A ~~further~~ decline in oil and gas drilling or a reduction in the use of potash in drilling fluids could increase our operating costs and decrease our ~~average net realized sales price of potash.~~revenue.

A ~~significant~~ portion of our revenue comes from the sale of potassium chloride for use in oil and gas drilling fluids. Oil and gas drilling ~~has~~ decreased significantly over the past ~~year.~~couple of years, although it is showing signs of stabilizing. A continued ~~or further~~ decline in oil and gas drilling could reduce our sales into this industrial market. In addition, alternative products that have some of the same clay-inhibiting properties as potash are commercially available. These alternative products could temporarily or permanently replace some of our sales into the industrial market, where our average net realized sales price per ton is higher than it is for the agricultural market. If a significant amount of our sales shift from the industrial market to the agricultural market due to any of these factors, our ~~average net realized sales price of potash would decline.~~revenue could decline and shipping costs could increase to reach these markets.

Increased costs could affect our per-ton profitability.

A substantial portion of our operating costs is comprised of fixed costs that do not vary based on production levels. These fixed costs include labor and benefits, base energy usage, property taxes, insurance, maintenance expenditures, and depreciation. Any increase in fixed costs or decrease in production generally increases our per-ton costs and correspondingly decreases our per-ton operating margin. As a result, a significant increase in costs at any of our facilities could have an adverse effect on our profitability and cash flows, particularly during periods of ~~decreasing~~lower potash prices.

A shortage of railcars or trucks for transporting our products, increased transit times, or interruptions in railcar or truck transportation could result in customer dissatisfaction, loss of sales, higher transportation or equipment costs, or disruptions in production.

We rely heavily upon truck and rail transportation to deliver our products to our customers. In addition, the cost of transportation is an important component of the price of our products. A shortage of trucks or railcars for carrying product or increased transit times due to accidents, highway or railway disruptions, congestion, high or compressed demand, labor disputes, adverse weather, natural disasters, changes to transportation systems, or other events could prevent us from making timely delivery to our customers or lead to higher transportation costs. As a result, we could experience customer dissatisfaction or a loss of sales. Similarly, disruption within the transportation systems could negatively affect our ability to obtain the supplies and equipment necessary to produce our products. We may also have difficulty obtaining access to ships to deliver our products to overseas customers.

We rely on our management personnel for the development and execution of our business strategy, and the loss of one or more members of our management team could harm our business.

Our management personnel have significant relevant industry and company-specific experience. Our senior management team has developed and implemented first-of-their-kind processes and other innovative ideas that are important to our business. If we are unable to retain these individuals, our operations could be disrupted and we may be unable to achieve our business strategies and grow effectively. We do not currently maintain ~~“key person”~~"key person" life insurance on any of our management personnel.

Existing and further oil and gas development in the Designated Potash Area could impair our potash reserves, which could adversely affect our financial condition or results of operations.

The U.S. Department of the Interior regulates the development of federal mineral ~~resources -~~ resources—both potash and oil and ~~gas -~~ gas—on federal lands in the Designated Potash Area. This 497,000-acre region outside of Carlsbad, New Mexico, includes all of our New Mexico operations and facilities. In 2012, the U.S. Department of the Interior issued an updated order that provides guidance to the ~~BLM~~U.S. Bureau of Land Management ("BLM") and industry on the co-development of these resources.

It is possible that oil and gas drilling in this area could limit our ability to mine valuable potash reserves or mineralized deposits because of setbacks from oil and gas wells and the establishment of unminable buffer areas around oil or gas wells. It is also possible that the BLM could determine that the size of these unminable buffer areas should be larger than they are currently, which could impact our ability to mine our potash reserves. We review applications for permits to drill oil and gas wells as they are publicly disclosed by the BLM and the State of New Mexico. When appropriate, we protest applications for drilling permits that we believe should not be drilled consistent with the operative federal and state rules and that could impair our ability to mine our potash reserves or put at risk the safety of our potash miners. We may not prevail in these protests or be able to prevent wells from being drilled in the vicinity of our potash reserves. If, notwithstanding our protests and appeals, a sufficient number of wells are drilled through or near our potash reserves, our potash reserves could be significantly impaired, which could adversely affect our financial condition or results of operations.

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If we are unable to obtain and maintain the required permits, governmental approvals, and leases necessary for our operations, our business could be adversely affected.

We hold numerous environmental, mining, safety, and other permits and governmental approvals authorizing the operations at each of our facilities. A decision by a governmental agency to deny or delay a new or renewed permit or approval, or to revoke or substantially modify an existing permit or approval, could prevent or limit us from continuing our operations at the affected facility, which could have an adverse effect on our business, financial condition, and results of operations. In addition, we could ~~experience increases in~~be required to expend significant amounts to obtain these permits, approvals, and leases, or we could be required to make significant capital investments to modify or suspend our ~~existing regulatory compliance costs.~~operations at one or more of our facilities.

Any expansion of our existing operations would ~~also~~ require us to secure the necessary environmental and other permits and approvals. We may not be able to obtain these permits and approvals in a timely manner or at all. In addition, the federal government must consider and study a ~~project’s~~project's likely environmental impacts. Based on the federal ~~government’s~~government's conclusion, it could require an environmental assessment or an environmental impact statement as a condition of approving a project or permit, which could result in significant time delays and costs. Furthermore, many of our operations take place on land that is leased from federal and state governmental authorities. Expansion of our existing operations could require securing additional federal and state leases. We may not be able to obtain or renew these leases on favorable terms or at all. In addition, our existing leases generally require us to commence mining operations within a specified time frame and to continue mining in order to retain the lease. The loss or non-renewal of a lease could adversely affect our ability to mine the associated reserves.

Also, our existing leases require us to make royalty payments based on the revenue generated by the potash we produce from the leased land. The royalty rates are subject to change whenever we renew our leases, which could lead to significant increases in these rates. As of December 31, ~~2015,~~2016, approximately ~~15%~~17% of our state and federal lease acres at our New Mexico facilities (including leases at the HB and North mines) and 0.2% of our state and federal lease acres at our Utah operations will be up for renewal within the next five years. Increases in royalty rates would reduce our profit margins and, if the increases were significant, would adversely affect our results of operations.

~~Our Trio~~^® ~~profitability could be affected by market entrants or the introduction of langbeinite alternatives.~~

Langbeinite is produced by us and one other company from a single reserve located near Carlsbad, New Mexico. Additional competition in the market for langbeinite and comparable products exists and could increase in the future. Other companies could seek to create and market chemically similar alternatives to langbeinite. The market for langbeinite and our Trio^® ~~sales could be affected by the success of these and other products that are competitive with langbeinite, which could adversely affect the viability of our Trio~~^® ~~business and our results of operations and financial condition. Further, increases in the supply of langbeinite by us and the other producer will decrease the sales price of Trio~~^®.

We have less product diversification than nearly all of our competitors, which could have an adverse effect on our financial condition and results of operations.

We are dedicated exclusively to the production and marketing of potash and langbeinite, whereas nearly all of our competitors are diversified, primarily into nitrogen- or phosphate-based fertilizer businesses or other chemical or industrial businesses. Because we are focused exclusively on potash and langbeinite, and because we sell our products primarily within the U.S., we could be impacted more acutely by factors affecting our industry or the regions in which we operate than we would if our business was more diversified and our sales more global. A decrease in the demand for potash and langbeinite would have an adverse effect on our financial condition and results of operations. Similarly, in periods when production exceeds demand, the price at which we sell our potash and langbeinite and our sales volumes would likely fall, which would adversely affect our results of operations and financial condition more than our diversified competitors.

Heavy precipitation or low evaporation rates at our solar solution mines could impact our potash production at those facilities, which could adversely affect our sales and results of operations.

All of our potash production comes from our solar solution mines. These facilities use solar evaporation ponds to form potash crystals from brines. Weather conditions at these facilities could negatively impact potash production. For example, heavy rainfall in September and October, just after the evaporation season ends, can reduce the amount of potash we produce in that year or the following year by causing the potash crystals to dissolve and consume pond capacity. Similarly, lower‑than‑average temperatures or higher-than-average seasonal rainfall would reduce evaporation rates and therefore impact production. If we experience heavy rainfall or low evaporation rates at any of our solar solution mines, we would have less potash available for sale, and our sales and results of operations could be adversely affected.

Inflows of water into our ~~potash mines~~langbeinite mine from heavy rainfall or groundwater could result in increased costs and production downtime and could require us to abandon athe mine, any of which could adversely affect our results of operations.

Major weather events such as heavy rainfall can result in water inflows into our ~~mines.~~underground, langbeinite mine. The ~~potential effects of climate change may increase the possibility of heavy rainfall that results in water inflows into our mines. Additionally, the~~ presence of water-bearing strata in many underground mines carries the risk of water inflows into the mines. If we experience water inflows at our ~~mines,~~langbeinite mine, our employees could be injured and our equipment and mine shafts could be seriously damaged. We could be forced to shut down the ~~affected~~ mine temporarily, potentially resulting in significant production delays, and spend substantial funds to repair or replace damaged equipment. Inflows may also destabilize the mine shafts over time, resulting in safety hazards for employees and potentially leading to the permanent abandonment of athe mine.

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~~Heavy precipitation or low evaporation rates at our solar solution mines could impact our potash production at those facilities, which could adversely affect our sales and results of operations.~~

Our HB, Moab, and Wendover facilities use solar evaporation ponds to form potash crystals from brines. Weather conditions could negatively impact potash production at these facilities. For example, heavy rainfall in September and October, just after the evaporation season ends, can reduce the amount of potash we produce in that year or the following year by causing the potash crystals to dissolve and consume pond capacity. Similarly, lower-than-average temperatures or higher-than-average seasonal rainfall would reduce evaporation rates and therefore impact production. The potential effects of climate change may increase the possibility of adverse weather conditions. If we experience heavy rainfall or low evaporation rates at any of our solar solution mines, we would have less potash available for sale, and our sales and results of operations could be adversely affected. As solar production increases as a percentage of our total production, our production risks related to rainfall and evaporation rates increase.

Environmental laws and regulations could subject us to significant liability and require us to incur additional costs.

We are subject to many environmental, safety, and health laws and regulations, including laws and regulations relating to mine safety, mine land reclamation, remediation of hazardous substance releases, and discharges into the soil, air, and water.

Our operations, as well as those of our predecessors, have involved the use and handling of regulated substances, hydrocarbons, potash, salt, related potash and salt by-products, and process tailings. These operations resulted, or may have resulted, in soil, surface water, and groundwater contamination. At some locations, salt-processing waste, building materials (including asbestos-containing material), and ordinary trash may have been disposed or buried in areas that have since been closed and covered with soil and other materials.

We could incur significant liabilities under environmental remediation laws such as CERCLA with regard to our current or former facilities, adjacent or nearby ~~third party~~third-party facilities, or off-site disposal locations. Under CERCLA and similar state laws, under some circumstances, liability may be imposed without regard to fault or legality of conduct and one party may be required to bear more than its proportional share of cleanup costs at a site. Liability under these laws involves inherent uncertainties.

We are also subject to federal and state environmental laws that regulate discharges of pollutants and contaminants into the environment, such as the U.S. Clean Water Act and the U.S. Clean Air Act. For example, our water disposal processes rely on dikes and reclamation ponds that could breach or leak, resulting in a possible prohibited release into the environment. Moreover, although the North and East mines in New Mexico and the Moab mine in Utah are designated as zero discharge facilities under the applicable water quality laws and regulations, these mines could experience some water discharges during significant rainfall events.

We expect that we will be required to continue to invest in environmental controls at our facilities and that these expenses could be significant. In addition, violations of environmental, safety, and health laws could subject us to civil and, in some cases, criminal sanctions. We could also be required to invest in additional equipment, facilities, or employees, or could incur significant liabilities, due to any of the following:

changes in the interpretation of environmental laws

modifications to current environmental laws

the issuance of more stringent environmental laws

malfunctioning process or pollution control equipment

Mining and processing of potash also generates residual materials that must be managed both during the operation of the facility and upon facility closure. For example, potash tailings, consisting primarily of salt, iron, and clay, are stored in surface disposal sites and require management. At least one of our New Mexico facilities, the HB mine, may have issues regarding lead in the tailings pile as a result of operations conducted by previous owners. During the life of the tailings management areas, we have incurred and will continue to incur significant costs to manage potash residual materials in accordance with environmental laws and regulations and permit requirements.

As a potash producer, we currently are exempt from certain State of New Mexico mining laws related to reclamation obligations. If this exemption were to be eliminated or restricted, we could be required to incur significant expenses related to reclamation at our New Mexico facilities.

For more information about environmental, safety and health matters affecting our business, see ~~“Business-Environmental,~~"Business-Environmental, Safety, and Health Matters.”"

Anti-corruption laws and regulations could subject us to significant liability and require us to incur costs.

~~Table~~As a result of ~~Contents~~our international sales, we are subject to the U.S. Foreign Corrupt Practices Act (the "FCPA") and other laws that prohibit improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business. Our international activities create the risk of unauthorized payments or offers of payments in violation of the FCPA or other anti-corruption laws by one of our employees, consultants, sales agents, or distributors even though these persons are not always subject to our control. Although we have implemented policies and training designed to promote compliance with these laws, these persons may take actions in violation of our policies. Any violations of the FCPA or other anti-corruption laws could result in significant civil or criminal penalties and have an adverse effect on our reputation.

The mining business is capital intensive, and our inability to fund necessary or desirable capital expenditures could have an adverse effect on our growth and profitability.

The mining business is capital intensive. We may find it necessary or desirable to make significant capital expenditures in the future to sustain or expand our existing ~~operations.~~operations and may not have, or have access to, the financial resources to pursue such expenditures. If costs associated with capital expenditures increase or if our earnings decrease significantly or we do not have access to the capital markets, we could have difficulty funding any necessary or desirable capital expenditures at an acceptable rate or at all. This could limit the expansion of our production or make it difficult for us to sustain our existing operations at optimal levels. Increased costs for capital expenditures could also have an adverse effect on the profitability of our existing operations and returns from our most recent strategic projects.

Market upheavals due to global pandemics, military actions, terrorist attacks, or economic repercussions from those events could reduce our sales or increase our costs.

Global pandemics, actual or threatened armed conflicts, terrorist attacks, or military or trade disruptions affecting the areas where we or our competitors do business could disrupt the global market for ~~potash.~~potassium-based products. As a result, our competitors may increase their sales efforts in our geographic markets and pricing of ~~potash~~our products could suffer. If this occurs, we could lose sales to our competitors or be forced to lower our prices. In addition, due to concerns related to terrorism or the potential use of certain fertilizers as explosives, local, state, and federal governments could implement new regulations impacting the production, transportation, sale, or use of ~~potash.~~potassium-based products. These new regulations could result in lower sales or higher costs.

A significant disruption to our information technology systems could adversely affect our business and operating results.

We rely on a variety of information technology and automated operating systems to manage or support our operations. The proper functioning of these systems is critical to the efficient operation and management of our business. In addition, these systems could require modifications or upgrades as of a result of technological changes or growth in our business. These changes could be costly and disruptive to our operations and could impose substantial demands on management time. Our systems, and those of ~~third party~~third-party providers, also could be vulnerable to damage or disruption caused by catastrophic events, power outages, natural disasters, computer system or network failures, viruses or malware, physical or electronic break-ins, unauthorized access, and cyber-attacks. Although we take steps to secure our systems and electronic information, these security measures may not be adequate. Any significant disruption to our systems could adversely affect our business, reputation and operating results.

Our business may be adversely affected by union activities.

Hourly employees at our Wendover facility are represented by a labor union. These employees represent approximately 5%7% of our workforce. Our current collective bargaining agreement with the union expires on May 31, 2017. Although we believe that our relations with our unionized employees are good, we may not be successful in negotiating a new collective bargaining agreement as a result of general economic, financial, competitive, legislative, political, and other factors beyond our control. Any new agreement could result in a significant increase in our labor costs. In addition, a breakdown in negotiations or failure to timely enter into a new collective bargaining agreement could materially disrupt our Wendover operations.

From time to time, efforts have been made to unionize employees at our other facilities. Additional unionization efforts could disrupt our business, consume management attention, or increase our operating costs. In addition, if these efforts were successful, we could experience increased labor costs, an increased risk of work stoppages, and limits on our flexibility to run our business in the most efficient manner to remain competitive.

Risks Related to our Common Stock

The price of our common stock may be volatile and you could lose all or part of your investment.

Securities markets experience significant price and volume fluctuations due to general economic and market conditions and other factors outside our control. This market volatility could cause the price of our common stock to decline significantly and without regard to our operating performance. Other factors that could affect the price of our common stock include the following:

factors relating to our evaluation and assessment of potential strategic alternatives

our operating performance and the performance of our competitors

the ~~public’s~~public's reaction to our press releases, other public announcements or filings with the SEC

changes in earnings estimates or recommendations by research analysts who follow us or other companies in our industry

variations in general economic, market, and political conditions

changes in certain commodity prices or foreign currency exchange rates

actions of our current stockholders, including sales of common stock by our directors and executive officers

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the arrival or departure of key personnel

other developments affecting us, our industry, or our competitors

the other risks described in this report

If our stock price declines due to one or more of these factors, you may not be able to sell your shares at or above the price you paid for them.

Our stock is currently listed on the New York Stock Exchange ~~(“NYSE”~~("NYSE"). For continued listing, we are required to meet specified listing standards, including a minimum stock price, market capitalization, and ~~stockholders’~~stockholders' equity. If we are unable to meet the ~~NYSE’s~~NYSE's listing standards, including our common stock continuing to trade at over $1.00 per share, the NYSE would delist our common stock. At that point, it is possible that our common stock could be quoted on the over-the-counter bulletin board or the pink sheets. This could have negative consequences, including reduced liquidity for stockholders; reduced trading levels for our common stock; limited availability of market quotations or analyst coverage of our common stock; stricter trading rules for brokers trading our common stock; and reduced access to financing alternatives for us. We also would be subject to greater state securities regulation if our common stock was no longer listed on a national securities exchange.

We may issue additional securities, including securities that are senior in right of dividends, liquidation, and voting to our common stock, without your approval, which would dilute your existing ownership interests.

Our board of directors may issue shares of preferred stock or additional shares of common stock without the approval of our stockholders, except as may be required by applicable NYSE rules. Our board of directors may approve the issuance of preferred stock with terms that are senior to our common stock in right of dividends, liquidation or voting. Our issuance of additional common shares or other equity securities of equal or senior rank will have the following effects:

our pre-existing ~~stockholders’~~stockholders' proportionate ownership interest in us will decrease

the relative voting strength of each previously outstanding common share may be diminished

the market price of the common stock may decline

Future sales of our common stock, or the perception that future sales may occur, could depress our common stock price.

Sales of a substantial number of shares of our common stock ~~including sales~~ by us or our directors ~~or executive~~and officers, including related to our exploration of strategic alternatives, or the perception that these sales may occur, could depress the market price of our common stock. We cannot predict the effect, if any, that future sales of shares of our common stock would have on the market price of our common stock.

Provisions in our charter documents and Delaware law may delay or prevent a third party from acquiring us.

We are a Delaware corporation and the anti-takeover provisions of Delaware law impose various barriers to the ability of a third party to acquire control of us, even if a change of control would be beneficial to our existing stockholders. In addition, our current certificate of incorporation and bylaws contain several provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors. These provisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding common stock. Among other things, these provisions provide for the following:

allow our board of directors to create and issue preferred stock with rights senior to those of our common stock without prior stockholder approval, except as may be required by applicable NYSE rules

do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates

prohibit stockholders from calling special meetings of stockholders

prohibit stockholders from acting by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders

require vacancies and newly created directorships on the board of directors to be filled only by affirmative vote of a majority of the directors then serving on the board

establish advance notice requirements for submitting nominations for election to the board of directors and for proposing matters that can be acted upon by stockholders at a meeting

classify our board of directors so that only some of our directors are elected each year

These provisions also may delay, prevent or deter a merger, acquisition, tender offer, proxy contest, or other transaction that might otherwise result in our stockholders receiving a premium over the market price of the common stock they own.

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ITEM 1B.	UNRESOLVED STAFF COMMENTS

None.


ITEM 2.	PROPERTIES

Properties

We produce potash at three solution mining ~~facilities and two conventional underground mining facilities. Our solution mining production comes from~~facilities: our HB mine ~~near~~in Carlsbad, New Mexico, a ~~solar~~ solution mine ~~near~~in Moab, Utah, and a ~~solar~~ brine recovery mine in Wendover, Utah. ~~Our conventional production comes from our underground West and East mines near Carlsbad, New Mexico.~~ We also operate ~~the~~our North compaction facility ~~near~~in Carlsbad, New Mexico, which compacts and granulates product from the HB mine. We produce Trio^® from our conventional underground East mine in Carlsbad, New Mexico. In April 2016, we converted our East facility from a mixed-ore facility that produced both potash and Trio^®, to a Trio^®-only facility. In addition, in early July 2016, we idled mining operations at our West facility and ~~HB mines.~~transitioned the facility into care-and-maintenance mode. These changes were designed to increase our production of Trio^®, a product that had traditionally shown more resilience to pricing pressure than potash, and to lower costs in a time of declining potash prices.

We control the rights to mine approximately 138,000 acres of land northeast of Carlsbad, New Mexico. We lease approximately 32,000 acres from the ~~state~~State of New Mexico, approximately 106,000 acres from the ~~federal~~U.S. government through the BLM, and approximately 240 acres from private leaseholders. We own approximately ~~4,300~~4,700 surface acres in the vicinity of our mine sites and adjacent to federal and state mining leases.

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We control the rights to mine approximately 10,300 acres of land west of Moab, Utah. We lease approximately 10,100 acres from the ~~state~~State of Utah and approximately 200 acres from the BLM. We own approximately 3,700 surface acres overlying and adjacent to portions of our mining leases with the state of Utah.

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We control the rights to mine approximately 90,000 acres of land near Wendover, Utah. We own approximately 57,000 acres, and we lease approximately 8,000 acres from the ~~state~~State of Utah and approximately 25,000 acres from the federal government through the BLM.

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We conduct most of our mining operations on properties that we lease from the state or federal government. These leases generally contain stipulations that require us to commence mining operations within a specified term and continue mining to retain the lease.

The stipulations on our leases are subject to periodic readjustment by the state and federal government. The lease stipulations could change in the future, which could impact the economics of our operations. Our federal leases are subject to readjustment of the lease stipulations, including the royalty payable to the federal government, every 20 years. Our leases with the ~~state~~State of New Mexico are issued for terms of ten years and for as long thereafter as potash is produced in commercial quantities and are subject to readjustment of the lease stipulations, including the royalty payable to the state. Our leases with the ~~state~~State of Utah are for terms of ten years subject to extension and possible readjustment of the lease by the ~~state~~State of Utah. Our leases for our Moab mine are operated as a unit under a unit agreement with the ~~state~~State of Utah, which extends the terms of all of the leases as long as operations are conducted on any portion of the leases. The term of the state leases for our Moab mine is currently extended until 2024 or so long as potash is being produced. Our federal leases are for indefinite terms subject to readjustment every 20 years. As of December 31, ~~2015,~~2016, approximately ~~15%~~17% of our state, federal, and private lease acres at our New Mexico facilities will be up for renewal within the next five years. Only 0.2% of our state and federal lease acres at our Utah operations will be up for renewal within the next five years.

We have water rights at each of our mine properties that we believe are adequate for our needs. All of our mining operations are accessible by paved state or county highways and are accessible by rail. All of our operations obtain electric power from local utilities.

Our mines, plants, and equipment have been in substantially continuous operation since the dates indicated in the chart entitled "Our Proven and Probable Reserves" on the following ~~pages;~~pages (except for our West facility, which is currently in care-and-maintenance mode), and our mineral development assets, mills, and equipment have been acquired over the interval since these dates.

As noted, we have relatively long-lived proven and probable reserves and consequently expect to conduct limited and focused additional exploration in the coming five years. We plan to drill core holes ~~on occasion~~ in areas near our Carlsbad, New Mexico ~~operations that are located in the Designated Potash Area,~~facility, in order to further define the ore body. Development of the underground mines is expected to be coincident with the continued advancement of ore zones. Development of the solution mine and brine evaporation operations is expected to be enhanced by the drilling of additional ~~wells.~~wells and flooding of new solution mine caverns. Although not in our current plans, we also have opportunities to rehabilitate the shafts at the currently idled North mine and additional surface infrastructure to accelerate mining of conventional reserves.

Our leased office space in Denver, Colorado, is approximately 25,503 square feet and has a term extending through May 31, 2017.

We believe that all of our present facilities are adequate for our current needs and that additional space is available for future expansion on acceptable terms.

Proven and Probable Reserves

Our potash ~~(muriate of potash)~~(produced from sylvite ore) and langbeinite ~~(sulfate of potash magnesia)~~(marketed as Trio^®) reserves each have substantial life, with remaining reserve life ranging from 3016 years to over 100 years, based on proven and probable reserves estimated in accordance with SEC requirements. This lasting reserve base is the result of our past acquisition and development strategy. The estimates of our proven and probable reserves as of December 31, ~~2015,~~2016, were prepared by us and were reviewed and independently determined by Agapito Associates, Inc. ~~(“Agapito”~~("Agapito") based on mine plans and other data furnished by us as described in footnote one ~~below.~~below the table. The following table summarizes our proven and probable reserves, stated as product tons and associated percent ore grade, as of December 31, ~~2015.~~2016.

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Our Proven and Probable Reserves ~~(thousands of tons)(1)~~¹

Proven (4) Probable (7)
Product/Operations Date Mine Opened (2) Current Extraction Method Minimum Remaining Life (years) (3) Recoverable Ore Tons (5) Ore Grade (6) (% KCl) Product Tons as KCl Recoverable Ore Tons (5) Ore Grade (6) (% KCl) Product Tons as KCl
Muriate of Potash

Carlsbad West 1931 Underground 100+ 217,170
21.2 % 38,790
126,700
20.6 % 21,730
Carlsbad East 1965 Underground 40 61,010
19.1 % 9,500
54,420
18.6 % 8,460
Carlsbad HB Mine (2,9) 2012 Solution 42 19,680
36.4 % 6,540
2,190
40.2 % 800
Moab 1965 Solution 100+ 30,410
42.5 % 12,100
32,110
44.0 % 14,800
Wendover (10) 1932 Brine Evaporation 30 —

—
—
0.7 % 3,220
Total Muriate of Potash

26.2 % 66,930

26.3 % 49,010



(tons in thousands)				Proven ⁴				Probable ⁷
Product/Operations	Date Mine Opened ²	Current Extraction Method	Minimum Remaining Life (years) ³	Recoverable Ore Tons ⁵	Ore Grade ⁶ (% KCl)		Product Tons as KCl	Recoverable Ore Tons ⁵	Ore Grade ⁶ (% KCl)		Product Tons as KCl
Potash
West ²	1931	Underground	75	112,430	22.9	%	21,380	59,920	22.0	%	11,070
East	1965	Underground	16	25,320	21.9	%	4,260	17,160	22.5	%	2,920
HB Mine ^{2, 9}	2012	Solution	40	19,180	36.7	%	6,430	2,190	40.2	%	800
Moab	1965	Solution	100+	30,160	42.5	%	12,000	32,110	44.0	%	14,800
Wendover ¹⁰	1932	Brine Evaporation	30	—	—		—	—	0.7	%	3,170
Total Potash					30.2	%	44,070		30.4	%	32,760

Proven (4) Probable (7)
Product/Operations Date Mine Opened (2) Current Extraction Method Minimum Remaining Life (years) (3) Recoverable Ore Tons (5) Ore Grade (6) (% Lang) Product Tons as Langbeinite Recoverable Ore Tons (5) Ore Grade (6) (% Lang) Product Tons as Langbeinite
Sulfate of Potash Magnesia

Carlsbad East (11) (8) 1965 Underground 100+ 112,530
27.4 % 35,100
82,290
26.2 % 25,730

(tons in thousands)

Proven ⁴

Probable ⁷

Product/Operations

Date Mine Opened ²

Current Extraction Method

Minimum Remaining Life (years) ³

Recoverable Ore Tons ⁵

Ore Grade ⁶ (% Lang)

Product Tons as Langbeinite

Recoverable Ore Tons ⁵

Ore Grade ⁶ (% Lang)

Product Tons as Langbeinite

Langbeinite

East ^8,11

1965

Underground

100+

102,880

26.0

32,060

79,430

26.9

24,960

~~(1)~~

The determination of estimated reserves has been prepared by us and is based on an independent review and analysis of our mine plans and geologic, financial and other data by Agapito, which is familiar with our mines. The most recent review performed by Agapito for the New Mexico East, West, and HB properties was in ~~2015.~~2016. Agapito's analysis for the West, East and ~~East~~HB mines was based on detailed examination of our geologic site data and mine plan, which was updated with information from 2016, 2015, and 2014. As a result of ~~the Agapito 2015~~Agapito's 2016 review, sylvite reserves in the West and East mines ~~decreased~~ and the langbeinite reserves in the East mine ~~were~~ decreased compared to previously reported reserves. The reduction ~~in sylvite and langbeinite reserves in the West and East mines~~ was primarily due to an increased economic cut-off grade for both sylvite and langbeinite ore reserves and for depletion for the ~~2015 mine plan update based on current geologic, mine~~2016 production ~~and economic data.~~from both mines. The HB mine reserve estimate ~~was increased~~decreased due to ~~the addition of the HB AMAX cavern solution mine reserves in 2015, less~~ depletion for ~~2014 and 2015~~2016 production ~~for~~from the ~~existing~~ HB mine. The Moab property reserves are based on Agapito's 2015 mine reserve ~~estimated based on detailed examination of our geologic, solution mine and site data that was updated with information from cavern development activities that occurred between 2012 and 2015.~~estimate adjusted for depletion for the 2016 production. The Wendover property reserves are based on Agapito's 2015 brine aquifer reserve ~~estimate based on detailed examination of our brine aquifer and site data that was updated with information from 2012 through 2015.~~estimate. However, depletion did not change the reserve life of 30 years as discussed in ~~note~~footnote 3 below. Because reserves are estimates, they cannot be audited for the purpose of verifying exactness. Instead, reserve information was reviewed in sufficient detail to determine if, in the aggregate, the data provided by us is reasonable and sufficient to estimate reserves in conformity with practices and standards generally employed by, and within the mining industry, and that are consistent with the requirements of U.S. securities laws.


~~(2)~~ ²	These mines, excluding the HB ~~mine,~~and West mines, have operated in a substantially continuous manner since the dates set forth in this table. The HB mine was originally opened in 1934 and operated continuously as an underground mine until 1996. In July 2016, we transitioned our West facility into care-and-maintenance mode due to the decline in potash prices.

~~(3)~~

Minimum remaining lives are calculated by dividing reserves by annual effective capacity. Effective capacity is the estimated amount of production that will likely be achieved based on the amount and quality of ore that we estimate can be mined, milled, and/or processed, assuming an estimated average reserve grade, potential future modifications to the systems, a normal amount of scheduled down time, average or typical mine development efforts and operation of all of our mines and facilities at or near full capacity. Minimum remaining lives at the West, East, HB mine, and Moab mines are based on reserves (product tons) divided by annual effective ~~productive~~ capacity over the full expected life of the ore body, and corrections for purity: one ton of red ~~muriate of potash equals 0.95 ton of KCl; one ton of East white~~ muriate of potash equals 0.95 ton of KCl; one ton of Moab white muriate of potash equals 0.97 ton of KCl; one ton of sulfate of potash magnesia equals 0.97 ton of langbeinite. East langbeinite minimum remaining life was based on ~~two plants~~a langbeinite-only plant and associated plant ~~capacities. Currently, langbeinite-only~~capacity. Langbeinite-only production ~~is planned for~~commenced in April 2016 at the East facility and the sylvite plant was shut down at that time. The West facility was shut down and placed into care-and-maintenance mode in July 2016 due to low potash prices. If we decided to produce potash from our East and West mine sylvite ore reserves in the future, we expect that we would reopen the West facility and be required to construct a new plant to replace the East sylvite plant closed in 2016 to process the remaining reserves. Calculated mine lives that exceed 100 years are reported at 100+ years to balance the reserve life with the uncertainties associated with those extended time frames. We

~~Table of Contents~~

mid-2016 and the existing sylvite plant is expected to be shut down at that time. If we decided to produce potash at East again in the future, we expect that we would be required to construct a new plant to process the remaining reserves. Annual effective productive capacity contemplates the grade of the ore and estimated recovery percentages. The current effective productive capacity is different than annual effective productive capacity which contemplates future additional investment in the East facility for both langbeinite and sylvite production. Calculated mine lives that exceed 100 years are reported at 100+ years to balance the reserve life with the uncertainties associated with those extended time frames. We currently do not report more than 30 years mining life for Wendover due to the uncertainties associated with natural brine‑containing aquifers.

~~(4)~~

⁴

Generally, "proven reserves" are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling, and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well-defined that the size, shape, and depth and mineral content of the reserves are well-established. Proven ~~reserves mean~~reserve tonnages are computed from projection of data using the inverse distance squared method taking into account mining dilution, mine extraction efficiency, ore body impurities, metallurgical recovery factors, sales prices and operating costs from potash ore zone measurements as observed and recorded either in drill holes using cores, or channel samples in mine workings. This classification has the highest degree of geologic assurance. The data points for measurement are adequately spaced and the geologic character so well defined that the thickness, areal extent, size, shape, and depth of the potash ore zone are well-established. The maximum acceptable distance for projection from ore zone data points varies with the geologic nature of the ore zone being studied.

~~(5)~~

⁵

Recovery is the percentage of valuable material in the ore that is beneficiated prior to further treatment to develop a saleable product. Recoverable ore tons is defined as the hoisted ore for the conventionally mined ore in our East and West ~~Mines.~~mines. This figure was derived from the in-place ore estimate that has been adjusted for factors such as geologic impurities and mine extraction ratios. For the HB mine and the Moab property, recoverable ore tons are defined as the potassium that can be extracted from the underground workings and pumped to the surface. This figure was derived from the in-place ore estimate that has been adjusted for factors such as geologic impurities, potash that dissolves but remains in the cavern (dissolution factor), and an extraction factor that accounts for potash that may not be recovered because solution may be channeled away or stranded due to cavern geometry. We do not calculate recoverable ore tons for the Wendover property as it is a lake brine resource, not an in-place ore deposit.


~~(6)~~ ⁶	Ore grade expressed as expected mill feed grade to account for minimum mining height for the East and West mines. ~~Muriate of potash~~Potash ore grade is reported in % KCl and ~~sulfate of potash magnesia~~langbeinite ore grade is reported in % langbeinite. The ore grade for the Moab and HB mines is the in-place KCl grade.

~~(7)~~

⁷

"Probable reserves" are reserves ~~means~~for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance of probable (indicated) reserves, although lower than that for proven (measured) reserves, is high enough to assume geological continuity between points of observation. The classification of minerals as probable reserves requires that we believe with reasonable certainty that access to the reserves can be obtained, even though currently-issued permits are not required. Probable reserve tonnages are computed by projection of data using the inverse distance squared method taking into account mining dilution, mine extraction efficiency, ore body impurities, metallurgical recovery factors, sales prices and operating costs from available ore zone measurements as observed either in drill holes using cores or in mine workings for a distance beyond potash classified as proven reserves. This classification has a moderate degree of geological assurance.

~~(8)~~

⁸

Our reserves in the 1^st, 3^rd, 4^th, 7^th, 8^th and 10^th ore zones contain either sylvite (KCl) or langbeinite (K₂SO₄(MgSO₄)₂) separately. ~~Reserves currently being mined at our~~Ore reserves in the East ~~mine are from the~~ 5^th ore zone ~~and~~ contain both sylvite and langbeinite which we call mixed ore. We ~~will cease~~ceased processing sylvite at the East ~~mine~~facility in ~~mid-2016,~~April 2016, and only the langbeinite ore contained in the East 5^th ore zone is included in the mine reserve estimate. Additionally, the reserve amounts include West mine 3^rd and 4^th ore zones which contain langbeinite that we anticipate will be processed at the East ~~mine.~~facility.


~~(9)~~ ⁹	The HB mine reserves were based on solution mining of old workings and recovery of potash from the residual pillars. Reserves are based on thicknesses, grades, and mine maps provided by us. The data presented here includes reserves available via the AMAX/Horizon mine as further described below under Our Development Assets.

~~(10)~~

¹⁰

The Wendover facility reserves are the combination of a shallow and a deep aquifer. There were no proven reserves reported for either aquifer because the shallow aquifer represents an unconventional resource and there is uncertainty of the hydrogeology of the deep aquifer. The estimating method for the shallow aquifer was based on brine concentration, brine density, soil porosity within the aquifer, and aquifer thickness from historical reports. The brine concentrations and brine density were confirmed by us recently, but values for the aquifer thickness and the porosity were obtained from literature published by other sources. Probable reserves for the shallow brine at the Wendover facility were calculated from KCl contained in the shallow aquifer based on estimates of porosity and thickness over the reserve area. The distance for projection of probable reserves is a radius of three‑quarters of a mile from points of measurement of brine concentration. Probable reserves for the deep-brine aquifer were estimated based on historical draw-down and KCl brine concentrations. The ore grade (% KCl) for both the shallow and deep aquifer is the percentage by weight of KCl in the brine.

~~Table of Contents~~

~~concentrations. The ore grade (% KCl) for both the shallow and deep aquifer is the percentage by weight of KCl in the brine.~~


~~(11)~~ ¹¹	A portion of these reserves are within the West mine boundary. The classification of the reserve as being associated with the East mine is a result of where the ore is intended to be processed.

Production

Our facilities have a current estimated annual productive capacity of approximately ~~1.0 million~~390,000 tons of potash, and approximately ~~200,000~~400,000 tons of langbeinite, based on current design. WeOur annual production rates are ~~not currently producing at annual rates equal to~~less than our estimated productive capacity. Actual production is affected by operating rates, the grade of ore mined, recoveries, mining rates, evaporation rates, product pricing, and the amount of development work that we perform. Therefore, as with other producers in our industry, our production results tend to be lower than reported productive capacity.

Our production capabilities and capital improvements at our facilities are described in more detail below, along with our historical production of our primary products and by-products for the years ended December 31, 2016, 2015, ~~2014~~ and ~~2013.~~2014.

Solution Mines

The HB mine has a current estimated productive capacity of 180,000 tons annually. The productive capacity may vary between approximately 160,000 and 200,000 tons of potash. Potash produced from our HB mine is shipped to the North facility for compaction.

Potash ore at Moab is mined from two stacked ore zones: the original mine workings in Potash 5 and the horizontal caverns in Potash 9.

The Moab mine has a current estimated productive capacity of approximately 110,000 tons of potash annually; evaporation rates have historically varied and, consequently, productive capacity may vary between approximately 75,000 and 120,000 tons of potash.

Potash at Wendover is produced primarily from brine containing salt, potash, and magnesium chloride that is collected in ditches from the shallow aquifers of the West Desert. These materials are also collected from a deeper aquifer by means of ~~deep brine~~deep-brine wells.

The Wendover facility has a current estimated productive capacity of approximately 100,000 tons of potash annually; evaporation rates have historically resulted in actual production between approximately 65,000 and 100,000 tons of potash.

Conventional Underground Mines

Sylvite and langbeinite ore at our Carlsbad locations is mined from a stacked ore body containing at least 10 different mineralized zones, seven of which contain proven and probable reserves.

The West mine was idled in July 2016 and placed in care-and-maintenance mode. When operational, it has ~~a current~~an estimated productive capacity of approximately 400,000 tons of red potash annually. Potash produced from our West mine is shipped to the North facility for compaction.

•

The East mine was converted to a Trio^®-only operation in April 2016 and potash is no longer produced from the East mine. The Trio^® productive capacity of the East mine increased in 2016 as a result of transition to a Trio^®‑only operation. The East mine has a current estimated productive capacity of approximately ~~225,000 tons of white potash annually and, based on current design, approximately 200,000~~400,000 tons of Trio^® ~~annually. The productive capacities at our East mine are~~annually, based on ~~annual averages. As the~~ current ~~plan is to transition to a Trio~~^® ~~-only operation in mid-2016, actual potash production is expected to be lower due to the transition. We expect our Trio~~^® ~~productive capacity to increase in 2016 as we transition the facility to a Trio~~^® ~~-only facility.~~design.

Compaction Facility

The North facility receives compactor feed from the West, when operating, and HB facilities via truck and converts the compactor feed to finished granular-sized product and standard-sized product.

Our Development Assets

We have ~~significant additional~~ development opportunities in our New Mexico facilities with the acceleration of production from our reserves and mineralized deposits of potash, and the potential construction of additional production facilities in the region. We also own the leases on two idled mines near ~~Carlsbad —~~Carlsbad: the AMAX/Horizon mine and the North mine.

~~Table of Contents~~

AMAX/Horizon ~~mine~~Mine

We acquired the potash leases associated with the AMAX/Horizon mine in October 2012. The AMAX/Horizon mine was in continuous operation between 1952 and 1993. This mine, similar to the HB mine, is a viable candidate for solution mining in a manner that is consistent with the HB mine. As

State and federal permits were obtained in 2015 to utilize these are relatively new lease holdings, we have not yet determined the feasibility associated with this potential development project, however, work is being performed to determine the ability to convert this area to aleases for solution ~~mining opportunity.~~

mining. The AMAX/Horizon solution mine is expected to utilize the same evaporation ponds and processing mill as the HB mine. We have not yet made a determination to proceed with this potential development project; however, future work may be performed to determine the ability to convert this idled underground mine to a solution mining opportunity.

As noted in footnote 9 to Our Proven and Probable Reserves table, these tons are included in the data presented for the HB Mine.

North ~~mine~~Mine

The North mine operated from 1957 to 1982 when it was idled mainly due to low potash prices and mineralogy changes which negatively impacted mineral processing at the facilities. Although the mining and processing equipment has been removed, the mine shafts remain open. The compaction facility at the North mine is where we granulate, store, and ship potash produced at the HB mine (and previously the West ~~and HB mines.~~mine). Two abandoned mine shafts, rail access, storage facilities, water rights, utilities and leases covering potash deposits, are already in place. As part of our ~~overall~~long-term mine planning efforts, we ~~continue~~may choose to evaluate our strategic development options with respect to the shafts at the North mine and their access to mineralized deposits of potash.

Production of Our Primary Products ~~(thousands of product tons)~~

One product ton of potash contains approximately 0.60 tons of K₂O when produced at our West, Moab, and Wendover facilities and approximately 0.62 tons of K₂O when produced at our East facility. The following table summarizes production of our primary products at each of our facilities for each of the years ended December 31, 2016, 2015, ~~2014,~~ and ~~2013.~~2014:

Year Ended December 31,
2015 2014 2013
Ore Production Mill Feed Grade (1) Finished Product Ore Production Mill Feed Grade (1) Finished Product Ore Production Mill Feed Grade (1) Finished Product
Muriate of Potash
Carlsbad West 2,532
11.1 % 322
2,991
10.9 % 352
3,044
11.6 % 379
Carlsbad East 2,368
7.8 % 145
2,535
8.8 % 217
2,608
7.7 % 196
Carlsbad HB (3) 695
14.9 % 134
623
14.3 % 98
—
13.8 % —
Moab 411
16.0 % 93
457
14.9 % 95
596
13.5 % 112
Wendover 379
16.2 % 74
462
17.2 % 97
447
17.5 % 93
6,385
768
7,068
859
6,695
780
Langbeinite Carlsbad East(2) 2,368
4.7 % 162
2,535
4.3 % 160
2,608
4.6 % 177
Total Primary Products 930
1,019
957



(tons in thousands)	Year Ended December 31,
	2016				2015				2014
	Ore Production	Mill Feed Grade¹		Finished Product	Ore Production	Mill Feed Grade¹		Finished Product	Ore Production	Mill Feed Grade¹		Finished Product
Potash
West	1,425	11.9	%	191	2,532	11.1	%	322	2,991	10.9	%	352
East ²	1,935	7.9	%	32	2,368	7.8	%	145	2,535	8.8	%	217
HB	587	16.1	%	124	695	14.9	%	134	623	14.3	%	98
Moab	429	16.6	%	97	411	16.0	%	93	457	14.9	%	95
Wendover	239	16.3	%	49	379	16.2	%	74	462	17.2	%	97
	4,615			493	6,385			768	7,068			859
Langbeinite
East ²	1,935	6.2	%	279	2,368	4.7	%	162	2,535	4.3	%	160
Total Primary Products				772				930				1,019


~~(1)~~	¹Mill feed grade shown is ~~shown~~ as percent of K₂O. Mill freed grade is a measurement of the amount of mineral contained in an ore as a percentage of the total weight of the ore. For potash it is often represented as a percent of potassium oxide (K₂O) or percent potassium chloride (KCl). ²Potash and langbeinite at our East mine were processed from the same ore until April 2016.


~~(2)~~	~~Muriate of potash and langbeinite at our East mine were processed from the same ore.~~


~~(3)~~	~~Our HB mine began processing a small amount of ore in late 2013; however, no ore production or finished product is shown due to rounding.~~

Our By-Product Production

During the extraction of potash, we also recover marketable salt, magnesium chloride, metal recovery salts, and ~~magnesium chloride.~~brine containing salt and potassium from our mining processes. Our salt is used in a variety of markets including animal feed, industrial applications, pool salt, and the treatment of roads and walkways for ice melting or to manage road conditions. Magnesium chloride is typically used as a road treatment agent for both deicing and dedusting. At our Wendover facility, we also produce metal recovery salt, which is potash mixed with salt, in ratios requested by our customers. Metal recovery salt is a combination of potash and salt that chemically enhances the recovery of aluminum in aluminum recycling processing facilities. Our brines are used primarily by the oil and gas industry to support well development and completion activities. We account for the revenue generated from sales of these minerals as ~~a reduction in the~~by-product credits to our cost of goods sold of our primary potash product.

~~Table of Contents~~


ITEM 3.	LEGAL PROCEEDINGS

In February 2015, Mosaic Potash Carlsbad Inc. ("Mosaic") filed a complaint and application for preliminary injunction and permanent injunction against Steve Gamble and us in the Fifth Judicial District Court for the County of Eddy in the State of New Mexico. Mr. Gamble is a former Intrepid employee and former Mosaic employee. The complaint alleges against us violations of the Uniform Trade Secrets Act and tortious interference with contract relating to alleged misappropriation of Mosaic's trade secrets. Mosaic seeks monetary relief of an unspecified amount, including damages for actual loss and unjust enrichment, exemplary damages, attorneys' fees, and injunctive relief and has alleged that it has spent hundreds of millions of dollars to research and develop its alleged trade secrets. In August 2015, the court denied Mosaic's application for preliminary injunction. The lawsuit is currently progressing through discovery. We are vigorously defending against the lawsuit.

In July 2016, Mosaic filed a complaint against Steve Gamble and us in the US District Court for the District of New Mexico. The complaint alleges violations of the Computer Fraud and Abuse Act, conversion, and civil conspiracy relating to alleged misappropriation of Mosaic's confidential information. Mosaic seeks injunctive relief and compensatory and punitive damages of an unspecified amount. We are vigorously defending against the lawsuit.

We are subject to other claims and legal actions in the ordinary course of business. While there are uncertainties in predicting the outcome of any claim or legal action, we believe that the ultimate resolution of these other claims or actions is not reasonably likely to have a material adverse effect on our financial ~~position,~~condition, results of operations, or cash flows. ~~We maintain liability insurance that will apply to some claims and actions and believe that our coverage is reasonable in view of the insurable legal risks to which our business ordinarily is subject.~~


ITEM 4.	MINE SAFETY DISCLOSURES

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

Our East, West, and North facilities in New Mexico are subject to regulation by MSHA under the Federal Mine Safety and Health Act of 1977 (the ~~“Mine Act”~~"Mine Act") and the New Mexico Bureau of Mine Safety. MSHA inspects these facilities on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. Exhibit 95.1 to this Annual Report on Form 10-K provides the information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K. Our Utah and HB facilities are subject to regulation by OSHA and, therefore, are not required to be included in the information provided in Exhibit 95.1.

~~Table of Contents~~

PART II


ITEM 5.	MARKET FOR ~~REGISTRANT’S~~REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is traded on the NYSE under the symbol IPI.

The following table sets forth the range of high and low sales prices of our common stock for the periods indicated, as reported by the ~~NYSE.~~

NYSE:


	High	Low	High	Low
2016
Quarter ended December 31, 2016			$3.04	$0.93
Quarter ended September 30, 2016			$1.68	$1.05
Quarter ended June 30, 2016			$1.83	$0.85
Quarter ended March 31, 2016			$3.26	$0.65
2015
Quarter ended December 31, 2015	$7.14	$2.63	$7.14	$2.63
Quarter ended September 30, 2015	$12.02	$5.35	$12.02	$5.35
Quarter ended June 30, 2015	$13.24	$10.85	$13.24	$10.85
Quarter ended March 31, 2015	$15.09	$10.92	$15.09	$10.92
2014
Quarter ended December 31, 2014	$15.57	$12.39
Quarter ended September 30, 2014	$16.98	$14.40
Quarter ended June 30, 2014	$17.64	$14.11
Quarter ended March 31, 2014	$17.29	$13.63

Performance Graph—Comparison of Cumulative Return

The graph below compares the cumulative total stockholder return on our common stock with the cumulative total stockholder return on the S&P 500 Index, the Dow Jones USU.S. Basic Materials Index, and our peer group (Potash Corporation of Saskatchewan Inc., The Mosaic Company, and Agrium Inc.) for the period beginning on December 31, ~~2010,~~2011, through December 31, ~~2015,~~2016, assuming an initial investment of $100 and the reinvestment of dividends.

~~Table of Contents~~


							Dow Jones U.S.								Dow Jones U.S.
	IPI		Peer Group		S&P 500		Basic Materials		IPI		Peer Group		S&P 500		Basic Materials
December 31, 2010	$	100.00	$	100.00	$	100.00	$	100.00
December 31, 2011	$	60.69	$	74.40	$	102.11	$	85.28	$	100.00	$	100.00	$	100.00	$	100.00
December 31, 2012	$	57.86	$	84.53	$	118.45	$	94.23	$	94.84	$	112.92	$	116.00	$	110.49
December 31, 2013	$	43.05	$	71.56	$	156.82	$	113.43	$	70.56	$	95.41	$	153.57	$	133.00
December 31, 2014	$	37.72	$	74.12	$	178.28	$	117.27	$	61.83	$	98.63	$	174.60	$	137.51
December 31, 2015	$	8.02	$	46.97	$	180.75	$	102.70	$	13.14	$	62.32	$	177.01	$	120.42
December 31, 2016									$	9.27	$	67.97	$	198.18	$	144.83

Holders

As of February 22, ~~2016,~~2017, we had ~~approximately 82~~73 record holders of our common stock based upon information provided by our transfer agent.

Dividends

We currently intend to retain earnings to reinvest for future operations and growth of our business and do not anticipate paying any cash dividends on our common stock. However, our board of directors, in its discretion, may decide to declare a dividend at an appropriate time in the future. A decision to pay a dividend would depend, among other factors, upon our results of operations, financial condition and cash requirements, and the terms and restrictions of our ~~unsecured~~ credit facility, senior notes, and other financing agreements at the time any payment is considered.

~~Table~~ Our debt agreements contain restrictions on our ability to declare and pay dividends. In general, the terms of ~~Contents~~our senior notes prohibit us from declaring and paying a dividend unless our leverage ratio is less than 3.5 to 1, our fixed charge coverage ratio after giving effect to the dividend would be greater than 1.3 to 1, and our cash on hand and availability under our credit facility after giving effect to the dividend would not be less than $15 million. In addition, the terms of our credit facility prohibit us from declaring and paying a dividend unless availability under the credit facility after giving effect to the dividend and during a specified period before the dividend is more than $10 million. More information about how the financial ratios are calculated under our debt agreements is provided in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading "Liquidity and Capital Resources."

Unregistered Sales of Equity Securities and Use of Proceeds

None.

~~Table of Contents~~


ITEM 6.	SELECTED FINANCIAL DATA

The following table sets forth our historical selected financial ~~and operating~~ data for the periods indicated (in thousands, except per share data). The selected financial ~~and operating~~ data should be read together with the other information contained in this document, including ~~“Item 1. Business,” wherein the presentation below is described more fully, and “Item~~"Item 7. ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations,”" and the audited historical financial statements and ~~the~~ notes ~~thereto included elsewhere~~ in ~~this document.~~

"Item 8. Financial Statements and Supplemental Data."


	Year Ended December 31,											Year Ended December 31,
	2015			2014		2013		2012		2011		2016			2015			2014		2013		2012
Sales	$	287,183		$	410,389	$	336,312	$	451,316	$	442,954	$	210,948		$	287,183		$	410,389	$	336,312	$	451,316
Net (loss) Income	$	(524,776	)	$	9,761	$	22,275	$	87,443	$	109,411	$	(66,633	)	$	(524,776	)	$	9,761	$	22,275	$	87,443
(Loss) Earnings Per Share:
Basic	$	(6.94	)	$	0.13	$	0.30	$	1.16	$	1.46	$	(0.88	)	$	(6.94	)	$	0.13	$	0.30	$	1.16
Diluted	$	(6.94	)	$	0.13	$	0.30	$	1.16	$	1.45	$	(0.88	)	$	(6.94	)	$	0.13	$	0.30	$	1.16
Cash dividends declared and paid per common share	$	—		$	—	$	—	$	0.75	$	—	$	—		$	—		$	—	$	—	$	0.75

December 31,
2015 2014 2013 2012 2011
Total assets $ 640,484
$ 1,166,719
$ 1,175,273
$ 994,623
$ 932,870
Total debt $ 150,000
$ 150,000
$ 150,000
$ —
$ —

~~Supplemental Selected Financial Data:~~



	December 31,
	2016		2015		2014		2013		2012
Total assets	$	540,901	$	639,969	$	1,166,119	$	1,174,590	$	994,623
Total debt	$	133,434	$	149,485	$	149,402	$	149,318	$	—


	December 31,										December 31,
	2015		2014		2013		2012		2011		2016		2015		2014		2013		2012
Cash, cash equivalents and investments	$	63,629	$	89,879	$	25,113	$	57,747	$	176,794	$	4,464	$	63,629	$	89,879	$	25,113	$	57,747
Stockholders’ equity	$	426,526	$	947,285	$	933,971	$	905,736	$	871,133
Stockholders' equity											$	363,371	$	426,526	$	947,285	$	933,971	$	905,736

~~Table of Contents~~


ITEM 7.	~~MANAGEMENT’S~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ~~AND RESULTS OF OPERATIONS~~

AND RESULTS OF OPERATIONS

This Management Discussion and Analysis should be read in conjunction with the accompanying consolidated financial statements and related notes contained elsewhere in this Annual Report on Form 10-K, which have been prepared assuming we will continue as a going concern. As discussed in Note 2 to the consolidated financial statements and below, the existence of a material uncertainty related to our compliance with financial covenants under our debt agreements raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from this uncertainty.

10-K.

This Management Discussion and Analysis contains forward‑looking statements that involve risks, uncertainties, and assumptions as described under the heading ~~“Cautionary~~"Cautionary Note Regarding Forward‑Looking Statements,”" in Part I of this Annual Report on Form 10-K. Our actual results could differ materially from those anticipated by these forward‑looking statements as a result of many factors, including those discussed under ~~“Item~~"Item 1A. Risk ~~Factors”~~Factors" and elsewhere in this Annual Report on Form 10-K.

~~Our Company~~Overview

We are the only producer of potash in the United States and are one of two producers of langbeinite, which we market and sell as Trio^®. Our revenues are generated exclusively from the sale of potash and Trio^®. We also produce salt, ~~and~~ magnesium chloride and brine from our potash and langbeinite mining processes, the sales of which are accounted for as by-product credits to our cost of sales. These by-product credits represented approximately 2% to 4%5% of total cost of goods sold in each of the last three years.

We produce potash at three solar evaporation solution mining facilities and, until the second quarter of 2016, we also produced potash from two conventional ~~underground~~ mining facilities. Our solution mining production comes from our HB solar solution mine ~~near~~in Carlsbad, New Mexico, a solution mine ~~near~~in Moab, Utah, and a brine recovery mine in Wendover, Utah. Our conventional production ~~comes~~came from our underground West and East mines ~~near~~in Carlsbad, New Mexico. We also operate the North compaction facility ~~near~~in Carlsbad, New Mexico, which services the ~~West and~~ HB ~~mines.~~mine. We produce Trio^® ~~production comes~~ from our conventional underground ~~conventional mining of~~East mine. In April 2016, we converted our East facility from a ~~mixed ore body~~mixed-ore facility that ~~contains~~produced both potash and ~~langbeinite, which is mined and processed at the East facility near Carlsbad, New Mexico. We are in the process of transitioning our East facility~~Trio^® to a Trio^®-only ~~production~~facility. We no longer produce potash from our conventional underground East mine.

In early July 2016, we idled mining operations at our West facility and ~~expect this transition~~transitioned it into a care-and-maintenance mode due to ~~be completed~~the decline in ~~mid-2016.~~potash prices. Accordingly, beginning in July 2016, all of our potash is produced from our three solution mining facilities.

Significant Business Trends and Activities

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

• Potash ~~prices.~~prices and demand. Our average net realized sales price for potash remained essentially flat at $339 per ton in the year ended December 31, 2015, compared to $332 per ton in the year ended December 31, 2014. However, we experienced price declines sequentially during each quarter in 2015 due to concerns that global productive capacity exceeds demand. Potash prices are a significant driver of profitability for our business. Our average net realized sales price per ton for potash decreased to $195 per ton in the year ended December 31, 2016, from $339 per ton in the year ended December 31, 2015. Potash prices declined for the first nine months of 2016, before increasing slightly in the fourth quarter of 2016 in advance of the 2017 spring application season. The significant price decline that began in the second half of 2015 and continued through the third quarter of 2016 was primarily due to oversupply and the impact of a strong U.S. dollar on global producers importing tonnage into the North American potash market. Although production curtailments from us and other producers in 2015 and 2016 reduced potash supply in North America, global capacity is expected to continue to exceed demand. Domestic pricing of our potash is influenced principally by the price established by our competitors. The significant price decline in the second half of 2015 was primarily due to oversupply and the impact of a strong US dollar on global producers importing tonnage into the North American potash market. The interaction of global potash supply and demand, credit, ocean, land and barge freight rates, and currency fluctuations also influence pricing. We expect potash prices will ~~continue to be pressured throughout 2016 as global and U.S. potash supply continues to exceed demand and as commodity prices continue to be pressured.~~remain firm through the first half of 2017.

• ~~Potash demand.~~ We sold ~~587,000~~681,000 tons of potash in the year ended December 31, ~~2015, a decrease~~2016, an increase of ~~328,000~~94,000 tons compared to potash sales volumes in the year ended December 31, ~~2014. The decrease in sales volumes~~2015. This increase resulted primarily from soft demand during the second half of ~~2015. Our sales volumes reflect the uncertainty surrounding declining potash prices and our customers not wanting~~2015 compared to ~~take inventory price risk. We experienced~~more normal demand in 2016. In addition, after experiencing weaker demand in ~~the~~our industrial markets ~~in 2015 as compared to 2014~~over the last couple of years due to ~~the decrease in~~less oil and gas drilling activity in the U.S. ~~We expect this trend~~, starting in mid-2016 drilling activity has increased in geographies near our mining locations as oil prices have begun to continue into 2016. As a result of the reduced demand, and limited inventory storage space, we temporarily curtailed production in late 2015 and early 2016 at our HB and West plants to manage inventory storage. If production continues to outpace demand, we may continue to utilize temporary curtailments to manage inventory levels.recover.

~~Table of Contents~~

Our ability to supply tons to our customers on a timely basis continues to be a fundamental element of our sales strategy. We utilize our geographic location, which is an advantage relative to other producers, as well as our strong distribution system, to effectively position product closer to our customers.

The specific timing of when farmers apply potash remains highly weather dependent and varies across the numerous growing regions within the U.S. The timing of potash sales is significantly influenced by the marketing programs of potash producers, as well as storage volumes closer to the farm gate. The combination of these items results in variability in potash sales and shipments, thereby increasing volatility of sales volumes from quarter to quarter and season to season.

Our potash production volume, and therefore our potash sales volumes, will be less in 2017 as compared to 2016 due to the transition of our East facility to Trio^®-only in April 2016 and the transition of our West facility into care-and-maintenance mode in July 2016.

• Trio^® prices and demand. ~~Sales volumes for~~We sold 146,000 tons of Trio^® ~~decreased 19,000 tons for~~in the year ended December 31, ~~2015, as~~2016, a decrease of 17,000 tons compared to Trio^® sales volumes in the ~~same period in 2014.~~year ended December 31, 2015. Trio^® demand was ~~also~~ negatively impacted by the overall softness in the fertilizer ~~market.~~market for the same reasons discussed above with respect to potash demand. Further, some of our domestic Trio^® customers delayed purchases and moved to more of a just-in-time purchasing model as these customers gained increased confidence in our ability to supply the product closer to the domestic traditional spring application season.

Our average net realized sales price per ton for Trio^® was $287 per ton in the year ended December 31, 2016, as compared to $364 per ton in the year ended December, 31 ~~2015,~~2015. Although we experienced price decreases for Trio^® into the fourth quarter of 2016, domestic Trio^® pricing stabilized in the fourth quarter and into the first part of 2017.

Over the long term, we believe the demand for Trio^® will exceed supply, providing an opportunity to increase our gross margin. In light of this opportunity, in mid-2016, we transitioned our East facility to a Trio^®-only facility, which significantly increased our production rate and our effective production capacity for Trio^®. We will continue our efforts to expand our sales and marketing efforts for Trio^®, particularly internationally. However, we have experienced a longer-than-expected ramp-up for international sales and in some international locations our Trio^®average net realized sales prices are significantly lower than domestic pricing. As a result, we may incur lower-of-cost-or-market adjustments for Trio^® tons that are positioned for sale into these markets. We operate our East facility at production levels that approximate demand and expect to continue to do so for the foreseeable future.

• Decrease in Production. Due to decreased potash prices, in July 2016 we idled mining operations at our West facility and transitioned it to care-and-maintenance mode. In addition, in April 2016, we transitioned our East facility from ~~$349 per ton~~a mixed-ore processing facility that processed both potash and Trio^® to a Trio^®-only facility. As discussed above, due to the longer-than-expected ramp-up for international Trio^® sales in the fourth quarter of 2016, we began operating our East facility at production levels that approximate demand and expect to continue to do so for the foreseeable future. As a result of these activities, we incurred restructuring charges of approximately $2.7 million in the year ended December 31, ~~2014.~~2016, primarily related to severance payments made to impacted employees.

• Evaluation of strategic alternatives. Under the terms of our senior notes, in December 2016 we engaged Cantor Fitzgerald & Co., a nationally-recognized investment bank, to assess, evaluate, and assist in pursuing potential strategic alternatives available to us, as we determine to be appropriate. These potential strategic alternatives could include, but are not limited to, continuing our current operating plan, equity offerings or balance sheet restructurings, merger and acquisition opportunities, partnership or joint venture opportunities, entering into new or complementary businesses, or a sale of Intrepid or some or all of our assets. This evaluation is ongoing.

• Weather impact. Evaporation rates at our potash solution mines during the 2015 evaporation season were below average, resulting in lower production levels in 2016. During the 2016 evaporation season, we experienced average to above-average evaporation rates. As a result, we expect our potash production to increase in 2017 compared to 2016.

• Revised Debt Terms. In October 2016, we entered into an amended agreement governing our senior notes. As a result, we expensed $3.1 million of debt restructuring costs paid to third parties. Under the revised terms of the agreement our interest rates increased by 4.5% above the stated rates under the terms of the original agreement. We ~~expect~~also entered into a new $35 million revolving line of credit facility.

Consolidated Results



(in thousands)	Year Ended December 31,
	2016			2015			2014
Sales	$	210,948		$	287,183		$	410,389

Cost of goods sold²	$	170,852		$	217,821		$	303,914

Gross (Deficit) Margin	$	(29,247	)	$	(15,477	)	$	42,004



Net (Loss) Income	$	(66,633	)	$	(524,776	)	$	9,761



Production volume (in thousands of tons):
Potash	493	768	859
Langbeinite	279	162	160
Sales volume (in thousands of tons):
Potash	681	587	915
Trio^®	146	163	182



Average Net Realized Sales Price per Ton¹
Potash	$	195	$	339	$	332
Trio^®	$	287	$	364	$	349

¹Average net realized sales price per ton is a non-GAAP measure that we calculate as sales less freight costs then divided by sales tons. More information about this non-GAAP measure is below under the heading "Non-GAAP Financial Measure."

²Cost of goods sold are presented net of by-product credits which were $9.0 million, $7.9 million and $6.5 million for the years ended December 31, 2016, 2015, and 2014, respectively.

Consolidated Results for the Years Ended December 31, 2016, and 2015

Total sales in 2016 decreased as compared to ~~see downward~~2015 due to lower average net realized sales price ~~pressure on the overall potassium markets in 2016; however,~~per ton for both potash and Trio^® ~~pricing has historically demonstrated more resiliency than~~, as well as lower sales volume for Trio^®, partially offset by increased potash sales volume. Our total cost of goods sold decreased in 2016 as compared to 2015 primarily from less depreciation on our assets in 2016 due to the impairment of long-lived assets in 2015, and from selling fewer potash ~~pricing due~~tons from our East facility, previously our highest cost facility, which transitioned to Trio^®~~'s unique nutrient make up and application to high-value crops. We continue to focus our efforts on maximizing our returns~~-only production in the ~~granular-~~second quarter of 2016. During the years ended December 31, 2016, and ~~premium- domestic markets.~~2015, 98% and 97% of our total sales were in the United States, with the remaining sales primarily into Canada, Asia, and Latin America.

• ~~Strategic rationalization~~In total, our cost of ~~assets. We are taking actions~~goods sold decreased $46.9 million, or 22%, from $217.8 million in 2015 to ~~expand~~$170.9 million in 2016. Due to the idling of our ~~Trio~~^® ~~production through~~West facility, and the transition of our East facility to a Trio^®-only ~~facility. This transition,~~facility, we sold fewer tons of potash from these facilities, which previously represented our highest cost facilities. Further, due to the impairment of long‑lived assets recorded in the fourth quarter of 2015, we ~~expect will be complete~~recorded less depreciation expense in ~~mid-2016, will remove~~2016. As a percentage of sales, cost of goods sold increased during 2016 as our ~~highest-cost~~net average sales price for both potash ~~production from our portfolio~~ and ~~allow us to grow~~ Trio^® ~~production. We expect~~decreased over 2015 levels.

Net loss for 2016 was $66.6 million, compared to a net loss for 2015 of $524.8 million, which primarily related to long-lived asset impairment charges of $323.8 million and an increase in our valuation allowance of $300.3 million on our deferred tax assets.

Selling and Administrative Expense

Selling and administrative expenses decreased to $20.0 million in 2016 compared to $27.5 million in 2015 as a result of lower administrative headcount, aircraft-related costs, corporate facility rent expense and professional fees.

Debt Restructuring Expense

In the ~~transition will allow us~~fourth quarter of 2016, after we completed our debt restructuring, we expensed $3.1 million of professional fees paid to ~~replace East's~~third parties.

Restructuring Expense

In January 2016, we undertook a number of cost-saving actions in response to continued downward pressure on potash ~~tons~~prices. These actions included the elimination of a portion of our workforce and reductions in compensation and benefits (including elimination of annual bonuses for 2015 and 2016 for most employees). Additionally, in connection with ~~Trio~~^® ~~tons over time.~~

~~Following~~ the transition of our East facility to a Trio^®-only ~~facility, West will be our only conventional potash mine and our highest cost~~ production ~~facility. We are performing a strategic review to determine~~in April 2016, the ~~long term viability of this facility given the current and expected potash pricing environment.~~

~~As we continue to rationalize assets, we expect to evaluate the underlying assumptions, including remaining asset lives, on the recoverability~~transition of our ~~assets~~West facility to care-and-maintenance mode in July 2016, and ~~these evaluations could result~~the implementation of a reduced operating schedule at our East facility in ~~accelerated depreciation or asset impairment charges in the future.~~December 2016, our overall headcount was approximately 48% less as of December 31, 2016, as compared to December 31, 2015. In connection with these events, we recorded restructuring expenses of approximately $2.7 million, primarily for severance related activities, the majority of which was paid in 2016.

Impairment of Long-Lived Assets

During 2015, in connection with our ~~analysis~~periodic evaluation of the recoverability of our ~~long lived~~ assets, due to the significant decrease in potash prices during the second half of 2015, ~~in the fourth quarter of 2015,~~ we recognized an impairment ~~charges~~charge of ~~$324~~$323.8 million related to our East and West conventional mining facilities, and our North facility in New Mexico due to the continued decline in potash prices noted during this period.

• Other Operating (Income) Expense

In December 2015, a snowstorm caused damage to a portion of one of our warehouses in New Mexico and product stored in the warehouse. These damages, as well as alternative handling and storage costs were covered by our insurance policies at replacement value, less a $1 million deductible. During the fourth quarter of 2015, we recognized $2.5 million of losses related to this snowstorm, and those losses are reflected in "Other operating (income) expense" in the accompanying consolidated statement of operations. In the second quarter of 2016, we received $1.2 million in insurance proceeds related to this event, and recognized that amount in "Other operating (income) expense" at that time.

In late 2014, we initiated legal action to protest property tax valuations in New Mexico. In the second quarter of 2015, we reached an agreement with the State of New Mexico that resulted in a net $2.0 million reduction in previously paid property taxes. Accordingly, as the inventory produced during 2014 has since been sold, we recorded the settlement in "Other operating (income) expense" during the second quarter of 2015.

Interest Expense

Interest expense increased to $11.6 million in 2016, as compared to $6.4 million in 2015. This increase was the result of the higher interest rates on our senior notes as discussed further below, acceleration of the maturity date of our previous unsecured revolving credit facility during 2016 which necessitated the expensing of deferred financing costs related to that facility and the expensing of a modified make-whole payment related to the $15 million principal payment on our senior notes.

Consolidated Results for the Years Ended December 31, 2015, and 2014

Total sales in 2015 decreased as compared to 2014 due to lower sales volumes for potash and Trio~~Costs~~^®. Our total cost of goods sold decreased in 2015 as compared to 2014 primarily due to lower sales volumes of both potash and Trio^®. In total, our cost of goods sold decreased $86.1 million or 28%, from $303.9 million in 2014 to $217.8 million in 2015, primarily as a result of fewer tons of potash sold in 2015 than in 2014. During both of the years ended December 31, 2015, and 2014, approximately 97% our total sales were in the United States, with the remaining sales primarily into Canada, Asia, and Latin America.

Our net loss for 2015 was $524.8 million, as compared to net income for 2014 of $9.8 million. Our net loss for 2015 included long-lived asset impairment charges of $323.8 million in the fourth quarter of 2015 and an increase in our valuation allowance of $300.3 million on our deferred tax assets.

Selling and Administrative Expense

Selling and administrative expenses were essentially flat in the year ended December 31, 2015 as compared to 2014.

Restructuring Expense

In January 2014, in response to lower potash prices and the substantial completion of our major capital projects, we undertook a number of cost saving actions that were intended to better align our cost structure with the current business environment. These initiatives included the elimination of approximately 7% of the workforce, including employees supporting our major capital projects, reduction in the use of outside professionals, and cutbacks in other general and administrative areas.

Other Operating (Income) Expense

policies at replacement value, less a $1 million deductible. We submitted an insurance claim of $2.2 million. During the fourth quarter of 2015, we recognized $2.5 million of losses related to this snowstorm, and those losses are reflected in "Other operating (income) expense" in the accompanying consolidated statement of operations. In the second quarter of 2016, after considering our deductible, we received $1.2 million in insurance proceeds related to this event, and recognized that amount in "Other operating (income) expense" at that time.

During 2013, our application for certain New Mexico employment-related credits was denied, and we recorded an additional allowance of $2.8 million related to the denied tax credits. In 2014, we received notice that the State of New Mexico had approved claims that had been previously denied. Accordingly, we reduced our estimate of the allowance related to the realizability of our claims by $4.1 million. The credits were for periods prior to 2014 and the inventory produced during that time has been sold; therefore, we recorded the decrease in the allowance as "Other operating (income) expense" in the accompanying consolidated statement of operations in 2014.

Potash Segment Results



	Year Ended December 31,
(in thousands)	2016			2015			2014
Sales	$	159,494		$	217,467		$	334,323
Less: Freight costs	26,661			18,262			30,615
Warehousing and handling costs	8,439			11,213			10,742
Cost of goods sold⁴	134,017			172,355			254,753
Lower-of-cost-or-market inventory adjustments	18,380			31,772			8,186
Costs associated with abnormal production and other	649			10,405			—
Gross (Deficit) Margin	$	(28,652	)	$	(26,540	)	$	30,027
Depreciation, depletion and amortization incurred^{2, 3}	$	37,936		$	68,562		$	67,712
Sales Volumes (tons in thousands)	681			587			915
Production Volumes (tons in thousands)	493			768			859
Average Net Realized Sales Price per Ton¹	$	195		$	339		$	332

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

³Depreciation expense decreased in 2016 compared to 2015 as a result of the impairment charge discussed above in the "Consolidated Results" section.

⁴Cost of goods sold are presented net of by-product credits which were $9.0 million, $7.9 million and $6.5 million for the years ended December 31, 2016, 2015, and 2014, respectively.

Potash Segment Results for the Years Ended December 31, 2016, and 2015

We sold 681,000 tons of potash in 2016 compared with 587,000 tons in 2015. In late 2015, there was significant uncertainty surrounding declining potash prices resulting from global and domestic potash supplies exceeding demand. As a result, customers limited their exposure to inventory price risk and deferred purchases. In 2016, we saw increased purchases based on farmer demand; however, customers have moved to more of a just-in-time purchasing model.

Sales of potash decreased by $58.0 million, or 27%, to $159.5 million for the year ended December 31, 2016, from $217.5 million for the year ended December 31, 2015. This decrease was primarily the result of a 42% decrease in average net realized sales price per ton for potash partially offset by a 16% increase in sales volume.

Our potash freight costs increased to $26.7 million in 2016 from $18.3 million in 2015 as we sold more tons in 2016 than in 2015. Our freight costs are impacted by the proportion of customers paying for their own freight, the geographic distribution of our products and the freight rates of our carriers.

Total cost of goods sold of potash, which includes royalties and depreciation, depletion and amortization, decreased in 2016 compared to 2015 as we recorded less depreciation in 2016 due to the impairment of long-lived assets recorded in the fourth quarter of 2015. Further, our potash cost of goods sold also benefited from the direct expensing of lower-of-cost-or-market adjustments and abnormal production costs related to reduced production at our East facility. We recorded lower-of-cost-or-market inventory adjustments, and costs associated with abnormal production and other costs, during 2016 of $18.4 million and $0.6 million respectively, which are excluded from our cost of goods sold.

Our production volume of potash in 2016 decreased to 493,000 tons, compared with 768,000 tons produced in 2015. Our potash production was lower as we stopped producing potash at our East facility in April 2016 and idled potash production at our West facility in July 2016.

. We routinely evaluate our production levels and costs to determine if any costs are associated with abnormal production, as described under generally accepted accounting principles. The assessment of normal production levels is judgmental and unique to each ~~quarter.~~

period. During ~~the third quarter of~~ 2015, we received an order issued by ~~the Mine Safety and Health Administration (“MSHA”) relating~~MSHA related to maintenance issues and salt build-up in the ore hoisting shaft at our West mine. Upon issuance of the order, we suspended production at the West mine for 15 days while we took corrective actions to resolve the issues. As a result, potash production from our West mine was abnormally low during this period. ~~In addition, although production resumed~~Further, during 2015 and in ~~mid-September, we continued to perform incremental maintenance on~~ the ~~ore hoisting shaft through the remainder~~first quarter of ~~2015, during which time production at the West mine was temporarily suspended.~~

~~During 2015,~~2016, we temporarily suspended potash production periodically at our East facility ~~for a total of eleven days~~ as we performed ~~four separate plant tests relating~~testing related to developing our plans to ~~transition our~~convert the East facility to a Trio^®-only ~~production.~~

facility in April 2016. As a result of ~~the~~these temporary suspensions of production, during 2015, we determined that approximately ~~$7.5 million and $2.9~~$10.4 million of ~~production~~ costs ~~at our West and East facilities, respectively,~~ would have been allocated to additional potash tons produced, assuming we had been operating at normal production rates. Accordingly, these costs were excluded from our inventory values and instead directly expensed in 2015 as ~~period~~ production costs. ~~We compare actual~~As a result of the same analysis, $0.6 million of abnormal production ~~levels relative~~costs were determined to ~~what we estimated could~~ have been ~~produced if we had not~~ incurred ~~the temporary production suspensions and lower operating rates~~ in ~~order to determine the abnormal cost adjustment. We expect to perform additional testing in early 2016 at our East facility prior to its transition to a Trio~~^®~~-only facility in mid-2016.~~2016.

• ~~Weather impact.~~Potash Segment Results for the Years Ended December 31, 2015, and 2014

Our ~~solar facilities experienced a below average evaporation season in 2014, which negatively impacted 2015 production rates at all facilities. In addition,~~sales volumes in 2015 we experienced a below average evaporation season, and as a result, fewer potash crystals were formed in our evaporation ponds for harvesting during the harvest season that began in the fall of 2015 and will continue into early 2016. Therefore, we expect lower production from these facilities in 2016decreased by 36% as compared to ~~2015~~2014 primarily due to lower demand and ~~are evaluating cost reduction opportunities at our solar facilities during~~ the ~~evaporative season.~~

~~Table~~decreased purchasing of ~~Contents~~

• ~~Cash conservation and covenant compliance.~~ ~~We remain focused on conserving cash and implementing further cost savings initiatives. We are currently in compliance with~~potash as the covenants under our debt agreements; however, if current market conditions continue, we anticipate that our EBITDA levels will not be sufficient for us to maintain compliance with these financial covenants through 2016. As a result, we are proactively working with our lenders and evaluating options for maintaining compliance, which include requesting covenant amendments, waivers, or forbearances and could include a possible reductionNorth American supply of ~~our debt level (including the payment of prepayment penalties). Our failure to comply with these covenants would be an event of default that, if not waived, could result~~potash pressured sales prices, particularly in the ~~acceleration~~second half of ~~all outstanding indebtedness. In addition, the amount available under our credit facility would be reduced to zero.~~2015. Our credit facility also has a covenant that requires us to provide to the lenders audited annual financial statements within 90 days of the end of each year. The audit report must not contain any going concern modification. The audit report included in this Annual Report on Form 10-K contains a going concern modification, and therefore does not satisfy the credit facility covenant. If we are unable to provide an audit report without a going concern modification by March 31, 2016, or are unable to obtain a waiver of this covenant, our failure to comply with this covenant would result in an event of default that could result in the acceleration of all outstanding indebtedness.

~~Selected Operating and Financial Data~~

The following tables present selected operations data for the periods noted. Analysis of the details of this information is contained 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. We calculatepotash average net realized sales price ~~by deducting freight costs from gross revenues and then by dividing this result by tons of product sold during the period.~~

~~Table of Contents~~

Year Ended December 31,
2015 2014 2013
Production volume (in thousands of tons):
   Potash 768
859
780
   Langbeinite 162
160
177
Sales volume (in thousands of tons):
   Potash 587
915
692
   Trio^®
163
182
123

Gross sales (in thousands):
   Potash $ 217,467
$ 334,323
$ 284,831
   Trio^®
69,716
76,066
51,481
   Total 287,183
410,389
336,312
Freight costs (in thousands):

   Potash 18,262
30,615
20,796
   Trio^®
10,461
12,608
8,060
   Total 28,723
43,223
28,856
Net sales (in thousands)⁽¹⁾:

   Potash 199,205
303,708
264,035
   Trio^®
59,255
63,458
43,421
   Total $ 258,460
$ 367,166
$ 307,456

Potash statistics (per ton):

   Average net realized sales price⁽¹⁾
$ 339
$ 332
$ 382
   Cash operating costs^(1)(2)(3)
203
198
195
   Depreciation and depletion 77
69
52
   Royalties 13
12
13
      Total potash cost of goods sold $ 293
$ 279
$ 260
   Warehousing and handling costs 19
12
16
   Average potash gross margin⁽¹⁾⁽³⁾
$ 27
$ 41
$ 106

Trio^® statistics (per ton):

   Average net realized sales price⁽¹⁾
$ 364
$ 349
$ 352
   Cash operating costs⁽¹⁾
203
194
201
   Depreciation and depletion 58
59
55
   Royalties 18
17
18
      Total Trio^® cost of goods sold
$ 279
$ 270
$ 274
   Warehousing and handling costs 17
11
15
   Average Trio^® gross margin ⁽¹⁾⁽³⁾
$ 68
$ 68
$ 63


~~(1)~~	~~Additional information about our non-GAAP financial measures is set forth under the heading "Non-GAAP Financial Measures.”~~


~~(2)~~	Amounts are presented net of by-product credits. On a per-ton basis, by-product credits were $13 for the year ended December 31, 2015, $7 for the year ended 2014, and $9 for the year ended 2013. By-product credits were $7.9 million, $6.5 million and $6.5 million for the years ended December 31, 2015, 2014, and 2013, respectively.


~~(3)~~	Amounts presented exclude lower-of-cost-or-market inventory adjustments and costs associated with abnormal production. Lower-of-cost-or-market inventory adjustments were $54 per ton and $8 per ton of potash soldper ton remained relatively flat in ~~the year~~

~~Table of Contents~~

~~ended December 31,~~ 2015 and ~~2014, respectively. Costs associated with abnormal production were $14 per ton~~2014.

Sales of potash ~~produced in the year ended December 31, 2015. There were no costs associated with abnormal production in the years ended December 31, 2014 and 2013.~~

~~Table of Contents~~

~~Results of Operations~~

~~Operating Highlights~~

~~Net loss for 2015 was $524.8~~decreased $116.9 million, or $6.94 per diluted share, and cash flows from operating activities were $22.7 million. Our net loss for 2015 included long-lived asset impairment charges of $324 million in the fourth quarter of 2015 and a valuation allowance on our deferred tax assets, contributing35%, to ~~an income tax expense of $150~~$217.5 million for the year ended December 31, ~~2015.~~

~~Potash~~

~~The majority of our revenues and gross margin is derived~~2015, from ~~the production and sales of potash. Potash sales as a percentage of our net sales, which we calculate as gross sales less freight costs, and gross margin were as follows~~$334.3 million for the ~~indicated periods.~~

Contribution from
Potash Sales
Net Sales Gross Margin
For the year ended December 31, 2015 77 % 59 %
For the year ended December 31, 2014 83 % 75 %
For the year ended December 31, 2013 86 % 90 %

~~We sold 587,000 tons~~year ended December 31, 2014. This decrease was the result of ~~potash in 2015 compared with 915,000 tons in 2014. The~~a 36% decrease in sales ~~volume was driven by uncertainty surrounding declining~~volumes of potash, ~~prices resulting from global and domestic~~as our customers lacked confidence in potash ~~supplies exceeding demand. As a result, customers have limited their exposure~~pricing in the second half of 2015 as mentioned above.

Our potash freight costs decreased to ~~inventory price risk, which resulted in decreased sales volumes~~$18.3 million in 2015 from $30.6 million in 2014 as we sold 36% fewer tons in 2015 than in 2014. Our freight costs are impacted by the proportion of customers paying for their own freight, the geographic distribution of our products and the freight rates of our carriers.

Total cost of goods sold of potash, which includes royalties and depreciation, depletion and amortization, decreased as we sold fewer tons in 2015 than in 2014. In addition, our lower-of-cost-or-market inventory adjustments during 2015 were $31.8 million, which are excluded from cost of goods sold. Further, as noted above, during 2015, we incurred $10.4 million of abnormal production costs, which were directly expensed rather than absorbed into inventory costs.

Our potash production volume in 2015 was 768,000 tons as compared to 2014. Our average net realized sales price of potash remained essentially flat at $339 per ton in 2015, as compared to $332 per ton in 2014. Beginning in the third quarter 2015, and intensifying through the fourth quarter 2015, the potash market experienced significant price declines due to global oversupply and producers importing tonnage into the North American potash market, in some cases by global producers seeking to reduce credit risk and take advantage of the strong U.S. dollar. We expect our average net realized sales price to decrease in 2016.

~~The table below shows our potash sales mix for 2015, 2014, and 2013.~~

Year Ended December 31,

2015 2014 2013
Agricultural 75 % 76 % 71 %
Industrial 17 % 19 % 21 %
Feed 8 % 5 % 8 %

Our industrial sales are significantly influenced by oil and gas drilling activity. We believe our sales volumes to our industrial customers will decrease, and potentially pressure our net realized sales price, during 2016 as oil and gas drilling activity continues to slow in response to lower crude oil pricing.

~~Our production volume of potash in 2015 decreased to 768,000 tons, compared with~~ 859,000 tons ~~produced~~ in 2014. The production decrease was due to reduced production at our West facility due to the temporary suspensions of production noted above, as well as lower production at our solar solution facilities due to less favorable evaporative conditions in ~~2014 and 2015.~~2014. These decreases were partially offset by increased production from our HB mine as it continued to ramp up production.

Potash Segment - Additional Information

The table below shows our potash sales mix for 2016, 2015, and 2014.



	Year Ended December 31,
	2016		2015		2014
Agricultural	89	%	75	%	76	%
Industrial	5	%	17	%	19	%
Feed	6	%	8	%	5	%

Our industrial sales are significantly influenced by oil and gas drilling activity. We believe our sales volumes to our industrial customers will increase in 2017, and potentially benefit our net realized sales price, as oil and gas drilling activity has increased in areas near our production facilities.

Our average net realized sales price per ton of potash steadily declined from the beginning of 2015 until the fourth quarter of 2016 due to concerns that global productive capacity exceeds demand. We saw a slight increase in the price in the fourth quarter of 2016 due in part to curtailments by potash producers, including us, that have resulted in lower potash supply.

Trio^®Segment Results



	Year Ended December 31,
(in thousands)	2016			2015		2014
Sales	$	51,454		$	69,716	$	76,066
Less: Freight costs	9,595			10,461		12,608
Warehousing and handling costs	2,567			2,726		2,320
Cost of goods sold	36,835			45,466		49,161
Lower-of-cost-or-market inventory adjustments	1,994			—		—
Costs associated with abnormal production and other	1,058			—		—
Gross (Deficit) Margin	$	(595	)	$	11,063	$	11,977
Depreciation, depletion and amortization incurred^{2, 3}	$	3,836		$	16,993	$	11,433
Sales Volumes (tons in thousands)	146			163		182
Production Volumes (tons in thousands)	279			162		160
Average Net Realized Sales Price per Ton¹	$	287		$	364	$	349

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

³Depreciation expense decreased in 2016 compared to 2015 as a result of the impairment charge discussed above in the "Consolidated Results" section.

Trio^® Segment Results for the Years Ended December 31, 2016, and 2015

Total sales of Trio^® decreased to $51.5 million for the year ended December 31, 2016 from $69.7 million for the year ended December 31, 2015, due to a $77 decrease in the average net realized sales price per ton of Trio^®, further reduced by a 10% decrease in sales volume. As some of our domestic Trio^® customers gained confidence in our inventory and production levels, they delayed purchases in late 2016 and moved to more of a just-in-time purchasing model as they await the traditional spring application season.

Our freight costs related to Trio^® sales were $9.6 million in 2016 as compared to $10.5 million in 2015, as the volume of product sold decreased.

Total cost of goods sold of Trio^® decreased on lower sales volumes in 2016 as compared to 2015. Further, our Trio^® cost of goods sold decreased in 2016 as compared to 2015 as depreciation and depletion expense for Trio^® was lower than in 2015 resulting from the impairment of long-lived assets at our East facility recorded in the fourth quarter of 2015. We also incurred lower production costs attributable to the conversion of our East facility to a Trio^®-only facility in April 2016.

Our Trio^® production ~~was flat~~increased 72% in ~~2015~~2016 compared to ~~2014. We continue~~2015, as we transitioned our East facility to ~~focus~~Trio^®-only in April 2016.

In 2016, we recorded $2.0 million of lower-of-cost-or-market adjustments related to the decreases in Trio^® pricing as compared to our ~~sales~~carrying cost of Trio^® inventory.

Further, in 2016, we recorded $1.1 million of abnormal production costs for ~~granular-~~the period which we transitioned our East facility from a mixed-ore processing facility that produced potash and ~~premium-sized product~~Trio^® to Trio^®-only production in April 2016.

Trio^® Segment Results for the ~~domestic market. Our~~Years Ended December 31, 2015, and 2014

Total sales of Trio^® decreased to ~~163,000 tons in 2015 as compared with 182,000 tons in 2014, as demand for Trio~~^®~~was negatively affected by overall fertilizer price uncertainty, as noted above. We convert standard-sized product into premium-sized product through a process we call pelletization. The export market~~$69.7 million for the ~~standard-sized product was relatively weak~~year ended December 31, 2015, from $76.1 million for the year ended December 31, 2014, due to a 10% decrease in ~~2015, highlighting~~ the ~~importance~~volume of ~~our focus on improving~~sales partially offset by a 4% increase in the ~~efficiency of our pelletization process and increasing the proportion of granular production.~~

~~Our average Trio~~^® ~~gross margin was essentially unchanged in 2015 as compared to 2014. Our~~ average net realized sales price ~~for~~per ton of Trio^® ~~increased by $15 per ton, but was offset by an increase~~.

Total cost of ~~$9 per ton~~goods sold of Trio^® decreased as our sales volumes in ~~cash operating costs for~~ 2015 were 10% lower than in 2014.

Trio^®~~and an increase~~Segment - Additional Information

As a result of ~~$6 per ton in warehouse and handling costs.~~

~~Table~~our increased production levels of ~~Contents~~

Trio, we are expanding our marketing efforts outside the United States. Our export sales of Trio^® tend to have more variability as to the timing of these ~~sales. As a result, the percentage~~sales particularly as it relates to our quarterly results. During 2016, approximately 6% of our total Trio^®sales ~~into the export market as compared to the domestic market can fluctuate significantly from period to period,~~were sold internationally as shown in the table ~~below.~~

United States Export
Trio^® only

For the year ended December 31, 2015 91 % 9 %
For the year ended December 31, 2014 91 % 9 %
For the year ended December 31, 2013 76 % 24 %

~~Average Net Realized Sales Price~~

We experienced price declines sequentially during each quarter in 2015 due to concerns that global productive capacity exceeds demand. We expect our average net realized sales price to decrease in 2016.

~~The table below demonstrates the progression of our average net realized sales price for potash and Trio~~^® ~~through 2014 and 2015.~~below:

Average net realized sales price for the three months ended: Potash
Trio^®
(Per ton)
December 31, 2015 $277 $330
September 30, 2015 $319 $379
June 30, 2015 $358 $383
March 31, 2015 $362 $367
December 31, 2014 $348 $354
September 30, 2014 $336 $351
June 30, 2014 $329 $350
March 31, 2014 $317 $340

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 on only a portion of our sales as 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. ~~Although~~When we calculate our average net realized sales price per ton, we deduct freight costs from gross sales ~~include~~before dividing by the number of tons sold. We believe the deduction of freight ~~that we bill, we do not believe that gross sales provide~~costs provides a more representative measure of our performance in the market due to variations caused by ongoing changes in the proportion of customers paying for their own freight, the geographic distribution of our products, and freight rates. Rail freight rates have been steadily increasing, thereby negatively influencing our average net realized sales ~~prices. We view net sales, which are gross sales less freight costs, as the key performance indicator of our revenue as it conveys the net sales~~ price ~~of the product that we sold.~~per ton. We manage our sales and marketing operations centrally and we work to achieve the highest average net realized sales price per ton we can by evaluating the product needs of our customers and associated logistics and then determining which of our production facilities can best satisfy these needs.

The volume of product we sell is determined by demand for our products and by our production capabilities. We ~~intend to~~ operate our facilities at ~~full~~ production levels ~~which provide the greatest operating efficiencies. By having adequate warehouse capacity, we can maintain production levels during periods of fluctuating product~~that approximate demand and ~~have product inventory positioned closer~~expect to continue to do so for the ~~fields in order to meet peak periods of fertilizer demand.~~foreseeable future.

Cost of Goods Sold

Our cost of goods sold reflects the 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 on a facility-by-facility basis tend to move inversely with the number of tons we produce, within the context of normal production levels. ~~We expect to experience~~Historically we experienced variability in our cost of goods sold due to fluctuations in the relative mix of product that we produce through conventional and solar solution mining. Our cost of goods sold per ton for our solar solution facilities is less than our

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cost of goods sold per ton for our conventional facilities. Since July 2016, all of our potash production comes from solar solution mining. However, our solar solution production is impacted by weather variability. Our principal production costs include labor and employee benefits, maintenance materials, contract labor, and materials for operating or maintenance projects, natural gas, electricity, operating supplies, chemicals, depreciation and depletion, royalties, and leasing costs. There are elements of our cost structure associated with contract labor, consumable operating supplies, ~~and~~ reagents, and royalties that are variable, which make up a smaller component 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, sales, and production levels at our facilities.

Our production costs per ton are also impacted when our production levels change, due to factors such as changes in the grade of ore delivered to the plant, levels of mine development, plant operating performance, downtime, and annual maintenance turnarounds. We expect that our labor and contract labor costs in Carlsbad, New Mexico, will continue to be influenced most directly by the demand for labor in the local Carlsbad, New Mexico, region where we compete for labor with another fertilizer company, companies in the ~~potash,~~ oil and gas industry, and a nuclear waste processing and storage ~~industries. Additionally, the~~facility. Prior to converting our East ~~mine has~~facility to a Trio^®-only facility, we mined in a complex, ~~mineralogy with a~~ mixed ore body comprised of ~~potash~~both sylvite and langbeinite. This complex ore ~~is currently~~was processed through a singular product flow at the surface facility. ~~The specific grade, volume,~~As a result of this complex ore body and ~~characterization~~the related complexities of processing the mixed ore ~~that is mined~~ at ~~any particular time is subject to fluctuations due~~the surface, our cost structure at our East facility was our highest cost facility. Subsequent to the ~~nature~~transition to mining in langbeinite areas and the conversion of the mineral deposits and influences the amount of tons of potash and langbeinite ultimately produced from the facility, which affects our production costs per ton for both products and affects our quarter-to-quarter results. Our total costs are also negatively impacted as we continue to perform plant tests relating to transitioning our East facility to Trio^®~~-only production. We expect this transition to be completed in mid-2016.~~‑only, our cost structure was reduced as the process flow was simplified.

We pay royalties to federal, state, and private lessors under our mineral leases. These payments typically equal a percentage of ~~net~~ sales (less freight) of minerals extracted and sold under the applicable lease. In some cases, federal royalties for

potash are paid on a sliding scale that varies with the grade of ore extracted. Our average royalty rate was 4.2%, 4.1%, and 3.8% in 2016, 2015 and ~~3.6% in 2015,~~ 2014, ~~and 2013,~~ respectively.

Income Taxes

We are a subchapter C corporation and, therefore, are subject to federal and state income taxes on our taxable income. Our effective tax rate for the years ended December 31, 2016, 2015, and 2014 ~~and 2013~~ was 2.0%, (40.0)%, ~~9.7%,~~ and ~~41.5%~~9.7%, respectively. Our effective income tax rates are impacted primarily by changes in the underlying tax rates in jurisdictions in which we are subject to income tax and permanent differences between book and tax income for the period, including the benefit associated with the estimated effect of the depletion deduction and research and development credits. During the year ended December 31, 2016, our effective tax rate was impacted by the recording of an addition to our valuation allowance of $25.5 million relating to deferred tax assets, including $34.6 million for federal and state net operating losses offset by reductions in the valuation allowance relating to deferred tax assets, including $6.7 million for property, plant, equipment and mineral properties, and $5.6 million for inventory. We also recorded a receivable of $1.4 million related to the monetization of a portion of our alternative minimum tax carryforwards based on an election made available to taxpayers for 2016. During the year ended December 31, 2015, our effective tax rate was impacted as a result of recording an additional valuation allowance of $300.3 million related to existing deferred tax assets, including $218.8 million for property, plant, equipment and mineral properties, $39.3 million for federal and state net operating losses, and $4.2 million for federal and state alternative minimum tax credits. The additional valuation allowance was recorded due to the uncertainty around our ability to generate sufficient taxable income to realize the deferred tax assets.

During the year ended December 31, 2014, our effective tax rate benefited from a discrete adjustment for the reversal of a $1.7 million valuation allowance related to our New Mexico net operating loss carry forwards based on legislation passed by the State of New Mexico during the first quarter of 2014. Further, we benefited from a discrete adjustment related to the calculation of the benefit of the net operating loss carry back generated in 2013. The impact on our effective tax rate during 2014 of these discrete adjustments is more pronounced given the current level of income before income ~~taxes~~taxes.

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

During the year ended December 31, 2016, we recognized a tax benefit of $1.4 million. During the years ended December 31, 2015, ~~2014,~~ and ~~2013,~~2014, we recognized income tax expense of $150.0 million, ~~$1.1 million~~ and ~~$15.8~~$1.1 million, respectively. In 2016, 2015, ~~2014,~~ and ~~2013,~~2014, we incurred ~~a net operating loss for income tax purposes. A portion of the net operating loss for 2013 was carried back to 2011 and 2012 with the remaining amount carried forward, along with the~~ net operating losses for ~~2014 and 2015,~~income tax purposes, which have been carried forward as a deferred tax asset.

Total tax (benefit) expense for the year ended December 31, 2016, was comprised of $1.4 million of current income tax benefit and no deferred income tax expense. Total tax expense for the year ended December 31, 2015, was comprised of $0.1 million of current income tax benefit and $150.1 million of deferred income tax expense. ~~The majority of our income tax expense in 2015 resulted from the increase in our valuation allowance related to our deferred tax assets, as discussed above.~~ Total tax expense for the year ended December 31, 2014, was comprised of ~~$1.0~~$1 million of current income tax benefit and $2.1 ~~million of deferred income tax expense. Total tax expense for the year ended December 31, 2013, was comprised of $14.3 million of current income tax expense and $30.1~~ million of deferred income tax expense. Our current tax expense for each of these periods was less than our total tax expense in large part due to the impact of accelerated tax bonus depreciation and the utilization of percentage depletion.

We evaluate our deferred tax assets and liabilities each reporting period using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted most significantly

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by the states in which we do business. Changing business conditions for normal business transactions and operations as well as changes to state tax rate and apportionment laws potentially alter our apportionment of income among the states for income tax purposes. These changes in apportionment laws result in changes in the calculation of our current and deferred income taxes, including the valuation of our deferred tax assets and liabilities. The effects of any such changes are recorded in the period of the adjustment. These adjustments can increase or decrease the net deferred tax asset on the balance sheet and impact the corresponding deferred tax benefit or deferred tax expense on the income statement. As of December 31, 2013, our estimate of our blended state tax rate increased, resulting in an increase of the value of the deferred tax asset by net $0.9 million to reflect changes in business conditions in concert with changes in apportionment rules of the states in which we operate, and a decrease in the state tax rate for the state of New Mexico.

~~Results of Operations for the Years ended December 31, 2015, and 2014~~

~~Net Sales~~

Net sales of potash decreased $104.5 million, or 34%, from $303.7 million for the year ended December 31, 2014, to $199.2 million for the year ended December 31, 2015. This decrease was primarily the result of a 36% decrease in sales volumes of potash at an essentially flat average net realized sales price. Sales volumes in 2015 decreased over those realized in 2014 due primarily to lower demand and the decreased purchasing of potash as North American supply pressured sales prices, particularly in the second half of 2015.

~~Net sales of Trio~~^® decreased from $63.5 million for the year ended December 31, 2014, to $59.3 million for the year ended December 31, 2015, due to a 10% decrease in the volume of sales, partially offset by the average net realized sales price of Trio^® ~~increased $15 per ton. We continued to see solid demand for our Trio~~^® ~~product, particularly the granular-sized and premium-sized products; however, the margin opportunity for standard-sized Trio~~^® ~~was pressured in 2015. As a result, we continue to focus on converting standard-sized product to premium-sized product for sale in the domestic market.~~

~~Cost of Goods Sold~~

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

Year ended December 31, Change Between
2015 2014 Periods % Change
Cost of goods sold (in millions) $ 217.8
$ 303.9
$ (86.1 ) (28 )%
Cost per ton of potash sold(1) $ 293
$ 279
$ 14
5 %
Cost per ton of Trio® sold(2) $ 279
$ 270
$ 9
3 %


~~(1)~~	~~Depreciation and depletion expense for potash was $45.4 million and $63.0 million in 2015 and 2014, respectively, which equates to $77 and $69 on a per-ton basis.~~


~~(2)~~	~~Depreciation and depletion expense for Trio~~^®~~was $9.5 million and $10.7 million in 2015 and 2014, respectively, which equates to $58 and $59 on a per-ton basis.~~

Total cost of goods sold of potash, which includes royalties and depreciation, depletion and amortization, decreased as we experienced lower sales volumes in 2015 compared to 2014. Our cash operating costs per ton for 2015 increased compared to 2014, due to lower production at our East, West and Wendover facilities, partially offset by increased production at our HB mine and costs associated with the start-up of our HB plant in 2014. As noted above, we recorded lower-of-cost-or-market inventory adjustments, and costs associated with abnormal production and other costs, during 2015 of $31.8 million and $10.4 million, respectively, which are excluded from our cost of goods sold.

~~Total cost of goods sold of Trio~~^® ~~decreased on lower sales volumes in 2015 as compared to 2014. Production of langbeinite remained flat compared with 2014.~~

In total, our cost of goods sold decreased $86.1 million, or 28%, from $303.9 million in 2014 to $217.8 million in 2015, as a result of fewer tons of potash sold in 2015. As a percentage of sales, cost of goods sold increased as our per ton production costs increased resulting from increased contract labor costs, maintenance, and professional services during the year ended December 31, 2015.

On a comparative basis, and within our production costs, depreciation and depletion increased $5.3 million, or 7.1%, during 2015 primarily as a result of the accelerated depreciation of assets that will be taken out of service as a result of the transitioning of our East facility to Trio^®~~-only. We expect this transition to be completed in mid-2016. Going forward, on a~~

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~~year-over-year basis, we expect depreciation expense to decrease significantly as a result of the impairment charges recognized in the fourth quarter of 2015.~~

~~Lower-of-Cost-or-Market Inventory Adjustments~~

During the years ended December 31, 2015 and 2014, we recorded charges of approximately $31.8 million and $8.2 million, respectively, as a result of routine assessments of the lower of weighted average cost or estimated net realizable value on our finished goods product inventory. The $31.8 million of lower-of-cost-or-market adjustments recorded during the year ended December 31, 2015, related to our potash inventories from our conventional facilities, and resulted from our higher production costs per ton and overall lower potash pricing. Of the $8.2 million of lower-of-cost-or-market adjustments recorded during the year ended December 31, 2014, $4.0 million related to the start-up activities of our HB mine and $4.2 million related to inventory from our conventional facilities.

~~Costs Associated with Abnormal Production and Other~~

As discussed above, because of the temporary suspensions of production during 2015, we determined that approximately $7.5 million and $2.9 million of production costs at our West and East facilities, respectively, would have been allocated to additional tons produced, assuming we had been operating at normal production rates. Accordingly, these costs were excluded from our inventory values and instead expensed in 2015 as period production costs. We compare actual production relative to what we estimated could have been produced if we had not incurred the temporary production suspensions and lower operating rates in order to determine the abnormal cost adjustment.

~~Selling and Administrative Expense~~

~~Selling and administrative expenses remained flat at $27.5 million in 2015 compared to $27.2 million in 2014.~~

~~Restructuring Expense~~

In January 2014, in response to lower potash prices and the substantial completion of our major capital projects, we undertook a number of cost saving actions that were intended to better align our cost structure with the current business environment. These initiatives included the elimination of approximately 7% of our workforce, including capital project related support associated with our major capital projects, reduction in the use of outside professionals, and cutbacks in other general and administrative areas.

In January 2016, in response to continued downward pressure on potash prices, we undertook additional cost-savings actions. These actions included the elimination of approximately 5% of our workforce and reductions in compensation and benefits (including elimination of annual bonuses for 2015 and 2016 for most employees). We expect to recognize a restructuring charge of approximately $400,000 in the first quarter of 2016. This restructuring charge is primarily comprised of severance-related payments.

~~Impairment of Long-Lived Assets~~

During the fourth quarter of 2015, we recognized impairment charges of $324 million related to our East and West conventional mining facilities, and our North facility in New Mexico due to the continued decline in potash prices noted during this period.

~~Other Operating Expense (Income)~~

In December 2015, a snowstorm caused damage to a portion of one of our warehouses in New Mexico and product stored in the warehouse. These damages, as well as alternative handling and storage costs are expected to be covered by our insurance policies at replacement value, less a $1 million deductible. We have submitted an insurance claim of $2.2 million and are awaiting our carrier's response. During the fourth quarter of 2015, we recognized $2.5 million of losses related to this snowstorm, and those losses are reflected in "Other operating (income) expense" in the accompanying consolidated statement of operations. We will recognize in income the portion of the proceeds from the insurance claim related to product losses if the claim is approved.

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~~time has been sold; therefore, we recorded the decrease in the allowance as "Other operating (income) expense" in the accompanying consolidated statement of operations in 2014.~~

~~Results of Operations for the Years ended December 31, 2014, and 2013~~

~~Net Sales~~

Net sales of potash increased $39.7 million, or 15%, from $264.0 million for the year ended December 31, 2013, to $303.7 million for the year ended December 31, 2014. This increase was the result of a 32% increase in sales volumes of potash partially offset by a decrease in the average net realized sales price of potash by $50 per ton, or 13%, in the comparable period. Our 2014 sales volumes increased over those realized in 2013, due primarily to higher demand and the increased purchasing of potash as our customers had increased confidence in the price of potash in 2014.

~~Net sales of Trio~~^® increased from $43.4 million for the year ended December 31, 2013, to $63.5 million for the year ended December 31, 2014, due to a 48% increase in the volume of sales while the average net realized sales price of Trio^® ~~remained essentially flat. We saw strong demand for our Trio~~^® ~~product, particularly the granular-sized and premium-sized products; however, the margin opportunity for standard-sized Trio~~^® ~~in the export market was limited.~~

~~Cost of Goods Sold~~

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

Year ended December 31, Change Between
2014 2013 Periods % Change
Cost of goods sold (in millions) $303.9 $212.9 $ 91.0
43 %
Cost per ton of potash sold(1) $279 $260 $ 19.0
7 %
Cost per ton of Trio^® sold(2)
$ 270
$ 274
$ (4.0 ) (1 )%


~~(1)~~	~~Depreciation and depletion expense for potash was $63.0 million and $35.6 million in 2014 and 2013, respectively, which equates to $69 and $52 on a per-ton basis.~~


~~(2)~~	~~Depreciation and depletion expense for Trio~~^®~~was $10.7 million and $6.8 million in 2014 and 2013, respectively, which equates to $59 and $55 on a per-ton basis.~~

Total cost of goods sold of potash, which includes royalties and depreciation, depletion and amortization, increased as we experienced higher sales volumes in 2014 compared to 2013. Further, although our cash operating costs per ton for 2014 were essentially flat compared to 2013, these costs were negatively impacted by lower production at our West facility and the costs associated with the start-up of our HB plant, offset by increased production at the HB plant and East facility. We recorded lower-of-cost-or-market inventory adjustments during 2014 of $8.2 million, of which $4.0 million related to the start-up activities of our HB mine, and approximately $3.9 million primarily related to standard-sized inventory at our East facility. The lower-of-cost-or market adjustments are excluded from our cost of goods sold.

~~Total cost of goods sold of Trio~~^® increased as our sales volumes in 2014 were significantly higher than in 2013. Further, production of langbeinite decreased compared with 2013 due to lower ore grade and production inefficiencies related to our efforts to convert standard-sized Trio^® ~~into premium-sized Trio~~^®~~, as described previously.~~

In total, our cost of goods sold increased $91.0 million, or 43%, from $212.9 million in 2013 to $303.9 million in 2014, as a result of more tons of potash sold in 2014. As a percentage of sales, cost of goods sold increased as our per ton production costs increased resulting in higher per ton inventory values. The increases in production costs were the result of increases in labor costs, natural gas, electricity, maintenance and professional services during the year ended December 31, 2014.

On a comparative basis, and within our production costs, depreciation and depletion increased $18.5 million, or 33%, during 2014 as a result of the significant capital investments being placed into service in the latter half of 2013 and the early part of 2014.

~~Lower-of-Cost-or-Market Inventory Adjustments~~

During the year ended December 31, 2014, we recorded charges of approximately $8.2 million, as a result of routine assessments of the lower of weighted average cost or estimated net realizable value on our finished goods product inventory. Of the $8.2 million of lower-of-cost-or-market adjustments recorded during the year ended December 31, 2014, $4.0 million related to the start-up activities of our HB mine and $4.2 million related to inventory from our conventional facilities.

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~~Selling and Administrative Expense~~

Selling and administrative expenses decreased $6.6 million, or 19%, to $27.2 million in 2014 from $33.8 million in 2013. The decrease was driven by a number of cost saving actions that were implemented during 2014 to better align our cost structure with the current business environment, including the cost reduction items noted below.

~~Restructuring Expense~~

~~Other Operating (Income) Expense~~

Also in 2013, we received a refund from the State of New Mexico related to a compensating tax refund submitted in prior periods. The receipt of the refund removed uncertainty about the amount and collection of the refund and therefore, we recorded $1.7 million of income, which was also recorded in "Other operating (income) expense" in the accompanying consolidated statement of operations in 2013.

~~Other Income (Expense)~~

In April 2013, we funded $2.0 million to settle all pension plan liabilities and recorded an additional expense of approximately $1.9 million to reflect the termination of the pension plan. This amount is recorded as "Other income (expense)" in the accompanying consolidated statement of operations in 2013, and represents the difference between the final amount funded, and the sum of the recorded pension liability and the unrecognized actuarial losses included in accumulated other comprehensive income.

~~Capital Investments~~

We expect our level of capital investment to be approximately $22 million to $27 million for 2016, the majority of which we expect to be sustaining capital. We anticipate our 2016 operating plans and capital programs will be funded out of operating cash flows and existing cash and investments. We may also use our revolving credit facility, to the extent available, to fund capital investments.

~~Expected capital investment include amounts relating to the transition of our East facility to a Trio~~^®~~-only facility, which we expect to be completed in mid-2016, and our efforts to optimize our langbeinite recovery techniques and maximize the amount of granular and premium-sized Trio~~^® ~~that we produce.~~

~~During 2015, we paid cash of $46.0 million for capital projects.~~

Liquidity and Capital Resources

As of December 31, ~~2015,~~2016, we had cash and cash equivalents ~~and investments~~ of $~~63.6~~4.5 million.

~~This amount was made up~~, consisting primarily of ~~the following:~~

•cash.~~$9.1 million in cash;~~

~~$0.3 million~~ ~~in cash equivalent investments, consisting of money market accounts with banking institutions that we believe are financially sound; and~~

~~$50.5 million~~ ~~and $3.8 million invested in short and long-term investments, respectively.~~

Our operations have been and are expected to be primarily funded from cash on hand and cash generated by operations. We also have the ability to borrow under our credit facility, to the extent available and subject to the limitations described below under the heading "Credit Facility." We may use our credit facility as a source of liquidity for operating activities and to give us additional flexibility to finance, among other things, capital investments. We will continue to monitor our future sources and uses of cash and anticipate that we will make adjustments to our capital allocation strategies when, and if, determined by our Board of Directors. We ~~also have the ability to borrow~~expect that cash generated from operations combined with availability under

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~~our unsecured credit facility, to the extent available and subject to the limitations described below under the heading “Unsecured Credit Facility.”~~

~~We may use~~ our credit facility, ~~as a source of liquidity~~will be sufficient to fund our operations in 2017.

We expect to continue to look for ~~operating activities and~~opportunities to ~~give us additional flexibility to finance, among other things,~~improve our capital ~~investments~~structure by reducing or restructuring debt and ~~possible repayments~~its related interest expense. We may, at any time we deem conditions favorable, also attempt to improve our liquidity position by accessing equity markets in accordance with our existing debt agreements. We cannot provide any assurance that we will pursue any of ~~debt.~~these transactions or that we will be successful in completing them on acceptable terms or at all. In addition, under the terms of our senior notes, in December 2016, we engaged Cantor Fitzgerald & Co., a nationally-recognized investment bank, to assess, evaluate, and assist in pursuing potential strategic alternatives available to us, as we determine to be appropriate. These potential strategic alternatives could include, but are not limited to, continuing our current operating plan, equity offerings or balance sheet restructurings, merger and acquisition opportunities, partnership or joint venture opportunities, entering into new or complementary businesses, or a sale of Intrepid or some or all of our assets. This evaluation is ongoing.

The following summarizes our cash flow activity for the years ended December 31, 2016, 2015, ~~2014,~~ and ~~2013:~~2014:

Year ended December 31,
2015 2014 2013
(In thousands)
Cash flows provided by operating activities $ 22,690
$ 127,486
$ 64,898
Cash flows used in investing activities $ (79,577 ) $ (59,624 ) $ (246,439 )
Cash flows (used in) provided by financing activities $ (1,395 ) $ (667 ) $ 148,316



	Year ended December 31,
	2016			2015			2014
	(In thousands)
Cash flows (used in) provided by operating activities	$	(18,270	)	$	22,690		$	127,486
Cash flows provided by (used in) investing activities	$	32,510		$	(79,577	)	$	(59,624	)
Cash flows used in financing activities	$	(19,083	)	$	(1,395	)	$	(667	)

Our debt agreements contain restrictions on our ability to declare and pay dividends. In general, the terms of our senior notes prohibit us from declaring and paying a dividend unless our leverage ratio is less than 3.5 to 1, our fixed charge coverage ratio after giving effect to the dividend would be greater than 1.3 to 1, and our cash on hand and availability under our credit facility after giving effect to the dividend, would not be less than $15 million. In addition, the terms of our credit facility prohibit us from declaring and paying a dividend unless availability under the credit facility after giving effect to the dividend and during a specified period before the dividend is more than $10 million. More information about how the financial ratios are calculated under our debt agreements is provided below under the heading "Senior Notes."

Operating Activities

Total cash ~~provided by~~used in operating activities for the year ended December 31, ~~2015,~~2016, was ~~$22.7~~$18.3 million, a decrease of ~~$104.8~~$41.0 million compared with the year ended December 31, ~~2014.~~2015. The primary driver of this decrease was lower ~~sales volumes at a flat average net realized sales price~~prices for potash and Trio^®, as discussed ~~previously,~~above, which resulted in a net loss.

Total cash provided by operating activities ~~increased~~decreased by ~~$62.6~~$104.8 million in ~~2014~~2015 compared to ~~2013.~~2014. The primary driver of this increase was higher sales volumes at a lower average net realized sales price per ton for potash which, together, resulted in lower net income.

Investing Activities

Total cash provided by investing activities increased $112.1 million in 2016 compared to 2015 primarily as a result of the increase in proceeds from the sale of investments to fund our operations in 2016 as compared to 2015. Total cash used in investing activities increased $20.0 million in 2015 compared to 2014 primarily as a result of the increase in purchases of investments partially offset by decreased capital investment in 2014.

Financing Activities

Total cash flows used in ~~investing~~financing activities ~~decreased $186.8~~increased $17.7 million in ~~2014~~2016 as compared to ~~2013~~2015 primarily ~~as a result~~due to the repayment of $15 million of our senior notes (the "Notes") and $3.9 million of debt issuance costs in October 2016.

Senior Notes

As of December 31, 2016, after the repayment of $15 million of the ~~decrease~~Notes in ~~capital investments in 2014.~~October 2016, the Notes consist of the following series:

~~Unsecured Credit Facility~~$54 million of Senior Notes, Series A, due April 16, 2020

$40.5 million of Senior Notes, Series B, due April 14, 2023

$40.5 million of Senior Notes, Series C, due April 16, 2025

We ~~have an unsecured credit facility, led by U.S. Bank, as administrative agent, and Wells Fargo Bank, as syndication agent. In February~~originally issued $150 million aggregate principal amount of the Notes in April 2013 pursuant to a note purchase agreement entered into in August 2012. On October 3, 2016, we ~~amended this unsecured credit facility~~repaid $15 million of the Notes as part of negotiations relating to ~~provide~~our previous noncompliance with financial covenants under the Notes. On October 31, 2016, we entered into a ~~revolving credit facility up~~revised note purchase agreement governing the Notes. In the first quarter of 2017, we repaid an additional $5.5 million of the Notes in connection with the sale of an asset.

Under the original note purchase agreement, we were subject to financial covenants consisting of a maximum ~~of $150 million. The actual amount available to us is limited by our~~ leverage ratio ~~which may not exceed 3.5 to 1,~~ and ~~our~~a minimum fixed charge coverage ratio as specified in the note purchase agreement. We were not in compliance with these financial covenants as of March 31, 2016, June 30, 2016, or September 30, 2016. Under a series of waivers entered into during the first nine months of 2016 and the revised note purchase agreement, the holders of the Notes permanently waived the requirement that we comply with these financial covenants for the quarters ended March 31, 2016, June 30, 2016, and September 30, 2016 (and agreed that any noncompliance with these covenants for the quarters ended March 31, 2016, June 30, 2016, and September 30, 2016, would not constitute a default or event of default under the agreement). As part of these waivers, our interest rates on the Notes increased several times during 2016.

Under the revised note purchase agreement, we granted to the collateral agent for the Noteholders a first lien on substantially all of our non-current assets and a second lien on substantially all of our current assets.

The revised note purchase agreement provides for the following changes to the Notes, among others:

The agreement includes a minimum adjusted EBITDA covenant, which ~~may not be below 1.3~~adjusts over time and is measured quarterly through March 2018, ranging from negative $20 million in the quarter ended September 30, 2016, to ~~1. As~~negative $7.5 million in the quarter ending March 31, 2018. Adjusted EBITDA is a non-GAAP measure that is calculated as adjusted earnings before interest, income taxes, depreciation, amortization, and certain other expenses for the prior four quarters, as defined under the agreement.

The agreement requires us to maintain a minimum fixed charge coverage amount of ~~December 31, 2015, our~~negative $15 million and negative $10 million for the quarters ending June 30, 2018, and September 30, 2018, respectively. The agreement includes requirements relating to a leverage ratio ~~was 1.51 to 1~~ and ~~our~~a fixed charge coverage ratio ~~was 5.99~~ to 1.

~~In January 2016, we entered into an amendment~~be tested on a quarterly basis commencing with the quarter ending June 30, 2018, with respect to ~~modify~~ the ~~financial covenants under~~leverage ratio, and December 31, 2018, with respect to the ~~credit facility. As amended our financial covenants are as follows:~~

~~Our~~fixed charge coverage ratio. The maximum leverage ratio will be 11.5 to 1.0 for the quarter ending June 30, 2018, and decreases to 3.5 to 1.0 for the quarter ending September 30, 2019, and each quarter thereafter. The minimum fixed charge coverage ratio will be 0.25 to 1.0 for the quarter ending December 31, 2018, and increases to 1.3 to 1.0 for the quarter ending September 30, 2019, and each quarter thereafter. In general, our minimum fixed charge coverage is calculated as adjusted EBITDA for the prior four quarters, minus maintenance capital expenditures, cash paid for income taxes and interest expense, plus scheduled principal amortization of long-term funded indebtedness; our leverage ratio is calculated as the ratio of funded indebtedness to adjusted EBITDA ~~(earnings before interest, income taxes, depreciation, amortization, and certain other expenses, as defined in the credit facility)~~ for the prior four ~~fiscal~~ quarters, ~~is 3.5 to 1. Funded indebtedness is calculated as total funded indebtedness less cash~~ and ~~cash equivalents up to a maximum of $75 million.~~

~~Our minimum~~our fixed charge coverage ratio is calculated as the ratio of adjusted EBITDA for the prior four ~~fiscal~~ quarters, ~~less~~minus maintenance capital expenditures and cash paid for income taxes, to interest expense plus scheduled principal amortization of long-term funded ~~indebtedness, is 1.3 to 1, where annual maintenance capital expenditures is set at $20 million.~~indebtedness.

~~These ratios operate to limit~~The interest rates for the ~~total amount available to us under~~Notes increased by 4.5% above the facility. If adjusted EBITDA remains flat or continues to decrease over several quarters with no change to indebtedness, our leverage ratio will remain at a level where less than $150 million is available to us. For example,previous rates such that, as of December 31, ~~2015, $133 million was available to us under~~2016, the ~~facility due to an increase~~Series A Senior Notes bear interest at 7.73%, the Series B Senior Notes bear interest at 8.63%, and the Series C Senior Notes bear interest at 8.78%, which reflect the highest rates in ~~our leverage ratio as~~ a ~~result of lower levels of adjusted EBITDA over~~pricing grid. These interest rates are based on a pricing grid set forth in the prior four fiscal quarters. Based on current market conditions, we expect that the total amount available to us under the facility will continue to be limited, potentially to zero, during 2016. We believe that any amounts available to usrevised agreement and will be ~~adequate~~adjusted quarterly based upon our financial performance and certain financial covenant levels. In addition, additional interest of 2%, which may be paid in kind, will begin to ~~fund our operations and our capital investment projects.~~accrue on April 1, 2018, unless we satisfy certain financial covenant tests.

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We are ~~currently~~required to make certain offers to prepay the Notes with the proceeds of dispositions of certain specified property and with the proceeds of certain equity issuances, as set forth in the agreement.

Our outstanding long-term debt, net, as of December 31, 2016 and 2015 (in thousands) is as follows:



	December 31,
	2016			2015
Senior Notes	$	135,000		$	150,000
Less deferred financing costs	(1,566		)	(515		)
Long-term debt, net	$	133,434		$	149,485

We were in compliance with ~~the covenants under~~ our ~~debt agreements; however, if current market conditions continue, we anticipate that our EBITDA levels will not be sufficient for us to maintain compliance with these~~ financial covenants ~~through~~as of December 31, 2016. ~~As a result, we~~The obligations under the Notes are ~~proactively working with our lenders and evaluating options for maintaining compliance, which include requesting covenant amendments, waivers or forbearances, and could include a possible reduction~~unconditionally guaranteed by several of our ~~debt level (including the payment~~subsidiaries.

Credit Facility

On October 31, 2016, we entered into a credit agreement with Bank of ~~prepayment penalties). Our failure~~Montreal that provides an asset-based revolving credit facility of up to ~~comply with these covenants would be an event of default that, if not waived, could result~~$35 million in ~~the acceleration of all outstanding indebtedness (including the acceleration of~~aggregate principal amount. The amount available is subject to monthly borrowing base limits based upon our ~~senior notes discussed below~~inventory and ~~any amounts outstanding~~receivables. If our total remaining availability under the credit ~~facility). In addition, the amount available under the~~ facility ~~would be reduced to zero. If the lenders were to make such a demand for repayment,~~falls below $6 million, we would be ~~unable~~subject to ~~pay the obligations as we do not have sufficient cash~~a minimum fixed charge coverage ratio of 1 to 1. Any borrowings on hand to satisfy these obligations. These factors raise substantial doubt about our ability to continue as a going concern. While we will continue to work with our existing lenders, there can be no assurance that we will be successful. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

The credit facility also has a covenant that requires us to provide to the lenders audited annual financial statements within 90 days of the end of each year. The audit report must not contain any going concern modification. As noted above, the audit report included in this Annual Report on Form 10-K contains a going concern modification, and therefore does not satisfy the credit facility ~~covenant. If we are unable~~will

bear interest at 1.75% to provide an audit report without a going concern modification by March 31, 2016, or are unable to obtain a waiver of this covenant, our failure to comply with this covenant would result in an event of default that could result in the acceleration of all outstanding indebtedness (including the acceleration of our senior notes discussed below and any amounts outstanding2.25% above LIBOR (London Interbank Offered Rate), based on average availability under the credit facility.

~~Outstanding balances under the unsecured~~ We have granted to Bank of Montreal a first lien on substantially all of our current assets and a second lien on substantially all of our non-current assets. The credit facility bear interest at a floating rate, which, at our option, is either (1) the London Interbank Offered Rate (LIBOR), plus a margin of between 1.125% and 2.25%, depending upon our leverage ratio, as defined above; or (2) an alternative base rate, plus a margin of between 0.125% and 1.25%, depending upon our leverage ratio. We pay a quarterly commitment feeexpires on the outstanding portion of the unused revolving unsecured credit facility amount of between 0.15% and 0.35%, depending on our leverage ratio. The interest rate paid under our unsecured credit facility on any debt varies both with changes in the LIBOR and with our leverage ratio.

The facility is unsecured and is guaranteed by our material subsidiaries. We are currently in compliance with the covenants under the facility. The facility was amended in August 2015 to extend the maturity date by two years to August 2020.October 31, 2018. As of December 31, ~~2015, and December 31, 2014,~~2016, there were no amounts outstanding under the ~~facility.~~facility, other than a $0.5 million letter of credit. We may occasionally borrow and repay amounts under the facility for near-term working capital ~~needs and may do so in~~needs.

Previous Credit Facility

During the ~~future.~~

~~Unsecured Senior Notes~~

~~In April 2013, we received net proceeds~~third quarter of ~~$149.3 million from the issuance of $150 million aggregate principal amount of the senior notes. The senior notes consist of the following series:~~

~~$60 million of 3.23% Senior Notes, Series A, due April 16, 2020~~

~~$45 million of 4.13% Senior Notes, Series B, due April 14, 2023~~

~~$45 million of 4.28% Senior Notes, Series C, due April 16, 2025~~

The senior notes are senior unsecured obligations and rank equally in right of payment with any of our other unsubordinated unsecured indebtedness. The obligations under the senior notes are unconditionally guaranteed by our material subsidiaries. In January 2016, we ~~entered into~~maintained an ~~amendment~~unsecured credit facility. Under a series of amendments during 2016, the maximum amount available to ~~modify~~us was reduced from $250 million to $1 million, which amount could be used only for letters of credit. Further, the ~~financial covenants under~~maturity date on this facility was accelerated to September 30, 2016. The credit facility matured according to its terms on September 30, 2016, and therefore is no longer outstanding. As of December 31, 2016, we had a $0.5 million letter of credit outstanding secured by a restricted cash account.

Capital Investments

We expect our level of capital investment to be approximately $13 million to $18 million for 2017, the ~~senior notes similar~~majority of which we expect to be sustaining capital. We anticipate our 2017 operating plans and capital programs will be funded out of operating cash flows and existing cash. We may also use our revolving credit facility, to the ~~amendment under~~extent available, to fund capital investments.

During 2016, we paid cash of $17.9 million for capital projects, the majority of which was sustaining capital and amounts to transition our ~~credit~~East facility ~~as described above. The amendment also provides that the interest rate for the senior notes will be increased by 0.25% during any time that our leverage ratio exceeds 2.25~~ to 1.

As described above, these ratios and other restricted covenants under the senior notes could limit our ability to engage in activities that we believe are in our long-term best interests. We are currently in compliance with the covenants under our debt agreements; however, if current market conditions continue, we anticipate that our EBITDA levels will not be sufficient for us to maintain compliance with our financial covenants through 2016. As a result, we are proactively working with our lenders and evaluating options for maintaining compliance, which include requesting covenant amendments, waivers, or forbearances and could include a possible reduction of our debt level (including the payment of prepayment penalties). Our failure to comply with these covenants would be an event of default that, waived, could result in the acceleration of all outstanding indebtedness (including the acceleration of any amounts outstanding under the credit facility discussed above).

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~~Interest on the senior notes is paid semiannually on April 16 and October 16 of each year.~~Trio^®-only facility.

Contractual Obligations

As of December 31, ~~2015,~~2016, we had contractual obligations totaling ~~$284.0~~$290.0 million on an undiscounted basis, as indicated below. Contractual commitments shown are for the full calendar year indicated unless otherwise indicated.

Payments Due By Period
Total 2016 2017 2018 2019 2020 More Than 5 Years
(In thousands)
Long-term debt $ 150,000
$ —
$ —
$ —
$ —
$ 60,000
$ 90,000
Fixed rate interest obligations on long-term debt 40,957
5,723
5,723
5,723
5,723
4,753
13,312
Operating lease obligations(1) 10,873
3,909
3,110
2,496
671
397
290
Purchase commitments(2) 6,698
6,698
—
—
—
—
—
Natural gas purchase commitments(3) 4,142
4,142
—
—
—
—
—
Asset retirement obligation(4) 58,395
—
1,597
1,325
1,325
2,325
51,823
Minimum royalty payments(5) 12,917
517
517
517
517
517
10,332
Total $ 283,982
$ 20,989
$ 10,947
$ 10,061
$ 8,236
$ 67,992
$ 165,757



	Payments Due By Period
	Total		2017		2018		2019		2020		2021		More Than 5 Years
	(In thousands)
Long-term debt	$	135,000	$	—	$	—	$	—	$	54,000	$	—	$	81,000
Variable rate interest obligations on long-term debt¹	67,553		11,225		11,225		11,225		9,138		7,051		17,689
Operating lease obligations²	8,236		3,175		2,598		809		548		230		876
Purchase commitments³	4,065		4,065		—		—		—		—		—
Asset retirement obligation⁴	59,323		35		1,622		—		1,000		1,325		55,341
Minimum royalty payments⁵	15,867		635		635		635		635		635		12,692
Total	$	290,044	$	19,135	$	16,080	$	12,669	$	65,321	$	9,241	$	167,598


~~(1)~~ ¹	See "Senior Notes" section above for more detail on the variable rate interest associated with our long-term debt. Amounts in the table above represent interest calculated at rates in effect as of December 31, 2016.


²	Amounts include all operating lease payments, inclusive of sales tax, for leases for office space, an airplane, railcars, and other equipment.


~~(2)~~ ³	Purchase contractual commitments include the approximate amount due to vendors for non-cancelable purchase commitments for materials and services.


~~(3)~~	We have committed to purchase a minimum quantity of natural gas, which is priced at floating index‑dependent rates plus $0.06 to $0.15 per Million British Thermal Unit, estimated based on forward rates. Amounts are based on spot rates inclusive of estimated transportation costs and sales tax.

~~(4)~~

⁴

We are obligated to reclaim and remediate lands that our operations have disturbed, but, because of the long-term nature of our reserves and facilities, we estimate that the majority of those expenditures will not be required until after ~~2020.~~2021. Although our reclamation obligation activities are not required to begin until after we cease operations, we anticipate certain activities to occur prior to then related to reclamation of facilities that have been replaced with newly constructed assets, as well as certain shaft closure activities for shafts that are no longer in use. Commitments shown are in ~~today’s~~today's dollars and are undiscounted.


~~(5)~~ ⁵	Estimated annual minimum royalties due under mineral leases, assuming approximately a 25-year life, consistent with estimated useful lives of plant assets.

Off-Balance Sheet Arrangements

As of December 31, ~~2015,~~2016, we had no off-balance sheet arrangements aside from the operating leases described above under “"Contractual ~~Obligations~~Obligations"” and bonding obligations described in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements. Actual results could differ from our estimates and assumptions, and these differences could result in material changes to our financial statements. The following discussion presents information about our most critical accounting policies and estimates. Our significant accounting policies are further described in Note 2 to our consolidated financial statements for the year ended December 31, ~~2015,~~2016, included elsewhere in this Annual Report on Form 10-K.

Revenue Recognition—

Revenue is recognized when evidence of an arrangement exists, risks and rewards of ownership have been transferred to customers, which is generally when title passes, the selling price is fixed and determinable, and collection is reasonably assured. Title passes at the designated shipping point for the majority of sales, but, in a few cases, title passes at the delivery destination. The shipping point may be the plant, a distribution warehouse, a customer warehouse, or a port. Title passes for some international shipments upon payment by the purchaser; however, revenue is not recognized for these transactions until shipment because the risks and rewards of ownership have not transferred pursuant to a contractual arrangement. Prices are generally set at the time of, or prior to, shipment. In cases where the final price is determined after shipment and agreed to with our customer, revenue is recognized when the final sales price is fixed and determinable and the other revenue recognition criteria have been met.

Sales are reported on a gross basis. We quote prices to customers both on a delivered basis and on the basis of ~~pick-up~~pick‑up at our plants and warehouses. When a sale occurs on a delivered basis, we incur and, in turn, bill the customer and record as gross revenue the product sales value, freight, packaging, and certain other distribution costs. Many customers, however, arrange and pay for these costs directly and, in these situations, only the product sales are included in gross revenues.

Application of this policy requires that we make estimates regarding creditworthiness of the customer, which impacts the timing of revenue recognition and, ultimately, the determination of allowance for doubtful accounts. We make those estimates based on the most recent information available and historical experience, but they may be affected by subsequent changes in market conditions.

Property, Plant, and Equipment—

Property, plant, and equipment are stated at historical cost. Expenditures for property, plant, and equipment relating to new assets or improvements are capitalized, provided the expenditure extends the useful life of an asset or extends the ~~asset’s~~asset's functionality. Property, plant, and equipment are depreciated under the straight-line method using estimated useful lives. No depreciation is taken on assets classified as construction in progress until the asset is placed into service. Gains or losses are recorded upon retirement, sale or disposal of assets. Maintenance and repair costs are recognized as period costs when incurred. Capitalized interest, to the extent of debt outstanding, is calculated and assigned to assets that are being constructed, drilled, being built or otherwise are classified as construction in progress.

Mineral Properties and Development Costs

—Mineral properties and development costs, which are referred to collectively as mineral properties, include acquisition costs, the cost of drilling wells, and the cost of other development work, all of which are capitalized. Depletion of mineral properties is calculated using the units-of-production method over the estimated life of the relevant ore body. The lives of reserves used for accounting purposes are shorter than current reserve life determinations due to uncertainties inherent in long-term estimates. We have prepared these reserve life estimates and they have been reviewed and independently determined by mine consultants. Tons of potash and langbeinite in the proven and probable reserves are expressed in terms of expected finished tons of product to be realized, net of estimated losses. Market price fluctuations of potash or Trio^®, as well as increased production costs or reduced recovery rates, could render proven and probable reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of reserves. In addition, the provisions of our mineral leases, including royalties payable, are subject to periodic readjustment by the state and federal government, which could affect the economics of our reserve estimates. Significant changes in the estimated reserves could have a material impact on our results of operations and financial position.

Inventory and Long-Term Parts Inventory—

Inventory consists of product and by-product stocks that are ready for sale; mined ore; potash in evaporation ponds, which is considered work-in-process; and parts and supplies inventory. Product and by-product inventory cost is determined using the lower of weighted average cost or estimated net realizable value and includes direct costs, maintenance, operational overhead, depreciation, depletion, and equipment lease costs applicable to the production process. Direct costs, maintenance, and operational overhead include labor and associated benefits.

We evaluate production levels and costs to determine if any should be deemed abnormal and therefore excluded from inventory costs and expensed directly during the applicable period. The assessment of normal production levels is

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judgmental and unique to each period. We model normal production levels and evaluate historical ranges of production by operating plant in assessing what is deemed to be normal.

Parts inventory, including critical spares, that is not expected to be used within a period of one year is classified as non-current. Parts and supply inventory cost is determined using the lower of average acquisition cost or estimated replacement cost. Detailed reviews are performed related to the net realizable value of parts inventory, giving consideration to quality, slow-moving items, obsolescence, excessive levels, and other factors. Parts inventories that have not turned over in more than a year, excluding parts classified as critical spares, are reviewed for obsolescence and, if deemed appropriate, are included in the determination of an allowance for obsolescence.

Recoverability of Long-Lived Assets—

We evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable. An impairment is considered to potentially exist if an asset group's total estimated future cash flows on an undiscounted basis are less than the carrying amount of the related asset. An impairment loss is measured and recorded based on the excess of the carrying amount of long-lived assets over its estimated fair value. Changes in significant assumptions underlying future cash flow estimates or fair values of asset groups may have a material effect on our financial position and results of operations. Sales price is a significant element of any cash flow estimate, particularly for higher cost operations. Other assumptions we estimate include, among other things, the economic life of the asset, sales volume, inflation, raw materials costs, cost of capital, tax rates and capital spending. These assumptions do not change in isolation; therefore, it is not practicable to present the impact of changing a single assumption.

Factors we generally will consider important and which could trigger an impairment review of the carrying value of long-lived assets include the following:

significant underperformance relative to expected operating results or operating ~~losses;~~losses

significant changes in the manner of use of assets or the strategy for our overall ~~business;~~business

the denial or delay of necessary permits or approvals that would affect the utilization of our tangible ~~assets;~~assets

underutilization of our tangible ~~assets;~~assets

discontinuance of certain products by us or our ~~customers;~~customers

a decrease in estimated mineral ~~reserves; and~~reserves

significant negative industry or economic ~~trends.~~

In connection with our analysis of the recoverability of our long lived assets, due to the significant decrease in potash prices during the second half of 2015, in the fourth quarter of 2015, we recognized impairment charges of $324 million related to our East and West conventional mining facilities, and our North facility in New Mexico.trends

Although we believe the carrying values of our long-lived assets were realizable as of the balance sheet dates, future events could cause us to conclude otherwise.

Asset Retirement Obligation—

All of our mining properties involve certain reclamation liabilities as required by the states in which they operate or by the BLM. Reclamation costs are initially recorded as a liability associated with the asset to be reclaimed or abandoned, based on applicable inflation assumptions and discount rates. The accretion of this discounted liability is recognized as expense over the life of the related assets, and the liability is periodically adjusted to reflect changes in the estimates of the time or amount of the reclamation and abandonment costs. These asset retirement obligations are reviewed and updated at least annually with any changes in balances recorded as adjustments to the related assets and liabilities. The estimates of amounts to be spent are subject to considerable uncertainty and long timeframes. Changes in these estimates could have a material impact on our results of operations and financial position.

Planned Turnaround Maintenance—

Each production operation typically shuts down periodically for planned maintenance activities. Our New Mexico operations have historically shut down for up to two weeks to perform turnaround maintenance. Generally, our HB, Moab, and Wendover operations cease harvesting potash from our solar ponds during one or more summer months to make the most of the evaporation season. During these summer turnarounds, annual maintenance is performed. The costs of maintenance turnarounds at our facilities are considered part of production costs and are absorbed into inventory in the period incurred.

Income Taxes—

We are a subchapter C corporation and therefore are subject to U.S. federal and state income taxes. We recognize income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of assets and

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liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. We record a valuation allowance if it is deemed more likely than not that our deferred income tax assets will not be realized in full; such determinations are subject to ongoing assessment.

Stock‑Based Compensation—

We account for stock‑based compensation by recording expense using the fair value of the awards at the time of grant. We have recorded compensation expense associated with the issuance of ~~non-vested~~ restricted ~~shares of~~ common stock, ~~non-vested~~ performance units, and ~~non-qualified~~non‑qualified stock options, all of which are subject to service conditions and in some cases are subject to operational or market based conditions. The expense associated with these awards is recognized over the service period associated with each issuance. ~~Performance units are also subject to operational performance or market based conditions.~~

New Accounting Standards

Pronouncements Issued But Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2014‑09, "Revenue from Contracts with Customers (Topic 606)," which requires revenue to be recognized based on the amount an entity is expected to be entitled to for promised goods or services provided to customers. The standard also requires expanded disclosures regarding contracts with customers. The guidance in this standard supersedes the revenue recognition requirements in Topic 605, "Revenue Recognition", and most industry-specific guidance. This guidance is effective for us beginning January 1, 2018. We are analyzing our sales contracts, particularly those where the final pricing of our product is determined subsequent to shipment, in order to evaluate the impact on our consolidated financial statements.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory." An entity using an inventory method other than last-in, first-out or the retail inventory method should measure inventory at the lower of cost and net realizable value. The new guidance clarifies that net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation and is effective for us beginning January 1, 2017. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements. As we finalize our conclusions, we may need to make changes to our business and accounting process to support recognition and disclosures under the new standard.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, "Leases (Topic 842)," which requires, among other things, lessees to recognize lease assets and liabilities on their balance sheets for those leases classified as operating leases under previous generally accepted accounting principles. These assets and liabilities must be recorded generally at the present value of the contracted lease payments, and the cost of the lease must be allocated over the lease term on a straight-line basis. This guidance is effective for us for annual and interim periods in fiscal years beginning after December 15, 2018, with a modified retrospective transition method mandated. We are currently in the process of gathering the data on our operating lease agreements in order to evaluate the potential impact on our consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." This standard changes several aspects of how we account for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liabilities, classification of excess tax benefits on the statement of cash flows, forfeitures, minimum statutory tax withholding payments, and classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. This standard is effective for us for in annual and interim periods in fiscal years beginning after December 15, 2016. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, "Statement of Cash Flows (Topic 230)" which is intended to clarify and align how certain cash receipts and cash payments are presented and classified in the statement of cash flows where there is currently diversity in practice. ASU 2016-15 specifically addresses eight classification issues within the statement of cash flows including debt prepayments or debt extinguishment costs; proceeds from the settlement of insurance claims; and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for annual and interim periods in fiscal years beginning after December 15, 2017.

In November 2016, the FASB issued ASU Updated 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" which will require entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows and will no longer require transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. This standard is effective for us in annual and interim periods in fiscal years beginning after December 15, 2017. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

Refer to Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in Item 8 ofin this Annual Report for a discussion of new accounting ~~standards.~~standards adopted during the year ended December 31, 2016.

Non-GAAP Financial ~~Measures~~Measure

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use ~~several~~"average net realized sales price per ton," which is a non-GAAP financial ~~measures~~measure to monitor and evaluate our performance. ~~These~~This non-GAAP financial ~~measures include net sales, average net realized sales price, cash operating costs per ton and average potash and Trio~~^® ~~gross margin per ton. These non-GAAP financial measures~~measure should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, because the presentation of ~~these~~this non-GAAP financial ~~measures~~measure varies among companies, our presentation of this non-GAAP financial ~~measures~~measure may not be comparable to similarly titled measures used by other companies.

We believe ~~these non-GAAP financial measures provide~~average net realized sales price per ton provides useful information to investors for analysis of our business. We also refer to ~~these~~this non-GAAP financial ~~measures~~measure in assessing our performance and when planning, forecasting, and analyzing future periods. We believe ~~these~~this non-GAAP financial ~~measures are widely~~measure is used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the potash mining industry. Many investors use the published research reports of these professional research analysts and others in making investment decisions.

~~Below is a reconciliation of these non-GAAP measures to the most directly comparable GAAP measure, for the years ended December 31, 2015, 2014, and 2013:~~

~~Net Sales and Average Net Realized Sales Price per Ton~~

~~Net sales and average net realized sales price per ton are non-GAAP financial measures. Net sales are calculated as sales less freight costs.~~ Average net realized sales price per ton is calculated as ~~net~~ sales, less freight costs, divided by the number of tons sold in the period. We consider ~~net sales and~~ average net realized sales price per ton to be useful because ~~they remove~~it shows average per-ton pricing without the effect of certain transportation and delivery ~~costs on sales and pricing.~~costs. When we arrange transportation and delivery for a customer, we include in revenue and in freight costs the costs associated with transportation and delivery. However, many of our customers arrange for and pay their own transportation and delivery costs, in which case these costs are not included in our revenue and freight costs. We use ~~net sales and~~ average net realized sales price per ton as a key performance ~~indicators~~indicator to analyze sales and price trends.

Year Ended December 31, 2015
Potash
Trio^®
Total
Sales $ 217,467
$ 69,716
$ 287,183
Freight costs 18,262
10,461
28,723
Net sales $ 199,205
$ 59,255
$ 258,460

Divided by:
Tons sold (in thousands) 587
163

Average net realized sales price per ton $ 339
$ 364

~~Table of Contents~~

Year Ended December 31, 2014
Potash
Trio^®
Total
Sales $ 334,323
$ 76,066
$ 410,389
Freight costs 30,615
12,608
43,223
Net sales $ 303,708
$ 63,458
$ 367,166

Divided by:
Tons sold (in thousands) 915
182

Average net realized sales price per ton $ 332
$ 349

Year Ended December 31, 2013
Potash
Trio^®
Total
Sales $ 284,831
$ 51,481
$ 336,312
Freight costs 20,796
8,060
28,856
Net sales $ 264,035
$ 43,421
$ 307,456

Divided by:
Tons sold (in thousands) 692
123

Average net realized sales price per ton $ 382
$ 352

~~Cash Operating Costs per Ton~~

~~Cash operating costs per ton~~Below is a ~~non-GAAP financial measure that is calculated as total cost~~reconciliation of goods sold divided by the number of tons sold in the period and then adjusted to exclude per-ton depreciation, depletion, and royalties. Total cost of goods sold is reported net of by-product credits and does not include warehousing and handling costs. We consider cash operating costs per ton to be useful because it represents our core, per-ton costs to produce potash and Trio^®~~. We use cash operating costs per ton as an indicator of performance and operating efficiencies.~~

Year Ended December 31, 2015
Potash
Trio^®
Total
Cost of goods sold $ 172,355
$ 45,466
$ 217,821
Divided by sales volume (in thousands of tons) 587
163

   Cost of goods sold per ton $ 293
$ 279

Less per-ton adjustments
   Depreciation and depletion $ 77
$ 58

   Royalties 13
18

Cash operating costs per ton $ 203
$ 203

~~Table of Contents~~

Year Ended December 31, 2014
Potash
Trio^®
Total
Cost of goods sold $ 254,752
$ 49,162
$ 303,914
Divided by sales volume (in thousands of tons) 915
182

   Cost of goods sold per ton $ 279
$ 270

Less per-ton adjustments
   Depreciation and depletion $ 69
$ 59

   Royalties 12
17

Cash operating costs per ton $ 198
$ 194

Year Ended December 31, 2013
Potash
Trio^®
Total
Cost of goods sold $ 179,207
$ 33,657
$ 212,864
Divided by sales volume (in thousands of tons) 692
123

   Cost of goods sold per ton $ 260
$ 274

Less per-ton adjustments
   Depreciation and depletion $ 52
$ 55

   Royalties 13
18

Cash operating costs per ton $ 195
$ 201

~~Average Potash and Trio~~^® ~~Gross Margin per Ton~~

Average potash and Trio® gross margin per ton are non-GAAP financial measures that are calculated by subtracting the sum of per ton total cost of goods sold and per ton warehousing and handling costs from the average net realized sales price. We believe these measures are useful because they represent the average margin we realize on each ton of potash and Trio® sold. The reconciliations of average potash and Trio® net realized sales price ~~to GAAP sales are set forth separately above under the heading "Net Sales and Average Net Realized Sales Price per Ton." Amounts presented exclude $54~~ per ton ~~$9 per ton and $5 per ton of potash sold relating~~ to ~~lower-of-cost-or-market inventory adjustments during~~ the three years ended December 31, 2015, 2014, and 2013, respectively. Further, our average potash gross margin per ton excludes costs associated with abnormal production of $14 per ton of potash produced during the year ended December 31, 2015. There were no abnormal production costs inmost directly comparable GAAP measure for the years ended December 31, ~~2014,~~2016, 2015, and ~~2013.~~2014:

Year Ended December 31,
2015 2014 2013
Potash
Average potash net realized sales price* $ 339
$ 332
$ 382
Less total potash cost of goods sold 293
279
260
Less potash warehousing and handling costs 19
12
16
Average potash gross margin per ton $ 27
$ 41
$ 106



	Year Ended December 31, 2016
	Potash		Trio^®		Total
Sales	$	159,494	$	51,454	$	210,948
Freight costs	26,661		9,595		36,256
Subtotal	$	132,833	$	41,859	$	174,692

Divided by:
Tons sold (in thousands)	681		146
Average net realized sales price per ton	$	195	$	287



	Year Ended December 31, 2015
	Potash		Trio^®		Total
Sales	$	217,467	$	69,716	$	287,183
Freight costs	18,262		10,461		28,723
Subtotal	$	199,205	$	59,255	$	258,460

Divided by:
Tons sold (in thousands)	587		163
Average net realized sales price per ton	$	339	$	364

~~Table of Contents~~

Year Ended December 31,
2015 2014 2013
Trio^®

Average Trio^® net realized sales price*
$ 364
$ 349
$ 352
Less total Trio^® cost of goods sold
279
270
274
Less Trio^® warehousing and handling costs
17
11
15
Average Trio^® gross margin per ton
$ 68
$ 68
$ 63



	Year Ended December 31, 2014
	Potash		Trio^®		Total
Sales	$	334,323	$	76,066	$	410,389
Freight costs	30,615		12,608		43,223
Subtotal	$	303,708	$	63,458	$	367,166

Divided by:
Tons sold (in thousands)	915		182
Average net realized sales price per ton	$	332	$	349

* The reconciliations of average potash and Trio^® ~~net realized sales price to GAAP sales are set forth above.~~



x	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, ~~2015~~2016
or
¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



Delaware	26-1501877
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
707 17th Street, Suite 4200, Denver, Colorado	80202
(Address of principal executive offices)	(Zip Code)



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



Large accelerated filer x¨	Accelerated filer ¨x	Non‑accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company ¨



		Page
	PART I	1
	Item 1. Business	2
	Item 1A. Risk Factors	11
	Item 1B. Unresolved Staff Comments	22
	Item 2. Properties	22
	Item 3. Legal Proceedings	31
	Item 4. Mine Safety Disclosures	31
	PART II	32
	Item 5. Market for ~~Registrant’s~~Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
	Item 6. Selected Financial Data	3534
	Item 7. ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	3635
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk	5651
	Item 8. Financial Statements and Supplementary Data	5753
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	8581
	Item 9A. Controls and Procedures	8681
	Item 9B. Other Information	8681
	PART III	8882
	Item 10. Directors, Executive Officers and Corporate Governance	8882
	Item 11. Executive Compensation	8882
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	8882
	Item 13. Certain Relationships and Related Transactions, and Director Independence	8882
	Item 14. Principal Accounting Fees and Services	8882
	PART IV	8983
	Item 15. Exhibits, Financial Statement Schedules	8983
	Item 16. Form 10-K Summary	85
	Signatures	9386


•	~~Evaluating West operations.~~ ~~Given the current and expected potash pricing environment, we are performing a strategic review to determine the viability of this facility long term. Following the transition of East to a Trio~~^® ~~-only facility, West will be our only conventional potash mine~~rate and our ~~highest cost~~effective production ~~facility.~~


•	~~Participation in specialty markets.~~ ~~Given the greater scarcity of langbeinite relative to potash and its agronomic suitability for certain soils and crops, there is demand for our langbeinite product, known as Trio~~^®~~, outside of our core potash markets. There continues to be a growing awareness of the agronomic value of this specialty product.~~



Name	Age	Position
Robert P. Jornayvaz III	5758	Executive Chairman of the Board, President, and Chief Executive Officer
James N. Whyte	5758	Executive Vice President ~~of Human Resources and Risk Management~~
~~Kelvin G. Feist~~	48	~~Senior Vice President of Sales and Marketing~~
Brian D. Frantz	5354	Senior Vice President and Chief Accounting Officer
John G. Mansanti	6061	Senior Vice President of Strategic Initiatives and Technical Services
Margaret E. McCandless	4344	Vice President, General Counsel, and Secretary
Jeffrey C. Blair	44	Vice President of Sales and Marketing



				Proven (4)				Probable (7)
Product/Operations	Date Mine Opened (2)	Current Extraction Method	Minimum Remaining Life (years) (3)	Recoverable Ore Tons (5)	Ore Grade (6) (% KCl)		Product Tons as KCl	Recoverable Ore Tons (5)	Ore Grade (6) (% KCl)		Product Tons as KCl
Muriate of Potash
Carlsbad West	1931	Underground	100+	217,170	21.2	%	38,790	126,700	20.6	%	21,730
Carlsbad East	1965	Underground	40	61,010	19.1	%	9,500	54,420	18.6	%	8,460
Carlsbad HB Mine (2,9)	2012	Solution	42	19,680	36.4	%	6,540	2,190	40.2	%	800
Moab	1965	Solution	100+	30,410	42.5	%	12,100	32,110	44.0	%	14,800
Wendover (10)	1932	Brine Evaporation	30	—			—	—	0.7	%	3,220
Total Muriate of Potash					26.2	%	66,930		26.3	%	49,010



	Contribution from
	Potash Sales
	Net Sales		Gross Margin
For the year ended December 31, 2015	77	%	59	%
For the year ended December 31, 2014	83	%	75	%
For the year ended December 31, 2013	86	%	90	%



	Year ended December 31,				Change Between
	2015		2014		Periods			% Change
Cost of goods sold (in millions)	$	217.8	$	303.9	$	(86.1	)	(28	)%
Cost per ton of potash sold(1)	$	293	$	279	$	14		5	%
Cost per ton of Trio® sold(2)	$	279	$	270	$	9		3	%



	Year Ended December 31, 2013
	Potash		Trio^®		Total
Sales	$	284,831	$	51,481	$	336,312
Freight costs	20,796		8,060		28,856
Net sales	$	264,035	$	43,421	$	307,456

Divided by:
Tons sold (in thousands)	692		123
Average net realized sales price per ton	$	382	$	352


ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



	Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings (Deficit)			Total Stockholders' Equity
	Shares	Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings (Deficit)			Total Stockholders' Equity
Balance, December 31, 2012	75,312,805	$	75	$	568,375		$	(1,729	)	$	339,015		$	905,736
Pension liability adjustment	—	—		—			1,700			—			1,700
Unrealized gain on investment available for sale, net of tax	—	—		—			19			—			19
Net income	—	—		—			—			22,275			22,275
Stock-based compensation	—	—		5,123			—			—			5,123
Change in excess income tax benefit from stock- based compensation	—	—		(230		)	—			—			(230		)
Vesting of restricted common stock, net of restricted common stock used to fund employee income tax withholding due upon vesting	92,605	—		(652		)	—			—			(652		)
Balance, December 31, 2013	75,405,410	75		572,616			(10		)	361,290			933,971
Unrealized loss on investment available for sale, net of tax	—	—		—			(18		)	—			(18		)
Net income	—	—		—			—			9,761			9,761
Stock-based compensation	—	—		4,237			—			—			4,237
Vesting of restricted common stock, net of restricted common stock used to fund employee income tax withholding due upon vesting	131,331	1		(667		)	—			—			(666		)
Balance, December 31, 2014	75,536,741	76		576,186			(28		)	371,051			947,285
Unrealized loss on investments available for sale, net of tax	—	—		—			(24		)	—			(24		)
Net loss	—	—		—			—			(524,776		)	(524,776		)
Stock-based compensation	—	—		5,080			—			—			5,080
Vesting of restricted common stock, net of restricted common stock used to fund employee income tax withholding due upon vesting	165,959	—		(1,039		)	—			—			(1,039		)
Balance, December 31, 2015	75,702,700	$	76	$	580,227		$	(52	)	$	(153,725	)	$	426,526



	December 31, 2015
			Unrealized
	Cost Basis		Gain		Loss			Fair Value
Corporate bonds	$	53,403	$	6	$	(92	)	$	53,317
Certificates of deposit and time deposits	1,005		—		—			1,005
Total available-for-sale securities	$	54,408	$	6	$	(92	)	$	54,322




	FORM 10-K


ITEM 1.	BUSINESS


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


	December 31,						Range of useful lives (years)		December 31,						Range of useful lives (years)
	2015			2014			Lower Limit	Upper Limit	2016			2015			Lower Limit	Upper Limit
Buildings and plant	$	81,208		$	268,032		2	25	$	82,457		$	81,208		2	25
Machinery and equipment	209,920			529,358			1	25	227,987			209,920			2	25
Vehicles	4,747			13,799			3	7	4,750			4,747			3	7
Office equipment and improvements	12,001			19,260			2	20	12,505			12,001			1	20
Ponds and land improvements	55,951			73,933			1	25	57,474			55,951			1	25
Total depreciable assets	363,827			904,382					385,173			363,827
Accumulated depreciation	$	(80,707	)	$	(271,294	)			$	(116,194	)	$	(80,707	)
Total depreciable assets, net	$	283,120		$	633,088				$	268,979		$	283,120

Mineral properties and development costs	139,751			163,197			10	25	138,578			139,751
Accumulated depletion	(17,254		)	(17,544		)			(21,974		)	(17,254		)
Total depletable assets, net	122,497			145,653					116,604			122,497

Land	$	719		$	909				$	719		$	719
Construction in progress	13,140			5,600					2,188			13,140
Total property, plant, equipment, and mineral properties, net	$	419,476		$	785,250				$	388,490		$	419,476


			Weighted Average Grant-Date Fair Value				Weighted Average Grant-Date Fair Value
	Shares		Weighted Average Grant-Date Fair Value		Shares		Weighted Average Grant-Date Fair Value
Non-vested restricted shares of common stock, beginning of period	464,769		$	16.49
Restricted stock, beginning of period					459,663		$	14.91
Granted	237,256		$	14.28	3,340,215		$	1.07
Vested	(201,261	)	$	17.76	(213,643	)	$	15.53
Forfeited	(41,101	)	$	15.09	(54,817	)	$	14.44
Non-vested restricted shares of common stock, end of period	459,663
Restricted stock, end of period					3,531,418		$	1.78



Risk free interest rate	1.8	%
Dividend yield	0.0	%
Estimated volatility	63.8	%
Expected option life	6.25 years



	Shares		Weighted Average Exercise Price	Aggregate Intrinsic Value (1)	Weighted Average Remaining Contractual Life
Outstanding non-qualified stock
options, beginning of period	326,375		$26.19
Exercised	—
Forfeited	(84,414	)	$27.19
Expired	—
Outstanding non-qualified stock
options, end of period	241,961		$25.85	$—	3.5

Vested or expected to vest, end
of period	241,961		$25.85	$—	3.5

Exercisable non-qualified
stock options, end of period	241,961		$25.85	$—	3.5



	Shares		Weighted Average Exercise Price	Aggregate Intrinsic Value¹	Weighted Average Remaining Contractual Life
Outstanding non-qualified stock options, beginning of period	241,961		$25.85
Granted	1,664,849		$1.03
Exercised	—
Forfeited	(23,104	)	$26.90
Expired	—
Outstanding non-qualified stock options, end of period	1,883,706		$3.90	$1,748,091	8.9

Vested or expected to vest, end of period	1,883,706		$3.90	$1,748,091	8.9

Exercisable non-qualified stock options, end of period	218,857		$25.74	$—	2.6


~~(1)~~ ¹	The intrinsic value of a stock option is the amount by which the market value exceeds the exercise price as of the end of the period presented.


Years Ending December 31,	(In thousands)
2016	$	3,909
2017	3,110		$	3,175
2018	2,496		2,598
2019	671		809
2020	397		548
2021			230
Thereafter	290		876
Total	$	10,873	$	8,236



For the year ended December 31, 2015	$	7,216
For the year ended December 31, 2014	$	6,979
For the year ended December 31, 2013	$	4,428



For the year ended December 31, 2016	$	6,591
For the year ended December 31, 2015	$	7,216
For the year ended December 31, 2014	$	6,979



			Fair Value at Reporting Date Using
	December 31, 2015		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investments
Corporate bonds	$	53,317	$	—	$	53,317	$	—



	December 31, 2016				December 31, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt	$	135,000	$	131,000	$	150,000	$	141,000



	Contributions
For the year ended December 31, 2015	$	2,277
For the year ended December 31, 2014	$	2,270
For the year ended December 31, 2013	$	2,323



	Year Ended December 31
	2013
Obligations and funded status at period end:
Change in benefit obligation:
Projected benefit obligation at beginning of period	$	5,486
Interest cost	28
Benefit payments	(5,721		)
Actuarial losses	207
Plan amendments	—
Projected benefit obligation at end of period	—
Accumulated benefit obligation at end of period	—
Change in plan assets:
Fair value of plan assets at beginning of period	$	3,702
Actual return on assets (net of expenses)	(1		)
Employer contributions	2,020
Benefit payments	(5,721		)
Fair value of plan assets at end of period	—
Unfunded status	—
Components of net periodic benefit cost:
Interest cost	$	28
Expected return on assets	—
Amortization of prior service cost	(5		)
Amortization of actuarial loss	100
Settlement loss	2,928
Net period benefit cost	$	3,051
Other comprehensive income	$	—



	Unrealized Gains and Losses on Available-for-Sale Securities
Balance as of December 31, 2014	$	(28	)
Other comprehensive loss before reclassifications	(29		)
Amounts reclassified from accumulated other comprehensive loss	5
Net current-period other comprehensive loss	$	(24	)
Balance as of December 31, 2015	$	(52	)



	Unrealized Gains and Losses on Available-for-Sale Securities
Balance as of December 31, 2015	$	(52	)
Other comprehensive income before reclassifications	62
Amounts reclassified from accumulated other comprehensive loss	(10		)
Net change in other comprehensive loss	$	52
Balance as of December 31, 2016	$	—


Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Consolidated Statement of Operations	Amount Reclassified from Accumulated Other Comprehensive Loss		Affected Line Item in the Consolidated Statement of Operations
Unrealized losses on available-for-sale securities	$	8		Other income (expense)
Realized gains on available-for-sale securities					$	10	Other income (expense)
Total before tax	8				10
Tax benefit	(3		)		—
Net of tax	$	5			$	10



	Three Months Ended
	December 31, 2015			September 30, 2015			June 30, 2015			March 31, 2015
Sales	$	42,819		$	53,692		$	73,651		$	117,021
Cost of Goods Sold	$	36,953		$	42,151		$	55,435		$	83,282
Lower-of-cost-or market inventory adjustments	$	21,709		$	4,427		$	5,276		$	360
Costs Associated with Abnormal Production	$	3,495		$	6,910		$	—		$	—
Gross (Deficit) Margin	$	(28,459	)	$	(8,343	)	$	2,605		$	18,720
Impairment of long-lived assets	$	323,796		$	—		$	—		$	—
Net (Loss) Income	$	(518,259	)	$	(8,110	)	$	(4,937	)	$	6,529
Earnings (Loss) Per Share, Basic	$	(6.85	)	$	(0.11	)	$	(0.07	)	$	0.09
Earnings (Loss) Per Share, Diluted	$	(6.85	)	$	(0.11	)	$	(0.07	)	$	0.09



	Three Months Ended
	December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
Sales	$	42,188		$	43,643		$	51,840		$	73,277
Cost of Goods Sold	$	33,953		$	35,272		$	41,850		$	59,777
Lower-of-cost-or-market inventory adjustments	$	3,245		$	5,192		$	2,930		$	9,007
Costs Associated with Abnormal Production	$	—		$	—		$	1,057		$	650
Gross Deficit	$	(7,004	)	$	(7,624	)	$	(5,466	)	$	(9,153	)
Net Loss	$	(16,567	)	$	(18,241	)	$	(13,398	)	$	(18,427	)
Loss Per Share, Basic	$	(0.22	)	$	(0.24	)	$	(0.18	)	$	(0.24	)
Loss Per Share, Diluted	$	(0.22	)	$	(0.24	)	$	(0.18	)	$	(0.24	)


ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ~~AND FINANCIAL DISCLOSURE~~

Trio^® only

United States

For the year ended December 31, 2016

For the year ended December 31, 2015

For the year ended December 31, 2014