U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; dollars in thousands)

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Net income $ 6,316
$ 41,273
$ 55,254
$ 73,254
Other comprehensive income (loss):
Unrealized gain (loss) on derivatives (net of tax of $193 and $(2) for the three months ended September 30, 2018 and 2017, respectively, and $195 and $(26) for the nine months ended September 30, 2018 and 2017, respectively) 538
(4 ) 544
(43 )
Foreign currency translation adjustment (net of tax of $(135) and zero for the three months ended September 30, 2018 and 2017, respectively, and $(144) and zero for the nine months ended September 30, 2018 and 2017, respectively) 95
—
(446 ) —
Pension and other post-retirement benefits liability adjustment (net of tax of $88 and $2,180 for the three months ended September 30, 2018 and 2017, respectively, and $1,617 and $1,335 for the nine months ended September 30, 2018 and 2017, respectively) 277
3,618
5,075
2,216
Comprehensive income $ 7,226
$ 44,887
$ 60,427
$ 75,427
Less: Comprehensive income (loss) attributable to non-controlling interest —
—
—
—
Comprehensive income attributable to U.S. Silica Holdings, Inc. $ 7,226
$ 44,887
$ 60,427
$ 75,427



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income (loss)	$	6,061		$	17,644		$	(13,267	)	$	48,938
Other comprehensive (loss) income:
Unrealized (loss) gain on derivatives (net of tax of $(660) and $1 for the three months ended June 30, 2019 and 2018, respectively, and $(959) and $2 for the six months ended June 30, 2019 and 2018, respectively)	(2,071		)	4			(3,011		)	6
Foreign currency translation adjustment (net of tax of $49 and $(7) for the three months ended June 30, 2019 and 2018, respectively, and $(11) and $(9) for the six months ended June 30, 2019 and 2018, respectively)	165			(540		)	(34		)	(541		)
Pension and other post-retirement benefits liability adjustment (net of tax of $(1,112) and $799 for the three months ended June 30, 2019 and 2018, respectively, and $(1,057) and $1,529 for the six months ended June 30, 2019 and 2018, respectively)	(3,491		)	2,505			(3,317		)	4,798
Comprehensive income (loss)	$	664		$	19,613		$	(19,629	)	$	53,201
Less: Comprehensive loss attributable to non-controlling interest	(89		)	—			(93		)	—
Comprehensive income (loss) attributable to U.S. Silica Holdings, Inc.	$	753		$	19,613		$	(19,536	)	$	53,201

The accompanying notes are an integral part of these financial statements.

U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited; dollars in thousands, except per share amounts)


	Common Stock		Treasury Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total U.S. Silica Holdings Inc., Stockholders’ Equity			Non-controlling Interest		Total Stockholders’ Equity			Common Stock		Treasury Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total U.S. Silica Holdings Inc., Stockholders’ Equity			Non-controlling Interest			Total Stockholders’ Equity
Balance at December 31, 2017	$	812	$	(25,456	)	$	1,147,084		$	287,992		$	(13,926	)	$	1,396,506		$	—	$	1,396,506
Balance at March 31, 2019																							$	820	$	(180,125	)	$	1,173,259		$	43,920		$	(15,985	)	$	1,021,889		$	12,209		$	1,034,098
Net income																							—		—			—			6,150			—			6,150			(89		)	6,061
Unrealized loss on derivatives																							—		—			—			—			(2,071		)	(2,071		)	—			(2,071		)
Foreign currency translation adjustment																							—		—			—			—			165			165			—			165
Pension and post-retirement liability																							—		—			—			—			(3,491		)	(3,491		)	—			(3,491		)
Cash dividend declared ($0.0625 per share)																							—		—			—			(4,846		)	—			(4,846		)	—			(4,846		)
Contributions from non-controlling interest																							—		—			—			—			—			—			400			400
Common stock-based compensation plans activity:
Equity-based compensation																							—		—			2,799			—			—			2,799			—			2,799
Tax payments related to shares withheld for vested restricted stock and stock units																							1		(650		)	(1		)	—			—			(650		)	—			(650		)
Balance at June 30, 2019																							$	821	$	(180,775	)	$	1,176,057		$	45,224		$	(21,382	)	$	1,019,945		$	12,520		$	1,032,465

Balance at March 31, 2018																							$	814	$	(103,940	)	$	1,153,336		$	314,405		$	(11,632	)	$	1,352,983		$	—		$	1,352,983
Net income	—		—			—			55,254			—			55,254			—		55,254			—		—			—			17,644			—			17,644			—			17,644
Unrealized gain on derivatives	—		—			—			—			544			544			—		544			—		—			—			—			4			4			—			4
Foreign currency translation adjustment	—		—			—			—			(446		)	(446		)	—		(446		)	—		—			—			—			(540		)	(540		)	—			(540		)
Pension and post-retirement liability	—		—			—			—			5,075			5,075			—		5,075			—		—			—			—			2,505			2,505			—			2,505
Cash dividend declared ($0.1875 per share)	—		—			—			(14,622		)	—			(14,622		)	—		(14,622		)
Contributions from non-controlling interest	—		—			—			—			—			—			3,212		3,212
Cash dividend declared ($0.0625 per share)																							—		—			—			(4,876		)	—			(4,876		)	—			(4,876		)
Common stock-based compensation plans activity:
Equity-based compensation	—		—			18,612			—			—			18,612			—		18,612			—		—			6,931			—			—			6,931			—			6,931
Proceeds from options exercised	—		93			(32		)	—			—			61			—		61			—		93			(31		)	—			—			62			—			62
Shares withheld for employee taxes related to vested restricted stock and stock units	3		(4,216		)	(3		)	—			—			(4,216		)	—		(4,216		)
Tax payments related to shares withheld for vested restricted stock and stock units																							1		(710		)	(1		)	—			—			(710		)	—			(710		)
Repurchase of common stock	—		(90,499		)	—			—			—			(90,499		)	—		(90,499		)	—		(15,499		)	—			—			—			(15,499		)	—			(15,499		)
Balance at September 30, 2018	$	815	$	(120,078	)	$	1,165,661		$	328,624		$	(8,753	)	$	1,366,269		$	3,212	$	1,369,481
Balance at June 30, 2018																							$	815	$	(120,056	)	$	1,160,235		$	327,173		$	(9,663	)	$	1,358,504		$	—		$	1,358,504

U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(Unaudited; dollars in thousands, except per share amounts)



	Common Stock		Treasury Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total U.S. Silica Holdings Inc., Stockholders’ Equity			Non-controlling Interest			Total Stockholders’ Equity
Balance at December 31, 2018	$	818	$	(178,215	)	$	1,169,383		$	67,854		$	(15,020	)	$	1,044,820		$	7,484		$	1,052,304
Net loss	—		—			—			(13,174		)	—			(13,174		)	(93		)	(13,267		)
Unrealized loss on derivatives	—		—			—			—			(3,011		)	(3,011		)	—			(3,011		)
Foreign currency translation adjustment	—		—			—			—			(34		)	(34		)	—			(34		)
Pension and post-retirement liability	—		—			—			—			(3,317		)	(3,317		)	—			(3,317		)
Cash dividend declared ($0.1250 per share)	—		—			—			(9,456		)	—			(9,456		)	—			(9,456		)
Contributions from non-controlling interest	—		—			—			—			—			—			5,129			5,129
Common stock-based compensation plans activity:
Equity-based compensation	—		—			6,844			—			—			6,844			—			6,844
Proceeds from options exercised	—		295			(167		)	—			—			128			—			128
Tax payments related to shares withheld for vested restricted stock and stock units	3		(2,855		)	(3		)	—			—			(2,855		)	—			(2,855		)
Balance at June 30, 2019	$	821	$	(180,775	)	$	1,176,057		$	45,224		$	(21,382	)	$	1,019,945		$	12,520		$	1,032,465

Balance at December 31, 2017	$	812	$	(25,456	)	$	1,147,084		$	287,992		$	(13,926	)	$	1,396,506		$	—		$	1,396,506
Net income	—		—			—			48,938			—			48,938			—			48,938
Unrealized gain on derivatives	—		—			—			—			6			6			—			6
Foreign currency translation adjustment	—		—			—			—			(541		)	(541		)	—			(541		)
Pension and post-retirement liability	—		—			—			—			4,798			4,798			—			4,798
Cash dividend declared ($0.1250 per share)	—		—			—			(9,757		)	—			(9,757		)	—			(9,757		)
Common stock-based compensation plans activity:
Equity-based compensation	—		—			13,185			—			—			13,185			—			13,185
Proceeds from options exercised	—		93			(31		)	—			—			62			—			62
Tax payments related to shares withheld for vested restricted stock and stock units	3		(4,194		)	(3		)	—			—			(4,194		)	—			(4,194		)
Repurchase of common stock	—		(90,499		)	—			—			—			(90,499		)	—			(90,499		)
Balance at June 30, 2018	$	815	$	(120,056	)	$	1,160,235		$	327,173		$	(9,663	)	$	1,358,504		$	—		$	1,358,504

The accompanying notes are an integral part of these financial statements.

U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; dollars in thousands)



	Six Months Ended June 30,
	2019			2018
Operating activities:
Net (loss) income	$	(13,267	)	$	48,938
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, depletion and amortization	89,499			65,155
Asset impairment	—			16,184
Gain on valuation change of royalty note payable	(14,100		)	—
Debt issuance amortization	2,640			4,421
Original issue discount amortization	528			561
Deferred income taxes	(943		)	11,023
Deferred revenue	(17,479		)	(6,970		)
Loss (gain) on disposal of property, plant and equipment	70			(5,619		)
Equity-based compensation	6,844			13,185
Bad debt provision, net of recoveries	2,399			387
Other	(2,886		)	(4,516		)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	(28,327		)	(24,472		)
Inventories	13,690			6,040
Prepaid expenses and other current assets	6,103			1,333
Income taxes	190			(4,757		)
Accounts payable and accrued expenses	26,121			(2,883		)
Short-term and long-term obligations-vendor incentives	4,021			54,632
Liability for pension and other post-retirement benefits	5,153			301
Other noncurrent assets and liabilities	2,232			—
Net cash provided by operating activities	82,488			172,943
Investing activities:
Capital expenditures	(78,451		)	(159,196		)
Capitalized intellectual property costs	(2,620		)	(3,863		)
Acquisition of business, net of cash acquired	—			(742,841		)
Proceeds from sale of property, plant and equipment	708			26,179
Net cash used in investing activities	(80,363		)	(879,721		)
Financing activities:
Dividends paid	(9,372		)	(10,132		)
Repurchase of common stock	—			(90,499		)
Proceeds from options exercised	128			62
Tax payments related to shares withheld for vested restricted stock and stock units	(2,855		)	(4,194		)
Proceeds from long-term debt	—			1,280,000
Payments on long-term debt	(8,226		)	(493,231		)
Financing fees paid	—			(37,273		)
Contributions from non-controlling interest	5,129			—
Principal payments on finance lease obligations	(39		)	(165		)
Net cash (used in) provided by financing activities	(15,235		)	644,568
Net decrease in cash and cash equivalents	(13,110		)	(62,210		)
Cash and cash equivalents, beginning of period	202,498			384,567
Cash and cash equivalents, end of period	$	189,388		$	322,357

U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited; dollars in thousands)

Nine Months Ended
September 30,
2018 2017
Operating activities:
Net income $ 55,254
$ 73,254
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 102,305
69,898
Asset impairment 16,184
—
Debt issuance amortization 3,953
1,038
Original issue discount amortization 1,668
281
Deferred income taxes 7,699
10,149
Deferred revenue (16,565 ) 32,487
(Gain) loss on disposal of property, plant and equipment (5,404 ) 362
Equity-based compensation 18,612
18,520
Bad debt provision, net of recoveries 516
1,779
Other 3,554
3,300
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable 8,177
(106,119 )
Inventories 2,732
(521 )
Prepaid expenses and other current assets (3,057 ) 7,449
Income taxes (4,369 ) 9,737
Accounts payable and accrued expenses 27,866
40,589
Short-term and long-term obligations-vendor incentives 54,632
—
Liability for pension and other post-retirement benefits (730 ) (788 )
Other noncurrent assets and liabilities (5,337 ) (554 )
Net cash provided by operating activities 267,690
160,861
Investing activities:
Capital expenditures (220,787 ) (261,243 )
Capitalized intellectual property costs (7,045 ) (2,600 )
Acquisition of business, net of cash acquired (743,325 ) (119,719 )
Proceeds from sale of property, plant and equipment 26,305
12
Net cash used in investing activities (944,852 ) (383,550 )
Financing activities:
Dividends paid (15,068 ) (15,285 )
Repurchase of common stock (90,499 ) —
Proceeds from options exercised 61
798
Tax payments related to shares withheld for vested restricted stock and stock units (4,216 ) (3,945 )
Proceeds from long-term debt 1,280,000
—
Payments on long-term debt (497,655 ) (5,576 )
Financing fees paid (37,272 ) —
Contributions from non-controlling interest 3,212
—
Principal payments on capital lease obligations (385 ) (878 )
Net cash provided by (used in) financing activities 638,178
(24,886 )
Net decrease in cash and cash equivalents (38,984 ) (247,575 )



	Six Months Ended June 30,
	2019		2018
Supplemental cash flow information:
Cash paid during the period for:
Interest	$	43,960	$	22,689
Taxes, net of refunds	$	1,360	$	3,778
Related party purchases	$	—	$	1,604
Non-cash items:
Accrued capital expenditures	$	30,134	$	21,966
Capital lease assumed by third-party	$	—	$	119
Asset retirement obligation assumed by third-party	$	—	$	2,116

Cash and cash equivalents, beginning of period 384,567
711,225
Cash and cash equivalents, end of period $ 345,583
$ 463,650
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 44,105
$ 18,498
Taxes, net of refunds $ 5,003
$ 216
Related party purchases $ 2,233
$ 3,171
Non-cash Items:
Equipment received $ —
$ 18,185
Accrued capital expenditures $ 36,693
$ 28,683
Capital lease assumed by third-party $ 119
$ —
Asset retirement obligation assumed by third-party $ 2,116
$ —

The accompanying notes are an integral part of these financial statements.

U.S. SILICA HOLDINGS, INC.

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; dollars in thousands, except per share amounts)

NOTE A—~~SUMMARY~~ORGANIZATION AND BASIS OF ~~SIGNIFICANT ACCOUNTING POLICIES~~PRESENTATION

~~Basis of Presentation and Consolidation~~Organization

~~The accompanying Condensed Consolidated Financial Statements (the “Financial Statements”) of~~ U.S. Silica Holdings, Inc. (“Holdings,” and together with its subsidiaries “we,” “us” or the “Company”) is a performance materials company and one of the largest domestic producers of commercial silica used in the oil and gas industry and in a wide range of industrial applications. In addition, through our acquisition of EP Minerals, LLC ("EPM") and its affiliated companies, we are an industry leader in the production of industrial minerals, including diatomaceous earth, clay (calcium bentonite and calcium montmorillonite) and perlite. During our 119-year history, we have developed core competencies in mining, processing, logistics and materials science that enable us to produce and cost-effectively deliver products to customers across our end markets. Our operations are organized into two reportable segments based on end markets served: (1) Oil & Gas Proppants and (2) Industrial & Specialty Products. See Note U - Segment Reporting for more information on our reportable segments.

Basis of Presentation and Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements for the quarter ended June 30, 2019 included in this Quarterly Report on Form 10-Q have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission (“SEC”). They do not contain certain information included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017;~~2018; therefore, the ~~interim~~unaudited Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K. In the opinion of management, all adjustments necessary for a fair presentation ~~of the Financial Statements~~ have been included. Such adjustments are of a normal, recurring nature.

Certain reclassifications of prior year's amounts have been made to conform to the current year presentation. In conforming to the current year's presentation, the Company identified and corrected an amount in its statement of cash flows for the nine months ended September 30, 2017. The correction reduced Capital Expenditures within Net Cash Used in Investing Activities with a corresponding decrease to Accounts Payable and Accrued Expenses within Net Cash Used in Operating Activities. The amount is presented as Non-cash Accrued Capital Expenditures and had no impact in the Company's Balance Sheet, Income Statement or Net Change in Cash and Cash Equivalents in the Statement of Cash Flows.

~~Throughout this report we refer to (i) our~~unaudited Condensed Consolidated Balance Sheets as our “Balance Sheets,” (ii) our Condensed Consolidated Statements of Operations as our “Income Statements,” and (iii) our Condensed Consolidated Statements of Cash Flows as our “Cash Flows.”

~~Consolidation~~

~~The~~ Financial Statements include the accounts of Holdings and its direct and indirect wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

We follow ~~FASB~~Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) guidance for identification and reporting of entities over which control is achieved through means other than voting rights. The guidance defines such entities as Variable Interest Entities (“VIEs”). We consolidate VIEs when we have variable interests and are the primary beneficiary. We continually evaluate our involvement with VIEs to determine when these criteria are met.

During the third quarter of 2018 we finalized a shareholders' agreement with unrelated parties to form a limited liability company with the purpose of constructing and operating a water pipeline to transport and sell water. In connection with the shareholders’ agreement, we acquired a 50% equity ownership for $3.2 million, with a maximum capital contribution of $7.0 million, and a water rights intangible asset for $0.7 million. Based on our evaluation, we ~~have~~ determined that this limited liability company is a VIE of which we are the primary beneficiary ~~of this VIE~~ and therefore we are required to consolidate ~~it, including~~it. During the ~~current construction work~~fourth quarter of 2018 we contributed an additional $3.8 million for a total of $7.0 million in ~~progress~~capital contributions for the year ended December 31, 2018. As of ~~$6.4~~June 30, 2019, the VIE had total assets of $19.7 million and total liabilities of $0.3 million. We did not make any capital contributions during the six months ended June 30, 2019.

~~Unaudited Interim Financial Statements~~

~~The accompanying~~Throughout this report we refer to (i) our unaudited Condensed Consolidated Balance ~~Sheet~~Sheets as ~~of September 30, 2018; the Income Statements and~~our “Balance Sheets,” (ii) our unaudited Condensed Consolidated Statements of ~~Comprehensive Income for the three~~Operations as our “Income Statements,” and ~~nine months ended September 30, 2018 and 2017; the~~(iii) our unaudited Condensed Consolidated Statements of ~~Stockholders' Equity and~~ Cash Flows ~~for the nine months ended September 30, 2018; and other information disclosed in the related notes are unaudited. The Balance Sheet~~ as ~~of December 31, 2017, was derived from~~ our ~~audited consolidated financial statements included in our 2017 Annual Report on Form 10-K.~~“Cash Flows.”

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates and Assumptions

The preparation of ~~the Financial Statements~~consolidated financial statements in conformity with GAAP requires usmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the ~~Financial Statements~~consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of management estimates and assumptions relate to the purchase price allocation for businesses acquired; mineral reserves that are the basis for future cash flow estimates utilized in impairment calculations and units-of-production amortization calculations; environmental, reclamation and closure obligations; estimates of recoverable minerals; estimates of allowance for doubtful accounts; estimates of fair value for certain reporting units and asset impairments (including impairments of goodwill, intangible assets and other long-lived assets); write-downs of inventory

to net realizable value; equity-based

compensation expense; post-employment, post-retirement and other employee benefit liabilities; valuation allowances for deferred tax assets; contingent considerations; reserves for contingencies and litigation and the fair value and accounting treatment of financial instruments, including derivative instruments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.

~~Revenue Recognition~~Leases

~~Products~~

We ~~derive~~lease railroad cars, office space, mining property, mining/processing equipment and transportation and other equipment.Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities, and operating lease liabilities in our ~~product sales by mining~~consolidated balance sheets. Finance leases are included in property, plant and ~~processing minerals that~~mine development, current portion of long-term debt, and long-term debt in our ~~customers purchase~~consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on the balance sheet. ROU assets represent our right to use an underlying asset for ~~various uses. Our product sales~~the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are ~~primarily a function~~recognized at the commencement date of the ~~price per ton and~~lease based on the ~~number~~present value of tons sold. We primarily sell our products through individual purchase orders executed under short-term price agreements or at prevailing market rates. The amount invoiced reflects product, transportation and / or additional handling services as applicable, such as storage, transloadinglease payments over the ~~product from railcars to trucks and last mile logistics to the customer site. We invoice~~lease term. As most of our ~~product customers on a per shipment basis, although for some larger customers,~~leases do not provide an implicit rate, we ~~consolidate invoices weekly or monthly. Standard collection terms are net 30 days, although extended terms are offered in competitive situations.~~

~~We recognize revenue for products and materials at a point in time following the transfer of control of such items to the customer, which typically occurs upon shipment or delivery depending~~use our incremental borrowing rate based on the ~~terms~~information available at the commencement date in determining the present value of lease payments. The ROU assets also include any lease payments made at or before the commencement date of the ~~underlying contracts. We account for shipping~~lease and ~~handling activities related~~excludes lease incentives. Our lease terms may include options to ~~product and material sales contracts with customers as costs to fulfill our promise to transfer~~extend or terminate the associated products pursuant to the accounting policy election allowed under ASC 606-10-18. Accordingly, we record amounts billed for shipping and handling costs as a component of net sales and accrue and classify related costs as a component of cost of sales at the time revenuelease when it is ~~recognized.~~

For a limited number of customers, we sell under long-term, minimum purchase supply agreements. These agreements define, among other commitments, the volume of product that our customers must purchase, the volume of product that we must provide and the pricereasonably certain that we will ~~charge~~exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and ~~that our customers will pay for each product. Prices under these agreements~~non-lease components, the latter of which are generally ~~fixed~~accounted for separately. See Note Q - Leases.

Foreign Operations

Foreign sales were approximately $16.6 million and subject to certain contractual adjustments. Sometimes these agreements may undergo negotiations regarding pricing and volume requirements, which may often occur in volatile market conditions. While these negotiations continue, we may deliver sand at prices or at volumes below the requirements in our existing supply agreements. We do not consider these agreements solely representative of contracts with customers. An executed order specifying the type and quantity of product to be delivered, in combination with the noted agreements, comprise our contracts in these arrangements.

~~Service~~

We derive our service revenues primarily through the provision of transportation, equipment rental, and contract labor services to companies in the oil and gas industry. Transportation services typically consist of transporting customer proppant from storage facilities to proximal well-sites and are contracted through work orders executed under established pricing agreements. The amount invoiced reflects the transportation services rendered. Equipment rental services provide customers with use of either dedicated or nonspecific wellhead proppant delivery equipment solutions for contractual periods defined either through formal lease agreements or executed work orders under established pricing agreements. The amounts invoiced reflect the length of time the equipment set was utilized in the billing period. Contract labor services provide customers with proppant delivery equipment operators through work orders executed under established pricing agreements. The amounts invoiced reflect the amount of time our labor services were utilized in the billing period.

We typically invoice our customers on a weekly or monthly basis; however, some customers receive invoices upon well-site operation completion. Standard collection terms are net 30 days, although extended terms are offered in competitive situations. We typically recognize revenue for specific, dedicated equipment set rental arrangements under ASC 840, Leases. For the remaining components of service revenue, we have applied the practical expedient allowed under ASC 606-10-55-18 to recognize transportation revenues in proportion to the amount we have the right to invoice.

~~Contracts with Multiple Performance Obligations~~

For contracts that contain multiple performance obligations, such as work orders containing a combination of product, transportation, equipment rentals, and contract labor services, we allocate the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product or service is transferred to the customer, in satisfaction of the corresponding performance obligations. We typically invoice our customers on a weekly or monthly basis; however, some customers receive invoices upon well-site operation completion. Standard collection terms are net 30 days, although extended terms are offered in competitive situations.

~~Taxes Collected from Customers and Remitted to Governmental Authorities.~~

We exclude from our measurement of transaction prices all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of net sales or cost of sales.

~~Deferred Revenues~~

For a limited number of customers, we enter into supply agreements which give customers the right to make advanced payments toward the purchase of certain products at specified volumes over an average initial period of one to five years. These payments represent consideration that is unconditional for which we have yet to transfer the related product. These payments are recorded as contract liabilities referred to as “deferred revenues” upon receipt and recognized as revenue upon delivery of the related product.

~~Unbilled Receivables~~

~~Revenues recognized in advance of invoice issuance create assets referred to as “unbilled receivables.” Any portion~~$31.9 million of our ~~unbilled receivables~~consolidated sales for which our right to consideration is conditional on a factor other than the passage of time is considered a contract asset. These assets are presented on a combined basis with accounts receivable and are converted to accounts receivable once billed.

~~Foreign Currency Translation~~

For our operations in countries where the functional currency is other than the U.S. dollar, balance sheet amounts are translated using the exchange rate in effect at the balance sheet date. Income statement amounts are translated monthly using the average exchange rate for the respective month. The gains and losses resulting from the changes in exchange rates from year-to-year are recorded as a component of accumulated other comprehensive income or loss as currency translation adjustments, net of tax. Any gains or losses on transactions in currencies other than the functional currency are included in other income (expense), net, including interest income. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2018, other~~2019, respectively; pre-tax income ~~(expense), net, including interest income, includes a net realized foreign currency transaction gain of $0.1~~was $2.6 million and ~~$0.3~~$4.5 million ~~respectively.~~

~~Recently Issued Accounting Pronouncements~~

~~In May 2014,~~for the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes previous revenue recognition guidance. The new guidance introduces a new principles-based framework for revenue recognitionthree and ~~disclosure. Since its issuance, the FASB has issued additional ASUs, amending the guidance~~six months ended June 30, 2019, respectively, and ~~the effective dates of amendments, and the SEC has rescinded certain related SEC guidance.~~

On January 1, 2018, we adopted the new accounting standard and all of the related amendments (“new revenue standard”) to all contracts using the modified retrospective method. Adoption of the new revenue standard did not result in a material cumulative effect adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We do not expect the adoption of the new revenue standard to have a material impact to our net income ~~on an ongoing basis. See Note S - Revenue to these Financial Statements~~was $2.1 million and $3.7 million for ~~additional disclosures.~~the three and six months ended June 30, 2019, respectively. Foreign operations constituted approximately $10.9 million of consolidated assets as of June 30, 2019. We had no significant foreign operations during the three and six months ended June 30, 2018.

New Accounting Pronouncements Recently Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and ~~in July 2018,~~issued ASU 2018-11 Leases (Topic 842): Targeted Improvements. The new standard(s) ~~establishes~~established a ~~right-of-use (ROU)~~ROU model that requires a lessee to record an ROU asset and a corresponding lease liability on the balance sheet for all leases with terms greater than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. Similarly, lessors will be required to classify leases as sales-type, finance or operating, with classification affecting the pattern of income recognition. Classification for both lessees and lessors will be based on an assessment of whether the lease risks and rewards, as well as substantive control, have been transferred through a lease contract. ~~This update is effective~~

On January 1, 2019, we adopted the new accounting standard using the modified retrospective approach. We elected the package of practical expedients permitted under the transition guidance, which allowed us to account for ~~public entities for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. The~~our existing operating leases without reassessing (a) whether the contracts contain a lease under the new ~~transition method allows companies to use the effective date~~standard, (b) whether classification of the operating leases would be different in accordance with the new ~~leases~~ standard, asor (c) whether the ~~date~~unamortized initial direct costs before transition adjustments would have met the definition of initial ~~application on transition. We have established a project team~~direct costs in ~~order to analyze~~ the new standard ~~and have begun to review our current accounting policies and procedures to identify potential differences and changes which would result from applying the requirements~~at lease commencement. Adoption of the new standard ~~to our~~resulted in the recognition of operating lease ~~contracts. We have selected a~~ROU assets of $223.0 million and lease ~~software to help us account for the new lease standard. We have identified our population~~liabilities of ~~lease agreements and are currently assessing the impact of other arrangements for embedded leases. While we continue to evaluate the effect of the~~$222.7 million. The standard ~~we anticipate that the adoption will result in a material increase in assets and liabilities on our consolidated balance sheet and will~~did not have a material impact on our consolidated ~~income statement~~statements of operations or ~~statement of~~ cash flows.

~~In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill~~ The comparative information has not been restated and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which removes Step 2 from the goodwill impairment test. It is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed with a measurement date after January 1, 2017. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit. The update requires companies to include the service cost component of net periodic benefit costs in the same line item or items as compensation costs arising from services rendered by the associated employees during the period. The update also disallows capitalization of the other components of net periodic benefit costs and requires those costscontinues to be ~~presented~~reported under the accounting standards in ~~the income statement separately from the service cost component and outside of a subtotal of income from operations. The update is effective~~effect for ~~fiscal years beginning after December 15, 2017, including interim periods within~~ those annual periods for public business entities. Companies are required to retrospectively apply the requirement for a separate presentation in the income statement of service costs and other components of net benefit cost and prospectively adopt the requirement to limit the capitalization of benefit costs to the service component. Application of a practical expedient is allowed permitting an employer to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements.

We implemented the update on January 1, 2018 and utilized the practical expedient to estimate the impact on the prior comparative period information presented in the interim and annual financial statements. We previously capitalized all net periodic benefit costs incurred for plant personnel in inventory and recorded the majority of net periodic benefit costs incurred by corporate personnel and retirees into selling, general, and administrative expenses.

The following is a reconciliation of the effect of the reclassification (in thousands) of the net benefit cost in the Company’s condensed consolidated statements of income for the three and nine months ended September 30, 2017. In addition, the table reflects the effect of the reclassification between product sales and services sales to conform to the current year's presentation for the three and nine months ended September 30, 2017:

Three Months Ended September 30, 2017
As Previously Reported Services Reclassifications ASU 2017-07 Adjustments As Revised
Product Sales $ 295,768
$ (14,630 ) $ —
$ 281,138
Service Sales 49,255
14,630
—
63,885
Total sales 345,023
—
—
345,023
Product cost of sales 189,105
(1,337 ) (134 ) 187,634
Service cost of sales 38,818
1,337
—
40,155
Total cost of sales (excluding depreciation, depletion and amortization) 227,923
—
(134 ) 227,789
Selling, general and administrative expenses 29,602
—
(60 ) 29,542
Operating income 62,825
—
194
63,019
Other income (expense) 1,502
—
(194 ) 1,308

Nine Months Ended September 30, 2017
As Previously Reported Services Reclassifications ASU 2017-07 Adjustments As Revised
Product Sales $ 751,111
$ (30,830 ) $ —
$ 720,281
Service Sales 129,174
30,830
—
160,004
Total sales 880,285
—
—
880,285
Product cost of sales 515,767
(3,131 ) (521 ) 512,115
Service cost of sales 97,042
3,131
—
100,173
Total cost of sales (excluding depreciation, depletion and amortization) 612,809
—
(521 ) 612,288
Selling, general and administrative expenses 77,955
—
(402 ) 77,553
Operating income 119,623
—
923
120,546
Other income (expense) (2,168 ) —
(923 ) (3,091 )

periods. See Note Q - Leases.

In February 2018, the FASB issued Accounting Standards Update ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The ASU provides that the stranded tax effects from the Tax Cuts and Jobs Act of 2017 in accumulated other comprehensive loss may be reclassified to retained earnings. The ASU is effective ~~February~~January 1, 2019, with early adoption permitted. We ~~are currently evaluating~~adopted the ~~effect that~~new accounting standard on January 1, 2019, and we do not intend to exercise the ~~transition guidance will have on our financial statements and related disclosures.~~option to reclassify stranded tax effects within accumulated other comprehensive income.

New Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The new guidance requires a customer in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. The update is effective for calendar-year public business entities in 2020. For all other calendar-year entities, it is effective for annual periods beginning in 2021 and interim periods in 2022. Early adoption is permitted. We are currently evaluating the ~~effect~~adoption of this standard and the impact to our consolidated financial statements.

In November 2018, FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses. The amendments in this ASU clarified issues related to Topic 326. In Issue 1, the amendment in this ASU mitigates transition complexity by requiring that for nonpublic business entities the ~~guidance will have on~~amendments in ASU 2016-13 are effective for fiscal years after December 15, 2021, including interim periods within those fiscal years. In Issue 2, the amendment clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The ASU is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. We are currently evaluating the adoption of this standard and the impact to our consolidated financial ~~statements and related disclosures.~~statements.

NOTE B—C—EARNINGS PER SHARE

Basic earnings per common share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is computed similarly to basic earnings per common share except that the weighted average number of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

Diluted net earnings per share assumes the conversion of contingently convertible securities and stock options under the treasury stock method, if dilutive. Contingently convertible securities and stock options are excluded from the calculation of fully diluted earnings per share if they are anti-dilutive, including when we incur a loss from continuing operations.

The following table shows the computation of basic and diluted earnings per share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019, and ~~2017:~~

2018:



In thousands, except per share amounts	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019			2018
Numerator:
Net income (loss) attributable to U.S. Silica Holdings, Inc.	$	6,150	$	17,644	$	(13,174	)	$	48,938

Denominator:
Weighted average shares outstanding	73,301		77,784		73,165			78,636
Diluted effect of stock awards	204		696		—			692
Weighted average shares outstanding assuming dilution	73,505		78,480		73,165			79,328

Earnings (loss) per share attributable to U.S. Silica Holdings, Inc.:
Basic earnings (loss) per share	$	0.08	$	0.23	$	(0.18	)	$	0.62
Diluted earnings (loss) per share	$	0.08	$	0.22	$	(0.18	)	$	0.62

In thousands, except per share amounts Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Numerator:
Net income attributable to U.S. Silica Holdings, Inc. $ 6,316
$ 41,273
$ 55,254
$ 73,254

Denominator:
Weighted average shares outstanding 77,365
81,121
78,209
81,058
Diluted effect of stock awards 494
662
467
918
Weighted average shares outstanding assuming dilution 77,859
81,783
78,676
81,976

Earnings per share attributable to U.S. Silica Holdings, Inc.:
Basic earnings per share $ 0.08
$ 0.51
$ 0.71
$ 0.90
Diluted earnings per share $ 0.08
$ 0.50
$ 0.70
$ 0.89
We excluded potentially dilutive shares of 222 for the six months ended June 30, 2019 from the calculation of diluted weighted average shares outstanding and diluted earnings per share because we were in a net loss position.

Certain stock options, restricted stock awards and performance share units were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive. ~~Weighted-average stock~~Stock awards ~~(in thousands)~~ excluded from the calculation of diluted earnings per common share were as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Weighted-average outstanding stock options excluded 589
564
562
195
Weighted-average outstanding restricted stock and performance share units awards excluded 151
457
289
358



In thousands	Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018
Stock options excluded	689	426	712	427
Restricted stock and performance share units awards excluded	254	264	298	319

NOTE C—D—CAPITAL STRUCTURE AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Common Stock

Our Amended and Restated Certificate of Incorporation authorizes up to 500,000,000 shares of common stock, par value of $0.01. Subject to the rights of holders of any series of preferred stock, all of the voting power of the stockholders of Holdings shall be vested in the holders of the common stock. There were ~~81,773,127~~82,549,488 shares issued and ~~77,511,268~~73,579,691 shares outstanding at ~~September~~June 30, ~~2018.~~2019. There were ~~81,267,205~~81,811,977 shares issued and ~~80,524,255~~73,148,853 shares outstanding at December 31, ~~2017.~~2018.

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, our Board of Directors declared quarterly cash dividends as follows:



Dividends per Common Share		Declaration Date	Record Date	Payable Date
$	0.0625	February 15, 2019	March 14, 2019	April 4, 2019
$	0.0625	May 13, 2019	June 14, 2019	July 5, 2019

Dividends per Common Share Declaration Date Record Date Payable Date
$ 0.0625
February 16, 2018 March 15, 2018 April 5, 2018
$ 0.0625
May 14, 2018 June 15, 2018 July 6, 2018
$ 0.0625
July 16, 2018 September 14, 2018 October 3, 2018

All dividends were paid as scheduled.

Any determination to pay dividends and other distributions in cash, stock, or property by Holdings in the future will be at the discretion of our Board of Directors and will be dependent on then-existing conditions, including our business and financial condition, results of operations, liquidity, capital requirements, contractual restrictions including restrictive covenants contained in our debt agreements, and other factors. Additionally, because we are a holding company, our ability to pay dividends on our common stock may be limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us, including restrictions under the terms of the agreements governing our indebtedness.

Preferred Stock

Our Amended and Restated Certificate of Incorporation authorizes our Board of Directors to issue up to 10,000,000 shares, in the aggregate, of preferred stock, par value of $0.01 in one or more series, to fix the powers, preferences and other rights of such series, and any qualifications, limitations or restrictions thereof, including the dividend rate, conversion rights, voting rights, redemption rights and liquidation preference, and to fix the number of shares to be included in any such series, without any further vote or action by our stockholders.

There were no shares of preferred stock issued or outstanding at ~~September~~June 30, ~~2018~~2019 or December 31, ~~2017.~~2018. At present, we have no plans to issue any preferred stock.

Share Repurchase Program

~~We are authorized by~~In May 2018, our Board of Directors authorized the repurchase of up to ~~repurchase shares~~$200 million of our ~~outstanding~~ common stock from time to time on the open market or in privately negotiated transactions. Stock repurchases, if any, will be funded using our available liquidity. The timing and amount of stock repurchases will depend on a variety of factors, including the market conditions as well as corporate and regulatory considerations.

~~In May 2018, our Board of Directors authorized the repurchase of up to $200 million of our common stock.~~ As of ~~September~~June 30, ~~2018,~~2019, we have repurchased a total of ~~536,139~~5,036,139 shares of our common stock at an average price of ~~$28.91~~$14.59 and ~~had $184.5~~have $126.5 million of remaining availability under this program.

In October 2017, our Board of Directors authorized us to repurchase up to $100 million of our common stock by December 11, 2018. During the three months ended March 31, 2018, we repurchased 2,828,023 shares of our common stock at an average price of $26.52 under this program. As of March 31, 2018, we had repurchased a total of 3,555,104 shares of our common stock at an average price of $28.13, and fully utilized our shares authorized to be repurchased at such time.

Our Board of Directors previously had authorized the repurchase of up to $50.0 million of our common stock. This program expired on December 11, 2017. We repurchased a total of 706,093 shares of our common stock at an average price of $23.83 under this program.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of fair value adjustments associated with cash flow hedges, accumulated adjustments for net experience losses and prior service ~~cost~~costs related to employee benefit plans and foreign currency translation adjustments, net of tax. The following table presents the changes in accumulated other comprehensive loss by component (in thousands) during the ~~nine~~six months ended ~~September~~June 30, ~~2018:~~2019:



	For the Six Months Ended June 30, 2019
	Unrealized loss on cash flow hedges			Foreign currency translation adjustments			Pension and other post-retirement benefits liability			Total
Beginning Balance	$	(1,621	)	$	(620	)	$	(12,779	)	$	(15,020	)
Other comprehensive loss before reclassifications	(3,011		)	(34		)	(3,946		)	(6,991		)
Amounts reclassified from accumulated other comprehensive loss	—			—			629			629
Ending Balance	$	(4,632	)	$	(654	)	$	(16,096	)	$	(21,382	)

For the Nine Months Ended September 30, 2018
Unrealized gain/(loss) on cash flow hedges Foreign currency translation adjustments Pension and other post-retirement benefits liability Total
Beginning Balance $ (76 ) $ (6 ) $ (13,844 ) $ (13,926 )
Other comprehensive gain (loss) before reclassifications 468
(446 ) 3,617
3,639
Amounts reclassed from accumulated other comprehensive loss 76
—
1,458
1,534
Ending Balance $ 468
$ (452 ) $ (8,769 ) $ (8,753 )

Amounts reclassified from accumulated other comprehensive loss related to cash flow hedges are included in interest expense in our Income Statements and amounts reclassified related to pension and other post-retirement benefits are included in the computation of net periodic benefit costs at their pre-tax amounts.

NOTE D—E—BUSINESS COMBINATIONS

2018 Acquisition:

On May 1, 2018, we completed the acquisition of all of the outstanding capital stock of EP Acquisition Parent, Inc., a Delaware corporation (“EPAP”), and the ultimate parent of EP Minerals, LLC ("EPM"). Contemporaneous with the merger, EPAP was renamed EP Minerals Holdings, Inc. ("EPMH"). The consideration paid consisted of ~~$743.3~~$743.2 million of cash, net of cash acquired of $19.1 million, including $0.5 million of post-closing adjustments. EPM is a global producer of engineered materials derived from industrial minerals, including diatomaceous earth, clay (calcium ~~bentonite)~~bentonite and calcium montmorillonite) and perlite. EPM's industrial minerals are used as filter aids, absorbents and functional additives for a variety of industries including food and beverage, biofuels, recreational water, oil and gas, farm and home, landscape, sports turf, paint, plastics, and insecticides. The acquisition of EPM increased our industrial materials product offering in our Industrial & Specialty Products business segment.

We have accounted for the acquisition of EPMH under the acquisition method of accounting in accordance with ASC 805, Business ~~Combinations.~~Combinations, and have accounted for measurement period adjustments in accordance with ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. Estimates of fair value included in the ~~consolidated financial statements~~Consolidated Financial Statements represent our best estimates and valuations. In accordance with the acquisition method of accounting, the allocation of consideration value iswas subject to adjustment until we ~~complete~~completed our analysis, ~~within~~in a period of time not to exceed one year after the date of acquisition, or May 1, 2019, in order to provide us with the time to complete the valuation of its assets and liabilities.

The following table sets forth the ~~preliminary~~final allocation of the purchase price to EPMH's identifiable tangible and intangible assets acquired and liabilities assumed, including measurement period adjustments (in thousands):



Preliminary allocation of purchase price:	Estimate as of December 31, 2018		Measurement Period Adjustments⁽¹⁾			Purchase Price Allocation
Accounts receivable, net	$	43,305	$	—		$	43,305
Inventories	86,112		—			86,112
Property, plant and mine development	148,495		(1,937		)	146,558
Mineral rights	419,469		(10,580		)	408,889
Identifiable intangible assets - finite lived	10,270		(1,500		)	8,770
Identifiable intangible assets - indefinite lived	38,050		(1,250		)	36,800
Prepaids and deposits	2,072		(245		)	1,827
Other assets	7,474		—			7,474
Goodwill	150,628		12,184			162,812
Total assets acquired	905,875		(3,328		)	902,547
Accounts payable	13,435		—			13,435
Accrued expenses and other current liabilities	10,304		—			10,304
Deferred tax liabilities	122,811		(3,328		)	119,483
Long term liabilities	16,076		—			16,076
Total liabilities assumed	$	162,626	$	(3,328	)	$	159,298
Net assets acquired	$	743,249	$	—		$	743,249

Preliminary allocation of purchase price: (In thousands)
Accounts receivable, net $ 43,354
Inventories 84,395
Property, plant and mine development 123,086
Mineral rights 462,050
Identifiable intangible assets - finite lived 21,050
Identifiable intangible assets - indefinite lived 25,050
Prepaids and deposits 2,054
Other assets 4,089
Goodwill 139,862
Total assets acquired 904,990
Accounts payable 13,435
Accrued expenses and other current liabilities 8,255
Deferred tax liabilities 130,209
Long term obligations 9,766
Total liabilities assumed $ 161,665
Net assets acquired $ 743,325

⁽¹⁾ Measurement period adjustment recorded during the three months ended March 31, 2019.

The acquired intangible assets and the related estimated useful lives consist of the following:



	Approximate Fair Value		Estimated Useful Life
	(in thousands)		(in years)
Technology and intellectual property	$	1,400	15
Customer relationships	7,370		15
Total identifiable intangible assets - finite lived	$	8,770

Trade names	$	36,800
Total identifiable intangible assets - indefinite lived	$	36,800

Approximate Fair Value Estimated Useful Life
(in thousands) (in years)
Technology and intellectual property $ 2,000
15
Customer relationships 19,050
15
Total identifiable intangible assets - finite lived $ 21,050

Trade name $ 25,050

Total identifiable intangible assets - indefinite lived $ 25,050

Goodwill represents the excess of the purchase price over the fair value of the underlying net assets acquired. Goodwill in this transaction is attributable to planned growth in our industrial materials product offering in our Industrial & Specialty Products business segment. Intangibles and goodwill are not expected to be deductible for tax purposes.

Our Income Statement included revenue of $60.1 million and net income of $3.9 million for the three months ended September 30, 2018, and revenue of $101.9 million and net income of $3.3 million for the nine months ended September 30, 2018, respectively, associated with EPMH following the date of acquisition. We incurred $11.0 million of acquisition-related charges, excluding debt issuance costs, for the nine months ended September 30, 2018, which are included in selling, general and administrative expenses on our Income Statement.

The acquisition of EPMH was accounted for using the acquisition method of accounting. The purchase price and purchase price allocation are subject to customary post-closing adjustments and changes in the fair value of assets and liabilities. The above estimated fair values of net assets acquired are based on the information that was available as of the reporting date. We believe that the information provides a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities, but the potential for measurement period adjustments exists based on our continuing review of matters related to the acquisition. As a result, our final purchase price allocation may be significantly different than reflected above. We expect to complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

Unaudited Pro Forma Results

The results of EPMH's operations have been included in ~~the~~our consolidated financial statements subsequent to the acquisition date. EPMH's fiscal year end was November 30 and the Company's fiscal year end was December 31. Under SEC regulations, if a target's fiscal year end varies by more than 93 days from the acquirer's fiscal year end, it is required to adjust

interim periods until it is within 93 days. Since EPMH’s fiscal year end was within 93 days of the Company's fiscal year end, no adjustment is necessary and EPMH’s fiscal year end and interim period ends are used as if they coincided with the Company's fiscal year end and interim period end. The following unaudited pro forma consolidated financial information reflects the results of operations as if the EPMH acquisition had occurred on January 1, ~~2017,~~2018, after giving effect to certain purchase accounting adjustments. Material non-recurring transaction costs attributable to the business combination were $15.2 million. Pro forma net income includes incremental interest expense due to the related debt financing, incremental depreciation and depletion expense related to the fair value adjustment of property, plant and mine development, amortization expense related to identifiable intangible assets, and tax expense related to the combined tax provisions. There were no proforma adjustments for the three months ended September 30, 2018. This information does not purport to be indicative of the actual results that would have occurred if the acquisition had actually been completed on the date indicated, nor is it necessarily indicative of the future operating results or the financial position of the combined company (in thousands, except per share amounts):

Three Months Ended
June 30, Six Months Ended
June 30,
2018 2017 2018 2017
Sales $ 451,566
$ 341,113
$ 879,493
$ 629,196
Net income $ 19,693
$ 13,196
$ 70,539
$ 8,097
Basic earnings per share $ 0.25
$ 0.16
$ 0.90
$ 0.10
Diluted earnings per share $ 0.25
$ 0.16
$ 0.89
$ 0.10

Basic shares 77,784
81,087
78,636
81,032
Diluted shares 78,480
81,945
79,328
82,103

~~2017 Acquisitions:~~

~~White Armor Acquisition:~~

On April 1, 2017, we completed the acquisition of White Armor, a product line of cool roof granules used in industrial roofing applications, for cash consideration of $18.6 million. The final purchase price was allocated to goodwill of approximately $3.9 million, identifiable intangible assets of $12.8 million and other net assets of approximately $1.9 million.

Goodwill in this transaction is attributable to planned growth in our specialty industrial sand segment. The goodwill amount is included in our Industrial & Specialty Products segment. Identifiable definite lived intangibles, including customer relationships, and goodwill are expected to be deductible for tax purposes.

We incurred $0.2 million of acquisition-related charges which are included in selling, general and administrative expenses during the year ended December 31, 2017. Revenue and earnings for White Armor after the acquisition date are not presented as the business was integrated into our operations subsequent to the acquisition and therefore impracticable to quantify.

~~MS Sand Acquisition:~~

On August 16, 2017, we completed the acquisition of Mississippi Sand, LLC ("MS Sand"), a Missouri limited liability company, for cash consideration of approximately $95.4 million, net of cash acquired of $2.2 million. As is normal and customary, subsequent adjustments were made including $(0.5) million of net working capital adjustments plus an additional $6.1 million consideration paid related to a pre-existing contracted asset sale, which was entered into prior to our acquisition, for total cash consideration of $101.0 million. MS Sand is a frac sand mining and logistics company based in St. Louis, Missouri. The acquisition of MS Sand increased our regional frac sand product offering in our Oil & Gas Proppants segment.

We have accounted for the acquisition of MS Sand under the acquisition method of accounting in accordance with ASC 805, Business Combinations, and have accounted for measurement period adjustments in accordance with ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. Estimates of fair value included in the consolidated financial statements represent our best estimates and valuations. In accordance with the acquisition method of accounting, the allocation of consideration value was subject to adjustment until we completed our analysis, in a period of time, but not to exceed one year after the date of acquisition, or August 16, 2018, in order to provide us with the time to complete the valuation of its assets and liabilities.

The following table sets forth the final allocation of the purchase price to MS Sands' identifiable tangible and intangible assets acquired and liabilities assumed, including measurement period adjustments (in thousands):

Estimate as of December 31, 2017 Measurement Period Adjustments Purchase Price Allocation
Accounts receivable $ 11,201
$ —
$ 11,201
Inventories 8,067
—
8,067
Other current assets 362
—
362
Assets held for sale 9,453
—
9,453
Property, plant and mine development 27,458
—
27,458
Mineral rights 26,300
(2,800 ) 23,500
Other non-current assets 1,136
—
1,136
Goodwill 22,522
2,800
25,322
Customer relationships 1,840
—
1,840
Total assets acquired 108,339
—
108,339
Accounts payable and accrued expenses 3,761
—
3,761
Unfavorable leasehold positions 2,237
—
2,237
Notes Payable 866
—
866
Other long term liabilities —
—
—
Asset retirement obligations 474
—
474
Total liabilities assumed 7,338
—
7,338
Net assets acquired $ 101,001
$ —
$ 101,001

~~The acquired intangible assets and the related estimated useful lives consist of the following:~~

Approximate Fair Value Estimated Useful Life
(in thousands) (in years)
Customer relationships $ 1,840
15

Goodwill in this transaction is attributable to planned growth in our regional frac sand product offering in our Oil & Gas Proppants segment. The goodwill amount is included in our Oil & Gas Proppants segment. Identifiable definite lived intangibles, including customer relationships, and goodwill are expected to be deductible for tax purposes.

We incurred $1.0 million of acquisition-related charges which are included in selling, general and administrative expenses. Revenue and earnings for MS Sand after the acquisition date are not presented as the business was integrated into our operations subsequent to the acquisition and therefore impracticable to quantify.

~~Unaudited Pro Forma Results~~

The results of MS Sand’s operations have been included in the consolidated financial statements subsequent to the acquisition dates. The following unaudited pro forma consolidated financial information reflects the results of operations as if the MS Sand Acquisition had occurred on January 1, 2016, after giving effect to certain purchase accounting adjustments. These adjustments mainly include incremental depreciation expense related to the fair value adjustment of property, plant, equipment and mine development, amortization expense related to identifiable intangible assets, and tax expense related to the combined tax provisions. This information does not purport to be indicative of the actual results that would have occurred if the acquisition had actually been completed on the date indicated, nor is it necessarily indicative of the future operating results or the financial position of the combined company (in thousands, except per share amounts):

For the year ended December 31,
2017 2016
Sales $ 1,287,202
$ 642,951
Net income (loss) $ 143,604
$ (55,835 )
Basic earnings (loss) per share $ 1.77
$ (0.86 )
Diluted earnings (loss) per share $ 1.75
$ (0.86 )



	Three Months Ended June 30, 2018		Six Months Ended June 30, 2018
Sales	$	451,566	$	879,493
Net Income	$	19,693	$	70,539
Basic earnings per share	$	0.25	$	0.90
Diluted earnings per share	$	0.25	$	0.89

NOTE E—F—ACCOUNTS RECEIVABLE

At ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, accounts receivable (in thousands) consisted of the following:



	June 30, 2019			December 31, 2018
Trade receivables	$	223,523		$	198,435
Less: Allowance for doubtful accounts	(9,071		)	(6,751		)
Net trade receivables	214,452			191,684
Other receivables⁽¹⁾	22,941			23,802
Total accounts receivable	$	237,393		$	215,486



(1	)	At both June 30, 2019 and December 31, 2018, other receivables included $16.0 million of refundable alternative minimum tax credits.

September 30,
2018 December 31,
2017
Trade receivables $ 248,361
$ 217,649
Less: Allowance for doubtful accounts (7,133 ) (7,100 )
Net trade receivables 241,228
210,549
Other receivables 6,464
2,037
Total accounts receivable $ 247,692
$ 212,586

Changes in our allowance for doubtful accounts (in thousands) during the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 are as follows:


	September 30, 2018			June 30, 2019			June 30, 2018
Beginning balance	$	7,100		$	6,751		$	7,780
Bad debt provision	516			2,399			387
Write-offs	(483		)	(79		)	(394		)
Ending balance	$	7,133		$	9,071		$	7,773

Our ten largest customers accounted for approximately ~~48% and 50%~~41% of total sales ~~during~~for both the ~~nine~~three and six months ended ~~September~~June 30, ~~2018~~2019, and ~~2017,~~approximately 49% and 50% for the three and six months ended June 30, 2018, respectively. Sales to one of our customers accounted for ~~15%~~11% and 12% of our total sales ~~during~~for the ~~nine~~three and six months ended ~~September~~June 30, ~~2018. Sales to two of our customers accounted~~2019, respectively, and 14% for ~~11%~~both the three and ~~10% of our total sales during the nine~~six months ended ~~September~~June 30, ~~2017.~~2018. No other customers accounted for 10% or more of our total sales. At ~~September~~June 30, ~~2018,~~2019, one of our customers' accounts receivable represented ~~19%~~14% of our total trade accounts receivable, net of allowance. At December 31, ~~2017, two of our customers'~~2018, the same customer's accounts receivable represented ~~19% and 11%~~18% of our total trade accounts receivable, net of allowance. No other customers accounted for 10% or more of our total trade accounts receivable.

NOTE F—G—INVENTORIES

At ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, inventories (in thousands) consisted of the following:



	June 30, 2019		December 31, 2018
Supplies	$	47,684	$	41,453
Raw materials and work in process	59,966		68,474
Finished goods	40,747		52,160
Total inventories	$	148,397	$	162,087

September 30, 2018 December 31, 2017
Supplies $ 39,053
$ 21,277
Raw materials and work in process 75,932
28,034
Finished goods 55,738
43,065
Total inventories $ 170,723
$ 92,376

NOTE G—H—PROPERTY, PLANT AND MINE DEVELOPMENT

At ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, property, plant and mine development (in thousands) consisted of the following:



	June 30, 2019			December 31, 2018
Mining property and mine development	$	991,639		$	995,759
Asset retirement cost	13,805			12,732
Land	55,355			55,502
Land improvements	69,226			67,729
Buildings	68,490			64,515
Machinery and equipment	1,087,605			958,357
Furniture and fixtures	3,547			3,599
Construction-in-progress	93,874			167,933
	2,383,541			2,326,126
Accumulated depletion, depreciation and amortization	(580,338		)	(499,823		)
Total property, plant and mine development, net	$	1,803,203		$	1,826,303

September 30,
2018 December 31,
2017
Mining property and mine development $ 1,051,506
$ 586,242
Asset retirement cost 14,308
14,184
Land 43,221
36,552
Land improvements 67,928
45,878
Buildings 69,242
56,330
Machinery and equipment 849,340
590,566
Furniture and fixtures 4,092
2,953
Construction-in-progress 184,431
189,970
2,284,068
1,522,675
Accumulated depletion, depreciation and amortization (415,686 ) (353,520 )
Total property, plant and mine development, net $ 1,868,382
$ 1,169,155

At ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the aggregate cost of machinery and equipment acquired under ~~capital~~finance leases was ~~$5.1~~$0.3 million and $0.9 million, respectively, reduced by accumulated depreciation of ~~$0.3~~$0.1 million and $0.2 million, respectively. The amount of interest costs capitalized in property, plant and mine development was ~~$5.2~~$1.8 million and ~~$0.2~~$3.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

On March 21, 2018, we completed the sale of three transload facilities located in the Permian, Eagle Ford, and Marcellus Basins to CIG Logistics (“CIG”) for total consideration of $86.1 million, including the assumption by CIG of $2.2 million of Company obligations. Total cash consideration was $83.9 million. The consideration includes receipt of a vendor incentive from CIG to enter into master transloading service arrangements. Of the total consideration, $25.8 million was allocated to the fair value of the transload facilities, which had a net book value of $20.0 million and resulted in a gain on sale of $5.8 million. The consideration included a related asset retirement obligation of $2.1 million and an equipment note of $0.1 million assumed by CIG. In addition, $60.3 million of the consideration received in excess of the facilities' fair value was allocated to vendor incentives to be recognized as a reduction of costs using a service-level methodology over the contract lives of the transloading service arrangements. At ~~September~~June 30, ~~2018,~~2019, vendor incentives of ~~$5.1~~$7.1 million and ~~$49.3~~$27.0 million were classified in accounts payable and accrued expenses and in other long-term ~~obligations,~~liabilities, respectively, on our balance sheet.

Separately, on March 21, 2018, we accrued $7.9 million in contract termination costs for facilities contracts operated by third-parties, which ~~will~~did not transfer to CIG. During the second quarter of 2018, as a result of the final settlement of these contracts, we recorded a $2.7 million credit in selling, general and administrative expenses on our Income Statement.

During 2019, management approved to dispose of certain non-operating parcels of land. The assets, which have a combined carrying value of approximately $1.3 million, have been classified as assets held for sale and are presented within Prepaid expenses and other current assets in the ~~second quarter~~Condensed Consolidated Balance Sheets. The proceeds of ~~2018, we recorded a $16.2 million asset~~the disposals are expected to exceed the net carrying value of the assets and, accordingly, no impairment ~~related~~loss has been recognized on these assets held for sale. Both assets were previously classified as Land, therefore, no adjustments were needed for depreciation of these assets. We expect to dispose of these assets within one year of the ~~closure of our resin coating facility and associated product portfolio.~~balance sheet date.

NOTE H—I—GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill (in thousands) by business segment consisted of the following:



	Oil & Gas Proppants Segment							Industrial & Specialty Products Segment						Totals
	Goodwill		Impairments					Goodwill		Impairments

Balance at December, 2018	$	250,267	$	(164,167	)	$	86,100	$	175,240	$	—	$	175,240	$	261,340

EPM acquisition measurement period adjustment⁽¹⁾	—		—			—		12,184		—		12,184		12,184

Balance at June 30, 2019	$	250,267	$	(164,167	)	$	86,100	$	187,424	$	—	$	187,424	$	273,524

⁽¹⁾ Measurement period adjustment was recorded during the three months ended March 31, 2019.

Goodwill
Balance at December 31, 2017 $ 272,079
EPMH acquisition 139,862
MS Sand acquisition measurement period adjustment 2,800
Balance at September 30, 2018 $ 414,741

Goodwill and trade names are evaluated for impairment annually as of October 31, or more frequently when indicators of impairment exist. We evaluated events and circumstances since the date of our last qualitative assessment, including macroeconomic conditions, industry and market conditions, and our overall financial performance. After assessing the totality of the events and circumstances, we determined that it was not more likely than not that the fair value of our reporting units was less than their carrying amount and no impairment existed.

The changes in the carrying amount of intangible assets (in thousands) consisted of the following:



		June 30, 2019							December 31, 2018
	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
	(in years)
Technology and intellectual property	15	$	84,871	$	(14,075	)	$	70,796	$	83,616	$	(11,168	)	$	72,448
Customer relationships	13 - 15	68,599		(16,278		)	52,321		68,664		(13,826		)	54,838
Total definite-lived intangible assets:		$	153,470	$	(30,353	)	$	123,117	$	152,280	$	(24,994	)	$	127,286
Trade names		65,390		—			65,390		66,640		—			66,640
Other		700		—			700		700		—			700
Total intangible assets:		$	219,560	$	(30,353	)	$	189,207	$	219,620	$	(24,994	)	$	194,626

September 30, 2018 December 31, 2017
Estimated Useful Life Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net
(in years)
Technology and intellectual property 15 $ 79,748
$ (10,394 ) $ 69,354
$ 70,703
$ (5,917 ) $ 64,786
Customer relationships 13 - 15 80,279
(12,953 ) 67,326
61,229
(9,076 ) 52,153
Total definite-lived intangible assets: $ 160,027
$ (23,347 ) $ 136,680
$ 131,932
$ (14,993 ) $ 116,939
Trade name 58,118
—
58,118
33,068
—
33,068
Other 700
—
700
—
—
—
Total intangible assets: $ 218,845
$ (23,347 ) $ 195,498
$ 165,000
$ (14,993 ) $ 150,007

Amortization expense was ~~$3.2~~$2.7 million and ~~$8.4~~$5.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively. Amortization expense was ~~$2.3~~$2.9 million and ~~$6.6~~$5.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively.

The estimated amortization expense related to definite-lived intangible assets (in thousands) for the five succeeding years is as follows:



2019	$	5,401
2020	10,800
2021	10,798
2022	10,783
2023	10,778

2018 $ 2,776
2019 11,095
2020 11,098
2021 11,098
2022 11,083

NOTE I—J—DEBT

At ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, debt (in thousands) consisted of the following:



	June 30, 2019			December 31, 2018
Senior secured credit facility:
Revolver expiring May 1, 2023 (8.5% at June 30, 2019 and December 31, 2018)	$	—		$	—
Term Loan—final maturity May 1, 2025 (6.50% at June 30, 2019 and 6.56% December 31, 2018)	1,264,000			1,270,400
Less: Unamortized original issue discount	(5,983		)	(6,511		)
Less: Unamortized debt issuance cost	(28,670		)	(31,310		)
Note payable secured by royalty interest	13,239			26,511
Equipment notes payable	193			321
Finance leases	134			344
Total debt	1,242,913			1,259,755
Less: current portion	(13,093		)	(13,327		)
Total long-term portion of debt	$	1,229,820		$	1,246,428

September 30,
2018 December 31,
2017
Senior secured credit facility:
Revolver expiring May 1, 2023 (8.25% at September 30, 2018 and 5.75% at December 31, 2017) $ —
$ —
Term loan facility—final maturity May 1, 2025 (6.25% at September 30, 2018 and 4.75%-5.25% December 31, 2017) 1,273,600
489,075
Less: Unamortized original issue discount (6,417 ) (944 )
Less: Unamortized debt issuance cost (29,279 ) (3,099 )
Note payable secured by royalty interest 25,720
24,740
Customer note payable —
745
Equipment notes payable 384
719
Capital leases 524
706
Total debt 1,264,532
511,942
Less: current portion (13,479 ) (6,867 )
Total long-term portion of debt $ 1,251,053
$ 505,075

~~Revolving Line-of-Credit~~

We have a $100.0 million revolving line-of-credit (the “Revolver”), with zero drawn and $4.8 million allocated for letters of credit as of September 30, 2018, leaving $95.2 million available under the Revolver.

Senior Secured Credit Facility

~~At September 30, 2018, contractual maturities of our senior secured credit facility (in thousands) are as follows:~~

2018 $ 3,200
2019 12,800
2020 12,800
2021 12,800
Thereafter 1,232,000
Total $ 1,273,600

On May 1, 2018, we entered into ~~the~~a Third Amended and Restated Credit Agreement (the "Credit Agreement")~~. The Credit Agreement increases~~, which increased our existing senior debt by entering into a new $1.380 billion senior secured credit facility, consisting of a $1.280 billion term loan (the "Term Loan") and a $100 million revolving credit facility (the "Revolver") (collectively the "Credit

Facility) that may also be used for swingline loans or letters of credit, and we may elect to increase the term loan in accordance with the terms of the Credit Agreement. Borrowings under the Credit Agreement will bear interest at variable rates as determined at our election, at LIBOR or a base rate, in each case, plus an applicable margin. In addition, under the Credit Agreement, we are required to pay a per annum facility fee and fees for letters of credit. The Credit Agreement is secured by substantially all of our assets and of our domestic subsidiaries' assets and a pledge of the equity interests in such entities. The ~~term loan~~Term Loan matures on May 1, 2025, and the ~~revolving credit facility~~Revolver expires May 1, 2023. We ~~incurred $37.3~~capitalized $38.7 million in debt issuance costs and original issue discount ~~of which $35.0 million was capitalized,~~ as a result of the new Credit ~~Agreement, and wrote-off $1.1 million of capitalized debt issuance costs relating to the previously existing senior debt.~~Agreement.

The ~~facility~~Credit Facility contains covenants that, among other things, ~~govern~~limit our ability, and certain of our subsidiaries' abilities, to create, incur or assume indebtedness and liens, to make acquisitions or investments, to sell assets and to pay dividends. The Credit Agreement also requires us to maintain a consolidated leverage ratio of no more than 3.75:1.00 as of the last day of any fiscal quarter whenever usage of the Revolver (other than certain undrawn letters of credit) exceeds 30% of the Revolver commitment. These covenants are subject to a number of important exceptions and qualifications. The Credit Agreement includes events of default and other affirmative and negative covenants that are usual for facilities and transactions of this type. As of ~~September~~June 30, ~~2018,~~2019, and December 31, ~~2017,~~2018, we are in compliance with all covenants in accordance with our senior secured Credit Facility.

Term Loan

At June 30, 2019, contractual maturities of our Term Loan (in thousands) are as follows:



2019	$	6,400
2020	12,800
2021	12,800
2022	12,800
2023	12,800
Thereafter	1,206,400
Total	$	1,264,000

Revolving Line-of-Credit

We have a $100.0 million Revolver with zero drawn and $4.8 million allocated for letters of credit ~~facility.~~as of June 30, 2019, leaving $95.2 million available under the Revolver.

Note Payable Secured by Royalty Interest

In conjunction with the acquisition of ~~NBI~~New Birmingham, Inc. in August 2016, we assumed a note payable secured by a royalty interest. The monthly royalty payment is calculated based on future tonnages and sales related to the sand shipped from our Tyler, Texas facility. The note payable is due by June 30, 2032. The note does not provide a stated interest rate. The minimum payments (in thousands) for the next five years required by the note are as follows:



2019	$	1,750
2020	1,750
2021	1,750
2022	1,750
2023	1,750

2018 $ 438
2019 1,750
2020 1,750
2021 1,750
2022 1,750

Under this agreement once a certain number of tons have been shipped from the Tyler facility, the minimum payments will decrease to $0.5 million per year, subject to proration in the period this threshold is met.

The royalty note payable fair value was estimated to be $22.5 million on the acquisition date. The estimate was made using a discounted cash flow model, which calculated the present value of projected future cash payments required under the agreement using a discounted rate of 14%. As of ~~September~~June 30, ~~2018,~~2019, the note payable had a balance of ~~$25.7~~$13.2 million. The ~~increase~~decrease in the fair value of the note payable amount is due to a change in estimate of future tonnages and sales related to the sand shipped from our Tyler, Texas facility. This change in estimate resulted in a gain of $14.1 million, which is recorded in Other income, net, including interest ~~paid-in-kind.~~income in the Condensed Consolidated Statement of Operations. The effective interest rate based on the updated projected future cash payments was ~~20%~~14% at ~~September~~June 30, ~~2018.~~

~~NOTE J—DEFERRED REVENUE~~

~~We enter into certain customer supply agreements which give~~2019. Other changes in fair value of the ~~customers the right to purchase certain products for a discounted price at certain volumes over an average initial contract term~~note payable amount may result if estimates of ~~one to five years. The advance payments represent~~ future ~~purchases~~tonnages and are recorded as deferred revenue, recognized as revenue over the contract term of each supply agreement. During the nine months ended September 30, 2018 we received advances of $28.0 million, including a customer's purchase of an interest in our sand reserves in Lamesa, Texas, and securing a long-term supply of sand. At September 30, 2018 and December 31, 2017, the total deferred revenue balance was $119.9 million and $118.4 million, respectively, of which $40.8 million and $36.1 million was classified as current on our Balance Sheets. sales increase or decrease.

NOTE K—ASSET RETIREMENT ~~OBLIGATION~~OBLIGATIONS

Mine reclamation or future remediation costs for inactive mines are accrued based on management’s best estimate at the end of each period of the costs expected to be incurred at asuch site. Such cost estimates include, where applicable, ongoing care, maintenance and monitoring costs. Changes in estimates at inactive mines are reflected in earnings in the period an estimate is revised.

As of ~~September~~June 30, 2019 and December 31, 2018, we had a liability of ~~$20.1~~$20.2 million and $18.4 million respectively, in other long-term ~~obligations~~liabilities related to our asset retirement ~~obligation.~~obligations. Changes in the asset retirement ~~obligation~~obligations (in thousands) during the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 are as follows:



	Six Months Ended June 30,
	2019		2018
Beginning balance	$	18,413	$	19,032
Accretion	745		611
Additions and revisions of prior estimates	1,061		(487		)
Addition related to EPMH acquisition	—		2,733
Disposal related to sale of transloads	—		(2,116		)
Ending balance	$	20,219	$	19,773

September 30,
2018
Beginning balance $ 19,032
Accretion 894
Additions and revisions of prior estimates (486 )
Addition related to EPMH acquisition 2,733
Disposal related to sale of transloads (2,116 )
Ending balance $ 20,057

NOTE L—FAIR VALUE ACCOUNTING

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

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

Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Cash Equivalents

Due to the short-term maturity, we believe our cash equivalent instruments at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018, approximate their reported carrying values.

Long-Term Debt, Including Current Maturities

We believe that the fair values of our long-term debt, including current maturities, approximate their carrying values based on their effective interest rates compared to current market rates.

Changes in the fair value of the royalty note payable utilize Level 3 inputs, such as estimates of future tonnages sold and average sales price. See Note J - Debt for more information on the change in fair value during the three months ended June 30, 2019.

Derivative Instruments

The estimated fair value of our derivative instruments are recorded at each reporting period and are based upon widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative contract. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable ~~market-~~

~~based~~market-based inputs, including interest rate curves and implied volatilities. We also incorporate credit valuation adjustments to appropriately reflect both our nonperformance risk as well as that of the respective counterparty in the fair value measurements.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default of ourselves and our counterparties. However, as of ~~September~~June 30, ~~2018,~~2019, we have assessed that the impact of the credit valuation adjustments on the overall valuation of our derivative positions is not significant. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. ~~Refer to~~See Note M - Derivative Instruments ~~to these Financial Statements~~ for ~~the fair value of our derivative instruments and additional disclosures.~~more information.

NOTE M—DERIVATIVE INSTRUMENTS

Cash Flow Hedges of Interest Rate Risk

We enter into interest rate swap agreements in connection with our ~~term loan facility (the "Term Loan")~~Term Loan to add stability to interest expense and to manage our exposure to interest rate movements. The derivative instruments are recorded on the balance sheet within other long-term assets or liabilities at their fair values. As of June 30, 2019, the fair value of our two interest rate swaps was a liability of $4.2 million and a liability of $1.9 million and classified within other long-term liabilities on our balance sheet, and the fair value of our interest rate cap was zero. At December 31, 2018, the fair value of our two interest rate swaps was a liability of $1.5 million and a liability of $0.7 million and classified within other long-term liabilities on our balance sheet, and the fair value of our interest rate cap was zero. We have designated the interest rate swap agreements as qualified cash flow hedges. Accordingly, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and recognized in earnings in the same period or periods during which the hedged transaction affects earnings.

The following table summarizes the fair value of our derivative instruments (in thousands, except contract/notional amount). See Note L - Fair Value Accounting for ~~additional disclosures~~more information regarding the estimated fair values of our derivative instruments at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017.~~2018.


		September 30, 2018								December 31, 2017							June 30, 2019										December 31, 2018
	Maturity Date	Contract/Notional Amount			Carrying Amount		Fair Value		Maturity Date	Contract/Notional Amount			Carrying Amount		Fair Value		Maturity Date	Contract/Notional Amount			Carrying Amount			Fair Value			Maturity Date	Contract/Notional Amount			Carrying Amount			Fair Value
LIBOR⁽¹⁾ interest rate swap agreement	2020		$440	million	$	419	$	419	—	$	—		$	—	$	—	2020		$440	million	$	(4,210	)	$	(4,210	)	2020		$440	million	$	(1,475	)	$	(1,475	)
LIBOR⁽¹⁾interest rate swap agreement	2020		$200	million	$	198	$	198	—	$	—		$	—	$	—	2020		$200	million	$	(1,898	)	$	(1,898	)	2020		$200	million	$	(663	)	$	(663	)
LIBORinterest rate cap agreement	2019		$249	million	$	—	$	—	2019		$249	million	$	—	$	—	2019		$249	million	$	—		$	—		2019		$249	million	$	—		$	—

⁽¹⁾ Agreements fix the LIBOR interest rate base to 2.74%

On May 1, 2018, as a result of entering into the new Credit Agreement, we determined the existing interest rate cap derivative no longer qualified for hedge accounting. During the nine months ended September 30, 2018 we recognized $76 thousand of deferred losses in accumulated other comprehensive loss into earnings.

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019 we had no ineffectiveness for the interest rate swap derivatives.

The following table summarizes the effect of derivative instruments (in thousands) on our income statements and our consolidated statements of comprehensive income for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018.



	Six Months Ended June 30,
	2019			2018
Deferred losses from derivatives in OCI, beginning of period	$	(1,621	)	$	(76	)
Loss recognized in OCI from derivative instruments	(3,011		)	—
Loss reclassified from Accumulated OCI	—			6
Deferred losses from derivatives in OCI, end of period	$	(4,632	)	$	(70	)

September 30, 2018 September 30,
2017
Deferred losses from derivatives in OCI, beginning of period $ (76 ) $ (32 )
Gain (loss) recognized in OCI from derivative instruments 468
(43 )
Loss reclassified from Accumulated OCI 76
—
Deferred losses from derivatives in OCI, end of period $ 468
$ (75 )

NOTE N—EQUITY-BASED COMPENSATION

In July 2011, we adopted the U.S. Silica Holdings, Inc. 2011 Incentive Compensation Plan (the “2011 Plan”), which was amended and restated in May 2015. The 2011 Plan provides for grants of stock options, restricted stock, performance share units and other incentive-based awards. We believe our 2011 Plan aligns the interests of our employees and directors with those of our common stockholders. At ~~September~~June 30, ~~2018,~~2019, we have ~~3,632,323~~1,740,814 shares of common stock that may be issued under the 2011 Plan. We use a combination of treasury stock and new shares if necessary to satisfy option exercises or vesting of restricted awards and performance share units.

Stock Options

The following table summarizes the status of, and changes in, our stock option awards during the ~~nine~~six months ended ~~September~~June 30, ~~2018:~~2019:



	Number of Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term in Years
Outstanding at December 31, 2018	901,996		$	28.52	$	18,566	4.8 years
Granted	—		$	—	$	—
Exercised	(10,000	)	$	12.87	$	11,557
Forfeited	—		$	—	$	—
Expired	(59,998	)	$	24.59	$	—
Outstanding at June 30, 2019	831,998		$	28.99	$	297,475	4.6 years
Exercisable at June 30, 2019	831,998		$	28.99	$	297,475	4.6 years

Number of
Shares Weighted
Average
Exercise Price Aggregate Intrinsic Value (in thousands) Weighted
Average
Remaining Contractual Term in Years
Outstanding at December 31, 2017 908,919
$ 28.46
$ 7,008
6.1 years
Granted —
—
—

Exercised (4,167 ) 14.65
—

Forfeited (918 ) 31.30
—

Expired (1,838 ) $ 31.30
$ —

Outstanding at September 30, 2018 901,996
$ 28.52
$ 1,611
5.0 years
Exercisable at September 30, 2018 855,446
$ 27.38
$ 1,611
5.0 years

There were no grants of stock options during the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018.

There were zero and 10,000 stock options exercised during the three and six months ended June 30, 2019, respectively. There were 4,167 stock options exercised during the ~~nine~~three and six months ended ~~September~~June 30, 2018. ~~There were 16,839 and 43,774~~The total intrinsic value of stock options exercised ~~during~~was $12 thousand for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017, respectively.~~2019. The total intrinsic value of stock options exercised was $0.1 million for the ~~nine~~three and six months ended ~~September~~June 30, 2018. ~~The total intrinsic value of stock options exercised was $0.3 million and $1.2 million for the three and nine months ended September 30, 2017, respectively.~~ Cash received from stock options exercised during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was ~~$61~~$128 thousand. Cash received from stock options exercised during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was ~~$0.3 million and $0.8 million, respectively.~~$62 thousand. The tax benefit realized from stock option exercises was ~~fourteen~~$3 thousand for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The tax benefit realized from stock option exercises was ~~$0.1 million and $0.4 million~~$14 thousand for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively.~~2018.

As of June 30, 2019, there was no unrecognized compensation expense related to these options. We recognized ~~$0.2~~$0.4 million and ~~$1.1~~$0.9 million of equity-based compensation expense related to options during the three and ~~nine~~six months ended ~~September~~June 30, 2018, respectively. We recognized $0.6 million and $1.9 million of equity-based compensation expense related to options during the three and nine months ended September 30, 2017, respectively. As of September 30, 2018, there was $0.1 million of total unrecognized compensation expense related to these options, which is expected to be recognized over a weighted-average period of approximately 0.1 years. We account for forfeitures as they occur.

Restricted Stock and Restricted Stock Unit Awards

The following table summarizes the status of, and changes in, our unvested restricted stock awards during the ~~nine~~six months ended ~~September~~June 30, ~~2018:~~2019:



	Number of Shares		Grant Date Weighted Average Fair Value
Unvested, December 31, 2018	586,409		$	25.18
Granted	757,113		$	13.67
Vested	(237,876	)	$	29.02
Forfeited	(35,811	)	$	25.45
Unvested, June 30, 2019	1,069,835		$	16.18

Number of Shares
Grant Date Weighted
Average Fair Value
Unvested, December 31, 2017 461,346
$ 30.76
Granted 280,118
26.24
Vested (219,635 ) 30.08
Forfeited (26,924 ) 31.39
Unvested, September 30, 2018 494,905
$ 28.47

We granted ~~42,187~~24,253 and ~~280,118~~757,113 restricted stock and restricted stock unit awards during the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively. We granted ~~7,771~~234,079 and ~~148,722~~237,931 restricted stock and restricted stock unit awards during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively. The fair value of the awards was based on the market price of our stock at date of grant.

We recognized ~~$1.4~~$2.0 million and ~~$5.2~~$4.3 million of equity-based compensation expense related to restricted stock awards during the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively. We recognized ~~$1.9~~$2.0 million and ~~$5.2~~$3.8 million of equity-based compensation expense related to restricted stock awards during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively. As of ~~September~~June 30, ~~2018,~~2019, there was ~~$10.0~~$14.4 million of ~~total~~ unrecognized compensation expense related to these restricted stock awards, which is expected to be recognized over a weighted-average period of ~~1.9~~2.2 years.

Performance Share Unit Awards

The following table summarizes the status of, and changes in, our performance share unit awards during the ~~nine~~six months ended ~~September~~June 30, ~~2018:~~2019:



	Number of Shares		Grant Date Weighted Average Fair Value
Unvested, December 31, 2018	838,188		$	39.44
Granted	607,130		$	15.58
Vested	(522,098	)	$	37.76
Forfeited/Cancelled	(68,527	)	$	27.14
Unvested, June 30, 2019	854,693		$	24.72

Number of Shares Grant Date Weighted
Average Fair Value
Unvested, December 31, 2017 881,416
$ 42.16
Granted 201,417
31.24
Vested (225,000 ) 41.99
Forfeited (31,723 ) 44.93
Unvested, September 30, 2018 826,110
$ 39.44

We granted ~~201,417~~zero and ~~90,501 of~~607,130 performance share ~~unit awards~~units during the ~~nine~~three and six months ended ~~September~~June 30, ~~2018 and 2017,~~2019, respectively. ~~The grant date fair value of these awards was estimated to be $31.24 and $67.69 for~~We granted 201,417 performance share units during both the ~~nine~~three and six months ended ~~September~~June 30, 2018 and 2017, respectively, and the number of units that will vest will depend on the percentage ranking of the Company's total shareholder return ("TSR") compared to the TSRs for each of the companies in the peer group over the three year period from January 1, 2018 through December 31, 2020 for the current period grant, and from January 1, 2017 through December 31, 2019 for the prior year grant. The related compensation expense is recognized on a straight-line basis over the vesting period.

2018. The grant date fair value for these awards was estimated using a Monte Carlo simulation model. The Monte Carlo simulation model requires the use of highly subjective assumptions. Our key assumptions in the model included the price and the expected volatility of our common stock and our self-determined peer group companies’ stock, risk-free rate of interest, dividend yields and cross-correlations between our common stock and our self-determined peer group companies' stock.

We recognized ~~$3.7~~$0.8 million and ~~$12.3~~$2.6 million of compensation expense related to performance share unit awards during the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively. We recognized ~~$4.1~~$4.5 million and ~~$11.5~~$8.6 million of compensation expense related to performance share unit awards during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively. As of ~~September~~June 30, ~~2018,~~2019, there was ~~$10.7~~$11.0 million of ~~estimated total~~ unrecognized compensation expense related to these performance share unit awards, which is expected to be recognized over a weighted-average period of ~~1.4 year.~~2.0 years.

NOTE O—COMMITMENTS AND CONTINGENCIES

Future Minimum Annual Commitments at ~~September~~June 30, ~~2018~~2019(in thousands):



Year ending December 31,	Minimum Purchase Commitments
2019	$	11,990
2020	15,094
2021	9,253
2022	6,900
2023	6,900
Thereafter	5,879
Total future purchase commitments	$	56,016

Year ending December 31, Operating Lease Minimum Rental Payments Minimum Purchase Commitments
2018 $ 19,961
$ 7,237
2019 75,484
21,640
2020 59,872
15,406
2021 40,109
8,307
2022 31,802
5,640
Thereafter 62,375
10,999
Total future lease and purchase commitments $ 289,603
$ 69,229

~~Operating Leases~~

We are obligated under certain operating leases for railroad cars, office space, mining property, mining/processing equipment and transportation and other equipment. Certain operating lease agreements include options to purchase the equipment for fair market value at the end of the original lease term. In general, the above leases include renewal options and provide that we pay for all utilities, insurance, taxes and maintenance. Expense related to operating leases and rental agreements totaled approximately $25.7 million and $73.4 million for the three and nine months ended September 30, 2018, respectively. Expense related to operating leases and rental agreements totaled approximately $16.7 million and $47.9 million for the three and nine months ended September 30, 2017, respectively.

Minimum Purchase Commitments

We enter into service agreements with our transload ~~service providers~~ and transportation service providers. Some of these agreements require us to purchase a minimum amount of services over a specific period of time. Any inability to meet these minimum contract requirements requires us to pay a shortfall fee, which is based on the difference between the minimum amount contracted for and the actual amount purchased.

Contingent Liability on Royalty Agreement

On May 17, 2017, we purchased reserves in Crane County, Texas, for $94.4 million cash consideration plus contingent consideration. The contingent consideration is a royalty that is based on the tonnage shipped to third-parties. Because the contingent consideration is dependent on future tonnage sold, the amounts of which are uncertain, it is not currently possible to estimate the fair value of these future payments. The contingent consideration will be capitalized at the time a payment is probable and reasonably estimable, and the related depletion expense will be adjusted prospectively.

Other Commitments and Contingencies

Our operating subsidiary, U.S. Silica Company (“U.S. Silica”), has been named as a defendant in various product liability claims alleging silica exposure causing silicosis. During the ~~nine~~six months ended ~~September~~June 30, ~~2018, three~~2019, one new ~~claims were~~claim was brought against U.S. Silica. As of ~~September~~June 30, ~~2018,~~2019, there were 58 active silica-related products liability claims pending in which U.S. Silica is a defendant. Although the outcomes of these claims cannot be predicted with certainty, in the opinion of management, it is not reasonably possible that the ultimate resolution of these matters will have a material adverse effect on our financial position or results of operations that exceeds the accrual amounts.

We have recorded estimated liabilities for these claims in other long-term ~~obligations~~liabilities as well as estimated recoveries under the indemnity agreement and an estimate of future recoveries under insurance in other assets on our ~~condensed~~ consolidated balance sheets. As of both ~~September~~June 30, ~~2018,~~2019 and December 31, ~~2017~~2018, other non-current assets included zero for insurance for third-party products liability ~~claims~~claims. As of June 30, 2019 and December 31, 2018 other long-term ~~obligations~~liabilities included $1.0 million and $1.0 million, respectively, for third-party products liability claims.

One of our subsidiaries has also been named as a defendant in lawsuits regarding certain labor practices. If we are unsuccessful in defending the litigation, these cases could result in a material liability for us.

Obligations under Guarantees

We have indemnified our insurers against any loss they may incur in the event that holders of surety bonds, issued on our behalf, execute the bonds. As of June 30, 2019, there was $41.9 million in bonds outstanding. The majority of these bonds, $30.4 million, relate to reclamation requirements issued by various governmental authorities. Reclamation bonds remain outstanding until the mining area is reclaimed and the authority issues a formal release. The remaining bonds relate to such indefinite purposes as licenses, permits, and tax collection.

NOTE P—PENSION AND POST-RETIREMENT BENEFITS

We maintain single-employer noncontributory defined benefit pension plans covering certain employees. There have been no new entrants to the USU. S. Silica Company plan since May 2009 and to the EP Management Corporation plan since January 2007 for salaried participants and January 2010 for hourly participants when the plans were frozen to all new employees. The plans provide benefits based on each covered employee’s years of qualifying service. Our funding policy is to contribute amounts within the range of the minimum required and maximum deductible contributions for the plans consistent with a goal of appropriate minimization of the unfunded projected benefit obligations. The pension plans use a benefit level per year of service for covered hourly employees and a final average pay method for covered salaried employees. The plans use the projected unit credit cost method to determine the actuarial valuation.

~~Net pension benefit cost (in thousands) consisted of the following for the three and nine months ended September 30, 2018 and 2017:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Service cost $ 355
$ 260
$ 956
$ 704
Interest cost 1,193
993
3,329
2,447
Expected return on plan assets (1,627 ) (1,317 ) (4,361 ) (3,405 )
Net amortization and deferral 806
443
2,068
1,391
Net pension benefit costs $ 727
$ 379
$ 1,992
$ 1,137

In addition, we provide defined benefit post-retirement health care and life insurance benefits to some employees. Covered employees become eligible for these benefits at retirement after meeting minimum age and service requirements. The projected future cost of providing post-retirement benefits, such as healthcare and life insurance, is recognized as an expense as employees render services. We previously maintained a Voluntary Employees’ Beneficiary Association trust that was used to partially fund health care benefits for future retirees. Benefits were funded to the extent contributions were tax deductible, which under current legislation is limited. In 2017, the trust terminated upon depletion of its assets, which were used in accordance with trust terms. In general, retiree health benefits are paid as covered expenses are incurred.

Net pension benefit cost (in thousands) consisted of the following for the three and six months ended June 30, 2019 and 2018:



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Service cost	$	156		$	322		$	742		$	601
Interest cost	726			1,158			3,310			2,136
Expected return on plan assets	(834		)	(1,491		)	(4,018		)	(2,734		)
Net amortization and deferral	222			631			846			1,264
Net pension benefit costs	$	270		$	620		$	880		$	1,267

Net post-retirement benefit cost (in thousands) consisted of the following for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Service cost	$	23	$	27	$	47	$	54
Interest cost	194		188		390		376
Expected return on plan assets	—		$	—	—		(1		)
Net post-retirement benefit costs	$	217	$	215	$	437	$	429

Three Months Ended
September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Service cost $ 33
$ 11
$ 87
$ 76
Interest cost 173
79
549
462
Expected return on plan assets —
—
—
(1 )
Net amortization and deferral —
—
—
107
Net post-retirement benefit costs $ 206
$ 90
$ 636
$ 644

We contributed ~~$1.5~~$0.9 million and ~~$2.6~~$1.7 million to the qualified pension ~~plan~~plans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively. We contributed ~~$1.5~~$0.5 million and ~~$1.8~~$0.8 million to the qualified pension ~~plan~~plans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively. ~~Total~~Our best estimate of expected ~~employer funding~~ contributions ~~during~~to the pension and post-retirement medical benefit plans for the 2019 fiscal year ~~ending December 31, 2018~~ are ~~$3.3~~$4.8 million ~~for the pension plan~~ and $1.4 million, ~~for the post-retirement medical and life plan.~~respectively.

We contribute to three multiemployer defined benefit pension plans under the terms of collective-bargaining agreements for union-represented employees. A multiemployer plan is subject to collective bargaining for employees of two or more unrelated companies. These plans allow multiple employers to pool their pension resources and realize efficiencies associated with the daily administration of the plan. Multiemployer plans are generally governed by a board of trustees composed of management and labor representatives and are funded through employer contributions. However, in most cases, management is not directly represented. Our contributions to individual multiemployer pension funds did not exceed 5% of the fund’s total ~~contributions.~~contributions for the three and six months ended June 30, 2019 and 2018. Additionally, our contributions to ~~the~~ multiemployer post-retirement benefit plans were immaterial for all periods presented in the accompanying consolidated financial statements.

We also sponsor a defined contribution plan covering certain employees. We contribute to the plan in two ways. For certain employees not covered by the defined benefit plan, we make a contribution equal to 4% of their salary. We may also contribute an employee discretionary match of 50 cents for each dollar contributed by an employee, up to 4% of their earnings. Finally, for some employees, we make a catch-up match of one dollar for each dollar contributed by an employee, up to 6% of catch-up contributions. Contributions were $1.1 million and $2.4 million for the three and ~~nine~~six months ended ~~September~~June 30, 2019, respectively, and $0.9 million and $1.6 million for the three and six months ended and June 30, 2018, ~~and 2017.~~respectively.

NOTE Q— ~~OBLIGATIONS UNDER GUARANTEES~~LEASES

We have indemnified our insurers against any loss they may incur in the event that holders of surety bonds, issued on our behalf, execute the bonds. As of September 30, 2018, there was $32.7 million in bonds outstanding.lease railroad cars, office space, mining property, mining/processing equipment and transportation and other equipment. The majority of ~~these bonds, $29.7 million, relate~~our leases have remaining lease terms of one year to ~~reclamation requirements issued by various governmental authorities. Reclamation bonds remain outstanding until~~20 years. Our lease terms may include options to extend or terminate the ~~mining area~~lease when it is ~~reclaimed~~reasonably certain that we will exercise that option. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We have lease agreements with lease and non-lease components, the ~~authority issues a formal release.~~ latter of which are generally accounted for separately.

Supplemental balance sheet information related to leases was as follows:



Leases	Classification	June 30, 2019
Assets
Operating	Operating lease right-of-use assets	$	196,660
Total leased assets		$	196,660

Liabilities
Current
Operating	Current portion of operating lease liabilities	$	59,479
Non-current
Operating	Operating lease liabilities	139,379
Total lease liabilities		$	198,858

Lease Term and Discount Rate
Weighted average remaining lease term (years):
Operating leases		4.7 years

Weighted average discount rate:
Operating leases		5.7%

The ~~remaining bonds relate~~components of lease expense were as follows:



Lease Costs	Classification	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease costs⁽¹⁾	Cost of sales	$	22,645	$	47,760
Operating lease costs⁽²⁾	Selling, general and administrative	1,068		2,237
		$	23,713	$	49,997



(1) Includes short-term operating lease costs of $4.5 million and $11.1 million for the three and six months ended June 30, 2019, respectively.
(2) Includes short-term operating lease costs of $0.2 million and $0.4 million for the three and six months ended June 30, 2019, respectively.

Supplemental cash flow information related to ~~such indefinite purposes~~leases was as ~~licenses, permits, and tax collection.~~follows:



	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	35,941

Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	226,950

Maturities of lease liabilities as of June 30, 2019:



Maturities of lease liabilities	Operating leases
2019	$	37,147
2020	61,094
2021	42,077
2022	32,008
2023	22,380
Thereafter	38,520
Total lease payments	$	233,226
Less: Interest	34,368
Total	$	198,858

NOTE R— INCOME TAXES

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code including, but not limited to, (1) bonus depreciation that will allow for full expensing of qualified property; (2) reduction of the U.S. federal corporate tax rate; (3) elimination of the corporate alternative minimum tax; (4) a new limitation on deductible interest expense; (5) the repeal of the domestic production activity deduction; (6) limitations on the deductibility of certain executive compensation; and (7) limitations on net operating losses generated after December 31, 2017, to 80 percent of taxable income.

The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. As we are not subject to either the international changes of the Tax Act or other applicable

provisions, we believe that the income tax effects of the Tax Act applicable to our accounting under ASC 740 is substantially complete as of September 30, 2018. Additional information that may affect the accounting under ASC 740 would include further clarification and guidance on how the Internal Revenue Service and state taxing authorities will implement the Tax Act. In August 2018, the Internal Revenue Service released Tax Act guidance on limitations on executive compensation which clarified transition rules for certain compensation agreements in existence on November 2, 2017. Based on the issued guidance, we recorded a discrete tax expense of $0.7 million to remove deferred tax assets on certain executive compensation agreements that were not eligible for transition relief.

The Tax Act reduces the corporate tax rate to 21 percent, effective January 1, 2018. Because ASC 740-10-25-47 requires the effect of a change in tax laws or rates to be recognized as of the date of enactment, we were required to adjust deferred tax assets and liabilities as of December 22, 2017. Accordingly, for the year ended December 31, 2017, we recorded a decrease related to deferred tax assets and liabilities of $45.0 million and $80.8 million, respectively, with a corresponding net adjustment to deferred income tax benefit of $35.8 million.

Under the Tax Act, net operating loss (NOL) deductions arising in tax years beginning after December 31, 2017 can only offset up to 80 percent of future taxable income. The Act also prohibits NOL carrybacks, but allows indefinite carryforwards for NOLs arising in tax years beginning after December 31, 2017. Net operating losses arising before January 1, 2018 are accounted for under the previous tax rules that imposed no limit on the amount of the taxable income that can be set off using NOLs and that can be carried back 2 years, and carried forward 20 years.

The Tax Act repeals the corporate alternative minimum tax (AMT), effective for tax years beginning after December 31, 2017, but allows an entity to claim portions of any unused AMT credits over the next four years to offset its regular tax liability. An entity with unused AMT credits as of December 31, 2017 can first use these credits to offset its regular tax for 2017, and can then claim up to 50 percent of the remaining AMT credits in 2018, 2019, and 2020, with all remaining AMT credits refundable in 2021.

For interim period reporting, we record income taxes using an estimated annual effective tax rate based upon projected annual income, forecasted permanent tax differences, discrete items and statutory rates in states in which we operate. At the end of each interim period, we update the estimated annual effective tax rate, and if the estimated tax rate changes based on new information, we make a cumulative adjustment in the period. We record the tax effect of an unusual or infrequently occurring item in the interim period in which it occurs as a discrete item of tax.

For the three and ~~nine~~six months ended ~~September~~June 30, 2019, we had tax expense of $2.4 million and $0.4 million, respectively. For the three and six months ended June 30, 2018, we had tax expense of $2.8 million and $10.4 million, respectively. The effective tax rate was 28% and (3)% for the three and six months ended June 30, 2019, respectively. The effective tax rate was 14% and 17% for the three and six months ended June 30, 2018, respectively. The effective tax rate for the three and six months ended June 30, 2019 would have been 18% and 36%, respectively without the below items recorded discretely. The effective tax rate for the three and six months ended June 30, 2018 would have been 13% and 16%, respectively, without the below items recorded discretely.

During the three and six months ended June 30, 2019, we recorded tax expense of $0.5 million and $4.5 million, respectively, related to equity compensation pursuant to ASU 2016-09. During the three and six months ended June 30, 2018, we recorded a tax expense of ~~zero~~$0.2 million and $0.7 million, respectively, related to equity compensation pursuant to ASU 2016-09. ~~For the three and nine months ended September 30, 2017, we recorded a tax benefit of $0.1 million and $1.8 million, respectively, related to equity compensation pursuant to ASU 2016-09.~~

The effective tax rate was (32)% and 14% for the three and nine months ended September 30, 2018, respectively. The effective tax rate was 26% and 22% for the three and nine months ended and September 30, 2017, respectively. The effective tax rate for the three and nine months ended September 30, 2018 would have been (52)% and 11%, respectively, without the discrete tax items. The effective tax rate for the three and nine months ended September 30, 2017 would have been 26% and 23%, respectively, without the discrete tax items.

With reduced profits mainly driven by decreased sand pricing, we updated our estimated annual effective tax rate to 11%. Our tax benefit in the period represented the cumulative adjustment to reflect the updated estimated annual effective tax rate, partially offset by the discrete tax items. Because of the updated tax rate and cumulative adjustment in the period, the (32)% tax rate is not representative of future tax rates.

Historically, our actual effective tax rates have differed from the statutory effective rate primarily due to the benefit received from statutory percentage depletion allowances. The deduction for statutory percentage depletion does not necessarily change proportionately to changes in income before income taxes.

NOTE S— REVENUE

We consider sales disaggregated at the product and service level by business segment to depict how the nature, amount, timing and uncertainty of revenues and cash flow are impacted by changes in economic factors. The following table disaggregates our sales by major source for the three and ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 (in thousands):



	Three Months Ended June 30, 2019						Three Months Ended June 30, 2018
Category	Oil & Gas Proppants		Industrial & Specialty Products		Total Sales		Oil & Gas Proppants		Industrial & Specialty Products		Total Sales
Product	$	181,251	$	121,790	$	303,041	$	242,587	$	103,370	$	345,957
Service	91,813		—		91,813		81,476		—		81,476
Total Sales	$	273,064	$	121,790	$	394,854	$	324,063	$	103,370	$	427,433


	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018						Six Months Ended June 30, 2019						Six Months Ended June 30, 2018
Category	Oil & Gas Proppants		Industrial & Specialty Products		Total Sales		Oil & Gas Proppants		Industrial & Specialty Products		Total Sales		Oil & Gas Proppants		Industrial & Specialty Products		Total Sales		Oil & Gas Proppants		Industrial & Specialty Products		Total Sales
Product	$	227,915	$	120,720	$	348,635	$	708,924	$	280,456	$	989,380	$	359,838	$	240,063	$	599,901	$	481,009	$	159,736	$	640,745
Service	74,537		—		74,537		230,521		17		230,538		173,703		—		173,703		155,984		17		156,001
Total Sales	$	302,452	$	120,720	$	423,172	$	939,445	$	280,473	$	1,219,918	$	533,541	$	240,063	$	773,604	$	636,993	$	159,753	$	796,746



Delaware		26-3718801
(State or other jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	SLCA	New York Stock Exchange



Large accelerated filer	ýþ	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	¨☐

		Emerging growth company	¨☐



		Page
PART I	Financial Information (Unaudited):
Item 1.	Financial Statements
	~~Condensed Consolidated Balance Sheets~~	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	67
	Notes to Condensed Consolidated Financial Statements	89
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	30
~~Item 3.~~	Quantitative and Qualitative Disclosures About Market Risk	4843
Item 4.	~~Controls and Procedures~~	49Controls and Procedures	45

PART II	Other Information:
Item 1.	~~Legal Proceedings~~	50Legal proceedings	46
Item 1A.	~~Risk Factors~~	51Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5147
Item 3.	Defaults Upon Senior Securities	5148
Item 4.	~~Mine Safety Disclosures~~	51Mine Safety Disclosures	48
Item 5.	~~Other Information~~	52Other Information	48
Item 6.	~~Exhibits~~	54Exhibits	48
Signatures		S-1



ý☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨ ☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
ASSETS
Current Assets:
Cash and cash equivalents	$	345,583		$	384,567		$	189,388		$	202,498
Accounts receivable, net	247,692			212,586			237,393			215,486
Inventories, net	170,723			92,376			148,397			162,087
Prepaid expenses and other current assets	18,827			13,715			12,876			17,966
Income tax deposits	2,804			—			2,010			2,200
Total current assets	785,629			703,244			590,064			600,237
Property, plant and mine development, net	1,868,382			1,169,155			1,803,203			1,826,303
Operating lease right-of-use assets							196,660			—
Goodwill	414,741			272,079			273,524			261,340
Intangible assets, net	195,498			150,007			189,207			194,626
Other assets	24,405			12,798			12,856			18,334
Total assets	$	3,288,655		$	2,307,283		$	3,065,514		$	2,900,840
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	231,302		$	171,041		$	231,260		$	216,400
Current portion of operating lease liabilities							59,479			—
Current portion of long-term debt	13,479			6,867			13,093			13,327
Current portion of deferred revenue	40,755			36,128			26,161			31,612
Income tax payable	—			1,566
Total current liabilities	285,536			215,602			329,993			261,339
Long-term debt, net	1,251,053			505,075			1,229,820			1,246,428
Deferred revenue	79,095			82,286			81,904			81,707
Liability for pension and other post-retirement benefits	46,045			52,867			60,830			57,194
Deferred income taxes, net	169,432			29,856			130,942			137,239
Other long-term obligations	88,013			25,091
Operating lease liabilities							139,379			—
Other long-term liabilities							60,181			64,629
Total liabilities	1,919,174			910,777			2,033,049			1,848,536
Commitments and Contingencies (Note O)
Stockholders’ Equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; zero issued and outstanding at September 30, 2018 and December 31, 2017	—			—
Common stock, $0.01 par value, 500,000,000 shares authorized; 81,773,127 issued and 77,511,268 outstanding at September 30, 2018; 81,267,205 issued and 80,524,255 outstanding at December 31, 2017	815			812
Preferred stock, $0.01 par value, 10,000,000 shares authorized; zero issued and outstanding at June 30, 2019 and December 31, 2018							—			—
Common stock, $0.01 par value, 500,000,000 shares authorized; 82,549,488 issued and 73,579,691 outstanding at June 30, 2019; 81,811,977 issued and 73,148,853 outstanding at December 31, 2018							821			818
Additional paid-in capital	1,165,661			1,147,084			1,176,057			1,169,383
Retained earnings	328,624			287,992			45,224			67,854
Treasury stock, at cost, 4,261,859 and 742,950 shares at September 30, 2018 and December 31, 2017, respectively	(120,078		)	(25,456		)
Treasury stock, at cost, 8,969,797 and 8,663,124 shares at June 30, 2019 and December 31, 2018, respectively							(180,775		)	(178,215		)
Accumulated other comprehensive loss	(8,753		)	(13,926		)	(21,382		)	(15,020		)
Total U.S. Silica Holdings, Inc. stockholders’ equity	1,366,269			1,396,506			1,019,945			1,044,820
Non-controlling interest	3,212			—			12,520			7,484
Total stockholders' equity	1,369,481			1,396,506			1,032,465			1,052,304
Total liabilities and stockholders’ equity	$	3,288,655		$	2,307,283		$	3,065,514		$	2,900,840


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Sales:
Product	$	348,635		$	281,138		$	989,380		$	720,281		$	303,041		$	345,957		$	599,901		$	640,745
Service	74,537			63,885			230,538			160,004			91,813			81,476			173,703			156,001
Total sales	423,172			345,023			1,219,918			880,285			394,854			427,433			773,604			796,746
Cost of sales (excluding depreciation, depletion and amortization):
Product	270,370			187,634			713,845			512,115			225,473			236,236			460,389			443,475
Service	51,966			40,155			162,246			100,173			68,687			56,609			131,309			110,280
Total cost of sales (excluding depreciation, depletion and amortization)	322,336			227,789			876,091			612,288			294,160			292,845			591,698			553,755
Operating expenses:
Selling, general and administrative	37,980			29,542			114,803			77,553			38,659			42,232			73,315			76,823
Depreciation, depletion and amortization	37,150			24,673			102,305			69,898			44,899			36,563			89,499			65,155
Asset impairment	—			—			16,184			—			—			16,184			—			16,184
Total operating expenses	75,130			54,215			233,292			147,451			83,558			94,979			162,814			158,162
Operating income	25,706			63,019			110,535			120,546			17,136			39,609			19,092			84,829
Other (expense) income:
Interest expense	(21,999		)	(8,347		)	(49,283		)	(24,098		)	(23,765		)	(20,214		)	(47,743		)	(27,284		)
Other income (expense), net, including interest income	1,062			1,308			2,808			(3,091		)
Other income, net, including interest income													15,074			1,081			15,796			1,746
Total other expense	(20,937		)	(7,039		)	(46,475		)	(27,189		)	(8,691		)	(19,133		)	(31,947		)	(25,538		)
Income before income taxes	4,769			55,980			64,060			93,357
Income tax benefit (expense)	1,547			(14,707		)	(8,806		)	(20,103		)
Net income	$	6,316		$	41,273		$	55,254		$	73,254
Less: Net income (loss) attributable to non-controlling interest	—			—			—			—
Net income attributable to U.S. Silica Holdings, Inc.	$	6,316		$	41,273		$	55,254		$	73,254
Earnings per share attributable to U.S. Silica Holdings, Inc.:
Income (loss) before income taxes													8,445			20,476			(12,855		)	59,291
Income tax expense													(2,384		)	(2,832		)	(412		)	(10,353		)
Net income (loss)													$	6,061		$	17,644		$	(13,267	)	$	48,938
Less: Net loss attributable to non-controlling interest													(89		)	—			(93		)	—
Net income (loss) attributable to U.S. Silica Holdings, Inc.													$	6,150		$	17,644		$	(13,174	)	$	48,938
Earnings (loss) per share attributable to U.S. Silica Holdings, Inc.:
Basic	$	0.08		$	0.51		$	0.71		$	0.90		$	0.08		$	0.23		$	(0.18	)	$	0.62
Diluted	$	0.08		$	0.50		$	0.70		$	0.89		$	0.08		$	0.22		$	(0.18	)	$	0.62
Weighted average shares outstanding:
Basic	77,365			81,121			78,209			81,058			73,301			77,784			73,165			78,636
Diluted	77,859			81,783			78,676			81,976			73,505			78,480			73,165			79,328
Dividends declared per share	$	0.06		$	0.06		$	0.19		$	0.19		$	0.06		$	0.06		$	0.13		$	0.13



Cash and cash equivalents, beginning of period	384,567		711,225
Cash and cash equivalents, end of period	$	345,583	$	463,650
Supplemental cash flow information:
Cash paid during the period for:
Interest	$	44,105	$	18,498
Taxes, net of refunds	$	5,003	$	216
Related party purchases	$	2,233	$	3,171
Non-cash Items:
Equipment received	$	—	$	18,185
Accrued capital expenditures	$	36,693	$	28,683
Capital lease assumed by third-party	$	119	$	—
Asset retirement obligation assumed by third-party	$	2,116	$	—



	Three Months Ended September 30, 2017
	As Previously Reported		Services Reclassifications			ASU 2017-07 Adjustments			As Revised
Product Sales	$	295,768	$	(14,630	)	$	—		$	281,138
Service Sales	49,255		14,630			—			63,885
Total sales	345,023		—			—			345,023
Product cost of sales	189,105		(1,337		)	(134		)	187,634
Service cost of sales	38,818		1,337			—			40,155
Total cost of sales (excluding depreciation, depletion and amortization)	227,923		—			(134		)	227,789
Selling, general and administrative expenses	29,602		—			(60		)	29,542
Operating income	62,825		—			194			63,019
Other income (expense)	1,502		—			(194		)	1,308



	Nine Months Ended September 30, 2017
	As Previously Reported			Services Reclassifications			ASU 2017-07 Adjustments			As Revised
Product Sales	$	751,111		$	(30,830	)	$	—		$	720,281
Service Sales	129,174			30,830			—			160,004
Total sales	880,285			—			—			880,285
Product cost of sales	515,767			(3,131		)	(521		)	512,115
Service cost of sales	97,042			3,131			—			100,173
Total cost of sales (excluding depreciation, depletion and amortization)	612,809			—			(521		)	612,288
Selling, general and administrative expenses	77,955			—			(402		)	77,553
Operating income	119,623			—			923			120,546
Other income (expense)	(2,168		)	—			(923		)	(3,091		)



	For the Nine Months Ended September 30, 2018
	Unrealized gain/(loss) on cash flow hedges			Foreign currency translation adjustments			Pension and other post-retirement benefits liability			Total
Beginning Balance	$	(76	)	$	(6	)	$	(13,844	)	$	(13,926	)
Other comprehensive gain (loss) before reclassifications	468			(446		)	3,617			3,639
Amounts reclassed from accumulated other comprehensive loss	76			—			1,458			1,534
Ending Balance	$	468		$	(452	)	$	(8,769	)	$	(8,753	)



	Estimate as of December 31, 2017		Measurement Period Adjustments			Purchase Price Allocation
Accounts receivable	$	11,201	$	—		$	11,201
Inventories	8,067		—			8,067
Other current assets	362		—			362
Assets held for sale	9,453		—			9,453
Property, plant and mine development	27,458		—			27,458
Mineral rights	26,300		(2,800		)	23,500
Other non-current assets	1,136		—			1,136
Goodwill	22,522		2,800			25,322
Customer relationships	1,840		—			1,840
Total assets acquired	108,339		—			108,339
Accounts payable and accrued expenses	3,761		—			3,761
Unfavorable leasehold positions	2,237		—			2,237
Notes Payable	866		—			866
Other long term liabilities	—		—			—
Asset retirement obligations	474		—			474
Total liabilities assumed	7,338		—			7,338
Net assets acquired	$	101,001	$	—		$	101,001



	For the year ended December 31,
	2017		2016
Sales	$	1,287,202	$	642,951
Net income (loss)	$	143,604	$	(55,835	)
Basic earnings (loss) per share	$	1.77	$	(0.86	)
Diluted earnings (loss) per share	$	1.75	$	(0.86	)



2018	$	3,200
2019	12,800
2020	12,800
2021	12,800
Thereafter	1,232,000
Total	$	1,273,600



	September 30, 2018			September 30, 2017
Deferred losses from derivatives in OCI, beginning of period	$	(76	)	$	(32	)
Gain (loss) recognized in OCI from derivative instruments	468			(43		)
Loss reclassified from Accumulated OCI	76			—
Deferred losses from derivatives in OCI, end of period	$	468		$	(75	)



	Number of Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value (in thousands)		Weighted Average Remaining Contractual Term in Years
Outstanding at December 31, 2017	908,919		$	28.46	$	7,008	6.1 years
Granted	—		—		—
Exercised	(4,167	)	14.65		—
Forfeited	(918	)	31.30		—
Expired	(1,838	)	$	31.30	$	—
Outstanding at September 30, 2018	901,996		$	28.52	$	1,611	5.0 years
Exercisable at September 30, 2018	855,446		$	27.38	$	1,611	5.0 years



	Number of Shares		Grant Date Weighted Average Fair Value
Unvested, December 31, 2017	461,346		$	30.76
Granted	280,118		26.24
Vested	(219,635	)	30.08
Forfeited	(26,924	)	31.39
Unvested, September 30, 2018	494,905		$	28.47



Year ending December 31,	Operating Lease Minimum Rental Payments		Minimum Purchase Commitments
2018	$	19,961	$	7,237
2019	75,484		21,640
2020	59,872		15,406
2021	40,109		8,307
2022	31,802		5,640
Thereafter	62,375		10,999
Total future lease and purchase commitments	$	289,603	$	69,229



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Service cost	$	33	$	11	$	87	$	76
Interest cost	173		79		549		462
Expected return on plan assets	—		—		—		(1		)
Net amortization and deferral	—		—		—		107
Net post-retirement benefit costs	$	206	$	90	$	636	$	644


	Unbilled Receivables			Unbilled Receivables
December 31, 2017	$	5,245
December 31, 2018				$	90
Reclassifications to billed receivables	(10,668		)	(1,660		)
Revenues recognized in excess of period billings	5,911			3,134
September 30, 2018	$	488
June 30, 2019				$	1,564



	Deferred Revenue
December 31, 2018	$	113,319
Revenues recognized from balances held at the beginning of the period	(15,830		)
Revenues deferred from period collections on unfulfilled performance obligations	12,225
Revenues recognized from period collections	(1,649		)
June 30, 2019	$	108,065



	Deferred Revenue
December 31, 2017	$	118,414
Revenues recognized from balances held at the beginning of the period	(26,600		)
Revenues deferred from period collections on unfulfilled performance obligations	28,036
September 30, 2018	$	119,850


Amounts in thousands except per ton data	Three Months Ended								Percentage Change
Amounts in thousands, except per ton data															Three Months Ended						Percentage Change
Oil & Gas Proppants	September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2017		September 30, 2018 vs. June 30, 2018		June 30, 2018 vs. March 31, 2018		March 31, 2018 vs. December 31, 2017		June 30, 2019		March 31, 2019		December 31, 2018		June 30, 2019 vs. March 31, 2019		March 31, 2019 vs. December 31, 2018
Sales	$	302,452	$	324,063	$	312,930	$	306,019	(7	)%	4	%	2	%	$	273,064	$	260,477	$	243,546	5	%	7	%
Tons Sold	3,821		3,465		3,252		3,171		10	%	7	%	3	%	3,932		3,864		3,704		2	%	4	%
Average Selling Price per Ton	$	79.16	$	93.52	$	96.23	$	96.51	(15	)%	(3	)%	—	%	$	69.45	$	67.41	$	65.75	3	%	3	%


◦	Our acquisition of Sandbox extends our delivery capability directly to our customers' wellhead locations, which increases efficiency and provides a lower cost logistics solution for our customers. Sandbox has operations in the major United States oil and gas producing regions, including Texas, New Mexico, Oklahoma, Rocky Mountains and the Northeast, where their largest customers are located.


(All amounts in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
(amounts in thousands)											Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018		2017		2019			2018			2019			2018
Net income attributable to U.S. Silica Holdings, Inc.	$	6,316		$	41,273		$	55,254	$	73,254
Net income (loss) attributable to U.S. Silica Holdings, Inc.											$	6,150		$	17,644		$	(13,174	)	$	48,938
Total interest expense, net of interest income	20,899			6,900			43,243		19,852		23,053			16,490			45,973			22,344
Provision for taxes	(1,547		)	14,707			8,806		20,103		2,384			2,832			412			10,353
Total depreciation, depletion and amortization expenses	37,150			24,673			102,305		69,898		44,899			36,563			89,499			65,155
EBITDA	62,818			87,553			209,608		183,107		76,486			73,529			122,710			146,790
Non-cash incentive compensation ⁽¹⁾	5,427			6,567			18,612		18,520		2,799			6,931			6,844			13,185
Post-employment expenses (excluding service costs) ⁽²⁾	544			194			1,653		923		323			554			875			1,109
Merger and acquisition related expenses ⁽³⁾	8,303			2,387			28,434		4,824		6,091			17,624			10,874			20,131
Plant capacity expansion expenses ⁽⁴⁾	24,999			1			45,100		3		3,740			10,721			12,311			20,101
Contract termination expenses ⁽⁵⁾	—			—			—		325		—			—			1,000			—
Asset impairment ⁽⁶⁾	—			—			16,184		—
Asset impairments ⁽⁶⁾											—			16,184			—			16,184
Business optimization projects ⁽⁷⁾	1,926			—			1,926		—		—			—			6			—
Other adjustments allowable under our existing credit agreement ⁽⁸⁾	1,525			(26		)	3,001		6,758
Facility closure costs ⁽⁸⁾											4,654			—			7,081			—
Gain on valuation change of royalty note payable⁽⁹⁾											(14,100		)	—			(14,100		)	—
Other adjustments allowable under the Credit Agreement ⁽¹⁰⁾											5,527			(1,932		)	6,740			1,477
Adjusted EBITDA	$	105,542		$	96,676		$	324,518	$	214,460	$	85,520		$	123,611		$	154,341		$	218,977




₍₁₎	Reflects equity-based, non-cash compensation expense.
₍₂₎	Includes net pension cost and net post-retirement cost relating to pension and other post-retirement benefit obligations during the applicable period, but in each case excluding the service cost relating to benefits earned during such period. Non-service net periodic benefit costs are not considered reflective of our operating performance asbecause these costs do not exclusively originate from employee services during the applicable period and may experience periodic fluctuations as a result of changes in non-operating factors, including changes in discount rates, changes in expected returns on benefit plan assets, and other demographic actuarial assumptions. See Note P - Pension and Post-Retirement Benefits to our Consolidated Financial Statements in Part 1,I, Item 1 of this Quarterly Report on Form ~~10-Q.~~ 10-Q for more information.
₍₃₎	Merger and acquisition related expenses include legal fees, consulting fees, bank fees, severance costs, certain purchase accounting items such as the amortization of inventory ~~write-offs,~~fair value step-up, information technology integration costs and similar charges. While these costs are not operational in nature and are not expected to continue for any singular transaction on an ongoing basis, similar types of costs, expenses and charges have occurred in prior periods and may recur in the future as we continue to integrate prior acquisitions and pursue any future acquisitions.
₍₄₎	Plant capacity expansion expenses include expenses that are not inventoriable or capitalizable as related to plant expansion projects greater than $5 million in capital expenditures or plant start up projects. While these expenses are not operational in nature and are not expected to continue for any singular project on an ongoing basis, similar types of expenses have occurred in prior periods and may recur in the future asif we continue to pursue future plant capacity expansion.
₍₅₎	Reflects contract termination expenses related to strategically exiting a service contract. While these expenses are not operational in nature and are not expected to continue for any singular event on an ongoing basis, similar types of expenses have occurred in prior periods and may recur in the future as we continue to strategically evaluate our contracts.
₍₆₎	~~The nine months ended September 30, 2018 reflects~~Reflects a $16.2 million asset impairment related to the closure of our resin coating facility and associated product ~~portfolio during the first quarter of 2018.~~ portfolio.
₍₇₎	Reflects costs incurred related to business optimization projects within our corporate center, which aim to measure and improve the efficiency, productivity and performance of our organization. While these costs are not operational in nature and are not expected to continue for any singular project on an ongoing basis, similar types of expenses may recur in the future.
₍₈₎	Reflects costs incurred related to idled sand facilities and closed corporate offices, including severance costs and remaining contracted costs such as office lease costs, maintenance, and utilities. While these costs are not operational in nature and are not expected to continue for any singular event on an ongoing basis, similar types of expenses may recur in the future.
₍₉₎	Gain on valuation change of royalty note payable due to a change in estimate of future tonnages and sales related to the sand shipped from our Tyler, Texas facility. This gain is not operational in nature and is not expected to continue for any singular event on an ongoing basis.
₍₁₀₎	Reflects miscellaneous adjustments permitted under ~~our existing credit agreement.~~the Credit Agreement. The three months ended ~~September~~June 30, 2019 includes $4.2 million of loss contingencies reserve. The six months ended June 30, 2019 includes $6.4 million of loss contingencies reserve, partially offset by insurance proceeds of $2.2 million. The three months ended June 30, 2018 includes ~~storm damage~~a $2.7 million credit as a result of the final settlement of contract termination costs ~~recruiting fees and relocation costs.~~related to the divestiture of assets in the first quarter of 2018. The ~~nine~~six months ended ~~September~~June 30, 2018 ~~also~~ includes a net loss of $0.7 million on divestiture of assets, consisting of $5.2 million of contract termination costs and $1.3 million of divestiture related expenses such as legal fees and consulting fees, partially offset by a $5.8 million gain on sale of assets. The nine months ended September 30, 2017 amount includes a contract restructuring cost of $6.3 million. While the gain and these types of costs are not operational in nature and are not expected to continue for any singular event on an ongoing basis, similar types of expenses have occurred in prior periods and may recur in the future.


(All amounts in thousands)	September 30, 2018
(All amounts in thousands, except calculated ratio)			June 30, 2019

Total debt	$	1,264,008	$	1,242,779
Capital leases	524
Finance leases			134
Total consolidated debt	$	1,264,532	$	1,242,913

Adjusted EBITDA-trailing twelve months	$	417,759	$	327,873
Pro forma Adjusted EBITDA of acquisitions ⁽¹⁾	31,918
Pro forma Adjusted EBITDA including impact of acquisitions ⁽¹⁾			—
Other adjustments for covenant calculation ⁽²⁾	271		265
Total Adjusted EBITDA-trailing twelve months for covenant calculation	$	449,948	$	328,138

Consolidated leverage ratio(3)	2.81		3.79




₍₁₎	Covenant calculation allows for the Adjusted EBITDA-trailing twelve months to include the impact of acquisitions on a pro forma basis.
₍₂₎	Covenant calculation excludes activity at legal entities above the operating company, which is mainly interest income offset by public company operating expenses.
₍₃₎	Calculated by dividing total consolidated debt by total Adjusted EBITDA-trailing twelve months for covenant calculation.


(All numbers in thousands except per ton data)	Three Months Ended September 30,				Percent Change
(In thousands except per ton data)							Three Months Ended June 30,				Percent Change
	2018		2017		'18 vs.'17		2019		2018		'19 vs.'18
Sales:
Oil & Gas Proppants	$	302,452	$	286,369	6	%	$	273,064	$	324,063	(16	)%
Industrial & Specialty Products	120,720		58,654		106	%	121,790		103,370		18	%
Total sales	$	423,172	$	345,023	23	%	$	394,854	$	427,433	(8	)%
Tons:
Oil & Gas Proppants	3,821		3,147		21	%	3,932		3,465		13	%
Industrial & Specialty Products	983		928		6	%	972		1,024		(5	)%
Total Tons	4,804		4,075		18	%	4,904		4,489		9	%
Average Selling Price per Ton:
Oil & Gas Proppants	$	79.16	$	91.00	(13	)%	$	69.45	$	93.52	(26	)%
Industrial & Specialty Products	122.81		63.20		94	%	125.30		100.95		24	%
Overall Average Selling Price per Ton	$	88.09	$	84.67	4	%	$	80.52	$	95.22	(15	)%



Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program⁽¹⁾	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program⁽¹⁾
July 1, 2018 - July 31, 2018	328	⁽²⁾	$	26.26	—	$	184,500,060
August 1, 2018 - August 31, 2018	405	⁽²⁾	$	23.10	—	$	184,500,060
September 1, 2018 - September 30, 2018	205	⁽²⁾	$	20.78	—	$	184,500,060
Total	938		$	23.70	—



Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program⁽¹⁾	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program⁽¹⁾
April 1, 2019 - April 30, 2019	36,132	⁽²⁾	$	17.25	—	126,540,060
May 1, 2019 - May 31, 2019	2,107	⁽²⁾	$	12.03	—	126,540,060
June 1, 2019 - June 30, 2019	137	⁽²⁾	$	12.21	—	126,540,060
Total	38,376		$	16.94	—	—




₍₁₎	In May 2018, our Board of Directors authorized and announced the repurchase of up to $200 million of our common stock.
₍₂₎	Shares withheld by U.S. Silica to pay taxes due upon the vesting of employee restricted stock and restricted stock ~~units.~~units for the months ended April 30, May 31, and June 30, 2019, respectively.



		Incorporated by Reference
Exhibit Number	Description	Form	File No.	Exhibit	Filing Date
3.1	Third Amended and Restated Certificate of Incorporation of U.S. Silica Holdings, Inc., effective May 4, 2017.	8-K	001-35416	3.1	May 10, 2017
3.2	Third Amended and Restated Bylaws of U.S. Silica Holdings, Inc., effective May 4, 2017.	8-K	001-35416	3.2	May 10, 2017
31.1*	Rule 13a-14(a)/15(d)-14(a) Certification by Bryan A. Shinn, Chief Executive Officer.
31.2*	Rule 13a-14(a)/15(d)-14(a) Certification by Donald A. Merril, Chief Financial Officer.
32.1*	Section 1350 Certification by Bryan A. Shinn, Chief Executive Officer.
32.2*	Section 1350 Certification by Donald A. Merril, Chief Financial Officer.
95.1*	Mine Safety Disclosure.
99.1*	Consent of Rystad Energy.
101*	101.INS XBRL Instance - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
	101.SCH XBRL Taxonomy Extension Schema
	101.CAL XBRL Taxonomy Extension Calculation
	101.LAB XBRL Taxonomy Extension Labels
	101.PRE XBRL Taxonomy Extension Presentation
	101.DEF XBRL Taxonomy Extension Definition