taxes

We are a subchapter C corporation and therefore are subject to U.S. federal and state income taxes. We recognize income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. We record a valuation allowance if it is deemed more likely than not that our deferred income tax assets will not be realized in full; such determinations are subject to ongoing assessment.

Non-GAAP Financial Measure

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

We believe average net realized sales price per ton provides useful information to investors for analysis of our business. We use this non-GAAP financial measure as one of our tools in comparing period-over-period performance on a consistent basis and when planning, forecasting, and analyzing future periods. We believe this non-GAAP financial measure is used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the potash mining industry. Many investors use the published research reports of these professional research analysts and others in making investment decisions.

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

Below is a reconciliation of average net realized sales price per ton for potash and Trio® and to the most directly comparable GAAP measure for the years ended December 31, 2021, 2020, and 2019 (in thousands, except per ton amounts):

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