Intrepid Potash, Inc.IPI
Intrepid Potash, Inc. Stock Compensation Disclosure
COMPENSATION PLANS
Cash Bonus Programs—We use cash bonus programs under which our employees may be eligible to receive cash bonuses based on corporate, department, location, or individual performance or other events or accomplishments. We accrue cash bonus expense related to the current year's performance and we expect to pay in March 2025 a cash bonus to our employees under our 2024 bonus program. We met certain performance metrics related to our 2023 cash bonus program and paid a cash bonus in March 2024. We met certain performance metrics related to our 2022 cash bonus program and paid a cash bonus in March 2023.
Equity Incentive Compensation Plan—Our Board of Directors and stockholders adopted a long-term incentive compensation plan called the Intrepid Potash, Inc. Amended and Restated Equity Incentive Plan (the "Plan"). We have issued restricted shares, common stock, restricted stock units, and non-qualified stock option awards under the Plan. As of December 31, 2024, 319,035 restricted shares, 111,285 restricted stock units, and options to purchase 273,206 shares of common stock were outstanding. As of December 31, 2024, approximately 0.8 million shares of common stock remained available for issuance under the Plan. Total compensation expense related to the Plan was $3.6 million, $6.5 million, and $6.2 million, for the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, there was $6.7 million of total remaining unrecognized compensation expense that is expected to be recognized over a weighted-average period of 1.9 years. When restricted shares and performance units vest and when stock options are exercised, new shares are issued and considered outstanding for financial statement purposes.
Restricted Shares
•Restricted Shares with Service Conditions—Under the Plan, the Compensation Committee of the Board of Directors (the "Compensation Committee") has granted restricted shares of common stock to members of the Board of Directors, executive officers, and other key employees. The restricted shares contain service conditions associated with continued employment or service. The restricted shares provide voting and regular dividend rights to the holders of the awards.
In 2024, the Compensation Committee granted an aggregate of 196,809 restricted shares to executives and key employees under the Plan as part of either our annual equity award program, to new employees or to employees that assumed additional responsibilities during the year. The awards vest over three years, subject to continued service. In May 2024, the Compensation Committee granted an aggregate of 20,739 shares of restricted shares to non-employee members of the Board of Directors. The restricted shares vest one year after the date of the grant, subject to continued service. In September 2024, the Compensation Committee granted special one-time grants of an aggregate of 6,282 shares of restricted stock to non-employee directors as additional compensation, which will vest on the earlier of the date a member of the Board resigns, May 25, 2025, or the day before the 2025 Annual Meeting of Stockholders.
In 2023, the Compensation Committee granted 130,975 restricted shares to executives and key employees under the Plan as part of our annual equity award program. The awards vest over three years, subject to continued employment or service. The Compensation Committee granted an aggregate 22,226 restricted shares to non-employee members of the Board of Directors in 2023. The restricted shares vest one year after the date of grant, subject to continued service.
In 2022, the Compensation Committee granted in aggregate 53,202 restricted shares to executives and key employees under the Plan as part of our annual equity award program. The awards vest over three years, subject to continued service. The Compensation Committee also granted an aggregate 6,635 restricted shares to non-employee members of the Board of Directors in 2022. The restricted shares vest one year after the date of grant, subject to continued service.
We use the closing price of our common stock on the grant date as the grant date fair value for these awards. We record compensation expense monthly using the straight-line recognition method over the vesting period of the award. The weighted-average grant date fair value per share for restricted shares with service conditions issued in 2024, 2023, and 2022 was $22.46, $25.11, and $66.07, respectively.
•Restricted Shares with Service and Market Conditions— Under the Plan in March 2024, the Compensation Committee granted restricted shares of common stock with service and market conditions to certain members of our executive team as part of their annual compensation package. The grants vest over three years from the grant date if the average share closing price for 20 consecutive days has met one of the
applicable price achievement targets; provided, however, that no vesting would occur if the average closing share price for 20 consecutive days has not met one or more applicable price achievement goals on or before March 17, 2027. All share price achievement goals for these awards have been met as of December 31, 2024, and the shares will vest on the grant date anniversary in 2025, 2026, and 2027.
Under the Plan in March 2023, the Compensation Committee granted restricted shares of common stock with service and market conditions to certain members of our executive team as part of their annual compensation package. The grants vest over three years from the grant date if the average share closing price for 20 consecutive days has met one of the applicable price achievement targets; provided, however, that no vesting would occur if the average closing share price for 20 consecutive days has not met one or more applicable price achievement goals on or before March 17, 2026. The share price achievement goals for these awards have not been met as of December 31, 2024.
Under the Plan in March 2023, the Compensation Committee also granted restricted shares of common stock with service and market conditions to our former chief executive officer as part of his annual compensation package. On September 30, 2024, our chief executive officer resigned from all positions with the Company and its subsidiaries and affiliates, and all unvested shares of restricted stock of common stock granted under this award were forfeited.
Under the Plan in March 2022, the Compensation Committee granted restricted shares of common stock with service and market conditions to certain members of our executive team as part of their annual compensation package. The grants vest over three years from the quarter ended in which the volume-weighted average share closing price for 20 consecutive days has met one of the applicable price achievement targets; provided, however, that no vesting would occur if the volume-weighted average closing price for 20 consecutive days has not met one or more applicable price achievement goals on or before March 17, 2025. The share price achievement goals of these awards were met in 2022, and 1,737 shares vested in 2024.
Under the Plan in March 2022, the Compensation Committee granted restricted shares of common stock with service and market conditions to our former chief executive officer as part of his annual compensation package. This grant vested over two years from the quarter ended in which the volume-weighted average share closing price for 20 consecutive trading days has met one of the applicable price achievement targets; provided, however, that no vesting would occur if the volume-weighted average closing price for 20 consecutive trading days has not met one or more applicable price achievement goals on or before March 17, 2026. The share price achievement goals of these awards were met in 2022, and 14,513 shares vested in June 2024.
We used a Monte Carlo simulation valuation model to estimate the fair value of these awards on the grant date. We record compensation expense monthly using the accelerated recognition method over the longer of the explicit or derived service period of the award. The weighted-average grant date fair value per share of restricted shares with service and market conditions issued in 2024, 2023, and 2022, was $17.80, $24.96, and $62.32, respectively.
Valuation models require the input of highly subjective assumptions, including the expected volatility of the price of the underlying stock. We used the following assumptions to compute the weighted-average grant date fair market value of restricted stock with service and market conditions granted in 2024, 2023, and 2022:
| 2024 | 2023 | 2022 | ||||||||||||||||||
| Closing stock price on grant date | $ | 19.37 | $ | 26.05 | $ | 66.33 | ||||||||||||||
| Risk free interest rate | 4.5 | % | 3.6 | % | 2.2 | % | ||||||||||||||
| Dividend yield | — | % | — | % | — | % | ||||||||||||||
| Estimated volatility | 67.6 | % | 82.9 | % | 79.8 | % | ||||||||||||||
| Expected life | 3.0 years | 3.8 years | 6.0 years | |||||||||||||||||
A summary of all activity relating to our restricted shares for the year ended December 31, 2024, is presented below:
| Weighted Average Grant-Date Fair Value | ||||||||||||||
| Shares | ||||||||||||||
| Restricted shares of common stock, beginning of period | 340,924 | $ | 36.98 | |||||||||||
| Granted with service only condition | 223,830 | $ | 22.46 | |||||||||||
| Granted with service and market conditions | 32,299 | $ | 17.80 | |||||||||||
| Vested, service only condition | (97,377) | $ | 20.82 | |||||||||||
| Vested, service and market conditions | (41,291) | $ | 49.04 | |||||||||||
| Forfeited, service only condition | (53,875) | $ | 32.29 | |||||||||||
| Forfeited, service and market conditions | (85,475) | $ | 28.72 | |||||||||||
| Restricted shares of common stock, end of period | 319,035 | $ | 31.23 | |||||||||||
Restricted Stock Units with Service and Market Conditions
In November 2024, the Board of Directors (the "Board") appointed a new chief executive officer and in connection with that appointment, in December 2024, the new chief executive officer was granted two restricted stock unit (“RSU”) awards. Both of the RSU awards contain a service condition and a market condition, with one RSU award containing an absolute total stockholder return (“TSR”) market condition (referred to as the “aTSR") and the other RSU award containing a relative TSR market condition (referred to as the “rTSR”). Under both the aTSR and rTSR awards, any RSUs that vest shall be settled through the issuance of an equal number of shares of our common stock as soon as administratively practicable.
Under the terms of the aTSR award, up to 19,575 RSUs may be earned based on the achievement of certain absolute TSR hurdles on or prior to December 31, 2028. If a TSR hurdle is achieved on or before the one-year anniversary of the grant date, the RSUs earned will vest in three equal installments on the one-, two-, and three-year anniversaries of the grant date. If any TSR hurdles are achieved after the one-year anniversary of the grant date but before the two-year anniversary of the grant date, one-third of the RSUs earned will vest immediately and the remaining earned RSUs will vest equally on the two- and three-year anniversaries of grant date. For any TSR hurdles met after the two-year anniversary of the grant date, two-thirds of the RSU's earned will vest immediately and one third will vest on the third-year anniversary of the grant date. If a TSR hurdle is achieved after the three-year anniversary of the grant date and on or prior to December 31, 2028, the RSUs earned will vest immediately. Any RSUs that have not been earned as of December 31, 2028, are forfeited. RSUs under the aTSR award do not have any stockholder rights of holders of shares of common stock.
Under the terms of the rTSR, RSUs may be earned based on the Company’s TSR percentile rank compared to each company included in the Russell 2000 Index as of January 1, 2025. The period under which the relative performance is measured is from January 1, 2025, through December 31, 2027 (the “Performance Period”). If the Company’s TSR percentile rank is in the 20th percentile rank or below, no RSUs will vest. If the Company’s TSR percentile rank is in the 90th percentile or above, up to 91,710 RSUs are eligible to vest, subject to a negative TSR cap and a max payout cap. If the Company’s TSR is negative, then, irrespective of the Company’s relative TSR percentile rank, the maximum number of RSUs that may be earned is 45,855. Under the max payout cap, the total fair market value of the shares of common stock issuable may not be greater than $6.6 million. The grantee is entitled to receive an additional amount in cash equal to the value of all dividends and distributions made during the Performance Period for any vested RSUs. The RSUs do not have any other stockholder rights of holders of shares of common stock.
We used a Monte Carlo simulation valuation model to estimate the fair value of the aTSR and rTSR awards on the grant date. We record compensation expense monthly using the accelerated recognition method over the longer of the explicit or derived service period of the award. The weighted-average grant date fair value per share using the maximum number of shares that can be earned under the aTSR and rTSR awards issued in 2024 was $22.63 and $14.89, respectively.
We used the following assumptions to compute the weighted-average grant date fair market value of RSUs granted with service and market conditions granted in 2024:
| Absolute TSR RSU Award | Relative TSR RSU Award | |||||||||||||
| Closing stock price on grant date | $ | 27.39 | $ | 27.39 | ||||||||||
| Risk free interest rate | 4.1 | % | 4.1 | % | ||||||||||
| Dividend yield | — | % | — | % | ||||||||||
| Estimated volatility | 67.8 | % | 62.2 | % | ||||||||||
| Expected life | 4.1 years | 3.1 years | ||||||||||||
Non-Qualified Stock Option Activity
We have not granted any non-qualified stock options to our employees since 2018. A summary of all stock option activity for the year ended December 31, 2024, is as follows:
| Shares | Weighted Average Exercise Price | Aggregate Intrinsic Value1 | Weighted Average Remaining Contractual Life | |||||||||||||||||||||||
| Outstanding non-qualified stock options, beginning of period | 273,206 | $29.04 | ||||||||||||||||||||||||
| Granted | — | $— | ||||||||||||||||||||||||
| Exercised | — | $— | ||||||||||||||||||||||||
| Forfeited | — | $— | ||||||||||||||||||||||||
| Expired | — | $— | ||||||||||||||||||||||||
| Outstanding non-qualified stock options, end of period | 273,206 | $29.04 | $767,141 | 0.8 | ||||||||||||||||||||||
| Vested or expected to vest, end of period | 273,206 | $29.04 | $767,141 | 0.8 | ||||||||||||||||||||||
| Exercisable non-qualified stock options, end of period | 273,206 | $29.04 | $767,141 | 0.8 | ||||||||||||||||||||||
1The 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.
No stock options were exercised during 2024 and 2023. The total intrinsic value of exercised options to purchase stock during 2022 was $0.6 million.About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.