# Intrepid Potash, Inc.: Form 10-Q for the period ended Sep 30, 2010

- Company: [Intrepid Potash, Inc.](/companies/ipi.md) (CIK 1421461)
- Form: 10-Q
- Filed: 2010-11-04
- Accepted by EDGAR: Nov 4, 2010, 13:13 ET
- Period: 2010-09-30
- Accession: 0001047469-10-009199
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1421461/000104746910009199/a2200702z10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1421461/000104746910009199/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2010-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Gross profit | 3 months, 2010-07-01 to 2010-09-30 | $26.8m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2010-01-01 to 2010-09-30 | $68.4m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2010-07-01 to 2010-09-30 | $6.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2010-01-01 to 2010-09-30 | $21.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2010-07-01 to 2010-09-30 | $19.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2010-01-01 to 2010-09-30 | $46.1m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2010-07-01 to 2010-09-30 | $8.2m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2010-01-01 to 2010-09-30 | $18.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2010-07-01 to 2010-09-30 | $11.7m | us-gaap:ProfitLoss |
| Net income | 9 months, 2010-01-01 to 2010-09-30 | $27.1m | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2010-07-01 to 2010-09-30 | $0.16 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2010-01-01 to 2010-09-30 | $0.36 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2010-07-01 to 2010-09-30 | $0.16 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2010-01-01 to 2010-09-30 | $0.36 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2010-07-01 to 2010-09-30 | 75,143,542 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2010-01-01 to 2010-09-30 | 75,133,775 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2010-01-01 to 2010-09-30 | $76.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2010-01-01 to 2010-09-30 | $57.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2010-09-30 | $66.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2010-09-30 | $198.2m | us-gaap:AssetsCurrent |
| Total assets | at 2010-09-30 | $811.1m | us-gaap:Assets |
| Current liabilities | at 2010-09-30 | $46.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2010-09-30 | $72.4m | us-gaap:Liabilities |
| Shareholders' equity | at 2010-09-30 | $738.7m | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |

## Management's discussion and analysis

As filed, 89,654 characters.

*This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933, which are subject to risks, uncertainties and assumptions that are difficult to predict. All statements in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. These forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements, among other things, concerning our business strategy, including anticipated trends and developments in and management plans for our business and the markets in which we operate; future financial results, operating results, revenues, gross margin, cost of goods sold, operating expenses, products, projected costs and capital expenditures; sales; and competition. 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," the negative or plural of these words and other comparable terminology. Forward-looking statements are only predictions based on our current expectations and our projections about future events. All forward-looking statements included in this Quarterly Report on Form 10-Q are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q. You should not place undue reliance on these forward-looking statements. We undertake no obligation to update any of these forward-looking statements for any reason.*

*These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by these statements. These risks and uncertainties include changes in the price of potash or Trio®; operational difficulties at our facilities; the ability to hire and retain qualified employees; changes in demand and/or production of potash or Trio®/langbeinite; changes in our reserve estimates; our ability to achieve the initiatives of our business strategy, including, but not limited to, the development of the HB Solar Solution Mine and the further development of our langbeinite recovery assets; changes in the prices of our raw materials, including, but not limited to, the price of chemicals, natural gas and power; fluctuations in the costs of transporting our products to customers; changes in labor costs and availability of labor with mining expertise; the impact of federal, state or local government regulations, including, but not limited to, environmental and mining regulations, and the enforcement of such regulations; competition in the fertilizer industry; declines in U.S. or world agricultural production; declines in oil and gas drilling; changes in economic conditions; adverse weather events at our facilities; our ability to comply with covenants inherent in our current and future debt obligations to avoid defaulting under those agreements; disruptions in credit markets; our ability to secure additional federal and state potash leases to expand our existing mining operations; and governmental policy changes that may adversely affect our business. These factors also include the matters discussed and referenced in the section entitled "Risk Factors" described in our Annual Report on Form 10-K for the year ended December 31, 2009, and elsewhere in this Quarterly Report on Form 10-Q.*

*Unless expressly stated otherwise or the context otherwise requires, the terms "we," "our," "us," and "Intrepid" refer to Intrepid Potash, Inc. and its subsidiaries. Unless expressly stated otherwise or the context otherwise requires, references to "tons" in this Quarterly Report on Form 10-Q refer to short tons. One short ton equals 2,000 pounds. One metric ton, which many of our international competitors use, equals 1,000 kilograms or 2,204.68 pounds.*

### Overview

### Our Company

We are the largest producer of muriate of potash ("potassium chloride" or "potash") in the United States and are dedicated to the production and marketing of potash and langbeinite ("sulfate of potash magnesia"), another mineral containing potassium that is produced from langbeinite ore and which we will generally describe as langbeinite when we refer to production and as Trio® or Intrepid Trio® when we refer to sales and marketing. Our revenues are generated exclusively from the sale of potash and Trio®. Potassium is one of the three primary nutrients essential to plant formation and growth. Since 2005, we have supplied, on average, approximately 1.6 percent of annual world potassium consumption and 9.8 percent of annual U.S. consumption. We are one of two producers of langbeinite, a low-chloride fertilizer that is well-suited for chloride sensitive crops and has the added benefit of sulfur and magnesium. We also produce salt, magnesium chloride, and metal recovery salts from our potash mining processes, the sales of which are accounted for as by-product credits to our cost of goods sold. We own five active potash production facilities—three in New Mexico (referenced collectively below as "Carlsbad" or individually as "West," "East," and "North") and two in Utah ("Moab" and "Wendover")—and we have a current estimated productive capacity to produce 910,000 tons of potash and 210,000 tons of langbeinite annually. We own two development assets in New Mexico—the HB Solar Solution Mine, which is an idled potash mine that we are in the process of reopening as a solution mine that will utilize solar evaporation techniques in the production of potash, and the North Mine, which was operated as a traditional underground mine until the early 1980s.

We routinely post important information about Intrepid and our business on our website under the Investor Relations tab. Our website address is *www.intrepidpotash.com.*

### Our Products and Markets

#### Potash

The majority of our revenues and gross margin are derived from the production and sales of potash. The percentages of our net sales, which we calculate as gross sales less freight costs, and gross margin derived from potash sales were approximately as follows for the indicated periods.

| 2010 | Contribution from Potash Sales Net Sales | Gross Margin |
| --- | ---: | ---: |
| For the three months ended September 30, 2010 | 91% | 99% |
| For the nine months ended September 30, 2010 | 88% | 98% |
| 2009 |  |  |
| For the three months ended September 30, 2009 | 84% | 90% |
| For the nine months ended September 30, 2009 | 82% | 87% |

Our potash is marketed for sale into three primary markets which are the agricultural market as a fertilizer, the industrial market as a component in drilling and fracturing fluids for oil and gas wells, and the animal feed market as a nutrient. Our primary regional markets include agricultural areas and feed manufacturers west of the Mississippi River, as well as oil and gas drilling areas in the Rocky Mountains and the Permian Basin. We also have domestic sales in the southeastern and eastern United States. Our potash production has a geographic concentration in the western United States and is therefore affected by weather and other conditions in this region.

The agricultural demand for potash in 2010 has been much more historically normal than the demand that we experienced beginning in the fall of 2008 which persisted through most of 2009. The demand for fertilizer began to recover late in 2009 and we continue to experience a more normal market in 2010 compared to historic demand levels over the last 25 years. The third quarter of 2010 has been characterized by good demand for potash as our customers began purchasing potash for their own inventory in anticipation of the fall planting season. The fall harvest got off to an early start this year compared to the last couple of years. With much of the fall harvest occurring on time or early and the weather window still open, applications of fertilizer in the fall have been robust. While the deliveries have been strong, we have also seen a general strengthening of agricultural commodity prices as well as a strengthening of potash prices. In addition, crop prices have moved up significantly due to increased demand and some downward revisions in yields by the United States Department of Agriculture ("USDA"). We also believe farmers became concerned about the risk of yield losses resulting from large cuts in fertilizer applications during the prior two growing seasons. These situations, together with a smaller chance of price shocks from nitrogen which can be attributed to the relatively flat natural gas forward curve, set the stage for strong economics to the farmer. Finally, potash prices appeared to hit a low in the summer of 2010 as multiple price increases to take effect in the fall of 2010 were announced both domestically and internationally.

In the first quarter of 2010, sales volumes of potash were higher than any quarter in the last two years as dealers and retailers prepared for the spring application season. Second quarter sales contracted, as is typical after a strong spring fertilizer application season, as dealers waited to start replenishing inventories for the fall season in order to see how pricing developed. During the third quarter of 2010, we experienced strong sales volumes with potash sales of 221,000 tons and Trio® sales of 45,000 tons, due to strong crop economics, and an increase in demand, each of which led to announced price increases in the fourth quarter of 2010. More specifically, on the macro level, the USDA recently revised world grain stocks down from 198.8 million metric tons last year to 163.4 million metric tons this year. As a result of both macro demand and supply for potash, as well as crop price trends, notably for corn, potash prices have increased over the last several months. Over the long-term, we believe that domestic apparent consumption of fertilizers will return to historical averages as the replacement of potassium in the soils is critical to continued high-yield agricultural production. This view is supported by data generated by Fertecon Limited, a fertilizer industry consultant, showing that over the past 25 years the domestic apparent consumption for potash has averaged approximately 9.2 million tons with annual volatility of approximately 10 percent through historical periods of low agricultural commodity prices, depressed oil and gas drilling, negative farmer margins, and a variety of other negative economic factors.

During the third quarter of 2010, potash prices began their first meaningful recovery since declining from peak levels in 2008. Our average net realized sales price for potash was $343 per ton in the third quarter of 2010. We realized a $33 per ton decrease in our average net realized sales price for potash in the third quarter of 2010 compared to the second quarter of 2010. The average net realized sales prices are calculated by subtracting freight costs from gross sales revenue and then dividing this result by the number of tons sold. Spot prices have increased from the summer price incentive pricing levels. We initially raised our price for red granular in Carlsbad from $360 per ton to $380 per ton for orders placed after October 1, 2010, and again to $410 per ton for orders placed after November 1, 2010. Subsequent to our announcement to increase prices on November 1, 2010, we increased our red granular pricing to $435 per ton effective October 18, 2010. Based on continued strong demand in the market and limited product availability, we again raised our price of red granular potash, effective November 1, 2010 to $485 per ton. Our average net realized sales price per ton will likely always be less than our posted price due to a variety of factors, including, but not limited to, the different competitive markets in which we sell our products, associated customer discounts, variable pricing across our different products and that it may take approximately three months after the effective date of any given price increase for the full impact of that price increase to be realized in our financial results. As we will continue to honor rail shipments that were committed to prior to the announcement of price increases, we do not expect to realize the impact of these price increases for rail shipments until December 2010. However, we will begin to realize the increased pricing immediately for product that is delivered at our plants into the truck market. We experienced increased truck market sales activity in September 2010 as a result of our announced price increases as we believe some of our customers accelerated their purchases from October into September, in advance of the price increases taking effect in October 2010.

Industrial demand for our standard-sized potash increased, as we sold 32 percent more in industrial sales volumes into this market in the third quarter of 2010 compared to a year ago, yet demand remains below the levels experienced during 2007 and 2008 due to continued relatively lower levels of oil and especially gas drilling in the geographic markets proximate to our mines. In addition, some drillers have switched to alternatives to standard potash or have attempted to forego the use of potash altogether in drilling and completing their wells in an effort to reduce costs. We believe that potash is the most effective clay inhibitor available, and we are promoting potash as the drilling fluid additive of choice in our traditional industrial markets and working with our key customers to find ways to stimulate demand. The market for the industrial standard potash used in fracture fluids is somewhat regional, and we have experienced differences in demand for our product with respect to the markets served by our Carlsbad operations and our Utah operations. Our Carlsbad operations, which predominately serve Texas, Oklahoma, Louisiana, and New Mexico, have experienced higher sales in comparison to the level of sales of standard potash from our Utah operations. The relatively lower natural gas prices in the Rocky Mountain region resulting in a decreased level of permitting for oil and gas wells in the Colorado, Utah, and Wyoming areas, have resulted in a significantly lower level of sales of standard-sized potash. Consequently, we have experienced an accumulation of standard-sized potash inventory at our Utah facilities.

We expect that industrial demand for our standard product will correlate over the long-term with oil and gas pricing, drilling, and well completion activity. Through industry publications, we monitor the oil and gas drilling rig count in the United States as an indicator of drilling activity. We are taking steps to increase our marketing flexibility by installing a new compaction facility in Moab that will be able to granulate all of our annual potash production at Moab. This will ensure our production mix can be modified, as needed, to meet demand in the agricultural, industrial, and feed markets that we serve. We expect the new Moab compaction facility to be placed in service in December 2010.

The tons of product sold to our feed markets declined during the third quarter of 2010 as a result of a more competitive feed market. We anticipate our feed market sales to be relatively flat during the fourth quarter of 2010 compared to the third quarter of 2010. The percentage of our overall sales mix changed when compared to the same period in 2009. This was driven, not by a decrease in feed sales, but rather by a stronger overall sales market for potash. The percentages of our potash sales volumes for each of the markets we serve were approximately as follows for the indicated periods:

| 2010 | Agricultural | Industrial | Feed |
| --- | ---: | ---: | ---: |
| For the three months ended September 30, 2010 | 83% | 12% | 5% |
| For the nine months ended September 30, 2010 | 82% | 12% | 6% |
| 2009 |  |  |  |
| For the three months ended September 30, 2009 | 70% | 17% | 13% |
| For the nine months ended September 30, 2009 | 65% | 20% | 15% |

#### Trio®

We began producing and selling langbeinite in late 2005 and have been marketing it as Trio® since 2007. Trio® is marketed into two primary markets, the agricultural market as a fertilizer and the animal feed market as a nutrient. We market Trio® internationally through an exclusive marketing agreement with PCS Sales (USA), Inc. for sales outside the United States and Canada and via a non-exclusive agreement for sales into Mexico. We are focusing our marketing efforts on increasing the awareness of the benefits of Trio® and working to grow the overall Trio® market. Sales of Trio® on an international basis tend to be larger bulk shipments and vary as to when such shipments take place; therefore, we see greater variability in our international sales volumes from period-to-period when compared to our domestic sales. Sales of our granular-sized Trio® product continued to be solid during the third quarter of 2010 as we sold through our available inventory.

In May 2010, we announced a capital project to expand our production of langbeinite to meet increasing demand, particularly for the granular-sized Trio® product. This capital project is designed to increase our recoveries of langbeinite from approximately 30-35 percent to approximately 50 percent, while, at the same time, reducing process water usage and providing us with the flexibility to produce a smoother premium granulated, or prilled, product, thereby allowing us to sell all of our production into the granular market.

We realized an increase in the net realized sales price per ton of Trio® from $162 per ton in the second quarter of 2010 to $173 per ton in the third quarter of 2010. Our pricing for granular Trio® was increased to $246 per ton effective October 15, 2010. Demand for granular Trio® continues to be robust and we expect Trio® sales demand will exceed our production capabilities for the next few quarters, resulting in the need to sell our granular product on an allocated basis. Part of the reason that we need to allocate tonnage to our Trio® customers is that during July 2010, we shut down our langbeinite plant at our East facility for a total of 14 days due to unusually heavy rainfall. The Carlsbad, New Mexico region received approximately nine inches of rain during late June and July 2010. For perspective, average total precipitation in Carlsbad is approximately 14 inches per year, and the July rains put Carlsbad on track to have one of the five wettest years on record since 1912. This aberrant weather in Carlsbad highlights the importance of our Langbeinite Recovery Improvement Project, which is designed to reduce our freshwater usage in the production of langbeinite, thereby reducing the risk of impacts from significant or unusual weather events like those just experienced. Production was not further impacted by rain in August and September and our storm water control systems are operating within the designed parameters as we exit the normal wet season in Carlsbad so we believe we should not experience further disruptions from rain this year. Although the underground mining operations have been delivering tons to the mill, the cost side of our East surface facility has continued to be challenging due to the nature of processing mixed ore combined with lower operating efficiencies due to older equipment at the East facility. As we actively upgrade the East surface plant, construct and improve its facilities, as part of our previously announced Langbeinite Recovery Improvement Project, we have experienced and expect to continue to experience operating inefficiencies from time to time.

Our Trio® product is marketed domestically and internationally. In contrast, virtually all of our potash is sold in the United States. The mix of our U.S. and export Trio® sales volumes has changed as domestic demand has remained strong for granular-sized Trio® product, while the export market for our standard-sized Trio® product has lagged the strong results experienced in 2007 and 2008. As the export market for granular Trio® has been strengthening, we have elected to take only selected opportunities of these sales as domestic product sales of granular Trio® yield a higher average net realized sales price. International standard Trio® customers are slowly converting to granular customers as the technology for spreading fertilizer develops internationally. We expect that future growth in Trio® demand will be primarily for granular-sized product. During the nine months ended September 30, 2010, 15 percent of our gross sales dollars were related to Trio®, and, of that 15 percent, 30 percent were export sales, resulting in less than five percent of our overall gross sales being sold outside the United States. The percentages of our Trio® sales volumes shipped to destinations in the United States and exported were as follows for the indicated periods.

| Trio® only 2010 | United States | Export |
| --- | ---: | ---: |
| For the three months ended September 30, 2010 | 57% | 43% |
| For the nine months ended September 30, 2010 | 66% | 34% |
| 2009 |  |  |
| For the three months ended September 30, 2009 | 39% | 61% |
| For the nine months ended September 30, 2009 | 59% | 41% |

### Specific Factors Affecting our Results

#### Sales

Our gross sales are derived from the sales of potash and Trio® and are determined by the quantities of product we sell and the sales prices we realize. We quote prices to customers both on a delivered basis and on the basis of pick-up at our plants and warehouses. Freight costs are incurred only on a portion of our sales. Many of our 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. Our gross sales include the freight that we bill, but we do not believe that gross sales provide a representative measurement of our performance in the market due to variations caused by ongoing changes in the proportion of customers paying for their own freight, in the geographic distribution of our products, and in freight rates. We view net sales, which are gross sales less freight costs, as the key performance indicator as it conveys the sales price of the product that we realize. We manage our sales and marketing operations centrally and we work to achieve the highest average net realized sales price we can by evaluating the product needs of our customers and then determine which of our production facilities can be utilized to fill these needs.

During the third quarter of 2010, we sold more granular tons then we produced and exited the quarter with our granular inventories at low levels as we responded to strong demand for our products. As mentioned previously, the early fall demand resulted from our customers building inventory in anticipation of the fall season in response to increasing crop and potash prices and the early harvest. As we are currently experiencing demand for our granular product at levels exceeding our inventories of granular product, we are compacting product at full capacity at all of our facilities to meet existing orders and to prepare for the coming spring season. We anticipate that crop prices will remain strong at least through the next crop cycle, which would support a continuation of strong demand in the spring of 2011.

The volumes of product we sell are determined by demand for our products and by our production capabilities. We manage our production levels, as needed, in response to market demand with a view toward managing inventory levels in the near term while ensuring that our balance sheet remains strong. At the current time, we are working to produce at maximum rates relative to staffing levels, plant capacities, and regularly scheduled maintenance specifically for larger maintenance turnaround projects. We performed annual turnaround maintenance at our Carlsbad facilities in the third quarter, including work performed at our East facility, which extended approximately 10 days into the fourth quarter this year. The timing and duration of the work performed at the East facility were a result of scheduled maintenance requirements and the need to perform certain tasks in anticipation of beginning construction of our Langbeinite Recovery Improvement Project. As a result of this maintenance work, we anticipate increasing production capacity beginning in November 2010.

Our profitability is directly linked to the sales price of our product, our production rates, and, to a lesser extent, the price of natural gas and other commodities used in the production of potash that affect our variable costs. Our current operating strategy is to build inventory for the spring season where we anticipate selling product at higher prices while producing as much product as possible, which, in turn, is intended to lower our per ton costs and improve our gross margins. Because of the location of our assets and the regional markets we serve, we see different market prices throughout the United States and actively manage our sales to take advantage of the pricing available in different regions.

To some degree, we consider international prices in determining the prices at which we sell our products. Generally, we have benefited from the weakening U.S. dollar in prior periods. The potential impact of a weaker U.S. dollar is that Canadian suppliers may adjust their sales price in U.S. dollars upward in order to retain their local currency equivalent sales price, potentially allowing for increases in the average net realized sales prices we can obtain for our products. Mitigating the impact of a weaker U.S. dollar is the fact that our sales and costs are denominated in U.S. dollars; therefore, the change in the value of the U.S. dollar against other currencies has less of an effect on us as opposed to our competitors. The strengthening we are seeing in pricing more recently however, is believed to be much more directly linked to the supply and demand fundamentals of the grain markets and the associated profitability to farmers at today's commodity prices.

Domestic pricing of our products is influenced by, among other things, the pricing established by the Canadian producers and other large world producers, the interaction of global supply and demand of potash, ocean, land and barge freight rates, and currency fluctuations. Any of these factors could have a positive or negative impact on the price of our products. The decline in third quarter net sales price was expected as summer price incentive programs were announced in July by some of our competitors. However, as disclosed above, we have subsequently announced four price increases subsequent to September 30, 2010, which has increased our pricing to $485 per ton. We expect the full price impact of these price increases to be realized approximately three months after their effective date as we typically have amounts of product already ordered at the time we announce a price increase. We note the price of potash is currently low relative to nitrogen and phosphate fertilizers, and crop prices are at levels favorable to balanced fertilization. The table below demonstrates the progression of our average net realized sales price for potash and Trio® in 2009 and 2010.

| Average net realized sales price for the three months ended: | Potash (Per ton) | Trio® |
| --- | ---: | ---: |
| September 30, 2010 | $343 | $173 |
| June 30, 2010 | $376 | $162 |
| March 31, 2010 | $354 | $167 |
| December 31, 2009 | $408 | $190 |
| September 30, 2009 | $458 | $246 |
| June 30, 2009 | $674 | $338 |
| March 31, 2009 | $727 | $330 |

#### Cost Associated with Abnormal Production

We periodically evaluate our production levels and costs to determine if any such items should be deemed abnormal under authoritative generally accepted accounting principles in the United States ("GAAP") with respect to inventory costing. In the first quarter of 2010, we determined that approximately $0.5 million of production costs would have been allocated to additional tons produced, assuming Intrepid had been operating at normal production rates. There was no such adjustment made in the second or third quarters of 2010 as we believe we were producing within our normal ranges of production. When such adjustments are recorded, the result is an acceleration of the recognition of this expense and the exclusion of these costs from the accumulated inventory costs and the resulting cost of goods sold elements. The assessment of normal production levels requires significant management estimates and is unique to each quarter. We compared actual production relative to what we estimated could have been produced if we had not elected market related shutdowns and lower operating rates in order to determine the abnormal cost adjustment. The staffing programs at our Carlsbad mines have allowed us to produce ore at levels that we consider within a normal range. We continue to produce below capacity at our Wendover facility; however, we are doing so in response to what we believe is lower sustained demand for standard potash. Therefore, we have adjusted our assessment of normal production for the Wendover facility at the current time. We are working on options to move standard tons into other markets and grow the existing market, but, until we identify those opportunities, we consider operation of the Wendover facility below its productive capacity in order to control inventory levels as a normal response to this market. We also recognize that our Wendover facility will therefore have a higher per-unit cost of production. In addition, the Moab Compaction Project we have begun will allow us to shift more standard sales to Wendover as sales can be shipped from either location to satisfy demand. Until that project is completed or we develop a market for more standard sales, we anticipate lower operating rates and, as a result, higher costs at our Wendover facility.

#### Cost of Goods Sold

Our cost of goods sold reflects the transfer from inventory of the accumulated costs to produce our potash and Trio® products, less credits generated from the sale of our by-products. Many of our production costs are largely fixed, and, consequently, our costs of sales per ton move inversely with the number of tons we produce, within the context of normal production levels. Our principal production costs include direct 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, leasing costs, and plant overhead expenses. There are elements of our cost structure associated with contract labor, consumable operating supplies, and chemicals that are variable, which make up approximately 20 percent of our cost base. Our periodic production costs and costs of goods sold will not necessarily match one another from period to period based on the fluctuation of inventory levels. Inventory levels are a function of previous period ending inventories, production rates, and sales levels. In 2010, we have seen an increase in both our overall production costs and our cost of goods sold compared to 2009. As the production rates from our mines returned to higher levels in 2010 as compared to 2009, per unit costs in 2010 have begun to decrease as compared to 2009. The total production related costs increased during the quarter ended September 30, 2010, compared to the same period in 2009, resulting primarily from increased production volumes. Increased production volumes resulted in higher labor costs, natural gas costs and chemicals. The increase in cost of goods sold is a reflection of the increase in sales volumes in 2010, compared to 2009, as well as the resulting lower inventory levels in 2010, when compared to 2009.

Our production costs per ton are also impacted when our production levels change, such as for annual maintenance turnarounds, mine development, or voluntary shutdowns to manage inventory levels. Our labor and contract labor costs in Carlsbad may continue to be influenced by the demand for labor in the local potash, oil and gas, and nuclear waste storage industries.

Excluding the effects of the direct expensing of costs associated with abnormally low production rates in the third quarter of 2009, our potash cost of goods sold per ton decreased slightly in the third quarter of 2010 relative to the third quarter of 2009. There were no abnormal production costs incurred during the third quarter 2010. Our potash cost of goods sold per ton, net of $7 per ton of by-product credits, was $171 per ton in the quarter ended September 30, 2010, exclusive of depreciation, depletion, amortization and royalties, compared to $177 per ton, net of $16 per ton of by-product credits, in the same quarter of 2009 and $206 per ton, net of $11 per ton of by-product credits, in the second quarter of 2010. Our slightly lower cost of goods sold per ton during the third quarter of 2010 resulted primarily from higher operating efficiencies and the effect of reducing our potash inventories.

We pay royalties to federal, state and private lessors under our mineral leases, and such payments are typically a percentage of net sales of minerals extracted and sold under the applicable lease. In some cases, federal royalties for potash are paid on a sliding scale basis that varies with the grade of ore extracted. For the three and nine months ended September 30, 2010, our royalty rates were 3.9 percent in each period. For the three and nine months ended September 30, 2009, our royalty rates were 4.1 percent and 3.8 percent, respectively. We expect that future average rates will be relatively consistent with these rates.

#### Income Taxes

Intrepid is a subchapter C corporation and, therefore, is subject to federal and state income taxes on its taxable income. For the three and nine month periods ending September 30, 2010, our effective income tax rates were 41.3 percent and 40.4 percent, respectively. For the three and nine month periods ending September 30, 2009, our effective income tax rates were 40.2 percent and 41.6 percent, respectively. Our effective income tax rate is impacted primarily by the amount of taxable income associated with each state jurisdiction in which our income is subject to 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 domestic production activities deduction.

On September 27, 2010, the Small Business Jobs Act of 2010 was enacted. In part, this legislation provides for an additional first year depreciation deduction equal to 50 percent of the adjusted basis of qualified property placed in service during 2010. The provisions of the Small Business Jobs Act of 2010 resulted in a reduction of our current tax provision and an increase of our deferred tax provision for the 2010 periods presented. As a result of our reduced taxable income, our projected domestic production activity deduction was also reduced. This reduction of our domestic production activity deduction is the predominant factor causing an increase in the estimated annual effective tax rate from 39.7 percent for the six months ended June 30, 2010, to 40.4 percent for the nine months ended September 30, 2010.

For the three and nine months ended September 30, 2010, our total tax expense was $8.2 million and $18.3 million, respectively. Total tax expense for the quarter ended September 30, 2010, was comprised of $4.0 million of current income tax benefit and $12.2 million of deferred income tax expense. There was $1.0 million of current income tax benefit and $19.3 million of deferred income tax expense for the nine months ended September 30, 2010. For the three and nine months ended September 30, 2009, our total tax expense was $6.4 million and $34.6 million, respectively. For these periods, total tax expense was comprised of $1.7 million of tax benefit and $8.5 million of tax expense, respectively, of current income tax (benefit) expense and $8.1 million and $26.1 million, respectively, of deferred income tax expense.

### Operating Highlights

### Three Months Ended September 30, 2010, and 2009

As a result of higher sales volumes during the third quarter of 2010 compared to the third quarter of 2009, income before income taxes was higher at $19.8 million for the three months ended September 30, 2010, compared to $15.9 million for the same period in 2009. Despite a decrease in our average net realized sales price per ton for both potash and Trio®, total sales volume in 2010 increased by 99 percent for potash and 13 percent for Trio®. We sold 221,000 tons of potash and 45,000 tons of Trio® in the three months ended September 30, 2010, as compared to 111,000 tons of potash and 40,000 tons of Trio® in the same period of 2009. The increase in sales volumes resulted from the continuation of the same factors that contributed to higher sales in the first quarter, including more historically normal demand from farmers because of improved economic and weather conditions, the decline in potash prices from their high point in 2008, and the need to replace the nutrients depleted by crops in 2008 and 2009 after lower potash fertilizer application rates in those periods. Industrial grade potash sales volumes in the third quarter of 2010 also increased by approximately 32 percent from sales volumes in the third quarter of 2009. The vast majority of this increase was from standard sales into the drilling markets located in Texas, Oklahoma, Louisiana, and New Mexico that are typically serviced from our Carlsbad East facility.

Our production volume of potash in the third quarter of 2010 was 166,000 tons, or 54,000 tons more than in the third quarter of 2009. Our 2010 production was higher than in 2009 primarily due to actions we took in 2009 to slow production in order to more closely align our supply with market demand and to manage our inventory. In the third quarter of 2010, we achieved the staffing levels for our mining operations which should allow the mines in Carlsbad to increase production rates. As demand increased through the fourth quarter of 2009 and into 2010, we have increased production in Moab and in Carlsbad.

Our average net realized sales price of potash was $343 per ton ($378 per metric ton) for the three months ended September 30, 2010, as compared to $458 per ton for the three months ended September 30, 2009. The decrease in our average net realized sales price was primarily the result of competitive pricing associated with summer fill programs offered by our competitors. We expect that our net realized sales price for potash will increase during the fourth quarter of 2010 compared to the third quarter of 2010 as a result of the price increases described previously that became effective subsequent to September 30, 2010. However, we do not expect the full impact of these price increases to be realized until the first part of 2011 as orders had been placed prior to the announced price increases. Excluding costs associated with abnormal production in 2009, our average potash gross margin as a percentage of net sales was 35 percent for the three months ended September 30, 2010, as compared to 50 percent in the three months ended September 30, 2009.

In the third quarter of 2010, our potash cost of goods sold was $210 per ton, net of by-product credits, compared to cost of goods sold for potash in the third quarter of 2009 of $214 per ton, net of by-product credits. We did not experience any costs associated with abnormal production during the three months ended September 30, 2010 and we expensed $5.8 million of abnormal production costs during the three months ended September 30, 2009.

Our cost of goods sold for Trio® increased $3 per ton in the third quarter of 2010 relative to the third quarter of 2009. The increase per ton cost in 2010 resulted primarily from the decreased productivity as we shut down our langbeinite plant at our East facility in July 2010 due to unusually heavy rainfall in addition to generally lower recoveries experienced in the quarter, coupled with slight increase in operating costs.

The annual maintenance turnaround at our East Mine began at the end of September 2010 and was successfully concluded approximately ten days into October 2010. The shutdown allowed us to complete scheduled maintenance work underground, and at our surface production facilities. In addition, certain utilities were relocated in preparation for the new langbeinite recovery improvement processing facility, which is expected to become operational in the fourth quarter of 2011. As our fixed costs during shutdowns remain at least the same and those costs are then distributed over fewer production tons during the quarter, we expect our fourth quarter per ton operating costs to be higher than the third quarter due to the East Mine maintenance turnaround operation that occurred mostly during the fourth quarter of 2010.

### Selected Operations Data

The following table presents selected operations data for the periods presented below. Analysis of the details of this information is presented throughout this discussion. We present this table as a summary of information relating to key indicators of financial condition and operating performance that we believe are important. Average net realized sales prices below are derived from the elements in the table presented below. Costs associated with abnormal production are excluded from the following analysis.

| Production volume (in thousands of tons): | Three months ended September 30, 2010 | September 30, 2009 | Change between Periods | % Change |
| --- | ---: | ---: | ---: | ---: |
| Potash | 166 | 112 | 54 | 48% |
| Langbeinite | 32 | 60 | (28) | (47)% |
| Sales volume (in thousands of tons): |  |  |  |  |
| Potash | 221 | 111 | 110 | 99% |
| Trio® | 45 | 40 | 5 | 13% |
| Gross sales (in thousands): |  |  |  |  |
| Potash | $81,246 | $54,521 | $26,725 | 49% |
| Trio® | 10,225 | 11,928 | (1,703) | (14)% |
| Total | 91,471 | 66,449 | 25,022 | 38% |
| Freight costs (in thousands): |  |  |  |  |
| Potash | 5,396 | 3,598 | 1,798 | 50% |
| Trio® | 2,435 | 1,995 | 440 | 22% |
| Total | 7,831 | 5,593 | 2,238 | 40% |
| Net sales (in thousands): |  |  |  |  |
| Potash | 75,850 | 50,923 | 24,927 | 49% |
| Trio® | 7,790 | 9,933 | (2,143) | (22)% |
| Total | $83,640 | $60,856 | $22,784 | 37% |
| Potash statistics (per ton): |  |  |  |  |
| Average net realized sales price | $343 | $458 | $(115) | (25)% |
| Cost of goods sold, net of by-product credits\* (exclusive of items shown separately below) | 171 | 177 | (6) | (3)% |
| Depreciation, depletion, and amortization | 26 | 19 | 7 | 37% |
| Royalties | 13 | 18 | (5) | (28)% |
| Total potash cost of goods sold | 210 | 214 | (4) | (2)% |
| Warehousing and handling costs | 11 | 13 | (2) | (15)% |
| Average potash gross margin (exclusive of costs associated with abnormal production) | $122 | $231 | $(109) | (47)% |
| Trio® statistics (per ton): |  |  |  |  |
| Average net realized sales price | $173 | $246 | $(73) | (30)% |
| Cost of goods sold (exclusive of items shown separately below) | 132 | 131 | 1 | 1% |
| Depreciation, depletion and amortization | 18 | 12 | 6 | 50% |
| Royalties | 8 | 12 | (4) | (33)% |
| Total Trio® cost of goods sold | 158 | 155 | 3 | 2% |
| Warehousing and handling costs | 12 | 17 | (5) | (29)% |
| Average Trio® gross margin (exclusive of costs associated with abnormal production) | $3 | $74 | $(71) | (96)% |

On a per ton basis, by-product credits were $7 and $16 for the three month period ended September 30, 2010, and 2009, respectively. By-product credits were $1.5 million and $1.7 million for the three month period ended September 30, 2010, and 2009, respectively. Costs associated with abnormal production were zero and $5.8 million for the three month period ended September 30, 2010, and 2009, respectively.

### Nine Months Ended September 30, 2010, and 2009

Income before income taxes for the nine months ended September 30, 2010, and 2009, was $45.4 million and $83.2 million, respectively. The decrease in the comparable periods again followed from a lower average net realized sales price per ton of both potash and Trio®. We sold 594,000 and 177,000 tons of potash and Trio® in the nine months ended September 30, 2010, as compared to 290,000 and 123,000 tons in the same period of 2009. The 105 percent increase in potash sales volumes resulted primarily from the surge in sales during the first and third quarters of 2010 which resulted from farmers' need to replace the nutrients depleted by crops in 2008 and 2009 because of lower potash fertilizer application rates in those periods, in conjunction with less volatile pricing. The fall application season has been particularly strong in 2010. Industrial grade potash sales volumes in the nine months ended September 30, 2010, also increased by approximately 20 percent from sales volumes in the comparative period of 2009. The 44 percent increase in Trio® sales volumes was driven largely by a continued increase in domestic sales combined with some shipments to fulfill export demand, particularly for granular product.

Our production volume of potash in the nine months ended September 30, 2010, was 503,000 tons, or 122,000 tons more than in the first nine months of 2009. Our production was primarily lower in 2009 due to actions we took to slow production in order to more closely align our supply with market demand and to manage our inventory. As demand increased through the fourth quarter of 2009 and into 2010, we have increased staffing levels at our Carlsbad facilities and following the hiring and training periods, we now have the staffing of the hourly mine and plant staff at levels that should allow us to increase production.

Our average net realized sales price of potash was $354 per ton ($391 per metric ton) in the nine months ended September 30, 2010, as compared to $610 per ton in the nine months ended September 30, 2009. The decrease in our average net realized sales price was the result of price reductions we took to remain competitive. The pricing was also impacted by the actions of our international competitors following their settlements of new contracts at lower prices with large importing countries, such as China, India and Brazil. Excluding costs associated with abnormal production, our average potash gross margin as a percentage of net sales was reduced to 32 percent for the nine months ended September 30, 2010, as compared to 58 percent in the nine months ended September 30, 2009, and was largely attributable to the lower average net realized sales price.

In the first nine months of 2010, we directly expensed $0.5 million of costs related to abnormal production, and our potash cost of goods sold was $229 per ton, net of by-product credits. This compares to cost of goods sold for potash in the first nine months of 2009 of $241 per ton, net of by-product credits, and the expensing of $12.0 million of costs related to abnormal production.

Our cost of goods sold for Trio® decreased $23 per ton in the first nine months of 2010 relative to the first nine months of 2009. Production decreased in the nine months ended September 30, 2010, attributable to the shut down of our langbeinite plant at our East facility in July 2010 due to unusually heavy rainfall, which was more than offset by increased tons sold in the first nine months of 2010 relative to the same period in 2009. Therefore, fixed production costs were spread over more tons in 2010, lowering the costs of goods sold per ton for Trio®. In the first nine months of 2009, we directly expensed $0.2 million of costs related to abnormal production.

### Selected Operations Data

The following table presents selected operations data for the periods presented below. Analysis of the details of this information is presented throughout this discussion. We present this table as a summary of information relating to key indicators of financial condition and operating performance that we believe are important. Average net realized sales prices below are derived from the elements in the table presented below. Costs associated with abnormal production are excluded from the following analysis.

| Production volume (in thousands of tons): | Nine months ended September 30, 2010 | September 30, 2009 | Change between Periods | % Change |
| --- | ---: | ---: | ---: | ---: |
| Potash | 503 | 381 | 122 | 32% |
| Langbeinite | 128 | 147 | (19) | (13)% |
| Sales volume (in thousands of tons): |  |  |  |  |
| Potash | 594 | 290 | 304 | 105% |
| Trio® | 177 | 123 | 54 | 44% |
| Gross sales (in thousands): |  |  |  |  |
| Potash | $223,522 | $184,602 | $38,920 | 21% |
| Trio® | 39,627 | 44,140 | (4,513) | (10)% |
| Total | 263,149 | 228,742 | 34,407 | 15% |
| Freight costs (in thousands): |  |  |  |  |
| Potash | 13,110 | 7,997 | 5,113 | 64% |
| Trio® | 10,060 | 6,425 | 3,635 | 57% |
| Total | 23,170 | 14,422 | 8,748 | 61% |
| Net sales (in thousands): |  |  |  |  |
| Potash | 210,412 | 176,605 | 33,807 | 19% |
| Trio® | 29,567 | 37,715 | (8,148) | (22)% |
| Total | $239,979 | $214,320 | $25,659 | 12% |
| Potash statistics (per ton): |  |  |  |  |
| Average net realized sales price | $354 | $610 | $(256) | (42)% |
| Cost of goods sold, net of by-product credits\* (exclusive of items shown separately below) | 190 | 200 | (10) | (5)% |
| Depreciation, depletion, and amortization | 26 | 19 | 7 | 37% |
| Royalties | 13 | 22 | (9) | (41)% |
| Total potash cost of goods sold | 229 | 241 | (12) | (5)% |
| Warehousing and handling costs | 10 | 14 | (4) | (29)% |
| Average potash gross margin (exclusive of costs associated with abnormal production) | $115 | $355 | $(240) | (68)% |
| Trio® statistics (per ton): |  |  |  |  |
| Average net realized sales price | $167 | $306 | $(139) | (45)% |
| Cost of goods sold (exclusive of items shown separately below) | 124 | 143 | (19) | (13)% |
| Depreciation, depletion and amortization | 17 | 14 | 3 | 21% |
| Royalties | 8 | 15 | (7) | (47)% |
| Total Trio® cost of goods sold | 149 | 172 | (23) | (13)% |
| Warehousing and handling costs | 10 | 14 | (4) | (29)% |
| Average Trio® gross margin (exclusive of costs associated with abnormal production) | $8 | $120 | $(112) | (93)% |

On a per ton basis, by-product credits were $8 and $17 for the nine month period ended September 30, 2010, and 2009, respectively. By-product credits were $4.9 million for both the nine month periods ended September 30, 2010, and 2009, respectively. Costs associated with abnormal production were $0.5 million and $12.2 million for the nine month period ended September 30, 2010, and 2009, respectively.

### Outlook for the Remainder of 2010

The potash market continues to exhibit more historically normal demand trends, which has allowed producers to bring back production capacity idled in 2008 and 2009. Spring 2010 fertilizer demand was indicative of the historical market in North America and the summer slow-down was also in line with historical norms. The fall application season got off to an early start as the fall harvest started earlier than the last couple of years and the outlook for crop prices improved in response to strong grain demand along with the USDA's recent downward revision of grain stocks. Potash prices reached a low this summer when some producers offered summer price incentive programs and are presently moving higher as we enter the heart of the fall season. We expect the remainder of 2010 to be in line with historical norms with strong potash demand through the fall season. After the fall, we would expect to experience a decline in sales volumes toward the end of the year as winter weather closes the fertilizer application window.

The potash market has stabilized markedly compared to the volatility the industry experienced in 2008 and 2009. The price of corn has increased significantly for front month delivery contracts over the past several months, increasing confidence that farmers should have the economic resources to replace the nutrients drawn from the soil. In addition, the overall commodity markets for grains, sugar, cotton and other commodities has significantly improved since the end of June 2010. There is also a much more stable environment for cattle and hog prices as the impact of herd liquidations has resulted in smaller herd sizes. This overall strengthening has afforded an opportunity for farmer economics to expand significantly. As a result, we anticipate that our recently announced price increases will be accepted in the market. We will continue to monitor the market and respond to overall improvements in demand and farmer economics. We do anticipate the typical decline in sales volumes toward the end of the year as winter weather closes the fertilizer application window. This is a normal part of the fertilizer purchasing cycle by our customers and the focus will be on anticipated demand into the spring. Our key agricultural customers understand these cycles as well and, as always, are seeking to maximize their returns by strategically choosing when to replenish their inventories.

In August 2010, BHP Billiton Plc ("BHP") initiated a hostile takeover of Potash Corp of Saskatchewan, Inc. ("Potash Corp."). BHP has stated publicly that, if successful with its takeover bid, it would plan to operate Potash Corp.'s potash mines at full capacity. This statement has led to speculation regarding the future longer term price of potash due to the effect that such a strategy may have on the worldwide supply of potash. While the outcome of BHP's bid for Potash Corp. and its operating intentions, if successful in its bid, remain unclear, we remain committed to reinvesting in the business and executing on projects that are expected to increase the reliability of the operations, increase recoveries and bring on new production at incrementally lower per unit costs, which are designed to decrease our per unit production costs and increase our operating margins.

### Potash Prices

The price for potash has been and will continue to be the most significant driver of profitability for our business. As discussed earlier, prices had contracted from 2008 and 2009 levels, and the $343 per ton average net realized sales price in the third quarter of 2010 for potash was affected by our competitor's summer price incentive programs. However, prices have begun to rebound this fall in response to strong demand and favorable commodity prices for corn and other crops. We have already announced three price increases for red granular potash subsequent to September 30, 2010, with our current price quoted at $485 per ton effective November 1, 2010. We expect these price increases to have a modest impact on our fourth quarter realized pricing before being fully realized in the first quarter of 2011.

Other factors that may impact pricing for the remainder of 2010 include the amount and price at which China will continue buying potash during 2010 and into 2011, how much demand will be satiated at current prices, and whether increases in crop prices and other crop nutrients can be sustained. The current uptick in demand has allowed us to sell down our granular inventories to historically normal levels for this time of year, indicating a strong likelihood that our granular sales for the remainder of 2010 will match, and in some cases exceed, our granular production rates.

We continue to have demand for our granular Trio® in excess of our productive capacity as the demand for this product remains strong. Trio® prices tend to move in relationship to potash. As a result, we raised the price on our granular Trio® from $211 per ton to $246 per ton effective October 15, 2010. We expect that the continued demand for this product and the improving agronomic understanding of the benefits of the magnesium and sulfur will provide an opportunity to continue to price this product based on the value to the farmer.

### Capital Investment

We operate in a capital-intensive industry that requires consistent capital expenditures to replace assets necessary to sustain safe and reliable production. We believe that, in the long-term, demand for potash will return to, or exceed, historical levels; therefore, we have developed an investment plan at each of our facilities to maintain safe and reliable production, ensure environmental compliance, improve and modernize equipment, and increase productivity and recoveries in order to decrease per ton production costs. This focus on continuing to enhance the operational reliability of our production is particularly directed at our Carlsbad facilities with production efficiency, instrumentation, and debottlenecking projects.

As we continue to invest in our facilities, we proactively manage our projects in order to manage cash investment with the need to maintain an appropriate cash level on our balance sheet that will allow us to react strategically to market conditions. In the three and nine months ended September 30, 2010, we invested approximately $30.9 million and $59.7 million, respectively, in capital projects. Based on our pace of capital expenditures thus far in 2010 and our current sales forecast, we believe we will have adequate cash to execute our capital plans for the remainder of 2010.

In May 2010, we announced our Langbeinite Recovery Improvement Project, which is designed to increase our recoveries of Trio® from the langbeinite ore. As part of this project, we are investing in a plant to allow us the flexibility to granulate all of our standard-sized product, if market conditions warrant, and have it available for sale into the granular market. In addition, this project is designed to reduce our water usage as it relates to our langbeinite production facility and therefore reduce the need to invest additional capital in water management equipment and storage capacity. We anticipate preliminary activities will begin in the fourth quarter of 2010, and completion and operation of the project are expected by the end of 2011. The total capital investment for this project is expected to be between $85 and $90 million. We are committed to the expansion of our langbeinite production and to increasing our marketing efforts to educate farmers about the agronomic benefits of Trio®.

We continue to prepare for construction of the HB Solar Solution Mine, a project to develop and build a solution mine combined with solar evaporation ponds. Project cost estimates remain in the range of $120 and $130 million, of which $31.3 million has been invested to date. We expect to invest the bulk of this capital after we receive all of the necessary approvals and permits from the state and federal regulatory agencies. In July 2010, a ground water discharge permit for the HB Solar Solution Mine was approved by the New Mexico Environment Department, which represented the achievement of an important regulatory milestone. The Environmental Impact Statement ("EIS") review being undertaken by the Bureau of Land Management ("BLM") is continuing to progress. We currently anticipate that the EIS process will be completed in the fourth quarter of 2011. Once all of the necessary regulatory permits and approvals are obtained, construction will begin promptly and first production should result approximately twelve to eighteen months later, with full production anticipated approximately two years after approvals are obtained and construction begins. We have budgeted $4 to

$8 million for this project in 2010 that will be used for continued permitting activities, engineering, and some advance purchases of materials.

Total capital investment in 2010 is estimated to be between $110 and $120 million. A breakdown of our capital investment plan includes approximately $41 to $45 million to replace assets needed to maintain production, $7 to $8 million to improve and modernize equipment, $55 to $59 million to increase productive capacity as described more fully below, and $7 to $8 million to continue the replacement of the East facility warehouse. A portion of the East facility warehouse investment has already been reimbursed, and the remainder we expect to be reimbursed by our insurer. The 2010 capital program is being funded out of cash flow and existing cash on hand.

The following are a few of the projects that are slated for investment and/or completion in 2010 to improve the overall reliability of the operations and increase productive capacity:

As mentioned previously, we announced our Langbeinite Recovery Improvement Project in May 2010. Of the total capital investment for the project, approximately $10.7 million has been invested to date, approximately $17 to $22 million will be invested during the remainder of 2010, and the balance will be invested in 2011. Variability in the timing of the fabrication of materials for this project could have an impact on the timing of investment in the project during 2010. This project is a high priority due to the expected increase in langbeinite production due to higher recoveries from the same amount of ore throughput from the East facility, which is expected to result in a lower average cash cost structure at the East facility;

Expand compaction capacity through our Moab Compaction Project by installing a new compaction facility that can granulate all of our Moab production. This project will allow us to better adapt to market demand fluctuations for our standard and granular potash. The longer lead-time equipment is already on site, and the project is proceeding as planned. The project investment is approximately $11 to $13 million, and the Moab compaction facility is scheduled to be operational at the end of this year;

Replace the wind-damaged warehouse capacity at the Carlsbad East facility for approximately $7 to $8 million. In addition, new warehouse capacity is planned at Wendover to provide increased operational flexibility of which approximately $0.3 million is planned to be invested in the fourth quarter of 2010, and approximately $2 to $3 million is planned in 2011;

Continue to improve our distribution control systems and overall monitoring instrumentation at our production facilities; and

Add new equipment, including miners and conveyors, to develop new mine panels at the Carlsbad mines at costs of approximately $7 to $8 million.

All dollar amounts for future capital spending are estimates that are subject to change as projects are further developed, modified, deferred, or canceled.

### Liquidity and Capital Resources

As of September 30, 2010, we had cash, cash equivalents, and investments of $126.5 million, we had no debt, and we had availability of $125.0 million under our senior credit facility. Included in cash and cash equivalents were $0.7 million in cash and $66.0 million in cash equivalent investments. The cash equivalents consisted of approximately $15.9 million in money market accounts or certificates of deposit with banking institutions, and approximately $50.1 million in U.S. Bank National Association ("U.S. Bank") overnight commercial paper. We had no losses on our cash and cash equivalents during the first nine months of 2010, and all cash equivalents are invested with institutions that we believe to be financially sound. Additionally, as of September 30, 2010, we had $33.0 million and $26.8 million, respectively, invested in short-term and long-term certificate of deposit and U.S. government agency, municipal and corporate bond investments. In addition, Intrepid has invested in corporate bonds that are convertible into equity securities in the amount of $4.3 million as of September 30, 2010, which we have classified as available-for-sale securities.

Our operations are primarily funded from cash on hand and cash generated by operations, and, if necessary, we have the ability to borrow under our senior credit facility. For the foreseeable future, we believe that our cash and investment balances, cash flow from operations, and available borrowings under our senior credit facility will be sufficient to fund our operations, our working capital requirements, and our presently planned capital investments.

*(In thousands)*

|  | Nine months ended September 30, 2010 | September 30, 2009 |
| --- | ---: | ---: |
| Cash Flows from Operating Activities | $76,509 | $57,990 |
| Cash Flows from Investing Activities | $(98,901) | $(86,033) |
| Cash Flows from Financing Activities | $(708) | $(1,283) |

### Operating Activities

Total cash provided by operating activities was $76.5 million for the nine months ended September 30, 2010, compared to $58.0 million for the nine months ended September 30, 2009. The $18.5 million increase in cash provided by operating activities in the first nine months of 2010 was due primarily to the sales of product early in the year which decreased product inventory balances. We have also continued to experience more robust overall sales in the third quarter of 2010 as compared to 2009, which has been a significant contributor to the higher operating cash flows. These changes were offset by lower net income and lower non-cash deferred income tax expense when comparing the first nine months of 2010 to 2009. The lower net income and decreased product inventory are reflective of the continued business conditions in our industry, as producers are selling more product than in the first nine months of 2009, although at much lower prices. For the nine months ended September 30, 2010, inventories decreased $15.8 million compared to an increase of $19.9 million in the same period in 2009, due to increased demand for our products reflected in sales tons after the declines in application rates for much of 2009.

### Investing Activities

Total cash used in investing activities was $98.9 million for the nine months ended September 30, 2010, compared to $86.0 million for the nine months ended September 30, 2009. The amount of cash invested in property, plant, and equipment as well as mineral properties and development costs was $58.0 million in the first nine months of 2010 compared to $82.4 million in the first nine months of 2009, reflecting the continued monitoring of our capital plan and the ongoing focus on ramping up production levels. Additionally, we expect larger capital expenditures is in the fourth quarter of 2010 associated with the Moab Compaction Project and the Langbeinite Recovery Improvement Project. For the nine months ended September 30, 2010, we have been investing excess cash in higher yielding corporate and government agency securities by purchasing $61.9 million of investments. We also received $19.5 million in proceeds from maturing investments. The maturity of these investments is expected to generally match the cash needs for our capital investments.

### Senior Credit Facility

Intrepid's senior credit facility, as amended, is a syndicated facility led by U.S. Bank as the agent bank, which provides a total revolving credit facility of $125 million. The lenders have a security interest in substantially all of the assets of Intrepid and certain of its subsidiaries. Obligations under the senior credit facility are cross collateralized between Intrepid and certain of its subsidiaries. Intrepid's $125 million revolving credit facility has a term through March 9, 2012, and the entire amount of the revolving credit facility was available for use as of September 30, 2010.

Our senior credit facility required us to maintain interest rate derivative agreements to fix the interest rate for at least 75 percent of the projected outstanding balance of our term loan, when we had debt outstanding. Historically, we maintained derivative hedging agreements that were swaps of variable rate interest for fixed rate payments. Despite repaying the amounts outstanding under the senior credit facility, we have left the interest rate swap agreements in place taking the view that interest rates would rise and that the cost of settling the derivatives would be relatively beneficial as compared to closing out the contracts. Interest rates, however, have decreased, and the liability that we have under these derivative agreements has increased since the date of the debt repayment. We review our derivative positions from the perspective of counterparty risk when we are in an asset position and believe that we continue to transact with strong, creditworthy institutions. Notional amounts for which the rate has been fixed as of September 30, 2010, are displayed below:

*(In thousands)*

| Termination Date | Notional Amount | Weighted Average Fixed Rate |
| --- | ---: | ---: |
| December 31, 2010 | $34,750 | 5.0% |
| December 31, 2011 | $29,400 | 5.2% |
| December 31, 2012 | $22,800 | 5.3% |

The weighted average notional amount outstanding for these derivatives as of September 30, 2010, and the weighted average 3-month LIBOR rate locked-in via these derivatives are $27.0 million and 5.2 percent. The interest rate paid under our senior credit facility on any debt varies both with the change in the 3-month LIBOR rate and with our leverage ratio.

See the Notes to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q for more information relating to our financing arrangements, including our indebtedness. A more detailed description of our financing arrangements is also included in Management's Discussion and Analysis of Results of Operations and Financial Condition and the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2009.

### Contractual Obligations

As of September 30, 2010, we had contractual obligations totaling $75.4 million on an undiscounted basis, as indicated below. Contractual commitments shown are for the full calendar year indicated unless otherwise indicated.

*(In thousands)*

|  | Payments due by period Total | Q4 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | More than 5 years |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Operating lease obligations(1) | $20,669 | $1,295 | $4,403 | $3,158 | $2,978 | $2,690 | $1,415 | $4,730 |
| Purchase commitments(2) | 3,248 | 3,248 | — | — | — | — | — | — |
| Natural gas purchase commitments(3) | 6,870 | 1,654 | 5,216 | — | — | — | — | — |
| Pension obligations(4) | 941 | — | 157 | 157 | 157 | 157 | 157 | 156 |
| Asset retirement obligation(5) | 32,252 | — | — | — | — | — | — | 32,252 |
| Minimum royalty payments(6) | 11,434 | 229 | 457 | 457 | 457 | 457 | 457 | 8,920 |
| Total | $75,414 | $6,426 | $10,233 | $3,772 | $3,592 | $3,304 | $2,029 | $46,058 |

(1)

Includes all operating lease payments, inclusive of sales tax, for leases for office space, an airplane, railcars and other equipment.

(2)

Purchase contractual commitments include the approximate amount due vendors for non-cancelable purchase commitments for materials and services.

(3)

We have committed to purchase a minimum quantity of natural gas, 87.5 percent of which is priced at contractually fixed rates and 12.5 percent of which is priced at floating index dependent rates, the latter being estimated based on forward rates as of the end of the reporting period. Amounts are inclusive of estimated transportation costs and sales tax.

(4)

Minimum required pension contributions as estimated by our actuaries. Estimated contributions represent additional funds Intrepid expects to pay into the pension plan and excludes amounts Intrepid has placed in trust as plan assets to fund the pension obligation, as well as the future direct payments by the pension plan to participants.

(5)

We are obligated to reclaim and remediate lands which our operations have disturbed, but, because of the long-term nature of our reserves and facilities, we estimate that none of those expenditures will be required until after 2015. Commitments shown are in today's dollars and are undiscounted.

(6)

Estimated annual minimum royalties due under mineral leases, assuming approximately a 25-year life, consistent with estimated useful lives of plant assets.

Payments related to derivative contracts cannot be reasonably estimated due to variable market conditions and are not included in the above tables.

### Off-Balance Sheet Arrangements

As of September 30, 2010, we had no off-balance sheet arrangements aside from the operating leases described under the section titled ***Contractual Obligations*** above and bonding obligations described in the Notes to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

### Results of Operations for the Three Months Ended September 30, 2010, and 2009

### Net Sales and Freight Costs

Net sales of potash increased $24.9 million, or 49 percent, from $50.9 million for the three months ended September 30, 2009, to $75.8 million for the three months ended September 30, 2010; this increase was the result of an increase in sales volume of 99 percent, offset by a decrease in the average net realized sales price of $115 per ton, or 25 percent. An increase in the demand for potash and Trio® resulted in a higher total volume of sales in the third quarter of 2010 compared to 2009 and resulted in the reduction of inventories, including some higher cost inventory we had built throughout 2009. Our production volume of potash in the three months ended September 30, 2010, was 166,000 tons, or 54,000 tons more than in the third quarter of 2009. Our potash production was more in 2010 than in 2009 principally due to our decision to increase production to satisfy the more robust demand currently being experienced. Our West production facility has returned to staffing levels that should enable us to increase production.

Net sales of Trio® decreased $2.1 million, or 22 percent, from $9.9 million for the three months ended September 30, 2009, to $7.8 million for the three months ended September 30, 2010, due to a 30 percent decrease in the average net realized sales price offset by a 13 percent increase in the volume of sales. Production of langbeinite decreased 47 percent in the third quarter of 2010 compared to the same period in 2009, due primarily to the quality of ore grade being processed, as well as the unusually heavy rainfall during July 2010. Recoveries and ore grade are variable items and will cause production differences from time to time, as they are a normal part of operations.

Freight costs increased $2.2 million, or 40 percent, for the three months ended September 30, 2010, compared to the three months ended September 30, 2009, due primarily to the increase in sales volume as well as increased movement of inventory to distribution warehouses. The mix of customers paying for their own freight is highly variable and affects the freight costs incurred by Intrepid and our gross sales. Fluctuations in freight costs are not a key indicator of any business trends or our operating performance, as freight costs are largely borne by our customers, either as part of the cost of the product delivered or as arranged directly by the customer.

### Cost of Goods Sold

The following table presents our cost of goods sold for potash and Trio® for the subject periods.

|  | Three months ended September 30, 2010 | September 30, 2009 | Change between Periods | % Change |
| --- | ---: | ---: | ---: | ---: |
| Cost of goods sold (in millions) | $53.8 | $30.0 | $23.8 | 79% |
| Costs associated with abnormal production (in millions) | $— | $5.8 | $(5.8) | (100)% |
| Cost per ton of potash sold(1) | $210 | $214 | $(4) | (2)% |
| Cost per ton of Trio® sold(2) | $158 | $155 | $3 | 2% |

(1)

Per ton potash costs include $26 and $19 of depreciation, depletion, and amortization expense in the third quarter of 2010 and 2009, respectively.

(2)

Per ton Trio® costs include $18 and $12 of depreciation, depletion, and amortization expense in the third quarter of 2010 and 2009, respectively.

Total cost of goods sold increased as we sold 99 percent more tons of potash and 13 percent more tons of Trio®, therefore resulting in more total costs being recognized in cost of goods sold. On a unit basis, cost of goods sold per ton of potash decreased $4 per ton, or 2 percent, from $214 per ton for the three months ended September 30, 2009, to $210 per ton for the three months ended September 30, 2010. These per ton results are exclusive of approximately $5.8 million of production costs that were not absorbed into inventory in the third quarter of 2009 due to the determination that our production rates were abnormally low for this period. The cost of goods sold numbers reflect only those costs that have been first absorbed into inventory and then subsequently recognized as the product tons are sold. The per ton improvement reflects the fact that the higher operating rates of our mines result in lower per ton costs as a result of the relatively high fixed cost structure of the operations. Higher natural gas costs and costs attributable to disruptions in production at our East facility in the third quarter of 2010 are the primary reasons that cost of goods sold per ton remained consistent relative to the comparable period in 2009.

Total cost of goods sold of our Trio® increased $3 per ton, or 2 percent, from $155 per ton for the three months ended September 30, 2009, to $158 per ton for the three months ended September 30, 2010 due primarily to higher natural gas costs and lower recoveries, as a result of the unusually heavy rainfall that occurred in July 2010 which required us to shut down our langbeinite facility for 14 days in July 2010. We did not experience any significant unplanned downtime at our langbeinite facility during August or September 2010.

During the three months ended September 30, 2010, we did not incur any costs associated with abnormal production. During the comparable period in 2009, we expensed $5.8 million of costs associated with abnormal production as we began to reduce our operating levels in connection with the reduction in total sales volumes.

Cost of goods sold increased $23.8 million, or 79 percent, from $30.0 million in the three months ended September 30, 2009, to $53.8 million in the three months ended September 30, 2010. The increase in the total expense was driven primarily by the higher volumes sold and an increase in spending primarily to support higher production and sales volumes, prior to absorption of costs into inventory. Production cost elements that changed materially during the three months ended September 30, 2010, compared to the three months ended September 30, 2009, included increases in labor, natural gas costs and depreciation.

Labor and contract labor costs increased $2.2 million, or 16 percent, in the third quarter of 2010 due to increased labor following managed cut-backs in operating rates and maintenance projects during the third quarter of 2009. Natural gas costs increased from $1.5 million to $2.4 million as a result of an increase in natural gas pricing and the increased production activity. Depreciation increased $2.5 million, or 75 percent, in the three months ended September 30, 2010, as a result of the capital spend in 2010. Maintenance expense decreased from $7.8 million in the three months ended September 30, 2009, to $5.7 million in the same period in 2010.

### Income Taxes

Total income taxes increased by $1.8 million in the third quarter of 2010 as compared to the same period in 2009. Income taxes of $8.2 million were recognized in the three months ended September 30, 2010, at an effective tax rate of 41.3 percent. Income taxes of $6.4 million were recognized in the three months ended September 30, 2009, at an effective tax rate of 40.2 percent.

### Results of Operations for the Nine Months Ended September 30, 2010, and 2009

### Net Sales and Freight Costs

Net sales of potash increased $33.8 million, or 19 percent, from $176.6 million for the nine months ended September 30, 2009, to $210.4 million for the nine months ended September 30, 2010; this change being the result of an increase in sales volume of 105 percent offset by a decrease in the average net realized sales price of $256 per ton, or 42 percent. An increase in the demand for potash and Trio® resulted in a higher total volume of sales in the first nine months of 2010 compared to 2009. As a result of the increased sales volumes in 2010, we sold the higher levels of inventories generated in 2009, including some of the higher cost inventory we had produced throughout 2009. Our production volume of potash in the nine months ended September 30, 2010, was 503,000 tons, or 122,000 tons more than in the first nine months of 2009. Our potash production was higher in 2010 than in 2009 principally due to our decision to increase production to satisfy the more robust demand currently being experienced. During the first quarter of 2009, we shut down the West and East production facilities for two weeks each and continued to operate with three operating shifts instead of four shifts at our Carlsbad facilities as part of an effort to reduce production in response to lower demand. Additionally, as described previously, our East production facility returned to normal production levels in the third quarter of 2009, and our West production facility has returned to full staffing levels in the third quarter of 2010 which should enable us to increase production.

Net sales of Trio® decreased $8.1 million, or 22 percent, from $37.7 million for the nine months ended September 30, 2009, to $29.6 million for the nine months ended September 30, 2010, due to a 45 percent decrease in the average net realized sales price offset by a 44 percent increase in the volume of sales. Production of langbeinite decreased 13 percent in the first nine months of 2010 compared to the same period in 2009, primarily due to operational challenges experienced during the third quarter as described above, as well as the unusually heavy rainfall during July 2010. Recoveries and ore grade are variable items and will cause production differences from time to time, as they are a normal part of operations.

Freight costs increased $8.7 million, or 61 percent, for the nine months ended September 30, 2010, compared to the nine months ended September 30, 2009, due primarily to the significant increase in sales volume as well as increased movement of inventory to distribution warehouses. The mix of customers paying for their own freight is highly variable and affects the freight costs incurred by Intrepid and our gross sales. Fluctuations in freight costs are not a key indicator of any business trends or our operating performance, as freight costs are largely borne by our customers, either as part of the cost of the product delivered or as arranged directly by the customer.

### Cost of Goods Sold

The following table presents our cost of goods sold for potash and Trio® for the subject periods.

|  | Nine months ended September 30, 2010 | September 30, 2009 | Change between Periods | % Change |
| --- | ---: | ---: | ---: | ---: |
| Cost of goods sold (in millions) | $162.5 | $90.9 | $71.6 | 79% |
| Costs associated with abnormal production (in millions) | $0.5 | $12.2 | $(11.7) | (96)% |
| Cost per ton of potash sold(1) | $229 | $241 | $(12) | (5)% |
| Cost per ton of Trio® sold(2) | $149 | $172 | $(23) | (13)% |

(1)

Per ton potash costs include $26 and $19 of depreciation, depletion, and amortization expense in the first nine months of 2010 and 2009, respectively.

(2)

Per ton Trio® costs include $17 and $14 of depreciation, depletion, and amortization expense in the first nine months of 2010 and 2009, respectively.

Total cost of goods sold per ton of potash decreased $12 per ton, or 5 percent, from $241 per ton for the nine months ended September 30, 2009, to $229 per ton for the nine months ended September 30, 2010. These per ton results are exclusive of approximately $0.5 million and $12.0 million of production costs that were not absorbed into inventory in the first nine months of 2010 and 2009, respectively, due to the determination that our production rates were abnormally low for these periods. The per ton improvement reflects the fact that the higher operating rates of our mines result in lower per ton costs as a result of being able to spread the fixed costs structure of the operations over more produced tons. The cost of goods sold numbers reflect only those costs that have been first absorbed into inventory and then subsequently recognized as the product tons are sold. Higher production rates in the first nine months of 2010 are the primary reason that cost of goods sold per ton declined relative to the comparable period in 2009.

Total cost of goods sold of our Trio® decreased $23 per ton, or 13 percent, from $172 per ton for the nine months ended September 30, 2009, to $149 per ton for the nine months ended September 30, 2010. These per ton results are exclusive of approximately $0.2 million of production costs that were not absorbed into inventory in the first nine months of 2009. A lower percentage of shared costs at our East mine were allocated to langbeinite in the first nine months of 2010 compared to the same period in the prior year, which contributed to the lower per ton costs.

During the nine months ended September 30, 2010, we incurred $0.5 million in costs associated with abnormal production, compared to $12.2 million in the comparable period for 2009. The higher costs of abnormal production in 2009 were recorded as we reduced production in 2009 in response to lower sales volumes.

Cost of goods sold increased $71.6 million, or 79 percent, from $90.9 million in the nine months ended September 30, 2009, to $162.5 million in the nine months ended September 30, 2010. The increase in the total expense was driven primarily by the higher volumes of potash and Trio® sold and an increase in production costs spending primarily to support higher production and sales volumes, prior to absorption of costs into inventory. Production cost elements that changed materially during the nine months ended September 30, 2010, compared to the nine months ended September 30, 2009, included increases in labor, depreciation and natural gas costs.

Labor and contract costs increased $8.7 million, or 24 percent, in the first nine months of 2010 due to increased labor following managed cut-backs in operating rates and maintenance projects during the first nine months of 2009. Depreciation increased $7.4 million, or 76 percent, in the nine months ended September 30, 2010, as a result of the capital investment in late 2009 and continuing in 2010. Maintenance expense decreased from $23.8 million in the nine months ended September 30, 2009, to $21.1 million in the same period in 2010.

Natural gas costs increased $3.6 million, or 83 percent, in the nine months ended September 30, 2010, due principally to higher market rates for this commodity. Higher market rates drove $2.9 million of the increase, and higher natural gas consumption at our East facility drove $0.9 million of the increase. Additionally, realized and unrealized gains and losses on natural gas derivatives in the first nine months of 2009 accounted for $0.2 million of the decrease in the expense from period to period.

Other changes in cost of goods sold followed from increased royalties, chemicals, rental costs and benefits and employment taxes, partially offset by decreased insurance, property taxes and maintenance spending.

### Income Taxes

Income taxes decreased by $16.3 million in the first nine months of 2010 as compared to the same period in 2009. Income taxes of $18.3 million were recognized in the nine months ended September 30, 2010, at an effective tax rate of 40.4 percent. Income taxes of $34.6 million were recognized in the nine months ended September 30, 2009, at an effective tax rate of 41.6 percent.

### Critical Accounting Policies and Estimates

For a description of the critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements, refer to our most recent Annual Report on Form 10-K for the year ended December 31, 2009. There have been no significant changes to our critical accounting policies since December 31, 2009.

### Recent Accounting Pronouncements

There are no recent accounting pronouncements that are expected to have an impact on our consolidated financial statements.

### Rulemaking

On November 2, 2010, the Environmental Improvement Board of the New Mexico Environment Department approved cap and trade regulations designed to regulate greenhouse gas emissions in the state of New Mexico. Intrepid is in the process of reviewing the approved regulations to determine their precise applicability to its operations in New Mexico. If applicable to Intrepid's operations in New Mexico, the regulations may have a negative effect on our business and operations due to the costs associated with compliance.

## Market risk

As filed, 302 characters.

There have been no significant changes to our market risk since December 31, 2009. For a discussion of our exposure to market risk, refer to Part II, Item 7A., "Quantitative and Qualitative Disclosure About Market Risk," contained in our Annual Report on Form 10-K for the year ended December 31, 2009.

## Controls and procedures

As filed, 3,531 characters.

### (a) Evaluation of Disclosure Controls and Procedures

We maintain "disclosure controls and procedures," as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that 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 Securities and Exchange Commission ("SEC") rules and forms, and that such information is accumulated and communicated to our management, including our Executive Chairman of the Board and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Executive Chairman of the Board and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

### (b) Changes in Internal Control over Financial Reporting

Our management, including our Executive Chairman of the Board and Chief Financial Officer, conducted an evaluation of our "internal control over financial reporting" as defined in Rule 13a-15(f) of the Exchange Act to determine whether any changes in our internal control over financial reporting occurred during the quarter ended September 30, 2010, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there have been no such changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### (c) Inherent Limitations on Effectiveness of Controls

Our management, including our Executive Chairman of the Board and Chief 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.

## Risk factors

As filed, 938 characters.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, "Item 1A: Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2009, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K for the year ended December 31, 2009, are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. Other than the changes disclosed in our Quarterly Reports filed on Form 10-Q for the quarterly periods ended March 31, 2010, and June 30, 2010, there have been no material changes in the risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2009.

Filed Nov 4, 2010.
Source: SEC EDGAR, the filing index for accession 0001047469-10-009199. Last ingested by Listed: Nov 4, 2026, 14:52 ET. No prices; not investment advice.