The undiscounted amount of the asset retirement obligation is $32.7 million as of March 31, 2011, and there are no significant payments expected to take place in the next five years.

Note 10—COMPENSATION PLANS

        Cash Bonus Plan—Intrepid has cash bonus plans that allow participants to receive varying percentages of their aggregate base salary. Any awards under the cash bonus plans are based on a variety of elements related to Intrepid's performance in certain production, operational, financial, and other areas, as well as the participants' individual performance. Intrepid accrues cash bonus expense related to the current year's performance.

        Equity Incentive Compensation Plan—Intrepid has issued common stock awards, awards of non-vested restricted shares of common stock, and non-qualified stock option awards under its 2008 Equity Incentive Plan (the "2008 Plan"). As of March 31, 2011, there were a total of 233,385 shares of non-vested restricted common stock outstanding and 363,940 outstanding stock options. As of March 31, 2011, there were approximately 4.1 million shares of common stock available for issuance under the 2008 Plan.

Non-vested Restricted Shares of Common Stock

        Under the 2008 Plan, grants of non-vested restricted shares of common stock have been awarded to executive officers, other key employees, and consultants. The awards contain service conditions associated with continued employment or service. There are no performance or market conditions associated with these awards. The terms of the non-vested restricted common stock awards provide voting rights and, upon vesting, the right to receive ordinary dividends otherwise payable during the vesting period to the holders of such awards. Upon vesting of the restricted shares of common stock, the restrictions on such shares of common stock lapse, the shares are no longer subject to forfeiture, all ordinary dividends otherwise payable during the vesting period are remitted to the award holder, and the shares are considered issued and outstanding.

        Through March 31, 2011, there have been multiple grants of non-vested restricted common stock. Awards have been made from time to time to existing and newly hired employees and are approved by the Compensation Committee of the Board of Directors. Awards made in connection with the initial public offering and upon hiring of selected individuals have had vesting schedules that vary between a two to four-year vesting schedule. The Compensation Committee of Intrepid's Board of Directors has also approved awards of restricted common stock to Intrepid's executive management and other selected employees under an annual awards program. These awards vest one-third on each of the first three anniversary dates of the grant.

        In measuring compensation expense associated with the grant of shares of non-vested restricted common stock, Intrepid uses the fair value of the award, determined as the closing stock price for Intrepid's common stock on the grant date. Compensation expense is recorded monthly over the vesting period of the award. Total compensation expense related to the awards of restricted common stock awards was $0.8 million for both the three months ended March 31, 2011, and 2010. Such amounts were net of estimated forfeiture adjustments. As of March 31, 2011, there was $5.4 million of

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INTREPID POTASH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 10—COMPENSATION PLANS (Continued)

total remaining unrecognized compensation expense related to non-vested restricted common stock awards that will be expensed through 2014.

        A summary of Intrepid's restricted common stock activity for awards that have not yet vested for the period from December 31, 2010, to March 31, 2011, is as follows:

Non-qualified Stock Options

        Under the 2008 Plan, the Compensation Committee of Intrepid's Board of Directors approves the award of non-qualified stock options to Intrepid's executive management and other selected employees under an annual awards program. One-third of each stock option award vests on each of the three anniversary dates of the grant. In measuring compensation expense for these grants of options, Intrepid estimated the fair value of the awards on the grant date using the Black-Scholes option valuation model. Option valuation models require the input of highly subjective assumptions, including the expected volatility of the price of the underlying stock.

        The following assumptions were used to compute the weighted average fair value of options granted in the periods presented:

        Intrepid's computation of the estimated volatility above is based on the historical volatility of its own common stock since the initial public offering as well as the volatility of three peer companies' common stock over the expected option life. The peer companies selected had volatility that was correlated to Intrepid's common stock from the date of the initial public offering to the dates of grant. These proxies were utilized because Intrepid has insufficient trading history to calculate a meaningful long-term volatility factor. The computation of expected option life was determined based on a reasonable expectation of the average life prior to exercise or expiration, giving consideration to the overall vesting period and contractual terms of the awards. The risk-free interest rates for periods that

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INTREPID POTASH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 10—COMPENSATION PLANS (Continued)

matched the option award's expected life were based on the U.S. Treasury constant maturity yield at the time of grant over the expected option life.

        For the three months ended March 31, 2011, and 2010, Intrepid recognized stock based compensation related to stock options of approximately $0.3 million and $0.2 million, respectively. As of March 31, 2011, there was $3.3 million of total remaining unrecognized compensation expense related to unvested non-qualified stock options that will be expensed through 2014. A summary of Intrepid's stock option activity for the three months ended March 31, 2011, is as follows:

Note 11—INCOME TAXES

        For the three months ended March 31, 2011, income tax expense was $18.9 million and the effective tax rate was 40.0 percent. For the three months ended March 31, 2010, income tax expense was $7.7 million and the effective tax rate was 39.3 percent. Intrepid's effective income tax rate is impacted primarily by the amount of taxable income associated with each jurisdiction in which Intrepid's income is subject to tax, permanent differences between the financial statement carrying amounts and tax bases of assets and liabilities, and the benefit associated with the estimated effect of the domestic production activities deduction. Income tax expense for the three months ended March 31, 2011, and 2010, differ from the amounts that would be provided by applying the statutory U.S. federal income tax rate to income before income taxes primarily as a result of the estimated

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INTREPID POTASH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 11—INCOME TAXES (Continued)

effects of the domestic production activities deduction and state income taxes. Intrepid's income tax provision is comprised of the elements below (in thousands).

        At March 31, 2011, there were no material uncertain tax positions that would impact Intrepid's effective tax rate. Therefore, no liabilities have been recognized, and no provisions have been made for interest or penalties related to uncertain tax positions.

Note 12—COMMITMENTS AND CONTINGENCIES

        Marketing Agreements—In 2004, Intrepid entered into a marketing agreement appointing PCS Sales (USA), Inc. ("PCS Sales") its exclusive sales representative for export potash sales, with the exception of sales to Canada and Mexico, and appointing PCS Sales as non-exclusive sales representative for potash sales into Mexico. Trio^® is also marketed under this arrangement. This agreement is cancelable with thirty days written notice.

        In 2004, Intrepid entered into a sales agreement with Envirotech Services, Inc. ("ESI") appointing ESI its exclusive distributor, subject to certain conditions, for magnesium chloride produced from Intrepid's Wendover, UT facility with the exception of up to 15,000 tons per year sold for applications other than dust control, de-icing, and soil stabilization. This agreement is cancelable with two years' written notice, unless a breach or other specified special event has occurred. Sales prices were specified to ESI in the agreement subject to cost-based escalators. Intrepid is also entitled to certain adjustments in the sales price to ESI based on the final sales price ESI receives from its customers, as defined by the agreement. Such adjustments in sales price are settled after ESI's fiscal year end in September; however, Intrepid estimates and recognizes earned sales price adjustments each quarter as the amounts are earned and reasonably determinable.

        Reclamation Deposits & Surety Bonds—As of March 31, 2011, Intrepid had $8.7 million of security placed principally with the State of Utah and the BLM for eventual reclamation of its various facilities. Of this total requirement, $2.5 million consisted of long-term restricted cash deposits reflected in "Other" long-term assets on the consolidated balance sheets, and $6.2 million was secured by surety bonds issued by an insurer.

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

        Health Care Costs—Intrepid is self-insured, subject to a stop-loss policy, for its employees' health care costs. The estimated liability for outstanding medical costs has been based on the historical pattern of claim settlements. The medical claims liability included in accrued liabilities was approximately $1.1 million as of March 31, 2011, and $1.2 million as of December 31, 2010.

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INTREPID POTASH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 12—COMMITMENTS AND CONTINGENCIES (Continued)

        Legal—Intrepid is involved from time to time in litigation arising in the normal course of business. Intrepid has determined that there are no material claims outstanding as of March 31, 2011.

        Future Operating Lease Commitments—Intrepid has certain operating leases for land, mining and other operating equipment, an airplane, offices, railcars, and vehicles, with original terms ranging up to twenty years.

        Rental and lease expenses follow for the indicated periods (in thousands):

        Refundable Credit—During the fourth quarter of 2009, Intrepid applied for a refundable credit of approximately $4.5 million with a state taxing authority, and the application is currently being audited by the state. No amounts associated with this potential credit, or potential cash receipt amounts related to this state filing, have been included in Intrepid's consolidated financial statements as of and for the three months ended March 31, 2011 or 2010.

Note 13—DERIVATIVE FINANCIAL INSTRUMENTS

        Intrepid is exposed to global market risks, including the effect of changes in commodity prices and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business. Intrepid does not enter into or hold derivatives for trading purposes. While all derivatives are used for risk management purposes and were originally entered into as economic hedges, they have not been designated as hedging instruments.

Interest Rates

        Intrepid's predecessor historically managed a portion of its floating interest rate exposure through the use of interest rate derivative contracts. Forward LIBOR-based contracts reduced the predecessor's risk from interest rate movements as gains and losses on such contracts partially offset the impact of changes in its variable-rate debt. Although Intrepid repaid its assumed debt obligations immediately subsequent to the closing of its initial public offering in April 2008, it has not yet closed its positions in the derivative financial instruments that were also assumed from the predecessor.

        A tabular presentation of the outstanding interest rate derivatives as of March 31, 2011, follows:

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INTREPID POTASH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 13—DERIVATIVE FINANCIAL INSTRUMENTS (Continued)

        The following table presents the fair values of the derivative instruments included within the consolidated balance sheets as of (in thousands):

        The following table presents the amounts of gain or (loss) recognized in income on derivatives affecting the consolidated statements of operations for the periods presented (in thousands):

        See footnote titled Fair Value Measurements for a description of how the estimated fair value of the above financial instruments is determined.

Credit Risk

        Intrepid can be exposed to credit-related losses in the event of non-performance by counterparties to derivative contracts. Intrepid believes the counterparties to the contracts to be credit-worthy trading entities and therefore, credit risk of counterparty non-performance is unlikely. U.S. Bank is the counterparty to the interest rate derivative contracts, but, as Intrepid is in a liability position at March 31, 2011, with respect to these interest rate derivative contracts, counterparty risk is not applicable. There were no derivative instruments with credit-risk-related contingent features at March 31, 2011.

Note 14—FAIR VALUE MEASUREMENTS

        Intrepid applies the provisions of the FASB's Accounting Standards Codification™ ("ASC") Topic 820, Fair Value Measurements and Disclosures, for all financial assets and liabilities measured at fair value on a recurring basis. The topic establishes a framework for measuring fair value and requires disclosures about fair value measurements. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability, as defined as an exit price, in an orderly transaction between market participants at the measurement date. The topic establishes market or observable inputs as the preferred sources of values, followed by assumptions based on hypothetical

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INTREPID POTASH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 14—FAIR VALUE MEASUREMENTS (Continued)

transactions in the absence of market inputs. The topic also establishes a hierarchy for grouping these assets and liabilities, based on the significance level of the following inputs:

•

Level 1—Quoted prices in active markets for identical assets and liabilities.



•

Level 2—Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable.



•

Level 3—Significant inputs to the valuation model are unobservable.

        The following is a listing of Intrepid's assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the hierarchy as of March 31, 2011 (in thousands):

        Financial assets or liabilities are categorized within the hierarchy based upon the lowest level of input that is significant to the fair value measurement. Below is a general description of Intrepid's valuation methodologies for financial assets and liabilities, which are measured at fair value and are included in the accompanying consolidated balance sheets.

        Intrepid's available-for-sale investments consist of convertible corporate bonds that are valued using Level 2 inputs. Market pricing for these investments is obtained from Reuters, an established financial markets data provider. The convertible corporate bonds have maturity dates in 2011.

        Intrepid uses Level 2 inputs to measure the fair value of interest rate swaps. This valuation is performed using a pricing model that calculates the fair value on the basis of the net present value of the estimated future cash flows receivable or payable. These instruments are allocated to Level 2 of the fair value hierarchy because the critical inputs to this model, including the relevant market values, yields, forward prices, and the known contractual terms of the instrument, are readily observable. The considered factors result in an estimated exit price for each asset or liability under a marketplace participant's view. Management believes that this approach provides a reasonable, non-biased, verifiable, and consistent methodology for valuing derivative instruments.

        Credit valuation adjustments may be necessary when the market price of an instrument is not indicative of the fair value due to the credit quality of the counterparty or Intrepid, depending on which entity is in the liability position of a given contract. Generally, market quotes assume that all counterparties have near zero, or low, default rates and have equal credit quality. Therefore, an

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INTREPID POTASH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 14—FAIR VALUE MEASUREMENTS (Continued)

adjustment for counterparty credit risk may be necessary to reflect the credit quality of a specific counterparty to determine the fair value of the instrument. A similar adjustment may be necessary with respect to Intrepid to reflect its credit quality. Intrepid monitors the counterparties' credit ratings and may ask counterparties to post collateral if their ratings deteriorate. Although Intrepid has determined that the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, any credit valuation adjustment associated with the derivatives would utilize Level 3 inputs. These Level 3 inputs include estimates of current credit spreads to evaluate the likelihood of default by both Intrepid and the counterparties to the derivatives. As of March 31, 2011, Intrepid has assessed the significance of the impact of a credit valuation adjustment on the overall valuation of its derivatives and has determined that the credit valuation adjustment is not significant to the overall valuation of the derivatives. Accordingly, management determined that the derivative valuations should be classified in Level 2 of the fair value hierarchy, and no adjustment has been recorded to the value of the derivatives.

        The methods described above may result in a fair value estimate that may not be indicative of net realizable value or may not be reflective of future fair values and cash flows. While Intrepid believes that the valuation methods utilized are appropriate and consistent with the requirements of ASC Topic 820 and with other marketplace participants, Intrepid recognizes that third parties may use different methodologies or assumptions to determine the fair value of certain financial instruments that could result in a different estimate of fair value at the reporting date.

Note 15—FUTURE EMPLOYEE BENEFITS

        Defined Benefit Pension Plan—In accordance with the terms of the purchase agreement associated with the acquisition of the Moab assets in 2000 (the "Moab Purchase Agreement"), the Moab subsidiary established the Moab Salt, L.L.C. Employees' Pension Plan ("Pension Plan"), a defined benefit pension plan. Pursuant to the terms of the Moab Purchase Agreement, employees transferring from the seller were granted credit under the Pension Plan for their prior service and for the benefits they had accrued under the seller's pension plan. Approximately $1.5 million was transferred from the seller's pension plan to the Pension Plan to accommodate the recognition of such prior service and benefits. In February 2002, the Pension Plan was "frozen" by limiting participation in the Pension Plan solely to employees hired before February 22, 2002, and by including only pay and service through February 22, 2002, in the calculation of benefits. The Pension Plan is required to be maintained for the existing participants and for the benefits they had accrued as of that date. Intrepid expects to contribute $156,000 to the Pension Plan in 2011, $29,000 of which has been paid through March 31, 2011.

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INTREPID POTASH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 15—FUTURE EMPLOYEE BENEFITS (Continued)

        The components of the net periodic pension expense are set forth below (in thousands):

Note 16—RECOGNITION OF INCOME ASSOCIATED WITH DEFERRED INSURANCE PROCEEDS

        In the three months ended March 31, 2011, Intrepid completed the reconstruction and commissioning for its product warehouses at its East facility and finalized insurance settlement amounts related to the associated product inventory warehouse insurance claim that resulted from a wind event that occurred in 2006. As a result, the $11.7 million of deferred insurance proceeds that were recorded as of December 31, 2010, plus approximately $0.8 million of additional insurance proceeds, were recognized as income in the three months ended March 31, 2011. The total of approximately $12.5 million has been recorded as "Insurance settlements from property and business losses" on the consolidated statement of operations in the three months ended March 31, 2011. There was no cash impact associated with this event in the three months ended March 31, 2011, as the previously deferred insurance proceeds were paid to Intrepid prior to December 31, 2010, and the final insurance payment of approximately $0.8 million was paid to Intrepid in April 2011.

Note 17—RELATED PARTIES

        Intrepid has entered into the transactions described below with Robert P. Jornayvaz III ("Mr. Jornayvaz"), Intrepid Production Corp. ("IPC"), which is owned and controlled by Mr. Jornayvaz, Hugh E. Harvey, Jr. ("Mr. Harvey"), Harvey Operating and Production Company ("HOPCO"), which is owned and controlled by Mr. Harvey, and other entities affiliated with Messrs. Jornayvaz and Harvey identified below. Messrs. Jornayvaz and Harvey are employees, directors and significant stockholders of Intrepid.

        Airplane Use Policy—Under Intrepid's aircraft use policy, Mr. Jornayvaz, Mr. Harvey, and approved executive officers are allowed personal use of Intrepid's plane. Any personal use of aircraft may be taxable to the executive officer as a "fringe benefit" under Internal Revenue Service ("IRS") regulations. Additionally, Mr. Jornayvaz and Mr. Harvey may use the plane under dry-leases and reimburse Intrepid the lesser of the actual cost or the maximum amount chargeable under Federal Aviation Regulation 91-501(d). The value of personal use of the airplane was calculated based on the requirements provided by IRS regulations.

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INTREPID POTASH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 17—RELATED PARTIES (Continued)

        BH Holdings LLC ("BH"), which is owned by entities controlled by Mr. Jornayvaz and Mr. Harvey, entered into a dry-lease arrangement with Intrepid to allow Intrepid use of an aircraft owned by BH for Intrepid business purposes. Additionally, in January 2009, a dry-lease arrangement by and between Intrepid and Intrepid Production Holdings LLC ("IPH"), which is indirectly owned by Mr. Jornayvaz, became effective to allow Intrepid use of an aircraft owned by IPH for Intrepid business purposes. Both dry-lease rates and dry-lease arrangements were approved by Intrepid's Audit Committee.

        In the three months ended March 31, 2011, and 2010, Intrepid incurred dry-lease charges of approximately $135,000 and $40,000, respectively, for BH. As of March 31, 2011, and December 31 2010, accounts payable balances due to BH were zero and $27,000, respectively. In the three months ended March 31, 2011, and 2010, Intrepid incurred dry-lease charges of approximately $79,000 and $177,000, respectively, for IPH. As of March 31, 2011, and December 31, 2010, accounts payable balances due to IPH were zero and $17,000, respectively.

        Transition Services Agreement and Surface Use Easement and Water Purchase Agreements —On April 25, 2008, Intrepid, Intrepid Oil & Gas, LLC ("IOG"), and Intrepid Potash—Moab, LLC ("Moab") executed a Transition Services Agreement, which has been extended until April 24, 2013. Pursuant to the Transition Services Agreement, IOG may request specified employees of Intrepid or its subsidiaries (other than Mr. Jornayvaz and Mr. Harvey) to provide a limited amount of geology, land title, and engineering services in connection with IOG's oil and gas ventures.

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Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

        These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by these statements. These risks and uncertainties include changes in the price of potash or Trio^®; operational difficulties at our facilities that limit production of our products; interruptions in railcar or truck transportation services; the ability to hire and retain qualified employees; changes in demand and/or supply for potash or Trio^®; changes in our reserve estimates; our ability to successfully execute the projects that are essential to our business strategy, including, but not limited to, the development of the HB Solar Solution Mine as a solution mine and the further development of our langbeinite recovery assets; weather risks affecting net evaporation rates at our solar solution mining operations; changes in the prices of raw materials, including, but not limited to, the price of chemicals, natural gas and power; fluctuations in the costs of transporting our products to customers; changes in labor costs and availability of labor with mining expertise; the impact of federal, state or local government regulations, including, but not limited to, environmental and mining regulations, and the enforcement of such regulations; obtaining permitting from applicable federal and state agencies related to the construction and operation of assets; competition in the fertilizer industry; declines in U.S. or world agricultural production; declines in use by the oil and gas industry of potash products in drilling operations; changes in economic conditions; adverse weather events at our facilities; our ability to comply with covenants inherent in our current and future debt obligations to avoid defaulting under those agreements; disruptions in credit markets; our ability to secure additional federal and state potash leases to expand our existing mining operations; and governmental policy changes that may adversely affect our business. These factors also include the matters discussed and referenced in the section entitled "Risk Factors" described in our Annual Report on Form 10-K for the year ended December 31, 2010, and elsewhere in this Quarterly Report on Form 10-Q.

        Unless expressly stated otherwise or the context otherwise requires, the terms "we," "our," "us," and "Intrepid" refer to Intrepid Potash, Inc. and its subsidiaries. Unless expressly stated otherwise or the context otherwise requires, references to "tons" in this Quarterly Report on Form 10-Q refer to short tons. One short ton equals 2,000 pounds. One metric tonne, which many of our international competitors use, equals 1,000 kilograms or 2,205 pounds.

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Overview

Our Company

        We are the largest producer of muriate of potash ("potassium chloride" or "potash") in the United States and are dedicated to the production and marketing of potash and langbeinite ("sulfate of potash magnesia"), another mineral containing potassium that is produced from langbeinite ore and which we will generally describe as langbeinite when we refer to production and as Trio^® when we refer to sales and marketing. Our revenues are generated exclusively from the sale of potash and Trio^®. Potassium is one of the three primary nutrients essential to plant formation and growth. Since 2005, we have supplied, on average, approximately 1.6 percent of annual world potassium consumption and 9.3 percent of annual U.S. consumption. We are one of two producers of sulfate of potash magnesia, a low-chloride fertilizer with the additional benefits of sulfate and magnesium, providing a multi-nutrient product. We also produce salt, magnesium chloride, and metal recovery salts from our potash mining processes, the sales of which are accounted for as by-product credits to our cost of sales.

        Our potash is marketed for sale into three primary markets: the agricultural market as a fertilizer, the industrial market as a component in drilling and fracturing fluids for oil and gas wells, and the animal feed market as a nutrient. Our sales are focused on the agricultural areas and feed manufacturers west of the Mississippi River, as well as oil and gas drilling areas in the Rocky Mountains and the greater Permian Basin area. We also have domestic sales, primarily of Trio^®, across the United States, with a focus on areas with specific nutrient requirements. Our potash production has a geographic concentration in the western United States and is therefore affected by weather and other conditions in this region. We manage our sales and marketing operations centrally which allows us to evaluate the product needs of our customers and then determine which of our production facilities can be utilized to fill customer orders, all of which is designed to realize the highest net realized sales price to Intrepid. We calculate our average net realized sales price by subtracting freight costs from gross sales revenue and then dividing this result by sales tons.

        We own five active potash production facilities—three in New Mexico (referenced collectively below as "Carlsbad" or individually as "West," "East," and "North") and two in Utah ("Moab" and "Wendover")—and we have a current estimated productive capacity to produce approximately 870,000 tons of potash and approximately 200,000 tons of langbeinite annually. Productive capacity is affected by operating rates, recoveries, mining rates and the amount of development work that we do and, therefore, our production results tend to be lower than our productive capacity. We have an active capital investment program that includes investment in process recovery projects such as our Langbeinite Recovery Improvement Project, as well as several projects to increase market flexibility via increased granulation capacity, including our recently completed compaction project in Moab and our planned expansions of compaction capacity in Wendover and at our North facility. In addition, we are actively developing the HB Solar Solution Mine, which is an idled potash mine that we are in the process of permitting to reopen as a solution mine that will utilize solar evaporation techniques in the production of potash. We also have additional opportunities to develop mineralized deposits of potash in New Mexico which could include the reopening of the North Mine, which was operated as a traditional underground mine until the early 1980s, as well as the acceleration of production from our reserves and mineralized deposits of potash through new access points in the area and the potential construction of additional production facilities in the region.

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

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Recent Events and Market Trends

Potash

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

        Our net income in the first quarter of 2011 was $28.3 million, or $0.38 per share with cash flows from operations of $28.6 million. We had capital investments of $26.9 million in the first quarter of 2011 and ended the quarter with $142.3 million of cash and investments with no debt outstanding. Our production volumes of potash and Trio^® increased to a combined 265,000 tons in first quarter of 2011 from 229,000 in the first quarter of 2010 as we were at full operating levels, including the seasonal production from our Moab, UT facility, in the first quarter of 2011.

        During the first quarter of 2011, sales demand for potash was consistent with our expectations. The sales levels in the first quarter of 2011 were 196,000 tons of potash and 52,000 tons of Trio^® as compared to 243,000 tons of potash and 70,000 tons of Trio^® in the first quarter 2010. The reduced 2011 sales volumes reflected the effect of the more robust application levels of potash in 2010 that followed the significant decreased application levels during 2009. Our Trio^® sales volumes were impacted negatively in 2011 by the relatively low production levels of granular-sized Trio^® during the first part of the quarter which was caused by low recoveries of product from the processing circuit. During the first quarter of 2010, we saw a return in agricultural demand to more historically normal levels during 2010 with increases in sales volumes for the spring 2010 application season. The level of potash and Trio^® sales in the first quarter of 2010 was robust, as farmers had not applied as much fertilizer in the 2009 season due to the unfavorable market conditions, and subsequently increased application rates in the spring of 2010. In the first quarter of 2011, certain areas in our primary markets have experienced poor weather conditions and, as such, the spring application season has been delayed in those areas relative to 2010. In addition, as weather conditions were favorable late into last fall, farmers applied nutrients at that time in anticipation of the 2011 planting season. We have experienced an improvement in potash pricing through the fall of 2010 and into the spring of 2011, as crop economics for U.S. farmers strengthened overall. Crop prices, which are driving the strong crop economics, moved up significantly during the second half of 2010 and have remained relatively stable in the first quarter of 2011 due to continued strong demand for grains worldwide. Further, downward revisions in crop yields by the United States Department of Agriculture ("USDA") have resulted in predictions of decreased world grain stocks from 488.7 million metric tons for 2010 to 435.6 million metric tons for 2011. This downward revision in crop yields coupled with historically low levels of ending stocks and stock-to-use ratios for both corn and soybeans have contributed to the overall strength in the agricultural market. Current crop economics suggest that farmers are economically motivated to add incremental marginal production and acreage, which will likely require the application of additional nutrients.

        The near-term outlook at the potash producer level appears to be constructive based on several factors, including the following:

•

declines in stock-to-use ratios of grains in the U.S. and the world, which has driven an increase in grain commodity prices. Estimated global ending stock-to-use ratios for corn are at levels not

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seen in 37 years while estimated ending stock-to-use ratios for soybeans in the United States are at levels not seen since the mid-1960's;

•

the profitability outlook for farmers across different commodity types;



•

the low chance of price shocks from nitrogen which can be attributed to the relatively flat natural gas forward curve; and



•

dealers and distributors focusing on maintaining adequate product levels to satisfy farmer demand and their willingness to exit the spring season with some inventory as they look forward to the fall application season.

        Industrial demand for our standard-sized potash increased in the first quarter of 2011 over the same period in 2010, as we sold 25 percent more in industrial sales volumes compared to the same period in 2010. We expect that industrial demand for our standard-sized product will correlate over the long term with oil and gas pricing, drilling, and well completion activity. However, sales demand for our standard-sized product remains below the levels experienced during 2007 and 2008 due to continued relatively lower levels of oil and gas drilling in the geographic markets served by our Utah facilities. In addition, some drillers have switched to alternatives to standard-sized potash or have attempted to forego the use of potash altogether in drilling and completing their wells in an effort to reduce costs. We believe that potash is the most effective clay-swelling inhibitor available, and we are promoting potash as the drilling fluid additive of choice in our traditional industrial markets and are working with our key customers to find ways to stimulate demand. The demand for industrial standard-sized potash used in fracture fluids varies by region, and we have experienced differences in demand for our product with respect to the markets served by our Carlsbad operations and our Utah operations. Our Carlsbad sales, which predominately serve Texas, Oklahoma, Louisiana, and New Mexico, have experienced relatively flat sales volumes of industrial standard-sized potash in comparison to the sales volumes from the first quarter of 2010. The relatively lower natural gas prices in the Rocky Mountain region have resulted in a decrease in the rig count of approximately 43 percent from the high in 2008 of the number of rigs drilling for oil and gas in the Colorado, Utah, and Wyoming areas, markets typically served by our Utah operations, which, in turn, has resulted in a lower volume of sales of standard-sized potash relative to 2007 and 2008. Consequently, we have experienced an accumulation of standard-sized potash inventory at our Utah facilities.

        As a result of the items noted above, as well as our strategy to have more marketing flexibility to provide multiple market outlets for our products, we have begun investing in additional granulation capacity as evidenced by the successful completion of the compactor at our Moab facility and our further planned investments in additional granulation capacity. In addition, we have taken shorter term actions, such as incentivizing sales of industrial standard-sized product from our Utah locations in an effort to reduce those inventory levels and balancing industrial sales between our Utah and New Mexico production facilities. The new compactor at Moab is designed to provide granular-sized capacity in excess of our anticipated production levels, allowing us to modify our production mix of granular-sized and standard-sized potash, as needed, to meet demand in the agricultural, industrial, and feed markets that we serve. The new Moab compactor was placed into service in December 2010 and has been operating as expected. We anticipate further enhancing our marketing flexibility through our plans to construct a new compactor at our Wendover facility that will provide us the capacity to granulate an amount of product greater than the average annual historical production levels from the Wendover facility beginning in 2012. The feed component of our sales stayed relatively flat from year to year, however the percentage of our overall sales into this market increased in 2011 relative to other markets, primarily as a result of lower sales volumes into the agricultural market. The percentages of

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our potash sales volumes for each of the markets we serve were approximately as follows for the indicated periods:

        As a result of both supply and demand trends in the general market for potash, as well as crop prices trending upwards, including prices for corn, soy beans, rice, potatoes, hay, cotton, barley, sugar beets and virtually all agricultural commodities, potash prices increased during the first quarter of 2011 on a trend basis from the last two quarters of 2010. Over the long-term, we believe that domestic consumption of fertilizers will remain at historical averages as the replacement of potassium in the soils is critical to continued high-yield agricultural production. This view is supported by data generated by Fertecon Limited, a fertilizer industry consultant, showing that over the past 25 years the domestic consumption for potash has averaged approximately 9.2 million tons with annual volatility of approximately 8 percent through historical periods of low and high agricultural commodity prices, variability in oil and gas drilling, negative farmer margins, and a variety of other macro-economic factors.

Trio^®

        Our Trio^® product is marketed both domestically and internationally. In contrast, virtually all of our potash is sold in the United States. The mix of our U.S. and export Trio^® sales volumes has changed as domestic demand has remained strong for granular-sized Trio^® product, while the export market for our standard-sized Trio^® product has lagged the strong results experienced in 2007 and 2008. We remain selective in selling into the export market as domestic product sales of granular Trio^® yield a higher average net realized sales price. International standard Trio^® customers are slowly converting to granular customers as the technology for spreading fertilizer develops internationally. We expect that future growth in Trio^® demand will be primarily for granular-sized product. During the first quarter of 2011, 13 percent of our gross sales dollars were related to Trio^®, and, of that 13 percent, 31 percent were export sales, resulting in less than five percent of our overall gross sales being sold outside the United States. The percentages of our Trio^® sales volumes shipped to destinations in the United States and exported were as follows for the indicated periods.

        We began producing and selling langbeinite in late 2005 and have been marketing it as Trio^® since 2007. Trio^® is marketed into two primary markets, the agricultural market as a fertilizer and the animal feed market as a nutrient. We market Trio^® internationally through an exclusive marketing agreement with PCS Sales (USA), Inc. for sales outside the United States and Canada and via a non-exclusive agreement for sales into Mexico. We are focusing our marketing efforts on increasing the awareness of the benefits of Trio^® and working to grow the overall Trio^® market. Sales of Trio^® on an international basis tend to be larger bulk shipments and vary as to when such shipments take place; therefore, we see greater variability in our international sales volumes from period-to-period when compared to our domestic sales. Despite lower available tons of granular-sized Trio^®, the sales of our granular-sized Trio^® product continued to be solid during the first quarter of 2011 as we sold through our available inventory. The lower availability of product was due to lower than expected recovery levels experienced in recent quarters. We placed an emphasis on restoring recovery levels, by reviewing operating practices against original design specifications, reviewing process equipment selection and operating parameters, improving maintenance practices, and stabilizing process conditions with minor

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instrumental modification. As a result of these activities, recoveries of Trio^® began to increase beginning in March 2011, and the increased recoveries have continued to date.

        As noted, demand for Trio^® continues to be robust and even with the recent improvement in our recoveries of granular Trio^®, we expect that granular-sized Trio^® sales demand will exceed our production capabilities for the next few quarters, resulting in the need to sell our granular-sized product on an allocated basis ahead of the completion of our enhanced recovery and granulation projects associated with Trio^®. In March 2011, we received the necessary construction permit for the dense media separation plant of our Langbeinite Recovery Improvement Project and we have begun construction on this plant. We have also received notice that the application for the permit for the granulation plant within the Langbeinite Recovery Improvement Project has been declared administratively complete and we plan to commence construction of this plant immediately upon receipt of the associated permit. With the addition of the granulation plant, we will produce a prilled or granular-sized particle that will supplement our granular-sized production capacity resulting in our ability to granulate all of our anticipated Trio^® production. The overall Langbeinite Recovery Improvement Project is designed to increase our recoveries of langbeinite from the current design recovery rates of approximately 30-35 percent to approximately 50 percent, and at the same time, reduce our freshwater usage in the production of Trio^®.

        During the first quarter of 2011, our average net realized sales price of Trio^® was negatively impacted by the sales of standard-sized Trio^® into the export market. The Langbeinite Recovery Improvement Project is expected to not only increase our overall Trio^® production but will also allow us the capability to produce all of our Trio^® in the higher value granular form. This will provide us with the opportunity to sell more granular Trio^® which currently commands a higher sales price than standard Trio^®. The average net realized price for our granular-sized Trio^® sold in the United States is approximately $55 to $60 higher than the average net realized price of our standard product sold in the export markets. Even with the increase in our domestic granular price for Trio^® that occurred during the quarter, our overall average net realized price for Trio^®, including both granular and standard-sized product, decreased as compared to the fourth quarter of 2010 because of the mix of product sold. As our current finishing process for Trio^® does not allow us to selectively produce granular or standard-sized product, we continue to make these lower priced export sales of standard-sized Trio to reduce inventory levels of this product so that we can continue to supply the higher-value granular-sized Trio^® product to the domestic market.

Rail Transportation Interruption

        On April 13, 2011, we were notified by Southwestern Railroad Inc. ("Southwestern Railroad") that a railcar derailment (the "Derailment") had occurred on a railroad line operated by the Southwestern Railroad approximately 25 miles north of Carlsbad, New Mexico. The Derailment destroyed a number of railcars that were loaded with Intrepid products which were in transit to Intrepid customers. This short-line track operated by Southwestern Railroad services the Carlsbad Basin and is the sole railroad line into and out of the Carlsbad Basin. In connection with the Derailment, a railroad bridge was destroyed. As a result, this railroad line was not operational for 17 days during which time we were not able to ship products to our customers by rail from our New Mexico operations. During this time period, the Derailment delayed us from making certain sales and timely deliveries to certain of our customers by rail. We have resumed shipments by rail from our New Mexico operations and we do not expect that the Derailment will have a material adverse effect on our future operating results and financial condition.

Selected Operations Data

        The following table presents selected operations data for the periods presented below. Analysis of the details of this information is presented throughout this discussion. We present this table as a

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