Intrepid Potash, Inc. (Form: 10-Q, Received: 05/07/2019 14:08:22)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________

FORM 10-Q

_______________________________________________________



x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2019
or
¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ______ to ______

Commission File Number: 001-34025

INTREPID POTASH, INC.

(Exact Name of Registrant as Specified in its Charter)



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

(303) 296-3006

(Registrant’s telephone number, including area code)

(Former address, if changed since last report)

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



Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	IPI	New York Stock Exchange

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

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

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



Large accelerated filer ¨	Accelerated filer x	Non - accelerated filer ¨
Smaller reporting company ¨	Emerging growth company ¨

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of April 30, 2019 , the registrant had outstanding 131,042,780 shares of common stock, par value $0.001 per share.

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INTREPID POTASH, INC.

TABLE OF CONTENTS



	Page
PART I - FINANCIAL INFORMATION	1
ITEM 1. Condensed Consolidated Financial Statements (Unaudited)	1
Condensed Consolidated Balance Sheets	1
Condensed Consolidated Statements of Operations	2
Condensed Consolidated Statements of Stockholders' Equity	3
Condensed Consolidated Statements of Cash Flows	4
Notes to Condensed Consolidated Financial Statements	5
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	15
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	26
ITEM 4. Controls and Procedures	26
PART II - OTHER INFORMATION	28
ITEM 1. Legal Proceedings	28
ITEM 1A. Risk Factors	28
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	28
ITEM 3. Defaults upon Senior Securities	28
ITEM 4. Mine Safety Disclosures	29
ITEM 5. Other Information	29
ITEM 6. Exhibits	30
Signatures	31

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PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

INTREPID POTASH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)



	March 31,			December 31,
	2019			2018
ASSETS
Cash and cash equivalents	$	34,032		$	33,222
Accounts receivable:
Trade, net	28,217			25,161
Other receivables, net	959			597
Inventory, net	86,270			82,046
Prepaid expenses and other current assets	7,480			4,332
Total current assets	156,958			145,358

Property, plant, equipment, and mineral properties, net	347,670			346,209
Long-term parts inventory, net	29,895			30,031
Other assets, net	3,594			3,633
Total Assets	$	538,117		$	525,231
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable:
Trade	$	12,017		$	9,107
Related parties	28			28
Income taxes payable	914			914
Accrued liabilities	8,535			8,717
Accrued employee compensation and benefits	4,204			4,124
Other current liabilities	10,725			11,891
Total current liabilities	36,423			34,781

Long-term debt, net	49,670			49,642
Asset retirement obligation	23,492			23,125
Operating lease liabilities	3,766			—
Other non-current liabilities	420			420
Total Liabilities	113,771			107,968
Commitments and Contingencies
Common stock, $0.001 par value; 400,000,000 shares authorized;
128,781,031 and 128,716,595 shares outstanding
at March 31, 2019, and December 31, 2018, respectively	129			129
Additional paid-in capital	650,130			649,202
Retained deficit	(225,913		)	(232,068		)
Total Stockholders' Equity	424,346			417,263
Total Liabilities and Stockholders' Equity	$	538,117		$	525,231

See accompanying notes to these condensed consolidated financial statements.

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INTREPID POTASH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)



	Three Months Ended March 31,
	2019			2018
Sales	$	57,554		$	57,320
Less:
Freight costs	10,456			10,483
Warehousing and handling costs	2,236			2,273
Cost of goods sold	31,694			36,659
Lower of cost or net realizable value inventory adjustments	—			705
Gross Margin	13,168			7,200

Selling and administrative	5,807			3,970
Accretion of asset retirement obligation	417			417
Care and maintenance expense	149			128
Other operating expense	371			168
Operating Income	6,424			2,517

Other Income (Expense)
Interest expense, net	(603		)	(878		)
Interest income	—			98
Other income	334			20
Income Before Income Taxes	6,155			1,757

Income Tax Expense	—			—
Net Income	$	6,155		$	1,757

Weighted Average Shares Outstanding:
Basic	128,730			127,661
Diluted	130,880			130,765
Earnings Per Share:
Basic	$	0.05		$	0.01
Diluted	$	0.05		$	0.01

See accompanying notes to these condensed consolidated financial statements.

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INTREPID POTASH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except share amounts)



	Common Stock		Additional Paid-in Capital		Retained Deficit		Total Stockholders' Equity
	Shares	Amount	Additional Paid-in Capital		Retained Deficit		Total Stockholders' Equity
Balance, December 31, 2017	127,646,530	128	645,813		(243,851	)	402,090
Net income	—	—	—		1,757		1,757
Stock-based compensation	—	—	947		—		947
Vesting of restricted common stock, net of common stock used to fund employee income tax withholding due upon vesting	30,708	—	(62	)	—		(62	)
Exercise of stock options	11,199	—	11		—		11
Balance, March 31, 2018	127,688,437	128	646,709		(242,094	)	404,743



	Common Stock			Additional Paid-in Capital			Retained Deficit			Total Stockholders' Equity
	Shares	Amount		Additional Paid-in Capital			Retained Deficit			Total Stockholders' Equity
Balance, December 31, 2018	128,716,595	$	129	$	649,202		$	(232,068	)	$	417,263
Net income	—	—		—			6,155			6,155
Stock-based compensation	—	—		1,031			—			1,031
Vesting of restricted common stock, net of common stock used to fund employee income tax withholding due upon vesting	55,249	—		(112		)	—			(112		)
Exercise of stock options	9,187	—		9			—			9
Balance, March 31, 2019	128,781,031	$	129	$	650,130		$	(225,913	)	$	424,346

See accompanying notes to these condensed consolidated financial statements.

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INTREPID POTASH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



	Three Months Ended March 31,
	2019			2018
Cash Flows from Operating Activities:
Net income	$	6,155		$	1,757
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	8,746			8,515
Accretion of asset retirement obligation	417			417
Amortization of deferred financing costs	68			183
Stock-based compensation	1,031			947
Lower of cost or net realizable value inventory adjustments	—			705
Loss on disposal of assets	19			(34		)
Allowance for parts inventory obsolescence	4			—
Changes in operating assets and liabilities:
Trade accounts receivable, net	(3,057		)	(11,828		)
Other receivables, net	(362		)	(207		)
Refundable income taxes	—			2,844
Inventory, net	(4,091		)	6,009
Prepaid expenses and other current assets	103			914
Accounts payable, accrued liabilities, and accrued employee compensation and benefits	2,455			1
Operating lease liabilities	(479		)	—
Other liabilities	(2,888		)	3,681
Net cash provided by operating activities	8,121			13,904

Cash Flows from Investing Activities:
Additions to property, plant, equipment, and mineral properties	(3,958		)	(6,470		)
Deposit on asset purchase	(3,250		)	—
Proceeds from sale of property, plant, equipment, and mineral properties	—			34
Net cash used in investing activities	(7,208		)	(6,436		)

Cash Flows from Financing Activities:
Proceeds from short-term borrowings on credit facility	—			13,500
Repayments of short-term borrowings on credit facility	—			(15,900		)
Employee tax withholding paid for restricted stock upon vesting	(112		)	(62		)
Proceeds from exercise of stock options	9			11
Net cash used in financing activities	(103		)	(2,451		)

Net Change in Cash, Cash Equivalents and Restricted Cash	810			5,017
Cash, Cash Equivalents and Restricted Cash, beginning of period	33,704			1,549
Cash, Cash Equivalents and Restricted Cash, end of period	$	34,514		$	6,566

Supplemental disclosure of cash flow information
Net cash paid (refunded) during the period for:
Interest	$	49		$	95
Income taxes	$	—		$	(2,843	)
Accrued purchases for property, plant, equipment, and mineral properties	$	1,435		$	933
Right-of-use assets exchanged for new operating lease liabilities	$	5,916		$	—

See accompanying notes to these condensed consolidated financial statements.

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INTREPID POTASH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Note 1	— COMPANY BACKGROUND

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

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

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

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


Note 2	— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Statement Presentation —Our unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation of interim financial information, have been included. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC on March 12, 2019.

Except for the accounting policies for leases that were updated as a result of adopting Accounting Standards Update ("ASU") No. 2016-02, Leases , as discussed in more detail below, there have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2018.

Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-02, Leases , ("ASC Topic 842"), which we adopted on January 1, 2019, using a modified retrospective method, applying the new standard to all leases existing at the date of initial application. We used the effective date as our date of initial application. Consequently, financial information will not be updated, and disclosures required under the new standard will not be provided for dates before January 1, 2019.

We determine if an arrangement is or contains a lease at inception of the arrangement.

The new standard requires lessees to recognize lease assets and liabilities on their balance sheet for those leases classified as operating leases under previous GAAP. These assets and liabilities are recorded generally at the present value of the contracted lease payments, using the rate implicit in the lease if known. If the implicit rate is not known, we use our estimated incremental borrowing rate.

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We do not account for lease and non-lease components separately and we do not apply the requirements of ASC Topic 842 to short-term leases with a term of one year or less at inception. Lease expense is recognized on a straight-line basis over the lease term.

As a result of adopting the new standard, we recorded operating lease right-of-use ("ROU") assets of $5.9 million and operating lease liabilities of $6.1 million on January 1, 2019.

Pronouncements Issued But Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - (Topic 326): Measurement of Credit Losses on Financial Instruments , which changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life. This guidance is effective for us for annual and interim periods beginning after December 15, 2019. Because we have historically experienced minimal bad debt expense related to our trade receivables, we do not expect the adoption of this standard to have a material impact on our condensed consolidated financial statements.

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


Note 3	— EARNINGS PER SHARE

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



	Three Months Ended March 31,
	2019		2018
Net income	$	6,155	$	1,757

Basic weighted-average common shares outstanding	128,730		127,661
Add: Dilutive effect of restricted stock	2,033		2,184
Add: Dilutive effect of stock options	117		920
Diluted weighted-average common shares outstanding	130,880		130,765


Basic	$	0.05	$	0.01
Diluted	$	0.05	$	0.01

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



	Three Months Ended March 31,
	2019	2018
Anti-dilutive effect of restricted stock	79	—

Anti-dilutive effect of stock options outstanding	1,701	545

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Note 4 — CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Total cash, cash equivalents and restricted cash, as shown on the condensed consolidated statements of cash flows are included in the following accounts at March 31, 2019, and 2018 (in thousands):



	March 31, 2019		March 31, 2018
Cash and cash equivalents	$	34,032	$	6,085
Restricted cash included in other long-term assets	482		481
Total cash, cash equivalents, and restricted cash as shown in the statement of cash flows	$	34,514	$	6,566

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

Note 5 — INVENTORY AND LONG-TERM PARTS INVENTORY

The following summarizes our inventory, recorded at the lower of weighted-average cost or estimated net realizable value, as of March 31, 2019 , and December 31, 2018 (in thousands):



	March 31, 2019		December 31, 2018
Finished goods product inventory	$	56,695	$	48,370
In-process mineral inventory	19,729		24,325
Total product inventory	76,424		72,695
Current parts inventory, net	9,846		9,351
Total current inventory, net	86,270		82,046
Long-term parts inventory, net	29,895		30,031
Total inventory, net	$	116,165	$	112,077

Parts inventory is shown net of estimated allowances for obsolescence of $1.7 million as of March 31, 2019, and December 31, 2018.

As a result of routine assessments of the lower of weighted-average cost or estimated net realizable value of our finished goods product inventory, we recorded charges of $0.7 million for the three months ended March 31, 2018. For the three months ended March 31, 2019, we recorded no such charges.

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

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



	March 31, 2019			December 31, 2018
Land	$	519		$	519
Ponds and land improvements	59,007			58,961
Mineral properties and development costs	139,443			139,418
Buildings and plant	81,483			81,429
Machinery and equipment	243,941			241,977
Vehicles	5,807			5,669
Office equipment and improvements	13,945			13,779
Operating lease ROU assets	5,916			—
Construction in progress	4,190			2,822
Total property, plant, equipment, and mineral properties, gross	$	554,251		$	544,574
Less: accumulated depreciation, depletion, and amortization	(206,581		)	(198,365		)
Total property, plant, equipment, and mineral properties, net	$	347,670		$	346,209

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



	Three Months Ended March 31,
	2019		2018
Depreciation	$	6,855	$	6,919
Depletion	1,418		1,596
Amortization of right of use assets	473		—
Total incurred	$	8,746	$	8,515


Note 7	— LEASES

We have operating leases for mining equipment, trucks, rail cars, and office space. Our operating leases have remaining leases terms ranging from less than one year to five years. Leases recorded on the balance sheet consist of the following (amounts in thousands):



Leases	Classification on the Balance Sheet	Balance as of March 31, 2019
Assets
Operating lease ROU assets, net	Property, plant, equipment, and mineral properties, net	$	5,443

Liabilities
Current operating lease liabilities	Other current liabilities	$	1,851
Non-current operating lease liabilities	Operating lease liabilities	$	3,766

Other information related to lease term and discount rate is as follows:

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	As of March 31, 2019
Weighted average remaining lease term - operating leases (in years)	3.1

Weighted average discount rate - operating leases	5.77	%

The components of lease expense are as follows:



	For the Three Months Ended March 31, 2019
The components of lease expense were as follows:
Operating lease expense	$	573
Short-term lease expense	28
Total lease expense	$	601

Rental and lease expenses for the three months ended March 31, 2018, were $1.0 million .

Maturities of lease liabilities are summarized as follows (amounts in thousands):



	Operating Leases
2019 (excluding the three months ended March 31, 2019)	$	1,635
2020	1,906
2021	1,551
2022	996
2023	73
Thereafter	—
Total future minimum lease payments	$	6,161
Less - amount representing interest	544
Present value of future minimum lease payments	$	5,617
Less - current lease obligations	1,851
Long-term lease obligations	$	3,766

At December 31, 2018 and prior to the adoption of ASC Topic 842, the annual future minimum lease payments were as follows:



Years Ending December 31,	Operating Leases
2019	$	2,266
2020	1,874
2021	1,602
2022	1,083
2023	172
Thereafter	1,343
Total	$	8,340


Note 8	— DEBT

Senior Notes —As of March 31, 2019 , we had outstanding $50 million of senior notes (the "Notes") consisting of the following series:


•	$20 million of Senior Notes, Series A, due April 16, 2020


•	$15 million of Senior Notes, Series B, due April 14, 2023

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•	$15 million of Senior Notes, Series C, due April 16, 2025

The agreement governing the Notes contains certain financial covenants, including the following:

•

We were required to maintain a minimum fixed charge coverage ratio of 0.75 to 1.0 for the four quarters ended March 31, 2019. Our fixed charge coverage ratio as of March 31, 2019, was 14.2 to 1.0, therefore we were in compliance with this covenant. Going forward we are required to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0 for the four quarters ending June 30, 2019, and 1.3 to 1.0 for each four-quarter period ending on or after September 30, 2019.


•	For the quarter ended March 31, 2019, we were allowed a maximum leverage ratio of 5.5 to 1.0. Our leverage ratio was 0.9 to 1.0 for the quarter ending March 31, 2019, therefore we were in compliance with this covenant. Going forward we are allowed a maximum leverage ratio of 4.5 to 1.0 for the quarter ending June 30, 2019, and 3.5 to 1.0 for each quarter ending on or after September 30, 2019.

Fixed charge coverage ratio and leverage ratio are calculated in accordance with the agreement governing the Notes.

For both the three months ended March 31, 2019, and 2018, the interest rates on the Notes were 3.73% for the Series A Notes, 4.63% for the Series B Notes and 4.78% for the Series C Notes. These rates represent the lowest interest rates available under the Notes. The interest rates may adjust upward if we do not continue to meet certain financial covenants.

We have granted to the collateral agent for the noteholders a first lien on substantially all of our non-current assets and a second lien on substantially all of our current assets. We are required to offer to prepay the Notes with the proceeds of dispositions of certain specified property and with the proceeds of certain equity issuances, as set forth in the agreement. The obligations under the Notes are unconditionally guaranteed by several of our subsidiaries.

We were in compliance with the applicable covenants under the agreement governing the Notes as of March 31, 2019 .

Our outstanding long-term debt, net, as of March 31, 2019 , and December 31, 2018 , was as follows (in thousands):



	March 31, 2019			December 31, 2018
Notes	$	50,000		$	50,000
Less deferred financing costs	(330		)	(358		)
Long-term debt, net	$	49,670		$	49,642

Credit Facility —We maintain an asset-based revolving credit facility with Bank of Montreal. The credit facility allows us to borrow up to $50 million , subject to monthly limits based on our inventory and receivables, and has a maturity date of October 31, 2023.

Borrowings under the credit facility bear interest at LIBOR (London Interbank Offered Rate) plus an applicable margin of 1.50% to 2.00% per annum, based on average availability under the credit facility. We have granted to Bank of Montreal a first lien on substantially all of our current assets and a second lien on substantially all of our non-current assets. The obligations under the credit facility are unconditionally guaranteed by several of our subsidiaries.

We occasionally borrow and repay amounts under the facility for near-term working capital needs or other purposes and may do so in the future. During the three months ended March 31, 2019, we had no borrowings under the facility. During the three months ended March 31, 2018, we borrowed $13.5 million and repaid $15.9 million under the facility. As of March 31, 2019, we had $1.0 million in outstanding letters of credit under the facility. Including the outstanding letters of credit, we had $49.0 million available to be borrowed under the facility as of March 31, 2019. We were in compliance with the applicable covenants under the facility as of March 31, 2019.

Interest Expense —Interest expense is recorded net of any capitalized interest associated with investments in capital projects. We incurred gross interest expense of $0.6 million and $0.9 million for the three months ended March 31, 2019 , and 2018 , respectively.

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Amounts included in interest expense, net for the three and nine months ended March 31, 2019 , and 2018, were as follows (in thousands):



	Three Months Ended March 31,
	2019			2018
Interest on Notes and credit facility	$	573		$	749
Amortization of deferred financing costs	68			183
Gross interest expense	641			932
Less capitalized interest	(38		)	(54		)
Interest expense, net	$	603		$	878


Note 9	— FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS OF POSSIBLE FUTURE

PUBLIC DEBT

Intrepid Potash, Inc., as the parent company, has no independent assets or operations, and operations are conducted solely through its subsidiaries. Cash generated from operations is held at the parent-company level as cash on hand and totaled $34.0 million and $33.2 million at March 31, 2019 , and December 31, 2018 , respectively. If one or more of our wholly-owned operating subsidiaries guarantee public debt securities in the future, those guarantees will be full and unconditional and will constitute the joint and several obligations of the subsidiary guarantors. Our other subsidiaries are minor. There are no restrictions on our ability to obtain cash dividends or other distributions of funds from the subsidiary guarantors, except those imposed by applicable law.


Note 10	— ASSET RETIREMENT OBLIGATION

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

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

Following is a table of the changes to our asset retirement obligation for the following periods (in thousands):



	Three Months Ended March 31,
	2019		2018
Asset retirement obligation, at beginning of period	$	23,125	$	21,476
Accretion of discount	417		417
Total asset retirement obligation, at end of period	$	23,542	$	21,893

The current portion of the asset retirement obligation of $0.1 million is included in "Other current liabilities" on the condensed consolidated balance sheet as of March 31, 2019. The undiscounted amount of asset retirement obligation was $59.5 million as of March 31, 2019 .


Note 11	— REVENUE

Revenue Recognition —We account for revenue in accordance with ASC Topic 606 Revenue from Contracts with Customers ("ASC 606"). Under ASC 606, we recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services.

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Contract Balances: The timing of revenue recognition, billings, and cash collection may result in contract assets or contract liabilities. For certain contracts, the customer has agreed to pay us before we have satisfied our performance obligations. Customer payments received before we have satisfied our performance obligations are accounted for as a contract liability. Our contract liability activity for the three months ended March 31, 2019, and 2018 is shown below. Amounts presented are in thousands:



	Three Months Ended March 31,
	2019			2018
Beginning balance	$	11,678		$	—
Additions	—			3,879
Recognized as revenue during period	(3,161		)	(192		)
Ending balance	$	8,517		$	3,687

Disaggregation of Revenue: The tables below show the disaggregation of revenues by product and reconciles disaggregated revenues to segment revenues for the three months ended March 31, 2019, and 2018. We believe the disaggregation of revenue by products best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic conditions. Amounts presented are in thousands:



	For the Three Months Ended March 31, 2019
Product	Potash Segment		Trio ^® Segment		Oilfield Solutions Segment		Intersegment Eliminations			Total
Potash	$	28,545	$	—	$	1,822	$	(1,208	)	$	29,159
Trio ^®	—		16,550		—		—			16,550
Water	340		942		4,104		—			5,386
Salt	3,001		317		—		—			3,318
Magnesium Chloride	1,740		—		—		—			1,740
Brines	704		—		—		—			704
Other	—		—		697		—			697
Total Revenue	$	34,330	$	17,809	$	6,623	$	(1,208	)	$	57,554



	For the Three Months Ended March 31, 2018
Product	Potash Segment		Trio ^® Segment		Oilfield Solutions Segment		Intersegment Eliminations		Total
Potash	$	27,064	$	—	$	—	$	—	$	27,064
Trio ^®	—		21,237		—		—		21,237
Water	170		505		4,849		—		5,524
Salt	1,733		78		—		—		1,811
Magnesium Chloride	1,405		—		—		—		1,405
Brines	234		—		—		—		234
Other	—		—		45		—		45
Total Revenue	$	30,606	$	21,820	$	4,894	$	—	$	57,320


Note 12	— COMPENSATION PLANS

Equity Incentive Compensation Plan —Our Board of Directors and stockholders adopted a long-term incentive compensation plan called the Intrepid Potash, Inc. Amended and Restated Equity Incentive Plan (the "Plan"). We have issued

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common stock, restricted stock, performance units, and non-qualified stock option awards under the Plan. At March 31, 2019, approximately 2.7 million shares remained available for issuance under the Plan.

For the three months ended March 31, 2019, we granted 0.4 million shares of restricted stock to executive officers and other key employees. These awards vest one or two years from the date of the grant and, in some cases, contain performance-vesting conditions.

As of March 31, 2019, the following awards were outstanding under the Plan:




		Outstanding as of March 31, 2019
Restricted Shares		2,261,749

Non-qualified Stock Options		3,231,327

Total share-based compensation expense was $1.0 million and $0.9 million for the three months ended March 31, 2019, and 2018, respectively. As of March 31, 2019 , we had $5.5 million of total remaining unrecognized compensation expense related to awards, that will be expensed through 2021.


Note 13	— INCOME TAXES

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

During the three months ended March 31, 2019 , and March 31, 2018, we incurred no income tax expense. Our effective tax rate for both the three months ended March 31, 2019, and 2018, was 0% . Our effective tax rates differed from the statutory rate during each period primarily due to the valuation allowance established to offset our deferred tax assets.

As of March 31, 2019 , we do not believe it is more likely than not that we will fully realize the benefit of our deferred tax assets. As such, we maintained a full valuation allowance against our net deferred tax assets as of March 31, 2019 , and December 31, 2018 .


Note 14	— COMMITMENTS AND CONTINGENCIES

Reclamation Deposits and Surety Bonds —As of March 31, 2019 , and December 31, 2018 , we had $19.1 million of security placed principally with the State of Utah and the Bureau of Land Management for eventual reclamation of our various facilities. Of this total requirement, $0.5 million consisted of long-term restricted cash deposits reflected in "Other assets, net" on the condensed consolidated balance sheets and $18.6 million was secured by surety bonds issued by an insurer. The surety bonds are held in place by an annual fee paid to the issuer and a letter of credit.

We may be required to post additional security to fund future reclamation obligations as reclamation plans are updated or as governmental entities change requirements.

Legal —In February 2015, Mosaic Potash Carlsbad Inc. ("Mosaic") filed a complaint and application for preliminary injunction and permanent injunction against Steve Gamble and us in the Fifth Judicial District Court for the County of Eddy in the State of New Mexico. Mr. Gamble is a former employee of Intrepid and Mosaic. In August 2015, the court denied Mosaic’s application for preliminary injunction. In July 2016, Mosaic filed a second complaint against Mr. Gamble and us in U.S. District Court for the District of New Mexico. In January 2018, the two lawsuits were consolidated into one lawsuit pending in the U.S. District Court for the District of New Mexico. Mosaic alleges against us violations of the New Mexico Uniform Trade Secrets Act, tortious interference with contract relating to Mr. Gamble’s separation of employment from Mosaic, violations of the Computer Fraud and Abuse Act, conversion, and civil conspiracy relating to the alleged misappropriation of Mosaic’s confidential information and related actions. Mosaic seeks monetary relief, including damages for actual loss and unjust enrichment, exemplary damages, attorneys' fees, and injunctive relief and has alleged damages of at least $22 million to $28 million plus other uncalculated damages. The lawsuit is progressing through discovery. A trial date has been set for September 2019. We are vigorously defending against the lawsuit. We have recorded no loss contingency in our statements of operations related to this legal matter.

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We are also subject to other claims and legal actions in the ordinary course of business. Legal costs are expensed as incurred. While there are uncertainties in predicting the outcome of any claim or legal action, we believe that the ultimate resolution of these other claims or actions is not reasonably likely to have a material adverse effect on our financial condition, results of operations, or cash flows.


Note 15	— FAIR VALUE

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

As of March 31, 2019 , and December 31, 2018 , our cash consisted of bank deposits. Other financial assets and liabilities including accounts receivable, refundable income taxes, accounts payable, accrued liabilities, and advances on our credit facility are carried at cost which approximates fair value because of the short-term nature of these instruments.

As of March 31, 2019 , and December 31, 2018 , the estimated fair value of our outstanding Notes was $49 million and $48.1 million , respectively. The fair value of our Notes is estimated using a discounted cash flow analysis based on current borrowing rates for debt with similar remaining maturities and ratings (a Level 2 input) and is designed to approximate the amount at which the instruments could be exchanged in an arm's-length transaction between knowledgeable willing parties.


Note 16	— BUSINESS SEGMENTS

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



Three Months Ended March 31, 2019	Potash		Trio ^®			Oilfield Solutions		Other			Consolidated
Sales	$	34,330	$	17,809		$	6,623	$	(1,208	)	$	57,554
Less: Freight costs	4,640		5,035			781		—			10,456
Warehousing and handling costs	1,267		969			—		—			2,236
Cost of goods sold	19,059		11,074			2,769		(1,208		)	31,694
Gross Margin	$	9,364	$	731		$	3,073	$	—		$	13,168
Depreciation, depletion, and amortization incurred ¹	$	6,795	$	1,558		$	190	$	203		$	8,746

Three Months Ended March 31, 2018	Potash		Trio ^®			Oilfield Solutions		Other			Consolidated
Sales	$	30,606	$	21,820		$	4,894	$	—		$	57,320
Less: Freight costs	4,206		6,277			—		—			10,483
Warehousing and handling costs	1,155		1,118			—		—			2,273
Cost of goods sold	20,269		15,798			592		—			36,659
Lower of cost or net realizable value inventory adjustments	—		705			—		—			705
Gross Margin (Deficit)	$	4,976	$	(2,078	)	$	4,302	$	—		$	7,200
Depreciation, depletion, and amortization incurred ¹	$	6,778	$	1,633		$	64	$	40		$	8,515

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

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Note 17	— SUBSEQUENT EVENT

On May 1, 2019, we completed our acquisition of 100% of certain Dinwiddie Jal Ranch assets located in Lea County, New Mexico, consisting primarily of land, water rights, and other related assets from Dinwiddie Cattle Company. We paid at closing $53 million , of which $3.3 million was placed as a deposit in February 2019. We have agreed to pay up to an additional $12 million pending the resolution of certain issues identified during the diligence process. Dinwiddie Cattle Company has also reserved a 20 -year, 10% royalty, proportionally reduced as to our interest, on certain produced water disposal revenue relating to the property and certain other properties located near the property. The acquisition was completed pursuant to a purchase and sale agreement entered into on February 5, 2019, among Dinwiddie Cattle Company, Sherbrooke Partners LLC, and us. Sherbrooke Partners LLC did not participate in the completed acquisition.


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

AND RESULTS OF OPERATIONS

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

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


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


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


•	challenges to our water rights;


•	our ability to integrate the Dinwiddie Jal Ranch assets into our existing business and achieve the expected benefits of the acquisition;


•	our ability to comply with the terms of our senior notes and our revolving credit facility, including the underlying covenants, to avoid a default under those agreements;


•	our ability to sell Trio ^® internationally and manage risks associated with international sales, including pricing pressure and freight costs;


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


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


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


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


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


•	changes in reserve estimates;


•	currency fluctuations;


•	adverse changes in economic conditions or credit markets;


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

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


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


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


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


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


•	our inability to fund necessary capital investments; and


•	the other risks, uncertainties, and assumptions described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2018 , as updated by this report.

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

In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in these forward-looking statements. As a result, you should not place undue reliance on these forward-looking statements. We undertake no duty to update or revise publicly any forward-looking statements to conform those statements to actual results or to reflect new information or future events.

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

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Company Overview

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

We have 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. On May 1, 2019, we completed our acquisition of 100% of certain Dinwiddie Jal Ranch assets located in Lea County, New Mexico, consisting primarily of land, water rights, and other related assets from Dinwiddie Cattle Company. We paid at closing $53 million, of which $3.3 million was placed as a deposit in February 2019. We have agreed to pay up to an additional $12 million pending the resolution of certain issues identified during the diligence process. Dinwiddie Cattle Company has also reserved a 20-year, 10% royalty, proportionally reduced as to our interest, on certain produced water disposal revenue relating to the property and certain other properties located near the property. The acquisition was completed pursuant to a purchase and sale agreement entered into on February 5, 2019, among Dinwiddie Cattle Company, Sherbrooke Partners LLC, and us. Sherbrooke Partners LLC did not participate in the completed acquisition.

Significant Business Trends and Activities

Our financial results have been, or are expected to be, impacted by several significant trends and activities, which are described below. We expect that these trends will continue to impact our results of operations, cash flows, and financial position.

• Potash pricing and demand. With potash sales comprising 52% of our total sales in the first quarter of 2019, potash prices continue to be a significant driver of our profitability. 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, and currency fluctuations also influence pricing.

Potash prices have steadily increased over the past few years, with our average net realized sales price per ton increasing from $185 for the three months ended December 31, 2016 to $288 per ton for the three months ended March 31, 2019. We expect potash prices to remain steady for the remainder of 2019.

Potash sales volumes in the first quarter of 2019 were adversely affected by wet weather in various regions of the U.S., which has delayed the spring application season. The specific timing of when farmers apply potash remains highly weather dependent and varies across the numerous growing regions within the U.S. The timing of potash sales is also significantly influenced by the marketing programs of potash producers, as well as storage volumes closer to the farm gate.

During the first quarter of 2019, we sold a higher percentage of our total potash tons into the industrial market as compared to the first quarter of 2018, due to an increase in potash used in high-speed mixing services. The increase in industrial sales benefited our average net realized sales price per ton as industrial sales generally carry higher prices. Although we continue to work to develop additional industrial markets for our potash, we expect that the majority of our total potash sales will continue to be made into the agricultural market.

We experience seasonality in potash demand, with more purchases coming in January through April and August through September in anticipation of expected demand for the spring and fall application season in the U.S. The combination of these items results in variability in potash sales and shipments, thereby increasing volatility of sales volumes from quarter to quarter and season to season. Our sales volumes into the industrial market correlate to drilling activity in the oil and gas market.

• Trio ^® pricing and demand. Trio ^® pricing trended up year over year, with an average net realized sales price per ton of $206 for the three months ended March 31, 2019, compared to $194 for the same period in 2018. We instituted a Trio ^® price increase in the fourth quarter of 2018, and we expect to see the benefit of the price increase in the second quarter of 2019.

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Trio ^® sales volume decreased 27% during the first quarter of 2019, compared to the first quarter of 2018, primarily related to wet weather delaying the spring application season. Internationally, competition from lower cost alternatives and higher freight costs have negatively impacted our average net realized sale price per ton. We remain selective in selling internationally and continue to focus on higher-priced international markets.

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 production levels that approximate expected demand and allow us to manage inventory levels.

• Water sales. We continue our efforts to diversify our sources of income by expanding sales of water, particularly to service the oil and gas markets near our operating plants. We have put in place a diverse set of arrangements aimed at generating a long-term recurring revenue stream from water sales. In the first quarter of 2019, water sales were $5.4 million compared to $5.5 million during the same period of 2018. Demand for water has been steady due to oil and gas exploration in the Permian Basin near our facilities in New Mexico. We anticipate water sales to increase during the remainder of 2019 as additional water transportation infrastructure in the Permian Basin becomes available.

We expect our water sales in 2019 to be at the high-end of our previously reported range of $20 million to $30 million and expect to receive cash of $25 million to $35 million.

Water rights in New Mexico are subject to a stated purpose and place of use, and our water rights were originally issued for uses relating to our mining operations. To sell water under these rights for oil and gas development, we must apply for a permit from the New Mexico Office of the State Engineer ("OSE") to change the purpose and/or place of use of the underlying water rights. The OSE reviews and makes a determination as to the validity of the right and if it determines the requested change will not negatively impact other valid interests, the OSE can issue a preliminary authorization for the change. The preliminary authorization allows for water sales to begin immediately, subject to repayment if the underlying water rights were ultimately found to be invalid. Third parties may protest the preliminary authorization at minimal cost and frequently do so. Once protested, the OSE is required to hold a hearing to determine if the preliminary authorization was appropriate. Virtually all of our water sales are being made under preliminary authorizations issued by the OSE. Third parties have protested these preliminary authorizations, and we believe the OSE is required to hold a hearing on the protests. In addition, in February 2019, certain protestants filed an inter se proceeding in New Mexico District Court at the Pecos Stream System Adjudication Court challenging the validity of our water rights. We continue to operate under the preliminary authorizations until the hearing and/or adjudication processes are complete. We may face political and regulatory issues relating to the potential use of the maximum amount of our rights. However, we believe that our legal position with respect to the validity of our water rights is solid and that we will be able to meet our water commitments.

• Byproduct sales. We sell byproducts such as salt, magnesium chloride, brines, and water that are derived from our potash and Trio ^® operations. Byproduct sales were $7.0 million for the three months ended March 31, 2019, compared to $4.1 million for the three months ended March 31, 2018. The increase was due to $1.8 million of increased sales of salt and magnesium chloride, driven by winter weather conditions in several regions of the U.S. Both products are used as deicing agents for roads. Our brines and water are used primarily by the oil and gas industry to support well development and completion activities. Our brines and byproduct water sales increased $1.1 million in the first quarter of 2019, compared to the same period in 2018. Demand for our byproducts used by the oil and gas industry was strong in the first quarter of 2019, due to the oil and gas drilling activities in the Permian Basin near our facilities in Carlsbad, New Mexico. We expect continued strong demand for our byproducts in 2019.

• Diversification of products and services. As we continue to diversify our portfolio, we may enter into new or complementary business that expand our product and service offerings beyond our existing assets or products through acquisition of companies or assets or otherwise. We recently purchased additional water and real property assets in southeastern New Mexico in an effort to expand our water sales and other revenue from the oil and gas industry. We are continuing to explore ways to potentially monetize the known but small lithium resource in our Wendover ponds. We now offer KCl real-time mixing services on location for hydraulic fracturing operations and trucking services. Additionally, we may expand into oil and natural gas exploration and production or into new products or services in our current industry or other industries.

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Consolidated Results



(in thousands, except per ton amounts)	Three Months Ended March 31,
	2019		2018
Sales ¹	$	57,554	$	57,320

Cost of goods sold	$	31,694	$	36,659

Gross Margin	$	13,168	$	7,200

Selling and administrative	5,807		3,970

Net Income	$	6,155	$	1,757

Average net realized sales price per ton ²
Potash	$	288	$	243
Trio ^®	$	206	$	194

¹ Sales include sales of byproducts which were $7.0 million and $4.1 million for the three months ended March 31, 2019, and 2018, respectively.

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

Consolidated Results for the Three Months Ended March 31, 2019 , and 2018

Total sales in the three months ended March 31, 2019, increased slightly compared to the three months ended March 31, 2018. Byproduct sales increased $2.9 million, mainly due to increased salt sales, as discussed below. The increase in byproduct sales was offset by decreases in potash and Trio ^® sales. While the average net realized sales price per ton increased for both products over the prior-year period, the increase in sales price was largely offset by a decrease in sales volume, as discussed below. Sales volumes were lower in the first quarter of 2019 mainly due to wet weather in several regions of the U.S. that has delayed the spring application season. Additionally, international Trio ^® sales in the first quarter of 2019, were less than the first quarter of 2018, as we remained selective in selling internationally and continued to focus on higher-priced international markets.

Our total cost of goods sold decreased 14% for the three months ended March 31, 2019, as compared to the three months ended March 31, 2018, primarily due to a 17% decrease in sales volume as discussed above.

Gross margin for the three months ended March 31, 2019, improved 83% over the gross margin for the three months ended March 31, 2018. The improved gross margin was mainly driven by the increase in average net realized sales price per ton for both potash and Trio ^® .

Selling and Administrative Expense

Selling and administrative expenses increased for the three months ended March 31, 2019, as compared to the prior-year period mainly due to increased administrative labor costs and legal fees. Additionally, selling and administrative expenses were lower than usual in the first quarter of 2018, due to the reversal of certain accruals that were no longer necessary.

Net Income

Net income increased $4.4 million for the three months ended March 31, 2019, compared to the three months ended March 31, 2018. The increase in net income was driven by the improvement in gross margin, partially offset by the increase in selling and administrative expense.

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Potash Segment



	Three Months Ended March 31,
(in thousands, except per ton amounts)	2019		2018
Sales ¹	$	34,330	$	30,606
Less: Freight costs	4,640		4,206
Warehousing and handling costs	1,267		1,155
Cost of goods sold	19,059		20,269
Gross Margin	$	9,364	$	4,976
Depreciation, depletion, and amortization incurred ²	$	6,795	$	6,778

Potash sales volumes (in tons)	88		97
Potash production volumes (in tons)	110		125

Average potash net realized sales price per ton ³	$	288	$	243

¹ Sales include sales of byproducts which were $5.8 million and $3.5 million for the three months ended March 31, 2019, and 2018, respectively.

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

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

Three Months Ended March 31, 2019 , and 2018

Our potash segment sales include potash sales and sales of byproducts generated or used in the production process, such as magnesium chloride, salt, water and brines. Potash segment sales increased in the first quarter of 2019 compared to the same period in 2018. Price increases announced throughout 2018 and a higher percentage of total potash sales into the industrial market resulted in a 19% increase in average net realized sales price per ton for potash in the first quarter of 2019 compared to the same period in 2018. Sales volume decreased by 9% due to weather in several regions of the U.S., which has delayed the spring application season. Salt sales increased $1.6 million due to increased demand for road salt used as a deicing agent. Brine sales increased $0.5 million, as oil and gas exploration activities near our facilities in New Mexico remain strong.

Potash segment freight expense increased $0.4 million, or 10%, in the first quarter of 2019, compared to the first quarter of 2018. Freight expense for salt shipments increased $0.6 million, or 85%, due to the 41% increase in sales volume coupled with an increase in carrier freight rates. Freight expense for potash shipments decreased $0.2 million, or 6%, mainly due to the 9% decrease in potash sales volume. Our freight expense is also impacted by the proportion of customers arranging for and paying their own freight costs, and the geographic distribution of our potash sales.

Our potash segment cost of goods sold decreased 6% in the first quarter of 2019, compared to the same period in 2018, mainly due to the 9% decrease in potash sales volume.

Our potash segment gross margin increased $4.4 million in the first quarter of 2019, compared to the same period in 2018, due to the increase in average net realized sales prices, partially offset by an increase in cost of goods sold per ton.

Additional Information Relating to Potash

The table below shows our potash sales mix for the three months ended March 31, 2019 , and 2018 :



	Three Months Ended March 31,
	2019	2018
Agricultural	71%	84%
Industrial	17%	5%
Feed	12%	11%

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Trio ^® Segment



	Three Months Ended March 31,
(in thousands, except per ton amounts)	2019		2018
Sales ¹	$	17,809	$	21,820
Less: Freight costs	5,035		6,277
Warehousing and handling costs	969		1,118
Cost of goods sold	11,074		15,798
Lower of cost or net realizable value inventory adjustments	—		705
Gross Margin (Deficit)	$	731	$	(2,078	)
Depreciation, depletion, and amortization incurred ²	$	1,558	$	1,633

Sales volumes (in tons)	56		77
Production volumes (in tons)	63		47

Average Trio ^® net realized sales price per ton ³	206		194

¹ Sales include sales of byproducts which were $1.3 million and $0.6 million for the three months ended March 31, 2019, and 2018, respectively.

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

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

Three Months Ended March 31, 2019 , and 2018

Trio ^® segment sales decreased 18% for the three months ended March 31, 2019, as compared to the same period in 2018. The decrease was mainly due to a 27% decrease in Trio ^® sales volume, partially offset by 6% increase in Trio ^® average net realized sales price per ton. Domestic Trio ^® sales volumes declined 32% mainly due to inclement weather which has delayed the spring application season. International Trio ^® sales volumes decreased 11% in the first quarter of 2019 compared to the first quarter of 2018, mainly due to the timing of purchases by international customers. Our Trio ^® average net realized sales price improved compared to the first quarter of 2018, due mainly to higher pricing for Trio ^® products in domestic markets. The decrease in Trio ^® sales was partially offset by an increase of $0.7 million in byproduct sales.

Trio ^® freight costs decreased 20% in the first quarter of 2019, compared to the first quarter of 2018, mainly due to the 27% decrease in sales volume, partially offset by an increase in freight rates. Freight rates have been increasing as carriers are operating near full capacity.

Our Trio ^® cost of goods sold decreased 30% in the first quarter of 2019, compared to the first quarter of 2018, due mainly to a 27% decrease in sales volume. Our Trio ^® production volume increased by 34% in the first quarter of 2019, compared to the first quarter of 2018, primarily due to increased conversion of work-in-progress inventory into premium Trio ^® .

Our Trio ^® segment generated gross margin of $0.7 million in the first quarter of 2019, compared to a gross deficit of $2.1 million in the first quarter of 2018, due to the factors discussed above.

Additional Information Relating to Trio ^®

The percentage of Trio ^® tons sold into the export market decreased during the three months ended March 31, 2019, compared to the same period in 2018, as we remain selective in selling internationally and continue to focus on higher-priced international markets.



	United States	Export
For the Three Months Ended March 31, 2019	72%	28%

For the Three Months Ended March 31, 2018	77%	23%

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Oilfield Solutions Segment



	Three Months Ended March 31,
(in thousands, except per ton amounts)	2019		2018
Sales	$	6,623	$	4,894
Less: Freight costs	781		—
Cost of goods sold	2,769		592
Gross Margin	$	3,073	$	4,302
Depreciation, depletion, and amortization incurred	$	190	$	64

We offer a variety of products and services from our oilfield solutions segment, including water, high-speed potassium chloride mixing services, and trucking services. Our oilfield solutions segment sales increased $1.7 million in the first quarter of 2019, compared to the same period in 2018, due to $2.3 million increased sales of potassium chloride brines and high-speed potassium chloride mixing services. The potassium chloride brines are used in oil and gas drilling as a clay inhibitor. The increase in total sales was partially offset by a $0.7 million decrease in oilfield solutions segment water sales. The decrease in oilfield solutions segment water sales decreased because a higher percentage of our total water sales was water that was used in the production of potash and Trio ^® . Water that we sell that was used in the production of potash and Trio ^® is accounted for as byproduct water sales in the potash or Trio ^® segments.

We have generated strong gross margins in the oilfield solutions segment, mainly due to the relatively low costs associated with selling water from our existing water rights. Our oilfield solutions cost of goods sold increased approximately $2.2 million for the three months ended March 31, 2019 compared to the same period in 2018, due to the increased sales of potassium chloride brines and high-speed mixing services, which carry a lower gross margin as a percentage of sales than our water sales.

Specific Factors Affecting Our Results

Sales

Our gross sales are derived from the sales of potash, Trio ^® , water and byproducts and are determined by the quantities of product we sell and the sales prices we realize. For potash and Trio ^® , we quote prices to customers both on a delivered basis and on the basis of pick-up at our plants and warehouses. Freight costs are incurred on most of our potash and Trio ^® sales, but some customers arrange and pay for their own freight directly. When we arrange and 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 byproduct sales and 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, thereby negatively influencing our average net realized sales price per ton. 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 are driven by demand from oil and gas exploration and production companies drilling in the Permian Basin. As such, demand for our water is generally stronger during a cyclical expansion of oil and gas drilling, which is currently occurring in the Permian Basin. Likewise, a cyclical contraction of oil and gas drilling may decrease demand for our water.

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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. There are elements of our cost structure associated with contract labor, consumable operating supplies, reagents, and royalties that are variable, which make up a smaller component of our cost base. Our costs often vary from period to period based on the fluctuation of inventory, sales, and production levels at our facilities.

Our production costs per ton are also impacted when our production levels change, due to factors such as changes in the grade of ore delivered to 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 for the three months ended March 31, 2019, and 2018, was 4.5% and 4.0%, respectively.

Income Taxes

We are subject to federal and state income taxes on our taxable income. Our effective tax rate for both the three months ended March 31, 2019, and 2018, was 0% . Our effective tax rates differed from the statutory rate during each period primarily due to the valuation allowance established to offset our deferred tax assets.

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

For both the three months ended March 31, 2019, and 2018, we incurred no income tax expense.

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

Capital Investments

During the first three months of 2019, cash paid for property, plant and equipment was $4.0 million . We expect operating capital expenditures for 2019 to be approximately $25 million to $35 million, which includes capital investment relating to our newly acquired assets. We anticipate our remaining 2019 operating plans and capital programs will be funded out of operating cash flows and existing cash. We may also use our revolving credit facility, to the extent available, to fund capital investments.

Liquidity and Capital Resources

As of March 31, 2019 , we had cash of $34.0 million , compared with cash of $33.2 million at December 31, 2018. On May 1, 2019, we completed our acquisition of the Dinwiddie assets for a cash payment of $53.0 million, which included a $3.3 million deposit made on February 5, 2019. Our cash balance as of May 3, 2019, was $15.6 million.

Our operations have primarily been funded from cash generated by operations. We continue to monitor our future sources and uses of cash and anticipate that we will adjust our capital allocation strategies when, and if, determined by our Board of Directors. We may, at any time we deem conditions favorable, attempt to improve our liquidity position by accessing debt or equity markets in accordance with our existing debt agreements. After the Dinwiddie acquisition and 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, included the principal payment due on our Senior Notes in April 2020.

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The following summarizes our cash flow activity for the three months ended March 31, 2019, and 2018 (in thousands):



	Three Months Ended March 31,
	2019			2018
Cash flows provided by operating activities	$	8,121		$	13,904
Cash flows used in investing activities	$	(7,208	)	$	(6,436	)
Cash flows used in financing activities	$	(103	)	$	(2,451	)

Operating Activities

Total cash provided by operating activities through March 31, 2019 , was $8.1 million , a decrease of $5.8 million compared with the first three months of 2018. The decrease was mainly driven by a decrease in contract liability additions and a decrease in refundable income taxes received.

Investing Activities

Total cash used in investing activities increased by $0.8 million in the first three months of 2019, compared with the same period in 2018, as we placed a $3.3 million deposit related to the Dinwiddie asset acquisition, partially offset by a decrease in additions to property, plant, equipment, and mineral properties of $2.5 million.

Financing Activities

Total cash used in financing activities decreased by $2.3 million in the first three months of 2019, compared with the same period in 2018. The decrease is due to the net repayments made on short-term borrowings under our credit facility in the first quarter of 2018.

Senior Notes

As of March 31, 2019 , we had outstanding $50 million of senior notes (the "Notes") consisting of the following series:


•	$20 million of Senior Notes, Series A, due April 16, 2020


•	$15 million of Senior Notes, Series B, due April 14, 2023


•	$15 million of Senior Notes, Series C, due April 16, 2025

The agreement governing the Notes contains certain financial covenants, including the following:

•


•	For the quarter ended March 31, 2019, we were allowed a maximum leverage ratio of 5.5 to 1.0. Our leverage ratio was 0.9 to 1.0 for the quarter ending March 31, 2019, therefore we were in compliance with this covenant. Going forward we are allowed a maximum leverage ratio of 4.5 to 1.0 for the quarter ending June 30, 2019, and 3.5 to 1.0 for each quarter ending on or after September 30, 2019.

Fixed charge coverage ratio and leverage ratio are calculated in accordance with the agreement governing the Notes.

For both the three months ended March 31, 2019 and 2018, the interest rates on the Notes were 3.73% for the Series A Notes, 4.63% for the Series B Notes and 4.78% for the Series C Notes. These rates represent the lowest interest rates available under the Notes. The interest rates may adjust upward if we do not continue to meet certain financial covenants.

We were in compliance with the applicable covenants under the agreement governing the Notes as of March 31, 2019.

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Our outstanding long-term debt, net, as of March 31, 2019 , and December 31, 2018 , was as follows (in thousands):



	March 31, 2019			December 31, 2018
Notes	$	50,000		$	50,000
Less deferred financing costs	(330		)	(358		)
Long-term debt, net	$	49,670		$	49,642

Borrowings under the credit facility after the amendment bear interest at LIBOR (London Interbank Offered Rate) plus an applicable margin of 1.50% to 2.00% per annum, based on average availability under the credit facility. We have granted to Bank of Montreal a first lien on substantially all of our current assets and a second lien on substantially all of our non-current assets. The obligations under the credit facility are unconditionally guaranteed by several of our subsidiaries.

We occasionally borrow and repay amounts under the facility for near-term working capital needs or other purposes and may do so in the future. As of May 3, 2019, we had $30 million of borrowings and $1.0 million in outstanding letters of credit under the facility. Including the outstanding letters of credit, we had $19.0 million available to be borrowed under the facility as of May 3, 2019.

Off-Balance Sheet Arrangements

As of March 31, 2019 , we had no material off-balance sheet arrangements aside from the bonding obligations described in the accompanying notes to the condensed consolidated financial statements.

Critical Accounting Policies and Estimates

Our Annual Report on Form 10-K for the year ended December 31, 2018 , describes the critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Except for the accounting policies for leases that were updated as a result of adopting ASC 842 on January 1, 2019, as discussed in Notes 2 and 7 to the condensed consolidated financial statements, there have been no significant changes to our critical accounting policies since December 31, 2018 .

Non-GAAP Financial Measure

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

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

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Average Net Realized Sales Price per Ton

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

Below is a reconciliation of average net realized sales price per ton to the most directly comparable GAAP financial measure for the three months ended March 31, 2019, and 2018:



	Three Months Ended March 31, 2019
(in thousands, except per ton amounts)	Potash		Trio ^®
Total Segment Sales	$	34,330	$	17,809
Less: Segment byproduct sales	5,785		1,259
Freight costs	3,242		5,035
Subtotal	$	25,303	$	11,515

Divided by:
Tons sold (in thousands)	88		56
Average net realized sales price per ton	$	288	$	206



	Three Months Ended March 31, 2018
(in thousands, except per ton amounts)	Potash		Trio ^®
Total Segment Sales	$	30,606	$	21,820
Less: Segment byproduct sales	3,542		583
Freight costs	3,458		6,276
Subtotal	$	23,606	$	14,961

Divided by:
Tons sold (in thousands)	97		77
Average net realized sales price per ton	$	243	$	194


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Part II, Item 7A., "Quantitative and Qualitative Disclosure About Market Risk," of our Annual Report on Form 10-K for the year ended December 31, 2018 , describes our exposure to market risk. There have been no significant changes to our market risk exposure since December 31, 2018 .

ITEM 4. CONTROLS AND PROCEDURES

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Evaluation of Disclosure Controls and Procedures

We maintain "disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act." Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. Our disclosure controls and procedures are also designed to ensure that this information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures as of March 31, 2019 . Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of March 31, 2019 , at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2019 , that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The adoption of ASC 842, Leases, required the implementation of new controls and the modification of certain accounting processes related to leases. The impact of these changes was not material to our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

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

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PART II - OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

In February 2015, Mosaic Potash Carlsbad Inc. (“Mosaic”) filed a complaint and application for preliminary injunction and permanent injunction against Steve Gamble and us in the Fifth Judicial District Court for the County of Eddy in the State of New Mexico. Mr. Gamble is a former employee of Intrepid and Mosaic. In August 2015, the court denied Mosaic’s application for preliminary injunction. In July 2016, Mosaic filed a second complaint against Mr. Gamble and us in U.S. District Court for the District of New Mexico. In January 2018, the two lawsuits were consolidated into one lawsuit pending in the U.S. District Court for the District of New Mexico. Mosaic alleges against us violations of the New Mexico Uniform Trade Secrets Act, tortious interference with contract relating to Mr. Gamble’s separation of employment from Mosaic, violations of the Computer Fraud and Abuse Act, conversion, and civil conspiracy relating to the alleged misappropriation of Mosaic’s confidential information and related actions. Mosaic seeks monetary relief, including damages for actual loss and unjust enrichment, exemplary damages, attorneys' fees, and injunctive relief and has alleged damages of at least $22 million to $28 million plus other uncalculated damages. The lawsuit is progressing through discovery. A trial date has been set for September 2019. We are vigorously defending against the lawsuit.

We are subject to other claims and legal actions in the ordinary course of business. While there are uncertainties in predicting the outcome of any claim or legal action, we believe that the ultimate resolution of these other claims or actions is not reasonably likely to have a material adverse effect on our financial condition, results of operations, or cash flows.


ITEM 1A.	RISK FACTORS

Our future performance is subject to a variety of risks and uncertainties that could materially and adversely affect our business, financial condition, results of operations, and the trading price of our common stock. These risks and uncertainties are described in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2018 . There have been no material changes to these risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2018.


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

Unregistered Sales of Equity Securities and Use of Proceeds



Issuer Purchases of Equity Securities
Period	(a) Total Number of Shares Purchased ¹	(b) Average Price Paid Per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Programs
January 1, 2019, through January 31, 2019	–	—	–	N/A
February 1, 2019, through February 28, 2019	—	—	–	N/A
March 1, 2019, through March 31, 2019	28,971	$3.86	–	N/A
Total	28,971	$3.86	—	N/A

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


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

None.

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ITEM 4. MINE SAFETY DISCLOSURES

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

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


ITEM 5.	OTHER INFORMATION

None.

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ITEM 6.	EXHIBITS



Exhibit No.		Description
10.1		Purchase and Sale Agreement, dated February 5, 2019, by and between Dinwiddie Cattle Company, LLC, Sherbrooke Partners, LLC and Intrepid Potash - New Mexico, LLC.*

10.2		Amendment to Purchase and Sale Agreement, dated March 28, 2019, by and between Dinwiddie Cattle Company, LLC, Sherbrooke Partners, LLC, and Intrepid Potash - New Mexico, LLC.*

10.3		Fourth Amendment to Employment Agreement, dated as of March 12, 2019, by and between Intrepid Potash, Inc. and Robert P. Jornayvaz III (incorporated by reference to Intrepid Potash, Inc.'s Form 8-K (File No. 001-34025) filed on March 15, 2019)+

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

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

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

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

95.1		Mine Safety Disclosure Exhibit.*

101.INS		XBRL Instance Document.*

101.SCH		XBRL Taxonomy Extension Schema.*

101.CAL		XBRL Extension Calculation Linkbase.*

101.LAB		XBRL Extension Label Linkbase.*

101.PRE		XBRL Extension Presentation Linkbase.*

101.DEF		XBRL Extension Definition Linkbase.*


*	Filed herewith.


**	Furnished herewith.


+	Management contract or compensatory plan or arrangement

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SIGNATURES

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



		INTREPID POTASH, INC. (Registrant)

Dated: May 7, 2019		/s/ Robert P. Jornayvaz III
		Robert P. Jornayvaz III - Executive Chairman of the Board, President, and Chief Executive Officer (Principal Executive Officer and Duly Authorized Officer)

Dated: May 7, 2019		/s/ Joseph G. Montoya
		Joseph G. Montoya - Vice President and Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer)


POST-CLOSING OBLIGATIONS; INDEMNIFICATION; LIMITATIONS; DISCLAIMERS AND WAIVERS	32


Section 1.1	Certain Defined Terms . Unless the context otherwise requires, the respective terms defined in Appendix A attached hereto and incorporated herein shall, when used herein, have the respective meanings therein specified, with each such definition to be equally applicable both to the singular and the plural forms of the term so defined.


Section 2.1	Purchase and Sale . At the Closing, and upon the terms and subject to the conditions of this Agreement, Seller agrees to sell, transfer, assign and convey the Assets to Buyers free and clear of all Liens other than Permitted Exceptions, and Buyers agree to purchase, accept and pay for the Assets.


Section 2.2	Assets . As used herein, the term “ Assets ” means, subject to the terms and conditions of this Agreement, all assets owned by Seller on, under, or appurtenant to, or used or held for use in connection with, the Dinwiddie Jal Ranch (but excluding the Excluded Assets), including, without limitation, the following:


(a)	the Fee Land as described in Schedule 2.2(a) – Part 1 and the Leases as described in Schedule 2.2(a) – Part 2 (collectively, the “ Land ”);


(b)	to the extent they may be assigned, all Easements, including those set forth on Schedule 2.2(b) ;


(c)	all Improvements, including those identified on Schedule 2.2(c) ;


(e)	all revenues, royalties or payments arising out of or attributable to the Applicable Contracts, including those royalties payable to Seller under the Poseidon SWD Lease with respect to any period of time on or after the Effective Time;


(f)	the Facilities, and all equipment, machinery, fixtures and other tangible personal property and improvements located on or constituting a part of the Facilities or used or held for use in connection with the operation of the Facilities, including those listed on Schedule 2.2(f) (“ Equipment ”);


(g)	all flow lines, pipelines, gathering systems, meters and appurtenances thereto constituting a part of the Facilities or used or held for use in connection with the operation of the Facilities, including those identified on Schedule 2.2(g) (“ Pipelines ”);


(k)	the SWD Wells and Freshwater Storage Pits, including those described on Schedule 2.2(k) ;


(m)	the right of reversion with respect to all Dinwiddie Diverted Water Rights and Dinwiddie Property (as such terms are defined in the Amended and Restated Operating Agreement of B&D).


Section 2.3	Excluded Assets . Notwithstanding the foregoing, the Assets shall not include, and there is excepted, reserved and excluded from the purchase and sale contemplated hereby (collectively, the “ Excluded Assets ”):


(a)	all corporate, financial, income and franchise tax and legal records of Seller or B&D that relate to Seller’s or B&D’s business generally (whether or not relating to the Assets), and all books, records and files that relate to the Excluded Assets and the Excluded Records and copies of any other Records retained by Seller pursuant to Section 2.5 ;


(b)	all rights to any refund of Taxes or other costs or expenses borne by Seller or Seller’s predecessors in interest and title attributable to periods prior to the Effective Time;


(c)	all rights to any refund of Taxes of B&D attributable to periods prior to the Effective Time;


(d)	all trade credits, account receivables, note receivables, and other receivables attributable to the Assets including all revenues, royalties or payments arising out of or attributable to the Applicable Contracts, including those royalties payable to Seller under the Poseidon SWD Lease with respect to any period of time prior to the Effective Time even if paid to Seller after the Effective Time;


(e)	all rights, titles, claims and interests of Seller or any Affiliate of Seller (i) to or under any policy or agreement of insurance or any insurance proceeds to the extent attributable to the period prior to the Effective Time, and (ii) to or under any bond or bond proceeds;


(f)	all livestock and ranching operations related equipment and vehicles listed on Schedule 2.3(f) ;


Section 2.4	Effective Time; Proration of Costs and Revenues .


(a)	Ownership and possession of the Assets shall be transferred from Seller to Buyers at the Closing, but certain financial benefits and burdens with respect to the Assets shall be transferred effective as of 12:00 A.M., Mountain Standard Time, on February 1, 2019 (the “ Effective Time ”), as described below.


Section 2.1	Delivery and Maintenance of Records . Seller, at Seller’s sole cost and expense, shall deliver the Records to Buyers at Closing. Seller may retain copies of any Records at Seller’s sole cost and expense.


Section 3.1	Purchase Price . The consideration for the Assets shall be (a) a cash purchase price (the “ Purchase Price ”) equal to $ SIXTY-FIVE MILLION DOLLARS ($65,000,000) adjusted as provided in Section 3.2 , and (b) the reservation of the SWD Royalty.


Section 3.2	Adjustments to Purchase Price . The Purchase Price for the Assets shall be adjusted as follows with all such amounts being determined in accordance with GAAP:


(a)	reduced by the aggregate amount of all proceeds earned and received by Seller with respect to the Assets between the Effective Time and the Closing Date (with the period between the Effective Time and the Closing Date referred to as the “ Adjustment Period ”);


(b)	increased by the amount of all Property Costs and other costs attributable to the ownership and operation of the Assets during the Adjustment Period and that are actually paid by Seller prior to the Closing Date, except any Property Costs and other such costs already deducted in the determination of proceeds in Section 3.2(a) ;


(c)	increased or reduced as agreed upon in writing by Seller and Buyers; and


(i)	the standard printed exception for taxes for the year 2019 and thereafter, not yet due or payable;


(ii)	reservations or exceptions otherwise permitted by this Agreement or as may be approved by Buyers in writing;


(iii)	the standard printed exception as to waters, tidelands, beaches, streams, and related matters, reading: “Water rights, claims or title to water.”; and