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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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45-2809926
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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1725 Hughes Landing Blvd, Suite 800
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The Woodlands, Texas 77380
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(281) 231-2660
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(Address of principal executive offices)
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(Registrant’s telephone number)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $0.001 per share
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The NASDAQ Stock Market LLC
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Securities registered pursuant to Section 12(g) of the Act:
None
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Large accelerated filer ☐
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Accelerated filer
ý
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Non-accelerated filer ☐
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Smaller reporting company
ý
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Emerging growth company
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PAGE
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“We”, “Us”, “Company”, “Smart Sand” or “Our”
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Smart Sand, Inc., a company organized under the laws of Delaware, and its subsidiaries.
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“shares”, “stock”
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The common stock of Smart Sand, Inc., nominal value $0.001 per share.
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“Credit Agreement”, “Credit Facility”
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On December 8, 2016, the Company entered into a $45 million 3-year senior secured revolving credit facility under a revolving credit agreement with Jefferies Finance LLC as administrative and collateral agent (the “Credit Agreement”). This credit facility was amended: (i) on April 8, 2018, to increase our total borrowing capacity to $60 million; (ii) on July 13, 2018, to among other things, (A) increase the limit on our ability to sell, transfer or dispose of assets, subject to certain considerations from an aggregate amount of $25 million to $55 million, (B) increase the limit on our ability to incur capital lease obligations from an aggregate principal amount of $15 million to $30 million and (C) exclude certain current and future earn-out obligations from the definition of indebtedness in the Credit Agreement; and (iii) on February 22, 2019 to, among other things (A) extend the maturity date to June 30, 2020 and (B) decrease our total borrowing capacity to $50 million between June 30, 2019 to December 31, 2019 (“Credit Facility”).
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“Exchange Act”
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The Securities Exchange Act of 1934, as amended.
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“Securities Act”
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The Securities Act of 1933, as amended.
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“FCA”, “DAT”, “DAP”
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Free Carrier, Delivered at Terminal, Delivered at Place, respectively, Incoterms 2010.
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“FASB”, “ASU”, “ASC”
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Financial Accounting Standards Board, Accounting Standards Update, Accounting Standards Codification, respectively.
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•
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fluctuations in demand for raw frac sand;
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•
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the cyclical nature of our customers' businesses;
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•
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operating risks that are beyond our control, such as changes in the price and availability of transportation, natural gas or electricity; unusual or unexpected geological formations or pressures; pit wall failures or rock falls: or unanticipated ground, grade or water conditions;
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•
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our dependence on our Oakdale mine and processing facility for current sales;
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•
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the level of activity in the oil and natural gas industries;
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•
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the development of either effective alternative proppants or new processes to replace hydraulic fracturing;
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•
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increased competition from new sources of raw frac sand supply, including new raw frac sand mines in locations such as the Permian Basin of West Texas;
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•
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federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing and the potential for related regulatory action or litigation affecting our customers' operations;
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•
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our rights and ability to mine our properties and our renewal or receipt of the required permits and approvals from governmental authorities and other third parties;
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•
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our ability to implement our capacity expansion plans within our current timetable and budget and our ability to secure demand for our increased production capacity, along with the actual operating costs we will incur once we have completed the capacity expansion;
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•
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our ability to successfully compete in the raw frac sand market;
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•
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loss of, or reduction in, business from our largest customers;
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•
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increasing costs or a lack of dependability or availability of transportation services and transload network access or infrastructure;
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•
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increases in the prices of, or interruptions in the supply of, natural gas, electricity, or any other energy sources;
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•
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increases in the price of diesel fuel;
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•
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loss of or diminished access to water;
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•
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our ability to successfully complete acquisitions or integrate acquired businesses;
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•
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our ability
to fully protect our intellectual property rights;
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•
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our ability to make capital expenditures to maintain, develop and increase our asset base and our ability to obtain needed capital or financing on satisfactory terms;
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•
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restrictions imposed by our indebtedness on our current and future operations;
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•
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contractual obligations that require us to deliver minimum amounts of frac sand or purchase minimum amounts of services;
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•
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the accuracy of our estimates of mineral reserves and resource deposits;
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•
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a shortage of skilled labor and rising costs in the frac sand mining and manufacturing industries;
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•
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our ability to attract and retain key personnel;
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our ability to maintain satisfactory labor relations;
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•
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our ability to maintain effective quality control systems at our mining, processing and production facilities;
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seasonal and severe weather conditions;
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•
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fluctuations in our sales and results of operations due to seasonality and other factors;
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•
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interruptions or failures in our information technology systems, including cyber-attacks;
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the impact of a terrorist attack or armed conflict;
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extensive and evolving environmental, mining, health and safety, licensing, reclamation and other regulation (and changes in their enforcement or interpretation);
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silica-related health issues and corresponding litigation;
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our ability to acquire, maintain or renew financial assurances related to the reclamation and restoration of mining property; and
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other factors disclosed in Item I A. "Risk Factors" and elsewhere in this Annual Report on Form 10-K.
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•
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Long-lived, strategically located, high-quality reserve base.
We believe our Oakdale facility is one of the few raw frac sand mine and production facilities that has the unique combination of a large high-quality reserve base of primarily fine mesh sand that is contiguous to its production and primary rail loading facilities. We have an implied proven reserve life of approximately
58 years
based on our current annual nameplate processing capacity of
5.5 million tons
. We believe that with further development and permitting, the Oakdale facility ultimately could be expanded to allow production of up to
9 million tons
of raw frac sand per year.
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Intrinsic logistics advantage.
We believe that we are one of the few raw frac sand producers with a facility custom-designed for the specific purpose of delivering raw frac sand to all of the major U.S. oil and natural gas producing basins by an on-site rail facility that can simultaneously accommodate multiple unit trains. Our on-site transportation assets at Oakdale include approximately
nine miles
of rail track in a triple-loop configuration and
four
railcar loading facilities that are connected to a Class I rail line owned by Canadian Pacific. We believe our customized on-site logistical configuration yields lower operating and transportation costs compared to manifest train or single-unit train facilities as a result of our higher railcar utilization, more efficient use of locomotive power and more predictable movement of product between mine and destination. In addition, we have a transload facility on a Class I rail line owned by Union Pacific in Byron Township, Wisconsin, approximately three miles from the Oakdale facility. This transload facility, which is capable of handling multiple unit trains simultaneously, allows us to ship sand directly to our customers on more than one Class I rail carrier. We believe that we are the only sand facility in Wisconsin that has dual served rail capabilities, which should create competition among our rail carriers and allow us to provide more competitive logistics options for our customers.
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Expanded logistics solutions.
Our recently acquired transloading terminal in Van Hook, North Dakota, became operational in April 2018. This terminal is capable of handling multiple unit trains simultaneously, and we have been providing in-basin sand at this terminal to our customers since operations began in April 2018. We believe this new terminal provides us with an opportunity to expand our customer base and offer more efficient delivery options to customers operating in the Bakken Formation in the Williston Basin. We believe our recent acquisition of Quickthree provides us with the technology, production capacity and management team to compete further in the
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•
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Ample liquidity and financial flexibility.
We believe we have ample liquidity to pursue our growth initiatives. As of December 31, 2018, we have cash on hand of
$1.5 million
and undrawn availability of
$15.5 million
on our $60.0 million Credit Facility. In February 2019, we entered into an agreement with the existing lenders on our Credit Facility to, among other things, extend the maturity date of the Credit Facility to June 30, 2020 and also to reduce the total capacity to $50.0 million by December 31, 2019. Additionally, we have entered into various financing arrangements which allow us to borrow an additional
$14.2 million
. We intend to utilize these funds to continue the manufacturing of our wellsite proppant storage solutions equipment. Additionally, 13% of our railcar fleet comes off lease in 2019, which allows us additional flexibility to manage costs should reduced activity continue.
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Focus on safety and environmental stewardship.
We are committed to maintaining a culture that prioritizes safety, the environment and our relationship with the communities in which we operate, which we believe is critical to the success of our business. In August 2014, we were accepted as a “Tier 1” participant in Wisconsin’s voluntary “Green Tier” program, which encourages, recognizes and rewards companies for voluntarily exceeding environmental, health and safety legal requirements. In addition, we committed to certification under ISO standards and, in April 2016, we received ISO 9001 and ISO 14001 registrations for our quality management system and environmental management system programs, respectively. In 2018, we received two awards for lowest injury rate for medium sized companies from the Industrial Mineral Association. We are one of a select group of companies who are members of the Wisconsin Industrial Sand Association, which promotes safe and environmentally responsible sand mining standards.
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Experienced management team.
The members of our senior management team bring significant experience to the market environment in which we operate. Their expertise covers a range of disciplines, including industry-specific operating and technical knowledge and experience managing high-growth businesses.
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Expanding and optimizing our logistics infrastructure and developing additional origination and destination points.
We intend to further optimize our logistics infrastructure and develop additional origination and destination points. We expect to capitalize on our Oakdale facility’s ability to simultaneously accommodate multiple unit trains on-site with the Canadian Pacific rail network and ship on two Class I rail carriers to maximize our product shipment rates, increase our railcar utilization and lower our transportation costs. Through our transloading facility located on the Union Pacific rail network approximately three miles from our Oakdale facility, we have the ability to ship our raw frac sand directly to our customers on more than one Class I rail carrier. This facility provides increased delivery options for our customers, greater competition among our rail carriers and potentially lower freight costs. In 2018, we added a new multi-unit train capable terminal in Van Hook, North Dakota, which we believe allows us to be one of the most efficient and low-cost sources of raw frac sand in the Bakken formation in the Williston Basin. We also acquired a manufacturer of portable vertical frac sand silo equipment, which will allow us to expand the logistics services we can provide all the way to the wellsite for our customers.
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i.
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our portable silos can be set up or taken down rapidly;
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ii.
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our trailers detach, which reduces their footprint on the wellsite;
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iii.
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our storage silos include industry-leading passive and active dust suppression technology; and
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iv.
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our patented system has the capability of a gravity-fed operation and when used in combination with our Quickload system, our silos can be filled by both pneumatic and gravity dump trailers.
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Focusing on organic growth by increasing our utilization of our existing facility.
We intend to continue to pursue opportunities to maximize the value and the utilization of our Oakdale facility in Wisconsin as a producer of high-quality Northern White raw frac sand through the addition of new contracted volumes. Despite the emergence of regional sand in the Permian basin, we believe the proppant market continues to offer attractive long-term growth fundamentals for Northern White raw frac sand due to its superior results as a proppant outweighing the incremental cost savings of regional sand.
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•
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Focusing on being a low-cost producer and continuing to make process improvements.
We will continue to focus on being a low-cost producer, which we believe will permit us to compete effectively for sales of raw frac sand and to achieve attractive operating margins. Our low-cost structure results from a number of key attributes, including, among others, our (i) relatively low royalty rates, (ii) balance of coarse and fine mineral reserve deposits and corresponding contractual demand that minimizes yield loss, and (iii) Oakdale facility’s proximity to two Class I rail lines and other sand logistics infrastructure. We have strategically designed our operations to provide for low-cost production. For example, as part of our recent Oakdale expansion, we enclosed two dryers and one wet plant in a single building to allow these processing plants to operate on a year-round basis. This should allow us to more efficiently match our wet sand production with our drying capacity and to better utilize our workforce with a goal to reduce the overall cost of production. In addition, we seek to maximize our mining yields on an ongoing basis by targeting sales volumes that more closely match our reserve gradation in order to minimize mining and processing of superfluous tonnage. We also continue to evaluate other mining techniques to reduce the overall cost of our mining operations.
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•
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Creating flexible sales activities.
We believe that demand for our products will remain strong in basins where regional sand is not widely available, such as the Bakken in North Dakota and Marcellus and Utica formations in the Northeast region of the United States. We continue to have discussions with operators in these regions regarding new relationship and growth opportunities. We also believe that the long-term benefits of high quality Northern White sand outweighs the short-term cost savings provided by regional sand in the Permian basin. We believe there are additional opportunities for customers in the Permian and other basins, which have regional supply, who are focused on the long-term performance of their production and on the long-term efficiency of the logistics of their supply needs.
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2014
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2015
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2016
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2017
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2018
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2019E
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2020E
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New US Horizontal Wells
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20,819
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14,413
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8,599
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13,116
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15,691
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14,840
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15,233
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Proppant Demand (Mil Tons)
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67
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52
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40
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74
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98
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101
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120
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•
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geological and mining conditions and/or effects from prior mining that may not be fully identified by available data or that may differ from experience;
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•
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assumptions concerning future prices of raw frac sand, operating costs, mining technology improvements, development costs and reclamation costs; and
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•
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assumptions concerning future effects of regulation, including wetland mitigation requirements, the issuance of required permits and the assessment of taxes by governmental agencies.
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•
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mistaken assumptions about revenues and costs, including synergies;
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•
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inability to integrate successfully the businesses we acquire;
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•
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inability to hire, train or retain qualified personnel to manage and operate our business and newly acquired assets;
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•
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the assumption of unknown liabilities;
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•
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limitations on rights to indemnity from the seller;
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•
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mistaken assumptions about the overall costs of equity or debt;
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•
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diversion of management’s attention from other business concerns;
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•
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unforeseen difficulties operating in new product areas or new geographic areas; and
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•
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customer or key employee losses at the acquired businesses.
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•
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grant liens;
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•
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incur additional indebtedness;
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•
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engage in a merger, consolidation or dissolution;
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•
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enter into transactions with affiliates;
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•
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sell or otherwise dispose of assets, businesses and operations;
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•
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materially alter the character of our business as conducted at the time of filing of this annual report; and
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•
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make acquisitions, investments and capital expenditures.
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•
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issuance of administrative, civil, or criminal penalties;
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•
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denial, modification, or revocation of permits or other authorizations;
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•
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occurrence of delays in permitting or performance of projects;
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•
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imposition of injunctive obligations or other limitations on our operations, including cessation of operations; and
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•
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requirements to perform site investigatory, remedial, or other corrective actions.
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•
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the lack of availability, higher expense, or unreasonable terms of such financial assurances;
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•
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the ability of current and future financial assurance counterparties to increase required collateral; and
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•
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the exercise by financial assurance counterparties of any rights to refuse to renew the financial assurance instruments.
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•
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our operating and financial performance;
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•
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quarterly variations in the rate of growth of our financial indicators, such as revenues, EBITDA, Adjusted EBITDA, contribution margin, net income, and net income per share;
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•
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the public reaction to our press releases, our other public announcements, and our filings with the SEC;
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•
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strategic actions by our competitors;
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•
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our failure to meet revenue or earnings estimates by research analysts or other investors;
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•
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changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts;
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•
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speculation in the press or investment community;
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•
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the failure of research analysts to cover our common stock;
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•
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sales of our common stock by us or our, stockholders, or the perception that such sales may occur;
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•
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changes in accounting principles, policies, guidance, interpretations, or standards;
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•
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additions or departures of key management personnel;
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•
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actions by our stockholders;
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•
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general market conditions, including fluctuations in commodity prices, sand-based proppants, or industrial and recreational sand-based products;
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•
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domestic and international economic, legal and regulatory factors unrelated to our performance; and
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•
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the realization of any risks described under this “Risk Factors” section.
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•
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advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of stockholders;
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•
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provisions that divide our board of directors into three classes of directors, with the classes to be as nearly equal in number as possible;
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•
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provisions that prohibit stockholder action by written consent after the date on which our Principal Stockholders collectively cease to beneficially own at least 50% of the voting power of the outstanding shares of our stock entitled to vote;
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•
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provisions that provide that special meetings of stockholders may be called only by the board of directors or, for so long as a Principal Stockholder continues to beneficially own at least 20% of the voting power of the outstanding shares of our stock, such Principal Stockholder;
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•
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provisions that provide that our stockholders may only amend our certificate of incorporation or bylaws with the approval of at least 66 2/3% of the voting power of the outstanding shares of our stock entitled to vote, or for so long as our Principal Stockholders collectively continue to beneficially own at least 50% of the voting power of the outstanding shares of our stock entitled to vote, with the approval of a majority of the voting power of the outstanding shares of our stock entitled to vote;
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•
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provisions that provide that the board of directors is expressly authorized to adopt, or to alter or repeal our bylaws; and
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•
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provisions that establish advance notice and certain information requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
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Facility Characteristic
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Description
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Site geography
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Situated on 1,256 contiguous acres, with on-site processing and rail loading facilities.
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Proven recoverable reserves
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317 million tons.
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Deposits
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Sand reserves of up to 200 feet; grade mesh sizes 20/40, 30/50, 40/70 and 100 mesh.
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Proven reserve mix
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Approximately 19% of 20/40 and coarser substrate, 41% of finer 40/70 mesh substrate and approximately 40% of fine 100 mesh substrate. Our 30/50 gradation is a derivative of the 20/40 and 40/70 blends.
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Excavation technique
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Generally shallow overburden allowing for surface excavation.
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Annual nameplate processing capacity
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5.5 million tons effective as of the second quarter of 2018.
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Logistics capabilities
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Dual served rail line logistics capabilities. On-site transportation infrastructure capable of simultaneously accommodating multiple unit trains and connected to the Canadian Pacific rail network. Additional unit train capable transload facility located approximately three miles from the Oakdale facility in Byron Township that provides access to the Union Pacific rail network.
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Royalties
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$0.50 per ton sold of 70 mesh and coarser substrate.
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Expansion Capabilities
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We believe that with further development and permitting, the Oakdale facility could ultimately be expanded to allow production of up to 9 million tons of raw frac sand per year.
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Facility Characteristic
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Description
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Site geography
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Situated on 959 contiguous acres, with access to a Canadian National Class I rail line.
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Proven recoverable reserves
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100 million tons
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Deposits
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Sand reserves with an average thickness of 120 feet; grade mesh sizes 20/40, 30/50, 40/70 and 100 mesh.
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Proven reserve mix
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Approximately 72% of 70 mesh and coarser substrate and approximately 28% of 100 mesh substrate.
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Logistics capabilities
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Planned on-site transportation infrastructure capable of simultaneously accommodating multiple unit trains and connected to the Canadian National rail network.
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Royalties
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$0.50 per ton sold of 70 mesh and coarser substrate.
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Total number of shares purchased
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Average price paid per share
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Total number of shares purchased as part of publicly announced plans or programs
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Maximum number of shares that may yet be purchased under the plans or programs
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October 2018
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—
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$
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—
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|
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—
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|
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—
|
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November 2018
|
588,200
|
|
|
$
|
3.37
|
|
|
588,200
|
|
|
1,411,800
|
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December 2018
|
—
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|
|
$
|
—
|
|
|
—
|
|
|
1,411,800
|
|
|
588,200
|
|
|
$
|
3.37
|
|
|
588,200
|
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|
Year Ended December 31,
|
||||||||||||||||||
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2018
|
|
2017
|
|
2016
(4)
|
|
2015
|
|
2014
|
||||||||||
|
(in thousands, except per share and per ton amounts)
|
||||||||||||||||||
Income Statement Data:
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|
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|
||||||
Revenues
|
$
|
212,470
|
|
|
$
|
137,212
|
|
|
$
|
59,231
|
|
|
$
|
47,698
|
|
|
$
|
68,170
|
|
Cost of goods sold
|
144,903
|
|
|
100,304
|
|
|
26,569
|
|
|
21,003
|
|
|
29,934
|
|
|||||
Gross profit
|
67,567
|
|
|
36,908
|
|
|
32,662
|
|
|
26,695
|
|
|
38,236
|
|
|||||
Operating expenses
|
41,688
|
|
|
18,203
|
|
|
12,271
|
|
|
10,112
|
|
|
12,470
|
|
|||||
Operating income
|
25,879
|
|
|
18,705
|
|
|
20,391
|
|
|
16,583
|
|
|
25,766
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income
(1)
|
18,688
|
|
|
21,526
|
|
|
10,379
|
|
|
4,990
|
|
|
7,556
|
|
|||||
|
|
|
|
|
|
|
|
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|
||||||||||
Net income per common share
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
$
|
0.46
|
|
|
$
|
0.54
|
|
|
$
|
0.43
|
|
|
$
|
0.23
|
|
|
$
|
0.34
|
|
Diluted
|
$
|
0.46
|
|
|
$
|
0.53
|
|
|
$
|
0.42
|
|
|
$
|
0.19
|
|
|
$
|
0.29
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Property, plant and equipment, net
(1)
|
$
|
248,396
|
|
|
$
|
171,762
|
|
|
$
|
104,096
|
|
|
$
|
108,928
|
|
|
$
|
85,815
|
|
Total assets
|
320,292
|
|
|
246,802
|
|
|
173,452
|
|
|
132,564
|
|
|
109,629
|
|
|||||
Long-term debt, net of current portion
|
47,893
|
|
|
—
|
|
|
860
|
|
|
64,583
|
|
|
60,842
|
|
|||||
Total stockholders’ equity (deficit)
(1)
|
209,360
|
|
|
190,022
|
|
|
142,442
|
|
|
3,729
|
|
|
(1,957
|
)
|
|||||
Cash Flow Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net cash provided by operating activities
|
$
|
50,909
|
|
|
$
|
15,628
|
|
|
$
|
26,703
|
|
|
$
|
30,703
|
|
|
$
|
22,137
|
|
Net cash used in investing activities
|
(125,989
|
)
|
|
(51,148
|
)
|
|
(2,470
|
)
|
|
(29,375
|
)
|
|
(30,888
|
)
|
|||||
Net cash provided by financing activities
|
41,319
|
|
|
23,213
|
|
|
19,405
|
|
|
1,766
|
|
|
7,434
|
|
|||||
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital expenditures
(3)
|
$
|
110,761
|
|
|
$
|
69,378
|
|
|
$
|
(546
|
)
|
|
$
|
28,102
|
|
|
$
|
34,719
|
|
Adjusted EBITDA
(2)
|
65,993
|
|
|
30,615
|
|
|
37,839
|
|
|
23,881
|
|
|
33,330
|
|
|||||
Contribution margin
(2)
|
83,864
|
|
|
44,197
|
|
|
38,738
|
|
|
31,625
|
|
|
41,717
|
|
|||||
Contribution margin per ton
(2)
|
$
|
28.00
|
|
|
$
|
18.05
|
|
|
$
|
46.90
|
|
|
$
|
42.11
|
|
|
$
|
33.24
|
|
Tons Sold
|
2,995
|
|
|
2,449
|
|
|
826
|
|
|
751
|
|
|
1,255
|
|
(1)
|
The amounts previously reported have been updated to reflect an immaterial correction as of and for the years ended December 31, 2016, 2015 and 2014. The year ended December 31, 2017 includes an immaterial reclassification in Property, plant and equipment, net.
|
(2)
|
For our definitions of the non-GAAP financial measures of EBITDA, Adjusted EBITDA and contribution margin, and reconciliations of Adjusted EBITDA and contribution margin to our most directly comparable financial measures calculated and presented in accordance with GAAP, please see the section entitled “Non-GAAP Financial Measures” in Item 7 of this Form 10-K.
|
(3)
|
Negative capital expenditures for the year ended December 31, 2016 resulted from return of deposits paid for projects included in construction in progress. The year ended December 31, 2018 includes approximately $30.0 million for the acquisition of Quickthree and $15.5 million for the acquisition of assets at the Van Hook terminal.
|
(4)
|
Includes the impact of our IPO, including proceeds received and additional charges incurred.
|
•
|
Impairment of goodwill and other intangible asset.
In 2018 we recorded an impairment of our goodwill and indefinite-lived intangible asset in the amount of
$17.8 million
, which was recorded as an operating expense on the consolidated income statement. The impairment charge reduced our earnings per share by
$0.44
per share for the year ended
December 31, 2018
. See our discussion in the “GAAP Results of Operations - Year Ended
December 31, 2018
compared to the Year Ended
December 31, 2017
: Operating Expenses” for additional information regarding this transaction.
|
•
|
Expansion of our Oakdale facility
. In May 2018, we completed an expansion project to increase our nameplate processing capacity at our Oakdale facility from 3.3 million tons per year to
5.5 million tons
per year.
|
•
|
We have increased our deliveries of sand to the basins.
In 2018, a greater portion of the raw frac sand that we sold was delivered directly to the basins. This results in higher average selling prices along with additional costs related to such delivery.
|
•
|
Market Trends
. Demand for proppants through the first half of 2016 decreased due to the downturn in commodity prices originating in late 2014 and the corresponding reduction in oil and natural gas drilling, completion and production activity. The change in demand during this period impacted contract discussions and negotiated terms with our customers as existing contracts were adjusted, resulting in a combination of reduced average selling prices per ton, and adjustments to take-or-pay volumes and lengths of contracts. During the market downturn, customers began to purchase more volumes on a spot basis as compared to committing to long-term contracts, and this trend continued until oil and natural gas drilling and completion activity began to increase beginning in the fourth quarter of 2016. From early 2017 through the second quarter of 2018, improvements in oil and natural gas prices created a more stable market environment. During the second half of 2018, the demand for Northern White sand decreased, which we believe was due primarily to insufficient takeaway capacity for the incremental oil and natural gas production coming online in the Permian Basin, along with increased availability of regional sand as a source of proppant in the Permian basin. Additionally, oil and natural gas companies reduced their spending in the latter portion of the year due to strong spending in the first half of 2018 and lower oil prices, particularly in the fourth quarter of 2018. Our spot sales continued at decreased rates through the second half of 2018, and we have agreed to temporary price adjustments under certain of our long-term agreements. In general, we have received a term extension in exchange for such price adjustments. Otherwise, the contractual terms under our long-term agreements have not changed materially. In general, customers under long-term take or pay contracts are required to make periodic shortfall payments, which we recognize as revenue in our results of operations in the period in which the obligation becomes due. Contracted volumes have decreased in the fourth quarter of 2018, resulting in additional shortfall revenue.
|
i.
|
our portable silos can be set up or taken down rapidly;
|
ii.
|
our trailers detach, which reduces their footprint;
|
iii.
|
our storage silos include industry-leading passive and active dust suppression technology; and
|
iv.
|
our patented system is the only one of its kind that has the capability of a gravity-fed operation and when used in combination with our Quickload system, our silos can be filled by both pneumatic and gravity dump trailers.
|
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019E
|
2020E
|
New US Horizontal Wells
|
20,819
|
14,413
|
8,599
|
13,116
|
15,691
|
14,840
|
15,233
|
Proppant Demand (Mil Tons)
|
67
|
52
|
40
|
74
|
98
|
101
|
120
|
|
|
Year Ended December 31,
|
|
Change
|
|||||||||||
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percentage
|
|||||||
|
|
(in thousands, except percentage change)
|
|||||||||||||
Revenues
|
|
$
|
212,470
|
|
|
$
|
137,212
|
|
|
$
|
75,258
|
|
|
55
|
%
|
Cost of goods sold
|
|
144,903
|
|
|
100,304
|
|
|
44,599
|
|
|
44
|
%
|
|||
Gross profit
|
|
67,567
|
|
|
36,908
|
|
|
30,659
|
|
|
83
|
%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
|||||||
Salaries, benefits and payroll taxes
|
|
11,043
|
|
|
8,219
|
|
|
2,824
|
|
|
34
|
%
|
|||
Depreciation and amortization
|
|
1,843
|
|
|
525
|
|
|
1,318
|
|
|
251
|
%
|
|||
Selling, general and administrative
|
|
12,825
|
|
|
9,459
|
|
|
3,366
|
|
|
36
|
%
|
|||
Change in estimated fair value of contingent consideration
|
|
(1,858
|
)
|
|
—
|
|
|
(1,858
|
)
|
|
Not meaningful
|
|
|||
Impairment of goodwill and indefinite-lived intangible asset
|
|
17,835
|
|
|
—
|
|
|
—
|
|
|
Not meaningful
|
|
|||
Total operating expenses
|
|
41,688
|
|
|
18,203
|
|
|
23,485
|
|
|
129
|
%
|
|||
Operating income
|
|
25,879
|
|
|
18,705
|
|
|
7,174
|
|
|
38
|
%
|
|||
Other income (expenses):
|
|
|
|
|
|
|
|
|
|||||||
Interest expense, net
|
|
(2,266
|
)
|
|
(450
|
)
|
|
(1,816
|
)
|
|
404
|
%
|
|||
Other income
|
|
197
|
|
|
462
|
|
|
(265
|
)
|
|
(57
|
)%
|
|||
Total other income (expenses), net
|
|
(2,069
|
)
|
|
12
|
|
|
(2,081
|
)
|
|
Not meaningful
|
|
|||
Income before income tax expense (benefit)
|
|
23,810
|
|
|
18,717
|
|
|
5,093
|
|
|
27
|
%
|
|||
Income tax expense (benefit)
|
|
5,122
|
|
|
(2,809
|
)
|
|
7,931
|
|
|
(282
|
)%
|
|||
Net income
|
|
$
|
18,688
|
|
|
$
|
21,526
|
|
|
$
|
(2,838
|
)
|
|
(13
|
)%
|
•
|
Sand sales revenue increased to
$143.1 million
for the year ended
December 31, 2018
compared to
$80.2 million
for the year ended
December 31, 2017
due to increased sales volumes and higher average selling prices. Tons sold increased by
22.3%
resulting from increased exploration and production activity in the oil and natural gas industry in
2018
compared to
2017
.
|
•
|
Average selling price per ton increased to
$47.76
for the year ended
December 31, 2018
from
$32.74
for the year ended
December 31, 2017
due to increased volumes and higher average selling prices related to increased in-basin sand sales volumes, which are sold at a higher price than sand sold at the mine gate and favorable price adjustments under certain of our take-or-pay contracts based upon the Average Cushing Oklahoma WTI Spot Prices.
|
•
|
We had
$6.0 million
in contractual shortfall revenue for the year ended
December 31, 2018
and
$1.2 million
for the year ended
December 31, 2017
, respectively. Our customer contracts dictate whether customers are invoiced quarterly or at the end of their respective contract year for shortfall payments. We recognize revenue to the extent of the unfulfilled minimum contracted quantity at the shortfall price per ton as stated in the contract once payment is received or reasonably assured.
|
•
|
Transportation revenue, which includes freight for certain mine gate sand sales and railcar usage, increased approximately
$7.1 million
for the year ended
December 31, 2018
when compared to the year ended
December 31, 2017
, increasing from
$55.8 million
to
$62.9 million
. The increase in transportation revenue was due to the increased sales volumes in
2018
compared to
2017
as a result of increased exploration and production activity in the oil and natural gas industry as well as our increased in-basin sales activity generated from our Van Hook terminal which began operations in April 2018.
|
|
Year Ended December 31,
|
|
Change
|
|||||||||||
|
2017
|
|
2016
|
|
Dollars
|
|
Percentage
|
|||||||
|
(in thousands, except percentage change)
|
|||||||||||||
Revenues
|
$
|
137,212
|
|
|
$
|
59,231
|
|
|
$
|
77,981
|
|
|
132
|
%
|
Cost of goods sold
|
100,304
|
|
|
26,569
|
|
|
73,735
|
|
|
278
|
%
|
|||
Gross profit
|
36,908
|
|
|
32,662
|
|
|
4,246
|
|
|
13
|
%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|||||||
Salaries, benefits and payroll taxes
|
8,219
|
|
|
7,385
|
|
|
834
|
|
|
11
|
%
|
|||
Depreciation and amortization
|
525
|
|
|
384
|
|
|
141
|
|
|
37
|
%
|
|||
Selling, general and administrative
|
9,459
|
|
|
4,502
|
|
|
4,957
|
|
|
110
|
%
|
|||
Total operating expenses
|
18,203
|
|
|
12,271
|
|
|
5,932
|
|
|
48
|
%
|
|||
Operating income
|
18,705
|
|
|
20,391
|
|
|
(1,686
|
)
|
|
(8
|
)%
|
|||
Other income (expenses):
|
|
|
|
|
|
|
|
|||||||
Preferred stock interest expense
|
—
|
|
|
(5,565
|
)
|
|
5,565
|
|
|
(100
|
)%
|
|||
Interest expense, net
|
(450
|
)
|
|
(2,862
|
)
|
|
2,412
|
|
|
(84
|
)%
|
|||
Other income
|
462
|
|
|
8,860
|
|
|
(8,398
|
)
|
|
(95
|
)%
|
|||
Total other income (expenses), net
|
12
|
|
|
433
|
|
|
(421
|
)
|
|
(97
|
)%
|
|||
Loss on extinguishment of debt
|
—
|
|
|
(1,051
|
)
|
|
1,051
|
|
|
(100
|
)%
|
|||
Income before income tax (benefit) expense
|
18,717
|
|
|
19,773
|
|
|
(1,056
|
)
|
|
(5
|
)%
|
|||
Income tax (benefit) expense
|
(2,809
|
)
|
|
9,394
|
|
|
(12,203
|
)
|
|
(130
|
)%
|
|||
Net income
|
$
|
21,526
|
|
|
$
|
10,379
|
|
|
$
|
11,147
|
|
|
107
|
%
|
•
|
Sand sales revenue increased to
$80.2 million
for the year ended
December 31, 2017
compared to
$31.6 million
for the year ended
December 31, 2016
. Tons sold increased by
196%
as exploration and production activity in the oil and natural gas industry improved in
2017
compared to
2016
.
|
•
|
Average selling price per ton, which includes reservation charges, decreased to
$32.74
for the year ended
December 31, 2017
from
$38.28
for the year ended
December 31, 2016
due to increased volumes, which led to reservation charges being allocated to a greater number of tons sold; and
|
•
|
Reservation and contractual shortfall revenues were
$30.0 million
and
$1.2 million
, respectively, for the year ended
December 31, 2017
. Shortfall revenues for the year ended
December 31, 2017
resulted from
two
customers that were unable to meet the take-or-pay requirements for their respective contract year. Reservation and contractual shortfall revenues were
$15.0 million
and
$20.9 million
, respectively, for the year ended
December 31, 2016
. Shortfall revenues for the year ended
December 31, 2016
resulted from
three
customers that were unable to meet the take-or-pay requirements for their respective contract year. Certain customers were required to pay a fixed-price monthly reservation charge based on a minimum contractual volume over the remaining life of their contract, which are then credited against any applicable shortfall payments. With respect to shortfall revenues, our customer contracts dictated whether customers were invoiced quarterly or at the end of their respective contract year for shortfall payments. We recognized revenue to the extent of the unfulfilled minimum contracted quantity at the shortfall price per ton as stated in the contract once payment was received or was reasonably assured.
|
•
|
Transportation revenue, which included railcar rental, was approximately
$49.1 million
higher for the year ended
December 31, 2017
compared to the year ended
December 31, 2016
increasing from
$6.7 million
to
$55.8 million
|
•
|
the financial performance of our assets without regard to the impact of financing methods, capital structure or historical cost basis of our assets;
|
•
|
the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities;
|
•
|
our ability to incur and service debt and fund capital expenditures;
|
•
|
our operating performance as compared to those of other companies in our industry without regard to the impact of financing methods or capital structure; and
|
•
|
our debt covenant compliance, as Adjusted EBITDA is a key component of critical covenants to the Credit Facility.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Net income
|
$
|
18,688
|
|
|
$
|
21,526
|
|
|
$
|
10,379
|
|
Depreciation, depletion and amortization
|
18,165
|
|
|
7,300
|
|
|
6,445
|
|
|||
Income tax expense (benefit)
|
5,122
|
|
|
(2,809
|
)
|
|
9,394
|
|
|||
Interest expense
|
2,320
|
|
|
700
|
|
|
8,436
|
|
|||
Franchise taxes
|
442
|
|
|
339
|
|
|
21
|
|
|||
EBITDA
|
$
|
44,737
|
|
|
$
|
27,056
|
|
|
$
|
34,675
|
|
Loss (gain) on sale of fixed assets
|
321
|
|
|
253
|
|
|
(59
|
)
|
|||
Integration and transition costs
|
—
|
|
|
16
|
|
|
—
|
|
|||
Initial public offering related costs
(1)
|
—
|
|
|
—
|
|
|
725
|
|
|||
Equity compensation
(2)
|
2,670
|
|
|
1,652
|
|
|
1,426
|
|
|||
Acquisition and development costs
(3)
|
(218
|
)
|
|
845
|
|
|
—
|
|
|||
Non-cash impairment of goodwill and other intangible asset
(4)
|
17,835
|
|
|
—
|
|
|
—
|
|
|||
Cash charges related to retention and employee relocation
|
674
|
|
|
279
|
|
|
—
|
|
|||
Accretion of asset retirement obligations
|
(26
|
)
|
|
514
|
|
|
21
|
|
|||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
1,051
|
|
|||
Adjusted EBITDA
|
$
|
65,993
|
|
|
$
|
30,615
|
|
|
$
|
37,839
|
|
(2)
|
Represents the non-cash expenses for stock-based awards issued to our employees and employee stock purchase plan compensation expense.
|
(3)
|
Represents costs incurred related to the business combinations and current development project activities. The year ended
December 31, 2018
includes
$1,858
decrease in the estimated fair value of our contingent consideration related to the acquisition of Quickthree, partially offset by $1,146 of costs related to the acquisition of Quickthree and $494 related to development project activities. The year ended
December 31, 2017
includes costs related to development project activities.
|
(4)
|
An impairment charge of
$17,835
related to goodwill and other indefinite-lived intangible asset was recorded in the fourth quarter of
2018
. The impairment charge relates primarily to the decline in our stock price in 2018 and the relationship between the resulting market capitalization and the equity recorded on our balance sheet.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Revenue
|
$
|
212,470
|
|
|
$
|
137,212
|
|
|
$
|
59,231
|
|
Cost of goods sold
|
144,903
|
|
|
100,304
|
|
|
26,569
|
|
|||
Gross profit
|
67,567
|
|
|
36,908
|
|
|
32,662
|
|
|||
Depreciation, depletion, and accretion of asset retirement obligations included in cost of goods sold
|
16,297
|
|
|
7,289
|
|
|
6,076
|
|
|||
Contribution margin
|
$
|
83,864
|
|
|
$
|
44,197
|
|
|
$
|
38,738
|
|
Contribution margin per ton
|
$
|
28.00
|
|
|
$
|
18.05
|
|
|
$
|
46.90
|
|
Total tons sold
|
2,995
|
|
|
2,449
|
|
|
826
|
|
|
Year Ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Total current assets
|
$
|
50,096
|
|
|
$
|
73,177
|
|
Total current liabilities
|
24,652
|
|
|
34,559
|
|
||
Working capital
|
$
|
25,444
|
|
|
$
|
38,618
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Net cash provided by operating activities
|
$
|
50,909
|
|
|
$
|
15,628
|
|
|
$
|
26,703
|
|
Net cash used in investing activities
|
$
|
(125,989
|
)
|
|
$
|
(51,148
|
)
|
|
$
|
(2,470
|
)
|
Net cash provided by financing activities
|
$
|
41,319
|
|
|
$
|
23,213
|
|
|
$
|
19,405
|
|
|
|
Year Ended
|
|
|
|
December 31, 2018
|
|
Shares repurchased
|
|
588,200
|
|
Average price per share
|
|
$3.37
|
|
Aggregate repurchase cost (including broker costs)
|
|
$ 2.0 million
|
|
|
Total
|
|
Less than
1 year
|
|
1-3
years
|
|
3-5
years
|
|
More than
5 years
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Capital lease obligations
|
$
|
771
|
|
|
$
|
131
|
|
|
$
|
262
|
|
|
$
|
378
|
|
|
$
|
—
|
|
Notes payable
|
3,830
|
|
|
739
|
|
|
1,777
|
|
|
1,314
|
|
|
—
|
|
|||||
Asset retirement obligations
|
13,322
|
|
|
1,704
|
|
|
3,327
|
|
|
—
|
|
|
8,291
|
|
|||||
Equipment, railcar and office leases
|
38,837
|
|
|
15,586
|
|
|
17,632
|
|
|
4,744
|
|
|
875
|
|
|||||
Land lease obligations
|
42,777
|
|
|
1,340
|
|
|
4,730
|
|
|
4,730
|
|
|
31,977
|
|
|||||
Credit Facility
|
44,255
|
|
|
—
|
|
|
44,255
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
143,792
|
|
|
$
|
19,500
|
|
|
$
|
71,983
|
|
|
$
|
11,166
|
|
|
$
|
41,143
|
|
|
Number of
Shares Granted
(in thousands)
|
|
Weighted Average
Grant Date
Fair Value
|
|||
For the year ended December 31, 2018
|
746
|
|
|
$
|
6.61
|
|
For the year ended December 31, 2017
|
352
|
|
|
$
|
14.77
|
|
For the year ended December 31, 2016
|
161
|
|
|
$
|
3.85
|
|
•
|
ABR (as defined in the revolving Credit Facility), plus an applicable margin of 2.00% - 3.00%, depending on the leverage ratio; or
|
•
|
LIBOR plus an applicable margin of 3.00% - 4.00%, depending on the leverage ratio.
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands, except share amounts)
|
||||||
Assets
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
1,466
|
|
|
$
|
34,740
|
|
Restricted cash
|
—
|
|
|
487
|
|
||
Accounts receivable, net
|
18,989
|
|
|
23,377
|
|
||
Unbilled receivables
|
7,823
|
|
|
1,192
|
|
||
Inventories
|
18,575
|
|
|
9,532
|
|
||
Prepaid expenses and other current assets
|
3,243
|
|
|
3,849
|
|
||
Total current assets
|
50,096
|
|
|
73,177
|
|
||
Property, plant and equipment, net
|
248,396
|
|
|
171,762
|
|
||
Intangible assets, net
|
18,068
|
|
|
—
|
|
||
Deferred financing costs, net
|
334
|
|
|
892
|
|
||
Other assets
|
3,398
|
|
|
971
|
|
||
Total assets
|
$
|
320,292
|
|
|
$
|
246,802
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
11,336
|
|
|
$
|
26,123
|
|
Accrued and other expenses
|
8,392
|
|
|
7,576
|
|
||
Deferred revenue
|
4,095
|
|
|
—
|
|
||
Current portion of long-term debt
|
829
|
|
|
860
|
|
||
Total current liabilities
|
24,652
|
|
|
34,559
|
|
||
Long-term debt, net of current portion
|
47,893
|
|
|
—
|
|
||
Deferred tax liabilities, long-term, net
|
17,898
|
|
|
13,239
|
|
||
Asset retirement obligation
|
13,322
|
|
|
8,982
|
|
||
Contingent consideration
|
7,167
|
|
|
—
|
|
||
Total liabilities
|
110,932
|
|
|
56,780
|
|
||
Commitments and contingencies (Note 17)
|
|
|
|
|
|
||
Stockholders’ equity
|
|
|
|
||||
Common stock, $0.001 par value, 350,000,000 shares authorized; 40,673,513
issued and 39,974,478 outstanding at December 31, 2018; 40,474,085
issued and 40,393,033 outstanding at December 31, 2017
|
40
|
|
|
40
|
|
||
Treasury stock, at cost, 699,035 shares and 81,052 shares at
December 31, 2018 and 2017, respectively
|
(2,839
|
)
|
|
(666
|
)
|
||
Additional paid-in capital
|
162,195
|
|
|
159,059
|
|
||
Retained earnings
|
50,277
|
|
|
31,589
|
|
||
Accumulated other comprehensive loss
|
(313
|
)
|
|
—
|
|
||
Total stockholders’ equity
|
209,360
|
|
|
190,022
|
|
||
Total liabilities and stockholders’ equity
|
$
|
320,292
|
|
|
$
|
246,802
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands, except per share amounts)
|
||||||||||
Revenues
|
$
|
212,470
|
|
|
$
|
137,212
|
|
|
$
|
59,231
|
|
Cost of goods sold
|
144,903
|
|
|
100,304
|
|
|
26,569
|
|
|||
Gross profit
|
67,567
|
|
|
36,908
|
|
|
32,662
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Salaries, benefits and payroll taxes
|
11,043
|
|
|
8,219
|
|
|
7,385
|
|
|||
Depreciation and amortization
|
1,843
|
|
|
525
|
|
|
384
|
|
|||
Selling, general and administrative
|
12,825
|
|
|
9,459
|
|
|
4,502
|
|
|||
Change in the estimated fair value of contingent consideration
|
(1,858
|
)
|
|
—
|
|
|
—
|
|
|||
Impairment of goodwill and indefinite-lived intangible asset
|
17,835
|
|
|
—
|
|
|
—
|
|
|||
Total operating expenses
|
41,688
|
|
|
18,203
|
|
|
12,271
|
|
|||
Operating income
|
25,879
|
|
|
18,705
|
|
|
20,391
|
|
|||
Other income (expenses):
|
|
|
|
|
|
||||||
Preferred stock interest expense
|
—
|
|
|
—
|
|
|
(5,565
|
)
|
|||
Interest expense, net
|
(2,266
|
)
|
|
(450
|
)
|
|
(2,862
|
)
|
|||
Other income
|
197
|
|
|
462
|
|
|
8,860
|
|
|||
Total other income (expenses), net
|
(2,069
|
)
|
|
12
|
|
|
433
|
|
|||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
(1,051
|
)
|
|||
Income before income tax expense (benefit)
|
23,810
|
|
|
18,717
|
|
|
19,773
|
|
|||
Income tax expense (benefit)
|
5,122
|
|
|
(2,809
|
)
|
|
9,394
|
|
|||
Net income
|
$
|
18,688
|
|
|
$
|
21,526
|
|
|
$
|
10,379
|
|
Net income per common share:
|
|
|
|
|
|
||||||
Basic
|
$
|
0.46
|
|
|
$
|
0.54
|
|
|
$
|
0.43
|
|
Diluted
|
$
|
0.46
|
|
|
$
|
0.53
|
|
|
$
|
0.42
|
|
Weighted-average number of common shares:
|
|
|
|
|
|
||||||
Basic
|
40,427
|
|
|
40,208
|
|
|
24,322
|
|
|||
Diluted
|
40,449
|
|
|
40,304
|
|
|
24,579
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Net income
|
$
|
18,688
|
|
|
$
|
21,526
|
|
|
$
|
10,379
|
|
Other comprehensive income:
|
|
|
|
|
|
||||||
Foreign currency translation adjustment
|
(313
|
)
|
|
—
|
|
|
—
|
|
|||
Comprehensive income
|
$
|
18,375
|
|
|
$
|
21,526
|
|
|
$
|
10,379
|
|
|
Common Stock
|
|
Treasury Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
(Accumulated
Deficit)
|
|
Accumulated Other Comprehensive Loss
|
|
Total
Stockholders’
Equity
|
||||||||||||||||||
|
Outstanding
Shares
|
|
Par Value
|
|
Shares
|
|
Amount
|
|
|
|
|
||||||||||||||||||
|
(in thousands, except share amounts)
|
||||||||||||||||||||||||||||
Balance at December 31, 2015
|
22,114,620
|
|
|
$
|
22
|
|
|
24,860
|
|
|
$
|
(123
|
)
|
|
$
|
4,146
|
|
|
$
|
(316
|
)
|
|
$
|
—
|
|
|
$
|
3,729
|
|
Vesting of restricted stock
|
167,090
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Proceeds from equity issuance, net
|
12,577,500
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
127,289
|
|
|
—
|
|
|
—
|
|
|
127,302
|
|
||||||
Exercise of warrants
|
3,999,998
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
22
|
|
||||||
Stock-based compensation, inclusive of $24 tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,426
|
|
|
—
|
|
|
—
|
|
|
1,426
|
|
||||||
Restricted stock buy back
|
(42,734
|
)
|
|
—
|
|
|
42,734
|
|
|
(416
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(416
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,379
|
|
|
—
|
|
|
10,379
|
|
||||||
Balance at December 31, 2016
|
38,816,474
|
|
|
$
|
39
|
|
|
67,594
|
|
|
$
|
(539
|
)
|
|
$
|
132,879
|
|
|
$
|
10,063
|
|
|
$
|
—
|
|
|
$
|
142,442
|
|
Vesting of restricted stock
|
90,017
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,973
|
|
|
—
|
|
|
—
|
|
|
1,973
|
|
||||||
Employee stock purchase plan compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
—
|
|
|
—
|
|
|
39
|
|
||||||
Proceeds from equity issuance, net of
transaction costs
|
1,500,000
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
24,168
|
|
|
—
|
|
|
—
|
|
|
24,169
|
|
||||||
Restricted stock buy back
|
(13,458
|
)
|
|
—
|
|
|
13,458
|
|
|
(127
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(127
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,526
|
|
|
—
|
|
|
21,526
|
|
||||||
Balance at December 31, 2017
|
40,393,033
|
|
|
$
|
40
|
|
|
81,052
|
|
|
$
|
(666
|
)
|
|
$
|
159,059
|
|
|
$
|
31,589
|
|
|
$
|
—
|
|
|
$
|
190,022
|
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(313
|
)
|
|
(313
|
)
|
||||||
Vesting of restricted stock
|
177,464
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,937
|
|
|
—
|
|
|
—
|
|
|
2,937
|
|
||||||
Employee stock purchase plan compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
72
|
|
|
—
|
|
|
—
|
|
|
72
|
|
||||||
Employee stock purchase plan issuance
|
21,964
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
127
|
|
|
—
|
|
|
—
|
|
|
127
|
|
||||||
Restricted stock buy back
|
(29,783
|
)
|
|
—
|
|
|
29,783
|
|
|
(174
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(174
|
)
|
||||||
Shares repurchased
|
(588,200
|
)
|
|
—
|
|
|
588,200
|
|
|
(1,999
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,999
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,688
|
|
|
—
|
|
|
18,688
|
|
||||||
Balance at December 31, 2018
|
39,974,478
|
|
|
$
|
40
|
|
|
699,035
|
|
|
$
|
(2,839
|
)
|
|
$
|
162,195
|
|
|
$
|
50,277
|
|
|
$
|
(313
|
)
|
|
$
|
209,360
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Operating activities:
|
|
|
|
|
|
|
|
|
|||
Net income
|
$
|
18,688
|
|
|
$
|
21,526
|
|
|
$
|
10,379
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation, depletion and accretion of asset retirement obligation
|
17,159
|
|
|
7,926
|
|
|
6,481
|
|
|||
Goodwill and indefinite-lived intangible asset impairment
|
17,835
|
|
|
—
|
|
|
—
|
|
|||
Amortization of intangible assets
|
1,002
|
|
|
—
|
|
|
—
|
|
|||
Asset retirement obligation settlement
|
(3,180
|
)
|
|
—
|
|
|
—
|
|
|||
Loss (gain) on disposal of assets
|
321
|
|
|
253
|
|
|
(54
|
)
|
|||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
1,051
|
|
|||
Provision for bad debt
|
42
|
|
|
—
|
|
|
—
|
|
|||
Amortization of deferred financing cost
|
300
|
|
|
455
|
|
|
159
|
|
|||
Accretion of debt discount
|
246
|
|
|
—
|
|
|
263
|
|
|||
Deferred income taxes
|
4,659
|
|
|
(1,805
|
)
|
|
539
|
|
|||
Stock-based compensation, net
|
2,937
|
|
|
2,012
|
|
|
1,426
|
|
|||
Employee stock purchase plan compensation
|
72
|
|
|
—
|
|
|
—
|
|
|||
Non-cash interest expense on Series A preferred stock
|
—
|
|
|
—
|
|
|
5,565
|
|
|||
Change in estimated fair value of contingent consideration
|
(1,858
|
)
|
|
—
|
|
|
—
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable
|
4,457
|
|
|
(18,038
|
)
|
|
(3,319
|
)
|
|||
Unbilled receivables
|
(6,631
|
)
|
|
(788
|
)
|
|
3,617
|
|
|||
Inventories
|
(7,343
|
)
|
|
4,407
|
|
|
(1,357
|
)
|
|||
Prepaid expenses and other assets
|
(1,761
|
)
|
|
(3,394
|
)
|
|
133
|
|
|||
Deferred revenue
|
4,095
|
|
|
(1,615
|
)
|
|
(5,518
|
)
|
|||
Accounts payable
|
(2,271
|
)
|
|
9,356
|
|
|
761
|
|
|||
Accrued and other expenses
|
2,140
|
|
|
2,391
|
|
|
(481
|
)
|
|||
Income taxes payable
|
—
|
|
|
(7,058
|
)
|
|
7,058
|
|
|||
Net cash provided by operating activities
|
50,909
|
|
|
15,628
|
|
|
26,703
|
|
|||
Investing activities:
|
|
|
|
|
|
||||||
Acquisition of businesses, net of cash acquired
|
(29,921
|
)
|
|
—
|
|
|
—
|
|
|||
Purchases of property, plant and equipment
|
(96,090
|
)
|
|
(51,162
|
)
|
|
(2,519
|
)
|
|||
Proceeds from disposal of assets
|
22
|
|
|
14
|
|
|
49
|
|
|||
Net cash used in investing activities
|
(125,989
|
)
|
|
(51,148
|
)
|
|
(2,470
|
)
|
|||
Financing activities:
|
|
|
|
|
|
||||||
Repayment of line of credit
|
—
|
|
|
—
|
|
|
(1,368
|
)
|
|||
Repayments of notes payable
|
(559
|
)
|
|
(282
|
)
|
|
—
|
|
|||
Payments under equipment financing obligations
|
(168
|
)
|
|
(353
|
)
|
|
(409
|
)
|
|||
Payment of deferred financing and debt issuance costs
|
(233
|
)
|
|
(193
|
)
|
|
(1,178
|
)
|
|||
Proceeds from revolving credit facility
|
84,000
|
|
|
—
|
|
|
1,100
|
|
|||
Repayment of revolving credit facility
|
(39,500
|
)
|
|
—
|
|
|
(65,316
|
)
|
|||
Payment of contingent consideration
|
(175
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from equity issuance
|
127
|
|
|
26,251
|
|
|
138,371
|
|
|||
Payment of equity transaction costs
|
—
|
|
|
(2,083
|
)
|
|
(11,047
|
)
|
|||
Repayment of Series A preferred stock
|
—
|
|
|
—
|
|
|
(40,328
|
)
|
|||
Purchase of treasury stock
|
(2,173
|
)
|
|
(127
|
)
|
|
(420
|
)
|
|||
Net cash provided by financing activities
|
41,319
|
|
|
23,213
|
|
|
19,405
|
|
|||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
(33,761
|
)
|
|
(12,307
|
)
|
|
43,638
|
|
|||
Cash and cash equivalents and restricted cash at beginning of year
|
35,227
|
|
|
47,534
|
|
|
3,896
|
|
|||
Cash and cash equivalents and restricted cash at end of year
|
$
|
1,466
|
|
|
$
|
35,227
|
|
|
$
|
47,534
|
|
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
|
2018
|
|
2017
|
|
2016
|
|||||||||||||||
|
|
Revenue
|
|
Percentage of Total Revenue
|
|
Revenue
|
|
Percentage of Total Revenue
|
|
Revenue
|
|
Percentage of Total Revenue
|
|||||||||
Sand sales revenue
|
|
$
|
121,377
|
|
|
57
|
%
|
|
$
|
50,200
|
|
|
37
|
%
|
|
$
|
17,076
|
|
|
29
|
%
|
Reservation charges
|
|
22,156
|
|
|
10
|
%
|
|
30,000
|
|
|
22
|
%
|
|
15,041
|
|
|
25
|
%
|
|||
Shortfall payments
|
|
6,032
|
|
|
3
|
%
|
|
1,244
|
|
|
1
|
%
|
|
20,902
|
|
|
35
|
%
|
|||
Railcar usage revenue
|
|
8,918
|
|
|
4
|
%
|
|
7,702
|
|
|
5
|
%
|
|
5,732
|
|
|
10
|
%
|
|||
Transportation revenue
|
|
53,987
|
|
|
26
|
%
|
|
48,066
|
|
|
35
|
%
|
|
480
|
|
|
1
|
%
|
|||
Total revenues
|
|
$
|
212,470
|
|
|
100
|
%
|
|
$
|
137,212
|
|
|
100
|
%
|
|
$
|
59,231
|
|
|
100
|
%
|
•
|
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date;
|
•
|
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs corroborated by observable market data for substantially the full term of the assets or liabilities; and
|
•
|
Level 3—Unobservable inputs that reflect the Company’s assumptions that market participants would use in pricing assets or liabilities based on the best information available.
|
|
|
December 31, 2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Contingent consideration
|
|
$
|
7,167
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,167
|
|
Total liabilities
|
|
$
|
7,167
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,167
|
|
Balance as of January 1, 2018
|
|
$
|
—
|
|
Contingent consideration pursuant to acquisition
|
|
9,200
|
|
|
Payment of contingent consideration
|
|
(175
|
)
|
|
Fair value adjustment
|
|
(1,858
|
)
|
|
Balance as of December 31, 2018
|
|
$
|
7,167
|
|
|
Year Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Determination of Shares
|
|
|
|
|
|
|
||
Weighted average common shares outstanding
|
40,427
|
|
|
40,208
|
|
|
24,322
|
|
Assumed conversion of restricted stock
|
22
|
|
|
96
|
|
|
257
|
|
Diluted weighted average common stock outstanding
|
40,449
|
|
|
40,304
|
|
|
24,579
|
|
Base price - cash
|
$
|
30,000
|
|
Contingent consideration – earnout
|
9,200
|
|
|
Working capital adjustment
|
(122
|
)
|
|
Total purchase consideration
|
$
|
39,078
|
|
|
|
Fair Value
|
|
Useful Life
|
||
Assets Acquired
|
|
|
|
|
||
Accounts receivable
|
|
$
|
112
|
|
|
|
Inventory
|
|
1,700
|
|
|
|
|
Prepaid expenses and other current assets
|
|
126
|
|
|
|
|
Total current assets acquired
|
|
$
|
1,938
|
|
|
|
Property, plant and equipment
|
|
740
|
|
|
|
|
Customer relationships
|
|
270
|
|
|
1 year
|
|
Developed technology
|
|
18,800
|
|
|
13 years
|
|
Trade name
|
|
900
|
|
|
Indefinite
|
|
Goodwill
|
|
16,935
|
|
|
|
|
Other assets
|
|
225
|
|
|
|
|
Total non-current assets acquired
|
|
37,870
|
|
|
|
|
Total assets acquired
|
|
$
|
39,808
|
|
|
|
|
|
|
|
|
||
Liabilities Assumed
|
|
|
|
|
||
Accounts payable
|
|
$
|
331
|
|
|
|
Accrued and other expenses
|
|
399
|
|
|
|
|
Total liabilities assumed
|
|
730
|
|
|
|
|
Estimated fair value of net assets acquired
|
|
$
|
39,078
|
|
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Work in progress
|
$
|
1,300
|
|
|
$
|
—
|
|
Total wellsite storage solutions inventory
|
$
|
1,300
|
|
|
$
|
—
|
|
|
|
|
|
||||
Total inventory
|
$
|
18,575
|
|
|
$
|
9,532
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Machinery, equipment and tooling
|
$
|
14,858
|
|
|
$
|
7,802
|
|
Wellsite proppant storage solutions
|
5,286
|
|
|
—
|
|
||
Vehicles
|
1,955
|
|
|
1,546
|
|
||
Furniture and fixtures
|
1,140
|
|
|
720
|
|
||
Plant and building
|
158,882
|
|
|
81,561
|
|
||
Real estate properties
|
4,601
|
|
|
4,432
|
|
||
Railroad and sidings
|
27,347
|
|
|
10,254
|
|
||
Land and land improvements
|
27,167
|
|
|
16,378
|
|
||
Asset retirement obligation
|
16,469
|
|
|
8,408
|
|
||
Mineral properties
|
10,075
|
|
|
9,878
|
|
||
Deferred mining costs
|
1,806
|
|
|
657
|
|
||
Construction in progress
|
21,619
|
|
|
56,493
|
|
||
|
291,205
|
|
|
198,129
|
|
||
Less: accumulated depreciation and depletion
|
42,809
|
|
|
26,367
|
|
||
Total property, plant and equipment, net
|
$
|
248,396
|
|
|
$
|
171,762
|
|
|
|
Total Goodwill
|
||
Balance at January 1, 2018
|
|
$
|
—
|
|
Goodwill attributable to Quickthree Solutions, Inc. acquisition
|
|
16,935
|
|
|
Impairment charge
|
|
(16,935
|
)
|
|
Balance at December 31, 2018
|
|
$
|
—
|
|
|
|
Estimated Useful Life (Years)
|
|
Gross Carrying Amount at December 31, 2017
|
|
Assets Acquired Pursuant to Business Combination
|
|
Accumulated Amortization
|
|
Impairment Charge
|
|
Net Book Value at December 31, 2018
|
||||||||||
Developed technology
|
|
13
|
|
$
|
—
|
|
|
$
|
18,800
|
|
|
$
|
844
|
|
|
$
|
—
|
|
|
$
|
17,956
|
|
Customer relationships
|
|
1
|
|
—
|
|
|
270
|
|
|
158
|
|
|
—
|
|
|
112
|
|
|||||
Trade name
|
|
Indefinite
|
|
—
|
|
|
900
|
|
|
—
|
|
|
900
|
|
|
—
|
|
|||||
|
|
|
|
$
|
—
|
|
|
$
|
19,970
|
|
|
$
|
1,002
|
|
|
$
|
900
|
|
|
$
|
18,068
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Employee related expenses
|
$
|
1,894
|
|
|
$
|
667
|
|
Accrued construction related expenses
|
948
|
|
|
2,197
|
|
||
Accrued professional fees
|
465
|
|
|
529
|
|
||
Accrued royalties
|
1,780
|
|
|
206
|
|
||
Accrued freight and delivery charges
|
2,556
|
|
|
2,197
|
|
||
Deferred rent
|
712
|
|
|
861
|
|
||
Other accrued liabilities
|
37
|
|
|
919
|
|
||
Total accrued liabilities
|
$
|
8,392
|
|
|
$
|
7,576
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Capital leases
|
$
|
90
|
|
|
$
|
572
|
|
Notes payable
|
739
|
|
|
288
|
|
||
Total current portion of long-term debt
|
$
|
829
|
|
|
$
|
860
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Credit Facility
|
$
|
44,255
|
|
|
$
|
—
|
|
Capital leases
|
547
|
|
|
—
|
|
||
Notes payable
|
3,091
|
|
|
—
|
|
||
Total long-term debt, net of current portion
|
$
|
47,893
|
|
|
$
|
—
|
|
Year Ended December 31,
|
|
Credit Facility
|
|
Notes Payable
|
|
Capital Leases
|
|
Total
|
||||||||
2019
|
|
$
|
—
|
|
|
$
|
739
|
|
|
$
|
131
|
|
|
$
|
870
|
|
2020
|
|
44,500
|
|
|
859
|
|
|
131
|
|
|
45,490
|
|
||||
2021
|
|
—
|
|
|
918
|
|
|
131
|
|
|
1,049
|
|
||||
2022
|
|
—
|
|
|
830
|
|
|
131
|
|
|
961
|
|
||||
2023
|
|
—
|
|
|
484
|
|
|
247
|
|
|
731
|
|
||||
Total minimum payments
|
|
44,500
|
|
|
3,830
|
|
|
771
|
|
|
49,101
|
|
||||
Amount representing interest
|
|
—
|
|
|
—
|
|
|
(134
|
)
|
|
(134
|
)
|
||||
Amount representing unamortized lender fees
|
|
(245
|
)
|
|
—
|
|
|
—
|
|
|
(245
|
)
|
||||
Present value of payments
|
|
—
|
|
|
—
|
|
|
637
|
|
|
48,722
|
|
||||
Less: current portion
|
|
—
|
|
|
(739
|
)
|
|
(90
|
)
|
|
(829
|
)
|
||||
Total long-term debt, net of current portion
|
|
$
|
44,255
|
|
|
$
|
3,091
|
|
|
$
|
547
|
|
|
$
|
47,893
|
|
Balance at December 31, 2016
|
$
|
1,384
|
|
Additions and revisions of prior estimates
|
7,084
|
|
|
Accretion expenses
|
514
|
|
|
Balance at December 31, 2017
|
$
|
8,982
|
|
Additions and revisions of prior estimates
|
7,546
|
|
|
Accretion expenses
|
(26
|
)
|
|
Settlement of liability
|
$
|
(3,180
|
)
|
Balance at December 31, 2018
|
$
|
13,322
|
|
|
Years ended December 31,
|
||||
|
2018
|
|
2017
|
||
Expected volatility
|
67.13
|
%
|
|
59.48
|
%
|
Expected life (years)
|
2.67
|
|
|
2.75
|
|
Risk-free interest rate
|
2.55
|
%
|
|
1.49
|
%
|
|
Number of
Shares
|
|
Weighted
Average
|
|||
Unvested, January 1, 2017
|
274
|
|
|
$
|
7.35
|
|
Granted
|
352
|
|
|
$
|
14.77
|
|
Vested
|
(90
|
)
|
|
$
|
8.01
|
|
Forfeiture
|
(2
|
)
|
|
$
|
8.94
|
|
Unvested, December 31, 2017
|
534
|
|
|
$
|
11.27
|
|
Granted
|
746
|
|
|
$
|
6.61
|
|
Vested
|
(177
|
)
|
|
$
|
12.15
|
|
Forfeiture
|
(76
|
)
|
|
$
|
11.56
|
|
Unvested December 31, 2018
|
1,027
|
|
|
$
|
9.83
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Current
|
|
|
|
|
|
|
|
|
|||
Federal
|
$
|
230
|
|
|
$
|
(965
|
)
|
|
$
|
8,337
|
|
State and local
|
161
|
|
|
(39
|
)
|
|
518
|
|
|||
Foreign
|
72
|
|
|
—
|
|
|
—
|
|
|||
Total current expense (benefit)
|
463
|
|
|
(1,004
|
)
|
|
8,855
|
|
|||
Deferred
|
|
|
|
|
|
||||||
Federal
|
4,611
|
|
|
(2,221
|
)
|
|
537
|
|
|||
State and local
|
48
|
|
|
416
|
|
|
2
|
|
|||
Foreign
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total deferred income tax expense (benefit)
|
4,659
|
|
|
(1,805
|
)
|
|
539
|
|
|||
Total income tax expense (benefit)
|
$
|
5,122
|
|
|
$
|
(2,809
|
)
|
|
$
|
9,394
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
At statutory rate
|
$
|
5,000
|
|
|
$
|
6,551
|
|
|
$
|
6,931
|
|
Non-deductible interest expense
|
—
|
|
|
—
|
|
|
1,948
|
|
|||
State taxes, net of US federal benefit
|
209
|
|
|
377
|
|
|
339
|
|
|||
Foreign taxes
|
72
|
|
|
—
|
|
|
—
|
|
|||
Federal tax deductions
|
238
|
|
|
(73
|
)
|
|
(679
|
)
|
|||
Change in applicable tax rate
|
144
|
|
|
(8,468
|
)
|
|
—
|
|
|||
Provision to return permanent difference
|
(129
|
)
|
|
(767
|
)
|
|
933
|
|
|||
Refund claims
|
(120
|
)
|
|
(201
|
)
|
|
—
|
|
|||
Fuel tax credit
|
(243
|
)
|
|
(166
|
)
|
|
—
|
|
|||
Foreign tax credit
|
(49
|
)
|
|
—
|
|
|
—
|
|
|||
Other
|
—
|
|
|
(62
|
)
|
|
(78
|
)
|
|||
Total income tax expense (benefit)
|
$
|
5,122
|
|
|
$
|
(2,809
|
)
|
|
$
|
9,394
|
|
|
Year Ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
Deferred tax assets:
|
|
|
|
|
|
||
Reserves and accruals
|
$
|
918
|
|
|
$
|
176
|
|
Prepaid expenses and other
|
1,086
|
|
|
—
|
|
||
Federal net operating losses
|
7,391
|
|
|
—
|
|
||
State net operating losses
|
106
|
|
|
—
|
|
||
Total gross deferred tax assets
|
9,501
|
|
|
176
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Prepaid expenses and other
|
—
|
|
|
(988
|
)
|
||
Depreciation and amortization
|
(27,399
|
)
|
|
(12,427
|
)
|
||
Total gross deferred tax liabilities
|
(27,399
|
)
|
|
(13,415
|
)
|
||
Noncurrent deferred tax liabilities, net
|
$
|
(17,898
|
)
|
|
$
|
(13,239
|
)
|
Twelve months ending December 31,
|
|
||
2019
|
$
|
16,926
|
|
2020
|
12,765
|
|
|
2021
|
9,597
|
|
|
2022
|
5,753
|
|
|
2023
|
3,721
|
|
|
Thereafter
|
32,852
|
|
|
Total future minimum annual commitments under operating lease obligations
|
$
|
81,614
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cash paid for interest
|
$
|
1,660
|
|
|
$
|
251
|
|
|
$
|
3,369
|
|
Cash paid for taxes
|
$
|
666
|
|
|
$
|
7,664
|
|
|
$
|
933
|
|
Non-cash investing activities:
|
|
|
|
|
|
||||||
Contingent consideration
|
$
|
9,200
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Asset retirement obligation
|
$
|
7,546
|
|
|
$
|
7,084
|
|
|
$
|
(188
|
)
|
Non-cash financing activities:
|
|
|
|
|
|
||||||
Equipment purchased with debt
|
$
|
4,733
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Leasehold improvements funded by landlord
|
$
|
—
|
|
|
$
|
787
|
|
|
$
|
—
|
|
Write-off of remaining balance of returned equipment under capital lease
|
$
|
398
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Capitalized non-cash interest into property, plant and equipment
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
139
|
|
Capitalized expenditures in accounts payable and accrued expenses
|
$
|
3,014
|
|
|
$
|
17,477
|
|
|
$
|
48
|
|
2018:
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||
Revenue
|
|
42,628
|
|
|
54,448
|
|
|
63,146
|
|
|
52,248
|
|
Cost of goods sold
|
|
35,413
|
|
|
34,678
|
|
|
40,595
|
|
|
34,217
|
|
Operating expenses
|
|
5,862
|
|
|
6,861
|
|
|
5,145
|
|
|
23,820
|
|
Net income
|
|
975
|
|
|
10,021
|
|
|
12,125
|
|
|
(4,433
|
)
|
Earnings per share, basic
|
|
0.02
|
|
|
0.25
|
|
|
0.30
|
|
|
(0.11
|
)
|
Earnings per share, diluted
|
|
0.02
|
|
|
0.25
|
|
|
0.30
|
|
|
(0.11
|
)
|
2017:
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||
Revenue
|
|
$
|
25,059
|
|
|
$
|
29,787
|
|
|
$
|
39,329
|
|
|
$
|
43,037
|
|
Cost of goods sold
|
|
19,662
|
|
|
21,407
|
|
|
26,297
|
|
|
32,938
|
|
||||
Operating expenses
|
|
3,839
|
|
|
4,570
|
|
|
4,261
|
|
|
5,533
|
|
||||
Net income
|
|
969
|
|
|
2,624
|
|
|
7,047
|
|
|
10,886
|
|
||||
Earnings per share, basic
|
|
0.02
|
|
|
0.07
|
|
|
0.17
|
|
|
0.27
|
|
||||
Earnings per share, diluted
|
|
0.02
|
|
|
0.06
|
|
|
0.17
|
|
|
0.27
|
|
3.1
|
|
|
3.2
|
|
|
4.1
|
|
|
4.2
|
|
|
10.1†
|
|
|
10.2†
|
|
|
10.3†
|
|
|
10.4†
|
|
|
10.5†
|
|
|
10.6†
|
|
|
10.7†
|
|
|
10.8†
|
|
|
10.9†
|
|
|
10.10‡
|
|
|
10.11‡
|
|
|
10.12‡
|
|
|
10.13‡
|
|
|
10.14‡
|
|
|
10.15‡
|
|
10.16‡
|
|
|
10.17‡
|
|
|
10.18‡
|
|
|
10.19‡
|
|
|
10.20‡
|
|
|
10.21‡
|
|
|
10.22†
|
|
|
10.23
|
|
|
10.24
|
|
|
10.25‡
|
|
|
10.26‡
|
|
|
10.27†
|
|
|
10.28†
|
|
|
10.29†
|
|
|
10.30‡
|
|
|
10.31‡
|
|
|
10.32‡
|
|
|
10.33‡
|
|
|
10.34*‡
|
|
10.35‡
|
|
|
10.36
|
|
|
10.37
|
|
|
10.38
|
|
|
10.39*‡
|
|
|
10.40*‡
|
|
|
10.41*‡
|
|
|
21.1*
|
|
|
23.1*
|
|
|
31.1*
|
|
|
31.2*
|
|
|
32.1*
t
|
|
|
32.2*
t
|
|
|
95.1*
|
|
|
101.INS*
|
|
XBRL Instance Document
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
*
|
Filed herewith
|
†
|
Compensatory plan, contract or arrangement.
|
‡
|
Certain portions have been omitted pursuant to a confidential treatment request. Omitted information has been separately filed with the Securities and Exchange Commission.
|
t
|
This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act.
|
/s/ Charles E. Young
|
|
/s/ Lee E. Beckelman
|
Charles E. Young,
|
|
Lee E. Beckelman
|
Director and Chief Executive Officer
|
|
Chief Financial Officer
|
(Principal Executive Officer)
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
/s/ Susan Neumann
|
|
|
Susan Neumann
|
|
|
Controller and Vice President of Accounting
|
|
|
(Principal Accounting Officer)
|
|
|
|
|
|
|
|
|
/s/ José E. Feliciano
|
|
/s/ Andrew Speaker
|
José E. Feliciano
|
|
Andrew Speaker
|
Director
|
|
Director
|
(Co-Chairman of the Board)
|
|
(Co-Chairman of the Board)
|
|
|
|
|
|
|
/s/ Colin Leonard
|
|
/s/ Timothy J. Pawlenty
|
Colin Leonard
|
|
Timothy J. Pawlenty
|
Director
|
|
Director
|
|
|
|
|
|
|
/s/ Tracy Robinson
|
|
/s/ Sharon Spurlin
|
Tracy Robinson
|
|
Sharon Spurlin
|
Director
|
|
Director
|
1.
|
Amendment to the Agreement
.
|
Product
|
Product Mix (%)
|
***
|
***
|
***
|
***
|
1.
|
During the period commencing on October 1, 2018 and ending on October 31, 2018 (a “
Credit Period
”), in the event that Liberty purchases at least *** tons of Products (the “
Credit Period Volume
”) during the Credit Period, it shall be eligible for a credit equal to *** for each ton of *** Products purchased during the Credit Period, *** for each ton of *** Products purchased during the Credit Period, and *** for each ton of *** Products purchased during the Credit Period. In the event that Liberty purchases less than the Credit Period Volume during the Credit Period, Liberty shall not be entitled to any credit hereunder. Notwithstanding the foregoing, if the volume of Products purchased by Liberty during the period commencing on September 1, 2018 and ending on October 31, 2018 is at least *** tons, then the foregoing credits shall also apply and be based on Products purchased during the period commencing on September 1, 2018 and ending on September 30, 2018, and an extra month shall be added to the Term in the manner set forth in Section 3 of this letter agreement.
|
2.
|
Smart Sand may, in its sole discretion, institute one or more additional Credit Periods for any calendar month during the Term by providing written notice to Liberty. The Credit Period Volume requirement set forth in Section 1 of this letter agreement shall apply to each additional Credit Period.
|
3.
|
For each Credit Period in which the Credit Period Volume is purchased, the Term of the PPA shall be extended for an additional one-month period (all additional months, collectively, the “
Tail Period
”). The Tail Period
|
4.
|
Except as expressly set forth in this letter agreement, all of the terms and conditions of the PPA shall remain unchanged and in full force and effect.
|
1.
|
During the period commencing on November 1, 2018 and ending on December 31, 2018 (the “
2018 Credit Period
”), Liberty shall be eligible for a credit (which may be issued at a future date) equal to *** for each ton of *** Products purchased during such month in the 2018 Credit Period, *** for each ton of *** Products purchased during such month in the 2018 Credit Period, and *** for each ton of *** Products purchased during such month in the 2018 Credit Period.
|
2.
|
During the period commencing on January 1, 2019 and ending on March 31, 2019 (the “
2019 Credit Period
”), Liberty shall be eligible for a credit (which may be issued at a future date) equal to *** for each ton of *** Products purchased during such month in the 2019 Credit Period, *** for each ton of *** Products purchased during such month in the 2019 Credit Period, and *** for each ton of *** Products purchased during such month in the 2019 Credit Period.
|
3.
|
The Term of the PPA shall be extended for an additional three-month period (the “
Additional
Tail Period
”). The Additional Tail Period, together with the Tail Period from the Letter Agreement (collectively, the “
Aggregate Tail Period
”), shall constitute a Contract Year under the PPA, except that the Minimum Tons per Year and Minimum Tons per Quarter, as applicable, shall be prorated to reflect any period that is less than 12 months (as it pertains to a Contract Year) or three months (as it pertains to a quarter). The Contract Price in
|
4.
|
Except as expressly set forth in this letter agreement, all of the terms and conditions of the PPA shall remain unchanged and in full force and effect.
|
Subsidiaries
|
|
State of Organization
|
|
|
|
Fairview Cranberry, LLC
|
|
Wisconsin
|
Will Logistics, LLC
|
|
Pennsylvania
|
Smart Sand Live Oak LLC
|
|
Delaware
|
Smart Sand Fayette County LLC
|
|
Delaware
|
Smart Sand Hixton LLC
|
|
Delaware
|
Smart Sand Reagan County LLC
|
|
Delaware
|
Smart Sand Tom Green County LLC
|
|
Delaware
|
Smart Sand Oakdale LLC
|
|
Delaware
|
SSI Logistics LLC
|
|
Delaware
|
SSI Permian I, LLC
|
|
Delaware
|
SSI Permian II, LLC
|
|
Delaware
|
Smart Sand Holdings, LLC
|
|
Delaware
|
SSI Bakken I, LLC
|
|
Delaware
|
Quickthree Technology, LLC
|
|
Delaware
|
SSI Marcellus, I, LLC
|
|
Delaware
|
1.
|
I have reviewed this Annual Report on Form 10-K of Smart Sand, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a).
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Charles E. Young
|
Charles E. Young, Chief Executive Officer
|
(Principal Executive Officer)
|
1.
|
I have reviewed this Annual Report on Form 10-K of Smart Sand, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Lee E. Beckelman
|
Lee E. Beckelman, Chief Financial Officer
|
(Principal Financial Officer)
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
/s/ Charles E. Young
|
Charles E. Young, Chief Executive Officer
|
(Principal Executive Officer)
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
/s/ Lee E. Beckelman
|
Lee E. Beckelman, Chief Financial Officer
|
(Principal Financial Officer)
|
•
|
Section 104 S&S Citations:
Citations received from MSHA under section 104 of the Mine Act for violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard.
|
•
|
Section 104(b) Orders:
Orders issued by MSHA under section 104(b) of the Mine Act, which represents a failure to abate a citation under section 104(a) within the period of time prescribed by MSHA. This results in an order of immediate withdrawal from the area of the mine affected by the condition until MSHA determines that the violation has been abated.
|
•
|
Section 104(d) Citations and Orders:
Citations and orders issued by MSHA under section 104(d) of the Mine Act for an unwarrantable failure to comply with mandatory health or safety standards.
|
•
|
Section 110(b)(2) Violations:
Flagrant violations issued by MSHA under section 110(b)(2) of the Mine Act.
|
•
|
Section 107(a) Orders:
Orders issued by MSHA under section 107(a) of the Mine Act for situations in which MSHA determined an “imminent danger” (as defined by MSHA) existed.
|
•
|
Pattern of Violations
: A pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of mine health or safety hazards under section 104(e) of the Mine Act.
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•
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Potential Pattern of Violations
: The potential to have a pattern of violations under section 104(e).
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•
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Contest Proceedings:
A contest proceeding may be filed by an operator to challenge the issuance of a citation or order issued by MSHA.
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•
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Civil Penalty Proceedings:
A civil penalty proceeding may be filed by an operator to challenge a civil penalty MSHA has proposed for a violation contained in a citation or order. The Partnership does not institute civil penalty proceedings based solely on the assessment amount of proposed penalties. Any initiated adjudications address substantive matters of law and policy instituted on conditions that are alleged to be in violation of mandatory standards of the Mine Act.
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•
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Discrimination Proceedings:
Involves a miner’s allegation that he or she has suffered adverse employment action because he or she engaged in activity protected under the Mine Act, such as making a safety complaint. Also includes temporary reinstatement proceedings involving cases in which a miner has filed a complaint with MSHA stating that he or she has suffered discrimination and the miner has lost his or her position.
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•
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Compensation Proceedings:
A compensation proceeding may be filed by miners entitled to compensation when a mine is closed by certain closure orders issued by MSHA. The purpose of the proceeding is to determine the amount of compensation, if any, due to miners idled by the orders.
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•
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Temporary Relief:
Applications for temporary relief are applications filed under section 105(b)(2) of the Mine Act for temporary relief from any modification or termination of any order.
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•
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Appeals:
An appeal may be filed by an operator to challenge judges’ decisions or orders to the Commission, including petitions for discretionary review and review by the Commission on its own motion.
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Mine
(1)
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Oakdale, WI
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Section 104 citations for violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard (#)
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|
1
(2)
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Section 104(b) orders (#)
|
|
0
|
Section 104(d) citations and orders (#)
|
|
0
|
Section 110(b)(2) violations (#)
|
|
0
|
Section 107(a) orders (#)
|
|
0
|
Proposed assessments under MSHA
(3)
|
|
$3,447.00
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Mining-related fatalities (#)
|
|
0
|
Section 104(e) notice
|
|
No
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Notice of the potential for a pattern of violations under Section 104(e)
|
|
No
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Legal actions before the Federal Mine Safety and Health Review Commission (“FMSHRC”) initiated (#)
|
|
0
|
Legal actions before the FMSHRC resolved (#)
|
|
11
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Legal actions pending before the FMSHRC, end of period:
|
|
|
Contests of citations and orders referenced in Subpart B of 29 CFR Part 2700 (#)
|
|
0
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Contests of proposed penalties referenced in Subpart C of 29 CFR Part 2700 (#)
|
|
0
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Complaints for compensation referenced in Subpart D of 29 CFR Part 2700 (#)
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|
0
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Complaints of discharge, discrimination or interference referenced in Subpart E of 29 CFR Part 2700 (#)
|
|
0
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Applications for temporary relief referenced in Subpart F of 29 CFR Part 2700 (#)
|
|
0
|
Appeals of judges’ decisions or orders referenced in Subpart H of 29 CFR Part 2700 (#)
|
|
0
|
Total pending legal actions (#)
|
|
0
|