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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________
FORM 10-Q
_______________________________________________________
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended
September 30, 2023
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
ipilogoa04.jpg
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.)
707 17th Street, Suite 4200
Denver, Colorado80202
(Address of principal executive offices)
(Zip Code)
(303296-3006
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act
Title of each classTrading symbolName of each exchange on which registered
Common Stock, par value $0.001 per shareIPINew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☒No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer ☒
Non-accelerated filer
Smaller reporting companyEmerging 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).YesNo

As of October 31, 2023, the registrant had outstanding 13,156,618 shares of common stock, par value $0.001 per share.


INTREPID POTASH, INC.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION    
ITEM 1. Condensed Consolidated Financial Statements (Unaudited)



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PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
INTREPID POTASH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
September 30,December 31,
20232022
ASSETS
Cash and cash equivalents$2,791 $18,514 
Short-term investments3,463 5,959 
Accounts receivable:
Trade, net24,091 26,737 
Other receivables, net2,357 790 
Inventory, net108,360 114,816 
Prepaid expenses and other current assets5,546 4,863 
Total current assets146,608 171,679 
Property, plant, equipment, and mineral properties, net402,862 375,630 
Water rights19,184 19,184 
Long-term parts inventory, net25,347 24,823 
Long-term investments7,930 9,841 
Other assets, net6,864 7,294 
Non-current deferred tax asset, net183,996 185,752 
Total Assets$792,791 $794,203 
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable$8,756 $18,645 
Accrued liabilities14,523 16,212 
Accrued employee compensation and benefits8,047 6,975 
Other current liabilities6,871 7,044 
Total current liabilities38,197 48,876 
Advances on credit facility2,000  
Asset retirement obligation, net of current portion28,169 26,564 
Operating lease liabilities1,119 2,206 
Finance lease liabilities1,658  
Other non-current liabilities1,221 1,479 
Total Liabilities72,364 79,125 
Commitments and Contingencies
Common stock, 0.001 par value; 40,000,000 shares authorized;
12,789,326 and 12,687,822 shares outstanding
at September 30, 2023, and December 31, 2022, respectively13 13 
Additional paid-in capital664,348 660,614 
Retained earnings 78,078 76,463 
Less treasury stock, at cost(22,012)(22,012)
Total Stockholders' Equity720,427 715,078 
Total Liabilities and Stockholders' Equity$792,791 $794,203 
See accompanying notes to these condensed consolidated financial statements.
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INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Sales$54,465 $74,752 $222,420 $270,891 
Less:
Freight costs7,909 7,793 30,015 27,257 
Warehousing and handling costs2,731 2,541 8,265 7,221 
Cost of goods sold39,921 37,648 148,502 120,656 
Lower of cost or net realizable value inventory adjustments3,413  3,413  
Gross Margin 491 26,770 32,225 115,757 
Selling and administrative7,685 8,551 24,491 22,558 
Accretion of asset retirement obligation535 491 1,605 1,471 
Impairment of long-lived assets521  521  
Loss on sale of assets59 10 252 1,176 
Other operating expense 857 264 1,880 1,239 
Operating (Loss) Income(9,166)17,454 3,476 89,313 
Other Income (Expense)
Equity in earnings of unconsolidated entities(54)766 (292)766 
Interest expense, net (28) (85)
Interest income88 77 249 94 
Other income (expense)19 (258)75 281 
(Loss) Income Before Income Taxes(9,113)18,011 3,508 90,369 
Income Tax Benefit (Expense)1,917 (4,903)(1,893)(22,131)
Net (Loss) Income$(7,196)$13,108 $1,615 $68,238 
Weighted Average Shares Outstanding:
Basic12,789 13,256 12,750 13,221 
Diluted12,789 13,489 12,876 13,567 
(Loss) Earnings Per Share:
Basic$(0.56)$0.99 $0.13 $5.16 
Diluted$(0.56)$0.97 $0.13 $5.03 
See accompanying notes to these condensed consolidated financial statements.
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INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
Nine-Month Period Ended September 30, 2023
Common StockTreasury StockAdditional Paid-in CapitalRetained EarningsTotal Stockholders' Equity
SharesAmount
Balance, December 31, 202212,687,822 $13 $(22,012)$660,614 $76,463 $715,078 
Net income— — — — 1,615 1,615 
Stock-based compensation— — — 5,071 — 5,071 
Vesting of restricted common stock, net of common stock used to fund employee income tax withholding due upon vesting101,504 — — (1,337)— (1,337)
Balance, September 30, 202312,789,326 $13 $(22,012)$664,348 $78,078 $720,427 
Three-Month Period Ended September 30, 2023
Common StockTreasury StockAdditional Paid-in CapitalRetained EarningsTotal Stockholders' Equity
SharesAmount
Balance, June 30, 202312,789,326 $13 $(22,012)$662,826 $85,274 $726,101 
Net loss— — — — (7,196)(7,196)
Stock-based compensation— — — 1,522 — 1,522 
Balance, September 30, 202312,789,326 $13 $(22,012)$664,348 $78,078 $720,427 
Nine-Month Period Ended September 30, 2022
Common StockTreasury StockAdditional Paid-in CapitalRetained EarningsTotal Stockholders' Equity
SharesAmount
Balance, December 31, 202113,149,315 $13 $— $659,147 $4,243 $663,403 
Net income— — — — 68,238 68,238 
Stock-based compensation— — — 3,965 — 3,965 
Exercise of stock options10,718 — — 110 — 110 
Purchase of treasury stock(70,733)— (2,881)— — (2,881)
Vesting of restricted common stock, net of common stock used to fund employee income tax withholding due upon vesting105,780 — — (4,362)— (4,362)
Balance, September 30, 202213,195,080 $13 $(2,881)$658,860 $72,481 $728,473 
Three-Month Period Ended September 30, 2022
Common StockTreasury StockAdditional Paid-in CapitalRetained EarningsTotal Stockholders' Equity
SharesAmount
Balance, June 30, 202213,265,813 $13 $ $657,453 $59,373 $716,839 
Net income— — — — 13,108 13,108 
Stock-based compensation— — — 1,407 — 1,407 
Purchase of Treasury Stock(70,733)— (2,881)— — (2,881)
Balance, September 30, 202213,195,080 $13 $(2,881)$658,860 $72,481 $728,473 
See accompanying notes to these condensed consolidated financial statements.
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INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended September 30,
20232022
Cash Flows from Operating Activities:
Net income $1,615 $68,238 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization28,305 25,285 
Accretion of asset retirement obligation1,605 1,471 
Amortization of deferred financing costs226 187 
Amortization of intangible assets241 241 
Stock-based compensation5,071 3,965 
Lower of cost or net realizable value inventory adjustments3,413  
Impairment of long-lived assets521  
Loss on disposal of assets252 1,176 
Allowance for doubtful accounts110  
Allowance for parts inventory obsolescence140 1,750 
Equity in earnings of unconsolidated entities292 (766)
Distribution of earnings from unconsolidated entities452  
Changes in operating assets and liabilities:
Trade accounts receivable, net2,536 (2,820)
Other receivables, net(1,659)(1,111)
Inventory, net2,379 (15,954)
Prepaid expenses and other current assets(898)(1,504)
Deferred tax assets, net1,756 21,548 
Accounts payable, accrued liabilities, and accrued employee
     compensation and benefits
(5,216)999 
Operating lease liabilities(1,218)(1,619)
Other liabilities(1,298)(31,974)
Net cash provided by operating activities38,625 69,112 
Cash Flows from Investing Activities:
Additions to property, plant, equipment, mineral properties and other assets(58,484)(37,100)
Purchase of investments(1,415)(12,864)
Proceeds from sale of assets125 46 
Proceeds from redemptions/maturities of investments4,500 1,504 
Other investing, net668  
Net cash used in investing activities(54,606)(48,414)
4

INTREPID POTASH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended September 30,
20232022
Cash Flows from Financing Activities:
Proceeds from short-term borrowings on credit facility7,000  
Repayments of short-term borrowings on credit facility(5,000) 
Payments of financing lease(399) 
Capitalized debt fees (933)
Employee tax withholding paid for restricted stock upon vesting(1,337)(4,362)
Repurchases of common stock (2,881)
Proceeds from exercise of stock options 110 
Net cash provided by (used in) financing activities264 (8,066)
Net Change in Cash, Cash Equivalents and Restricted Cash(15,717)12,632 
Cash, Cash Equivalents and Restricted Cash, beginning of period19,084 37,146 
Cash, Cash Equivalents and Restricted Cash, end of period$3,367 $49,778 
Supplemental disclosure of cash flow information
Net cash paid during the period for:
Interest$287 $66 
Income taxes$295 $679 
Amounts included in the measurement of operating lease liabilities$1,357 $1,419 
Accrued purchases for property, plant, equipment, and mineral properties$3,241 $7,373 
Right-of-use assets exchanged for operating lease liabilities$48 $1,588 
Right-of-use assets exchanged for financing lease liabilities$3,009 $ 

See accompanying notes to these condensed consolidated financial statements.
5

INTREPID POTASH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1COMPANY 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, salt, magnesium chloride, brine and various oilfield products and services.
Our extraction and production operations are conducted entirely in the continental U.S. We produce potash from three solution mining facilities: our HB solution mine in Carlsbad, New Mexico, our solution mine in Moab, Utah, and our brine recovery mine in Wendover, Utah. We also operate 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 permitted, licensed, declared and partially adjudicated water rights in New Mexico that support our mining and industrial operations. Water that is not used to support our mining and industrial operations is primarily sold to support oil and gas development in the Permian Basin in New Mexico near our Carlsbad facilities. We continue to work to expand our water business. See Note 14—Commitments and Contingencies below for further information regarding our water rights.
We also operate certain land, water rights, state grazing leases for cattle, and other related assets in southeast New Mexico. We refer to these assets and operations as "Intrepid South." Due to the strategic location of Intrepid South, part of our long-term operating strategy is selling small parcels of land, including restricted use agreements of surface or subsurface rights, to customers where such sales provide a solution to such customer's operations in the oil and gas industry.
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 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Statement PresentationOur unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation of interim financial information, have been included. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022.
Pronouncements Issued But Not Yet AdoptedWe believe that all recently issued accounting pronouncements from the FASB either do not apply to us or will not have a material impact on our Condensed Consolidated Financial Statements.

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Note 3EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. For purposes of determining diluted earnings per share, basic weighted-average common shares outstanding is adjusted to include potentially dilutive securities, including restricted stock, stock options, and performance units. The treasury-stock method is used to measure the dilutive impact of potentially dilutive shares. Potentially dilutive shares are excluded from the diluted weighted-average shares outstanding computation in periods in which they have an anti-dilutive effect. The following table shows the calculation of basic and diluted earnings per share (in thousands, except per share amounts):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Net (loss) income$(7,196)$13,108 $1,615 $68,238 
Basic weighted-average common shares outstanding12,789 13,256 12,750 13,221 
Add: Dilutive effect of restricted stock 143 80 223 
Add: Dilutive effect of stock options 90 46 123 
Diluted weighted-average common shares outstanding12,789 13,489 12,876 13,567 
Basic$(0.56)$0.99 $0.13 $5.16 
Diluted$(0.56)$0.97 $0.13 $5.03 

The following table shows the shares that have an anti-dilutive effect and are excluded from the diluted weighted-average shares outstanding computations (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Anti-dilutive effect of restricted stock372 106 213 64 
Anti-dilutive effect of stock options outstanding273 — 173 — 
    
Note 4CASH, CASH EQUIVALENTS AND RESTRICTED CASH
    We consider financial instruments with original maturities of three months or less to be cash equivalents. Total cash, cash equivalents and restricted cash, as shown on the condensed consolidated statements of cash flows are included in the following accounts at September 30, 2023, and 2022 (in thousands):
September 30, 2023September 30, 2022
Cash and cash equivalents$2,791 $49,209 
Restricted cash included in other current assets25 25 
Restricted cash included in other long-term assets551 544 
Total cash, cash equivalents, and restricted cash as shown in the statement of cash flows$3,367 $49,778 
    
Restricted cash included in other current and long-term assets on the condensed consolidated balance sheets represents amounts for which use is restricted by contractual agreements with various entities, principally the Bureau of Land Management or the State of Utah, as security to fund future reclamation obligations at our sites.

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Note 5INVENTORY AND LONG-TERM PARTS INVENTORY
    The following summarizes our inventory, recorded at the lower of weighted-average cost or estimated net realizable value, as of September 30, 2023, and December 31, 2022 (in thousands):
September 30, 2023December 31, 2022
Finished goods product inventory$55,408 $74,777 
In-process inventory33,240 24,767 
Total product inventory88,648 99,544 
Current parts inventory, net19,712 15,272 
Total current inventory, net108,360 114,816 
Long-term parts inventory, net25,347 24,823 
Total inventory, net$133,707 $139,639 

Parts inventory is shown net of estimated allowances for obsolescence of $1.4 million and $1.3 million as of September 30, 2023, and December 31, 2022, respectively.

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Note 6PROPERTY, PLANT, EQUIPMENT, AND MINERAL PROPERTIES
    Property, plant, equipment, and mineral properties were comprised of the following (in thousands):
September 30, 2023December 31, 2022
Land$24,136 $24,136 
Ponds and land improvements91,215 73,501 
Mineral properties and development costs161,555 146,333 
Buildings and plant90,995 89,014 
Machinery and equipment314,851 288,345 
Vehicles8,072 7,399 
Office equipment and improvements11,390 10,436 
Operating lease ROU assets5,630 5,908 
Breeding stock310 329 
Construction in progress37,958 47,188 
Total property, plant, equipment, and mineral properties, gross$746,112 $692,589 
Less: accumulated depreciation, depletion, and amortization(343,250)(316,959)
Total property, plant, equipment, and mineral properties, net$402,862 $375,630 

We own a 3.9% non-operating working interest in an oil and gas well. Because oil and gas production from the well has not met expected production, we determined the future undiscounted cash flows were unable to recover the carrying amount of our non-operating working interest in the oil and gas well. We estimated the fair value of our non-operating working interest in the oil and gas well using a discounted cash flow technique and recorded a $0.5 million impairment expense during the third quarter of 2023.
We incurred the following expenses for depreciation, depletion, and amortization, including expenses capitalized into inventory, for the following periods (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Depreciation$9,102 $7,519 $25,156 $22,051 
Depletion621 459 1,968 1,889 
Amortization of right of use assets399 384 1,181 1,345 
Total incurred$10,122 $8,362 $28,305 $25,285 
Note 7DEBT
    Revolving Credit Facility—In August 2022, we and certain of our subsidiaries entered into the Second Amended and Restated Credit Agreement with a syndicate of lenders with the Bank of Montreal, as administrative agent, which provides for a revolving credit facility. The credit agreement amended our existing revolving credit facility to, among other things, increase the amount available under the facility from $75 million to $150 million, extend the maturity date to August 4, 2027, and transition from London Interbank Offered Rate ("LIBOR") to Secured Overnight Financing Rate ("SOFR") as a reference rate for borrowings under the credit agreement. Borrowings under the amended credit facility bear interest at SOFR plus an applicable margin of 1.50% to 2.25% per annum, based on our leverage ratio as calculated in accordance with the amended agreement governing the revolving credit facility. Borrowings under the revolving credit facility are secured by substantially all of our current and non-current assets, and the obligations under the credit facility are unconditionally guaranteed by several of our subsidiaries.
    We occasionally borrow and repay amounts under the revolving credit facility for near-term working capital needs or other purposes and may do so in the future. During the three months ended September 30, 2023, we made $2.0 million in borrowings and made no repayments under the revolving credit facility. During the nine months ended September 30, 2023, we made $7.0 million in borrowings, and we made $5.0 million in repayments under the revolving credit facility. During the three and nine months ended September 30, 2022, we made no borrowings, and we made no repayments under the revolving credit facility. As of September 30, 2023, we had $2.0 million in borrowings outstanding and no outstanding letters of credit
9

under this facility. As of December 31, 2022, we had no borrowings outstanding and $1.0 million in outstanding letters of credit under this facility.
As of September 30, 2023, we were in compliance with all applicable covenants under the revolving credit facility.
Interest Expense—Interest expense is recorded net of any capitalized interest associated with investments in capital projects. We incurred gross interest expense of $0.2 million and $0.1 million for the three months ended September 30, 2023 and September 30, 2022, respectively, and $0.5 million and $0.3 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.
    Amounts included in interest expense, net for the three and nine months ended September 30, 2023, and 2022 were as follows (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Interest expense on borrowings$58 $ $133 $ 
Commitment fee on unused credit facility57 47 169 90 
Amortization of deferred financing costs75 67 226 187 
Gross interest expense190 114 528 277 
Less capitalized interest(190)(86)(528)(192)
Interest expense, net$ $28 $ $85 
    
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Note 8INTANGIBLE ASSETS
    We have water rights, recorded at $19.2 million at September 30, 2023, and December 31, 2022. Our water rights have indefinite lives and are not amortized. We evaluate our water rights at least annually as of October 1 for impairment, or more frequently if circumstances require.
    We account for other intangible assets as finite-lived intangible assets and amortize those intangible assets over the period of estimated benefit, using the straight-line method. The weighted average amortization period for the other intangible assets is approximately 15.5 years. At September 30, 2023, and December 31, 2022, these intangible assets had a net book value of $5.0 million and $5.2 million, respectively, and are included in "Other assets, net" on the Condensed Consolidated Balance Sheets.
    
Note 9FINANCIAL 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 cash equivalents and totaled $2.8 million and $18.5 million at September 30, 2023, and December 31, 2022, respectively. If one or more of our wholly-owned operating subsidiaries guarantee public debt securities in the future, those guarantees will be full and unconditional and will constitute the joint and several obligations of the subsidiary guarantors. The assets and liabilities of our other subsidiaries are immaterial. There are no restrictions on our ability to obtain cash dividends or other distributions of funds from the subsidiary guarantors, except those imposed by applicable law.

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Note 10ASSET 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 close 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 reclamation liabilities range from 6.9% to 9.7%. Revisions to the liability occur due to construction of new or expanded facilities, changes in estimated closure costs or economic lives, or to reflect new federal or state rules, regulations, or requirements regarding the closure or reclamation of mines.
Following is a table of the changes to our asset retirement obligation for the following periods (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Asset retirement obligation, at beginning of period$27,934 $28,004 $26,864 $27,024 
Liabilities settled (511) (511)
Liabilities incurred 250  250 
Accretion of discount535 491 1,605 1,471 
Total asset retirement obligation, at end of period$28,469 $28,234 $28,469 $28,234 
Less current portion of asset retirement obligation$(300)$(1,029)$(300)$(1,029)
Long-term portion of asset retirement obligation$28,169 $27,205 $28,169 $27,205 
    
The current portion of the asset retirement obligation is included in "Other current liabilities" on the Condensed Consolidated Balance Sheet as of September 30, 2023.
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Note 11REVENUE
    Revenue RecognitionWe 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 in exchange for those goods or services. The timing of revenue recognition, billings, and cash collection may result in contract assets or contract liabilities.

Contract Balances: As of September 30, 2023, and December 31, 2022, we had a total of $2.2 million and $2.4 million of contract liabilities, respectively, of which $1.0 million and $0.9 million were current as of September 30, 2023, and December 31, 2022, respectively, and included in "Other current liabilities" on the Condensed Consolidated Balance Sheets. Customer advances received before we have satisfied our performance obligations are accounted for as a contract liability (sometimes referred to in practice as deferred revenue).
In August 2022, a customer notified us that they were terminating a water sales agreement with us. Under that agreement, the customer had prepaid us for future water deliveries. In September 2022 we refunded the customer's prepayment balance of $32.6 million. See Note 14—Commitments and Contingencies below for additional information regarding our water rights and repayment of this customer's prepayment balance.
Our deferred revenue activity for the three and nine months ended September 30, 2023, and 2022 is shown below (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Beginning balance$2,168 $34,110 $2,374 $33,788 
Additions313 124 627 714 
Refund of prepayments (32,579) (32,579)
Recognized as revenue during period(291)(150)(811)(418)
Ending Balance$2,190 $1,505 $2,190 $1,505 

Disaggregation of Revenue: The tables below show the disaggregation of revenue by product and reconciles disaggregated revenue to segment revenue for the three and nine months ended September 30, 2023, and 2022. We believe the disaggregation of revenue by products best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic conditions (in thousands):
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Three Months Ended September 30, 2023
ProductPotash Segment
Trio® Segment
Oilfield Solutions SegmentIntersegment EliminationsTotal
Potash$21,980 $ $ $(71)$21,909 
Trio®
 20,605   20,605 
Water48 1,368 1,133  2,549 
Salt2,676 57   2,733 
Magnesium Chloride2,035    2,035 
Brine Water863  1,030  1,893 
Other  2,741  2,741 
Total Revenue$27,602 $22,030 $4,904 $(71)$54,465 
Nine Months Ended September 30, 2023
ProductPotash SegmentTrio® SegmentOilfield Solutions SegmentIntersegment EliminationsTotal
Potash$110,241 $ $ $(260)$109,981 
Trio®
 76,887   76,887 
Water228 3,890 5,320  9,438 
Salt8,997 275   9,272 
Magnesium Chloride4,839    4,839 
Brine Water3,058  2,853  5,911 
Other  6,092  6,092 
Total Revenue$127,363 $81,052 $14,265 $(260)$222,420 
14

Three Months Ended September 30, 2022
ProductPotash Segment
Trio® Segment
Oilfield Solutions SegmentIntersegment EliminationsTotal
Potash$36,177 $ $ $(68)$36,109 
Trio®
 23,158   23,158 
Water427 796 5,380  6,603 
Salt2,845 89   2,934 
Magnesium Chloride2,008    2,008 
Brine Water897  792  1,689 
Other  2,251  2,251 
Total Revenue$42,354 $24,043 $8,423 $(68)$74,752 
Nine Months Ended September 30, 2022
ProductPotash Segment
Trio® Segment
Oilfield Solutions SegmentIntersegment EliminationsTotal
Potash$131,684 $ $ $(228)$131,456 
Trio®
 97,461   97,461 
Water1,564 2,722 13,260  17,546 
Salt8,137 378   8,515 
Magnesium Chloride4,022    4,022 
Brine Water2,215  2,179  4,394 
Other  7,497  7,497 
Total Revenue$147,622 $100,561 $22,936 $(228)$270,891 

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Note 12COMPENSATION PLANS
Equity Incentive Compensation Plan—Our Board of Directors and stockholders adopted a long-term incentive compensation plan called the Intrepid Potash, Inc. Amended and Restated Equity Incentive Plan (the "Plan"). The Plan was most recently amended and restated in May 2022. We have issued common stock, restricted stock, performance units, and non-qualified stock option awards under the Plan. At September 30, 2023, approximately 1.0 million shares remained available for issuance under the Plan.
    In March 2023, the Compensation Committee granted an aggregate of 225,117 shares of restricted stock to executive officers and other key employees. These awards vest over three years, and in some cases, contain a market condition. In May 2023, the Compensation Committee granted an aggregate of 22,226 shares of restricted stock to members of our Board of Directors. These awards vest over one year. In March 2022, the Compensation Committee granted an aggregate of 104,039 restricted shares to executive officers and other key employees. These awards vest over three years, and in some cases, contain a market condition. In May 2022, the Compensation Committee granted an aggregate of 6,635 restricted shares to members of our Board of Directors. These awards vest over one year.
As of September 30, 2023, the following awards were outstanding under the Plan (in thousands):
Outstanding as of
September 30, 2023
Restricted Shares371 
Non-qualified Stock Options273 

    Total share-based compensation expense was $1.5 million and $1.4 million for the three months ended September 30, 2023, and 2022, respectively, and $5.1 million and $4.0 million for the nine months ended September 30, 2023, and 2022, respectively. As of September 30, 2023, we had $7.2 million of total remaining unrecognized compensation expense related to awards that is expected to be recognized over a weighted-average period of 1.3 years.

Note 13INCOME 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, and the benefit associated with the estimated effect of the percentage depletion deduction.
A summary of our provision for income taxes is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Current portion of income tax expense$3 $296 $137 $583 
Deferred portion of income tax (benefit) expense(1,920)4,607 1,756 21,548 
Total income tax (benefit) expense$(1,917)$4,903 $1,893 $22,131 

    Our effective tax rate for the three months ended September 30, 2023, was 21.0%. Our effective tax rate for the nine months ended September 30, 2023 was 54.0%. Our effective tax rate differed from the statutory rate during this period primarily from the estimated permanent difference between book and tax income for the first nine months of 2023 for the percentage depletion deduction and the officers' compensation deduction. Additionally, because small changes in projected income may produce significant variations in our estimated annual effective tax rate, we have determined that we are unable to reliably estimate an annual effective tax rate to apply to our income for the nine months ended September 30, 2023, as described in ASC 740. Therefore, we have elected to apply the actual effective tax rate for this period to our income since we believe that this is the best estimate of our annual effective tax rate. Our effective tax rate for the three and nine months ended September 30, 2022, was 27.2% and 24.5%, respectively, which differed from the statutory rate primarily from the estimated
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permanent difference between book and tax income for 2022, for the percentage depletion deduction as well as the effect of state income tax law changes enacted during the first half of 2022.

Note 14COMMITMENTS AND CONTINGENCIES
Reclamation Deposits and Surety Bonds—As of September 30, 2023, and December 31, 2022, we had $26.8 million and $24.6 million, respectively, of security placed principally with the State of Utah and the Bureau of Land Management ("BLM") for eventual reclamation of our various facilities. As of September 30, 2023, $0.5 million consisted of long-term restricted cash deposits and $26.3 million was secured by surety bonds issued by an insurer. As of December 31, 2022, $0.5 million consisted of long-term restricted cash deposits and $24.1 million was secured by surety bonds issued by an insurer. The restricted cash deposits are included in "Other assets, net" on the condensed consolidated balance sheets and the surety bonds are held in place by an annual fee paid to the issuer.
We may be required to post additional security to fund future reclamation obligations as reclamation plans are updated or as statutory and regulatory requirements change.
    Legal—We are subject to claims and legal actions in the ordinary course of business. We expense legal costs as they are incurred. While there are uncertainties in predicting the outcome of any claim or legal action, except as noted below, we believe the ultimate resolution of these claims or actions is not reasonably likely to have a material adverse effect on our financial condition, results of operations, or cash flows.
Water Rights and Other Legal Contingencies
In February 2019, an expedited inter se proceeding commenced to determine the validity of our Pecos River water rights, representing approximately 20,000 acre feet of surface water per year. On December 17, 2021, the adjudication court entered its findings of fact and conclusions of law, which held that our predecessors in interest had forfeited all but approximately 5,800 acre feet of water per year, and that of the remaining 5,800 acre feet of water that had not been forfeited, all but 150 acre feet of water had been abandoned prior to 2017. On March 17, 2022, the adjudication court entered the subfile order and partial final judgment and decree, which adopted the court's December 17, 2021 findings of fact and conclusion of law and specifies our right to 150 acre feet per annum of water for industrial-salt processing use. On April 15, 2022, we filed a notice of appeal of the adjudication court's ruling on the validity of our water rights to the New Mexico Court of Appeals. On October 18, 2023, the New Mexico Court of Appeals issued a decision affirming the adjudication court's ruling. We are evaluating our options in response to the Court of Appeals opinion. We plan on filing a petition for certiorari to the New Mexico Supreme Court, which will seek review of the Court of Appeals decision. The New Mexico Supreme Court has discretion whether to accept the petition for certiorari; if it is not accepted, the New Mexico Court of Appeals' decision will be final.
    In 2017 and 2018 the New Mexico Office of the State Engineer ("OSE") granted us preliminary and emergency authorizations to sell approximately 5,700 acre-feet of water per year from our Pecos River Water rights. The preliminary and emergency authorizations allowed for water sales to begin immediately, subject to repayment if the underlying water rights were ultimately found to be invalid. If the New Mexico Court of Appeals' decision is ultimately affirmed, we may have to repay for the water we sold under the preliminary and emergency authorizations. Repayment of this water can be up to two times the amount of water removed from the river. Repayment is customarily made in-kind over a period of time but can take other forms including cash repayment. If we are not able to repay in-kind due to the lack of remaining water rights or logistical constraints, we may need to purchase water to meet this repayment or be subject to a cash repayment. We cannot reasonably estimate the potential volume, timing, or form of repayment, if any, and have not recorded a loss contingency in our Condensed Consolidated Statement of Operations related to this legal matter.
    In March 2021, we received notice from a customer of a default under the terms of a long-term sales contract because we have been unable to deliver water to diversion points specified in the contract. We have relied primarily upon our Pecos River water rights to deliver water under this contract, the majority of which are currently unavailable due to the factors discussed above. Under this contract we had previously received quarterly installments of approximately $3.9 million for the future delivery of water to the customer. In April 2021, we agreed to suspend the second quarter 2021 and future quarterly installments due from the customer as we continued to work to resolve the issue. In December 2021, we amended our long-term sales agreement with the customer due to our inability to deliver water. Under the amendment, we agreed to suspend all rights and obligations of both parties under the agreement until July 1, 2022. During the suspension period, we had no obligation to deliver water and our customer had no obligation to take water, if available, or make quarterly payments to us. In August 2022, the customer notified us that they were terminating the long-term sales contract and in September 2022, we refunded the $32.6 million outstanding contract liability we had with this customer. See Note 11—Revenue above for additional information.
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We have estimated contingent liabilities recorded in "Other current liabilities" on the condensed consolidated balance sheets of $3.1 million as of September 30, 2023, mainly related the potential underpayment of royalties from 2012 to 2016. As of December 31, 2022, we had $4.2 million in contingent liabilities mainly related to a trespass issue at Intrepid South and the potential underpayment of royalties in 2012 to 2016. During the nine months ended September 30, 2023, we resolved the contingent liability related to the trespass issue at Intrepid South and we paid the BLM $2.7 million.


Note 15FAIR VALUE
    We measure our financial assets and liabilities in accordance with ASC Topic 820, Fair Value Measurements and Disclosures. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation at the measurement date:
Level 1 - Quoted market prices in active markets for identical assets or liabilities.
Level 2 - Inputs, other than Level 1, that are either directly or indirectly observable.
Level 3 - Unobservable inputs developed using estimates and assumptions which reflect those that market participants would use.
The classification of fair value measurement within the hierarchy is based upon the lowest level of input that is significant to the measurement.
     Other financial instruments consist primarily of cash equivalents, accounts receivable, refundable income taxes, investment securities, accounts payable, accrued liabilities, and, if any, advances under our credit facility. With the exception of investment securities, we believe cost approximates fair value for our financial instruments because of the short-term nature of these instruments.
Cash Equivalents—As of September 30, 2023, we had no cash equivalents. As of December 31, 2022, we had cash equivalents of $1.7 million.
Held-to-Maturity Investments—As of September 30, 2023, and December 31, 2022, we owned debt investment securities classified as held-to-maturity because we have the intent and ability to hold these investments to maturity. Our held-to-maturity debt investment securities consist of investment grade corporate bonds and U.S. government issued bonds. These debt securities are carried at amortized cost and consist of the following (amounts in thousands):
As of September 30, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term
Corporate bonds$1,499 $ $(8)$1,491 
Government bonds1,964  (21)1,943 
Total$3,463 $ $(29)$3,434 
Long-term
Corporate bonds$489 $ $(8)$481 
Government bonds1,447  (19)1,428 
Total$1,936 $ $(27)$1,909 
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As of December 31, 2022
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term
Corporate bonds$3,992 $ $(24)$3,968 
Government bonds1,967  (18)1,949 
Total$5,959 $ $(42)$5,917 
Long-term
Corporate bonds$499 $ $(10)$489 
Government bonds1,935  (26)1,909 
Total$2,434 $ $(36)$2,398 
Our long-term held to maturity investments are recorded in "Long-term investments" on the Condensed Consolidated Balance Sheets. As of September 30, 2023 and December 31, 2022, we had $5.4 million and $8.4 million in held-to-maturity debt investment securities, respectively. As of September 30, 2023, our long-term held-to-maturity investments mature in less than 2 years.
Equity Investments without a Readily Determinable Fair Value—In May 2020, we acquired a non-controlling equity investment in W.D. Von Gonten Laboratories ("WDVGL") for $3.5 million. We account for this investment as an equity investment without a readily determinable fair value and elected to measure our investment, as permitted by GAAP, at cost plus or minus any adjustments for observable changes in prices resulting from orderly transactions for the identical or a similar investment of the same issuer or impairment. As of September 30, 2023, and December 31, 2022, we had not recorded any adjustments to the carrying value of this investment since the purchase in May 2020. We include this investment in "Long-term investments" on the Condensed Consolidated Balance Sheets.
In July 2022, WDVGL entered into a purchase agreement with another company (“Acquiror”), a foreign issuer whose shares are traded on the Nasdaq Capital Market (“Nasdaq”). Under the terms of the purchase agreement, WDVGL would be combined with the consulting business owned by W.D. Von Gonten (“Consulting”) to form a new entity, W.D. Von Gonten Engineering, LLC (“Engineering”), and Acquiror would then purchase Engineering in a majority stock transaction at an agreed upon selling price.
Acquiror delivered equity shares and a nominal amount of cash to WDVGL for purchase of Engineering in July 2022, with the number of shares equal to the selling price divided by an assumed $10 share price. Under the terms of the purchase agreement, if Acquiror was current in its SEC filing on June 30, 2023, the actual number of shares to be delivered as part of the purchase price would be adjusted to equal the agreed upon purchase price divided by the average closing price of Acquiror’s stock for the ten trading days prior to June 30, 2023, and the stock received from the sale of Engineering would be distributed to the investors in WDVGL and Consulting.
In March 2022, Acquiror disclosed that it had discovered errors in its financial statements for the fiscal years ended December 31, 2018, 2019 and 2020, and was working to file restated financial statements with the SEC. On April 27, 2023, Acquiror disclosed it had not been able to file its Annual Report on Form 20-F for the fiscal year ended December 31, 2021 with the SEC by April 25, 2023, which was the deadline set by the Nasdaq Hearings Panel in connection with a delisting proceeding, and Acquiror’s shares were subsequently delisted from Nasdaq. Acquiror also disclosed on April 27, 2023 that it has shifted its focus to filing audited financial statements with the SEC for the fiscal years ended December 31, 2020, 2021 and 2022 to regain compliance with Nasdaq listing standards before the end of 2023. Pursuant to the purchase agreement with Engineering, if the Acquiror did not file current financial statements with the SEC by June 30, 2023, Engineering had the option to terminate the purchase agreement, beginning on July 1, 2023. Although Acquiror did not file current financial statements by June 30, 2023, Engineering intends to proceed with the purchase agreement and allow Acquiror additional time to file updated financial statements.
We have not impaired our investment in WDVGL because our share of the estimated selling price exceeds the carrying value of our investment in WDVGL. We will continue to monitor the investment for impairment. If Acquiror is unable to file restated financial statements by the end of 2023 and the purchase transaction is not finalized, we may need to impair our investment in WDVGL.

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Equity Method Investments—We have committed to invest up to $4.0 million in cash as a limited partner for a 16% interest in PEP Ovation, LP ("Ovation"), of which we had invested $3.2 million of cash as of September 30, 2023, and December 31, 2022. This investment is accounted for under the equity method whereby we recognize our proportional share of the income or loss from our investment in Ovation on a one-quarter lag. This investment is included in "Long-term investments" on the Condensed Consolidated Balance Sheets. For the three and nine months ended September 30, 2023, our proportional share of Ovation's net loss was $0.1 million and $0.3 million, respectively.
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Note 16BUSINESS SEGMENTS
    Our operations are organized into three segments: potash, Trio® and oilfield solutions. We determine reportable segments based on several factors including the types of products and services sold, production processes, markets served and the financial information available for our chief op