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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2019
OR
¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-35416
 
 usslogo2q15a36.jpg
U.S. Silica Holdings, Inc.
(Exact name of registrant as specified in its charter)
 
 
Delaware
 
26-3718801
(State or other jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
24275 Katy Freeway, Suite 600
Katy, Texas 77494
(Address of Principal Executive Offices) (Zip Code)
(281) 258-2170
(Registrant’s telephone number, including area code)
 
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
ý
  
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨
  
Smaller reporting company
 
¨
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  þ
As of April 26, 2019, 73,553,442 shares of common stock, par value $0.01 per share, of the registrant were outstanding.





U.S. SILICA HOLDINGS, INC.
FORM 10-Q
For the Quarter Ended March 31, 2019
TABLE OF CONTENTS
 
 
 
Page
PART I
Financial Information (Unaudited):
 
 
 
 
 
 
 
 
 
 
PART II
Other Information:
 
 
 
 
 


1



PART I-FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
U.S. SILICA HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; dollars in thousands)
 
March 31, 
 2019
 
December 31,  
 2018
ASSETS
Current Assets:
 
 
 
Cash and cash equivalents
$
161,615

 
$
202,498

Accounts receivable, net
258,348

 
215,486

Inventories, net
143,149

 
162,087

Prepaid expenses and other current assets
14,572

 
17,966

Income tax deposits
1,388

 
2,200

Total current assets
579,072

 
600,237

Property, plant and mine development, net
1,820,102

 
1,826,303

Operating lease right-of-use assets
209,699

 

Goodwill
273,524

 
261,340

Intangible assets, net
190,584

 
194,626

Other assets
16,459

 
18,334

Total assets
$
3,089,440

 
$
2,900,840

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
 
 
 
Accounts payable and accrued expenses
$
223,611

 
$
216,400

Current portion of operating lease liabilities
61,583

 

Current portion of long-term debt
13,112

 
13,327

Current portion of deferred revenue
28,838

 
31,612

Total current liabilities
327,144

 
261,339

Long-term debt, net
1,245,242

 
1,246,428

Deferred revenue
86,930

 
81,707

Liability for pension and other post-retirement benefits
56,879

 
57,194

Deferred income taxes, net
131,053

 
137,239

Operating lease liabilities
149,040

 

Other long-term liabilities
59,054

 
64,629

Total liabilities
2,055,342

 
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 March 31, 2019 and December 31, 2018

 

Common stock, $0.01 par value, 500,000,000 shares authorized; 82,455,734 issued and 73,524,817 outstanding at March 31, 2019; 81,811,977 issued and 73,148,853 outstanding at December 31, 2018
820

 
818

Additional paid-in capital
1,173,259

 
1,169,383

Retained earnings
43,920

 
67,854

Treasury stock, at cost, 8,930,917 and 8,663,124 shares at March 31, 2019 and December 31, 2018, respectively
(180,125
)
 
(178,215
)
Accumulated other comprehensive loss
(15,985
)
 
(15,020
)
Total U.S. Silica Holdings, Inc. stockholders’ equity
1,021,889

 
1,044,820

Non-controlling interest
12,209

 
7,484

Total stockholders' equity
1,034,098

 
1,052,304

Total liabilities and stockholders’ equity
$
3,089,440

 
$
2,900,840

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

2


U.S. SILICA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; dollars in thousands, except per share amounts)
 
Three Months Ended 
 March 31,
 
2019
 
2018
Sales:
 
 
 
Product
$
296,860

 
$
294,788

Service
81,890

 
74,525

Total sales
378,750

 
369,313

Cost of sales (excluding depreciation, depletion and amortization):
 
 
 
Product
234,916

 
207,239

Service
62,622

 
53,671

Total cost of sales (excluding depreciation, depletion and amortization)
297,538

 
260,910

Operating expenses:
 
 
 
Selling, general and administrative
34,656

 
34,591

Depreciation, depletion and amortization
44,600

 
28,592

Total operating expenses
79,256

 
63,183

Operating income
1,956

 
45,220

Other (expense) income:
 
 
 
Interest expense
(23,978
)
 
(7,070
)
Other income, net, including interest income
722

 
665

Total other expense
(23,256
)
 
(6,405
)
(Loss) income before income taxes
(21,300
)
 
38,815

Income tax benefit (expense)
1,972

 
(7,521
)
Net (loss) income
$
(19,328
)
 
$
31,294

Less: Net (loss) income attributable to non-controlling interest
(4
)
 

Net (loss) income attributable to U.S. Silica Holdings, Inc.
$
(19,324
)
 
$
31,294

Earnings (loss) per share attributable to U.S. Silica Holdings, Inc.:
 
 
 
Basic
$
(0.26
)
 
$
0.39

Diluted
$
(0.26
)
 
$
0.39

Weighted average shares outstanding:
 
 
 
Basic
73,040

 
79,496

Diluted
73,040

 
80,309

Dividends declared per share
$
0.06

 
$
0.06

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

3



U.S. SILICA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited; dollars in thousands)
 
Three Months Ended 
 March 31,
 
2019
 
2018
Net (loss) income
$
(19,328
)
 
$
31,294

Other comprehensive (loss) income:
 
 
 
Unrealized loss on derivatives (net of tax of $(299) and $1 for the three months ended March 31, 2019 and 2018, respectively)
(940
)
 
(2
)
Foreign currency translation adjustment (net of tax of $(60) and $1 for the three months ended March 31, 2019 and 2018, respectively)
(199
)
 
3

Pension and other post-retirement benefits liability adjustment (net of tax of $55 and $730 for the three months ended March 31, 2019 and 2018, respectively)
174

 
2,293

Comprehensive (loss) income
$
(20,293
)
 
$
33,588

Less: Comprehensive (loss) income attributable to non-controlling interest
(4
)
 

Comprehensive (loss) income attributable to U.S. Silica Holdings, Inc.
$
(20,289
)
 
$
33,588

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

4



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
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



(19,324
)

(19,324
)
(4
)
(19,328
)
Unrealized loss on derivatives




(940
)
(940
)

(940
)
Foreign currency translation adjustment




(199
)
(199
)

(199
)
Pension and post-retirement liability




174

174


174

Cash dividend declared ($0.0625 per share)



(4,610
)

(4,610
)

(4,610
)
Contributions from non-controlling interest






4,729

4,729

Common stock-based compensation plans activity:
 
 
 
 
 
 
 
 
Equity-based compensation


4,045



4,045


4,045

Proceeds from options exercised

295

(167
)


128


128

Tax payments related to shares withheld for vested restricted stock and stock units
2

(2,205
)
(2
)


(2,205
)

(2,205
)
Balance at March 31, 2019
$
820

$
(180,125
)
$
1,173,259

$
43,920

$
(15,985
)
$
1,021,889

$
12,209

$
1,034,098

 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
$
812

$
(25,456
)
$
1,147,084

$
287,992

$
(13,926
)
$
1,396,506

$

$
1,396,506

Net income



31,294


31,294


31,294

Unrealized loss on derivatives




(2
)
(2
)

(2
)
Foreign currency translation adjustment




3

3


3

Pension and post-retirement liability




2,293

2,293


2,293

Cash dividend declared ($0.0625 per share)



(4,881
)

(4,881
)

(4,881
)
Common stock-based compensation plans activity:
 
 
 
 
 
 
 
 
Equity-based compensation


6,254



6,254


6,254

Tax payments related to shares withheld for vested restricted stock and stock units
2

(3,484
)
(2
)


(3,484
)

(3,484
)
Repurchase of common stock

(75,000
)



(75,000
)

(75,000
)
Balance at March 31, 2018
$
814

$
(103,940
)
$
1,153,336

$
314,405

$
(11,632
)
$
1,352,983

$

$
1,352,983

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

5



U.S. SILICA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; dollars in thousands)
 
Three Months Ended 
 March 31,
 
2019
 
2018
Operating activities:
 
 
 
Net (loss) income
$
(19,328
)
 
$
31,294

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
44,600

 
28,592

Debt issuance amortization
1,322

 
345

Original issue discount amortization
265

 
93

Deferred income taxes
(2,553
)
 
7,786

Deferred revenue
(7,576
)
 
3,562

(Gain) loss on disposal of property, plant and equipment
113

 
(5,799
)
Equity-based compensation
4,045

 
6,254

Bad debt provision, net of recoveries
721

 
237

Other
(3,872
)
 
(871
)
Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
Accounts receivable
(43,583
)
 
(39,077
)
Inventories
18,938

 
15,797

Prepaid expenses and other current assets
3,151

 
694

Income taxes
812

 
(961
)
Accounts payable and accrued expenses
12,970

 
(27,930
)
Short-term and long-term obligations-vendor incentives

 
57,986

Liability for pension and other post-retirement benefits
924

 
212

Other noncurrent assets and liabilities
(48
)
 
(605
)
Net cash provided by operating activities
10,901

 
77,609

Investing activities:
 
 
 
Capital expenditures
(44,376
)
 
(72,327
)
Capitalized intellectual property costs
(1,307
)
 
(1,011
)
Proceeds from sale of property, plant and equipment

 
25,960

Net cash used in investing activities
(45,683
)
 
(47,378
)
Financing activities:
 
 
 
Dividends paid
(4,690
)
 
(5,069
)
Repurchase of common stock

 
(75,000
)
Proceeds from options exercised
128

 

Tax payments related to shares withheld for vested restricted stock and stock units
(2,205
)
 
(3,485
)
Payments on long-term debt
(4,043
)
 
(1,657
)
Contributions from non-controlling interest
4,729

 

Principal payments on finance lease obligations
(20
)
 
(75
)
Net cash used in financing activities
(6,101
)
 
(85,286
)
Net decrease in cash and cash equivalents
(40,883
)
 
(55,055
)
Cash and cash equivalents, beginning of period
202,498

 
384,567

Cash and cash equivalents, end of period
$
161,615

 
$
329,512

Supplemental cash flow information:
 
 
 
Cash paid (received) during the period for:
 
 
 
Interest
$
21,557

 
$
6,592


6



Taxes, net of refunds
$
(472
)
 
$
770

Related party purchases
$

 
$
672

Non-cash Items:
 
 
 
Accrued capital expenditures
$
39,239

 
$
20,170

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.

7



U.S. SILICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; dollars in thousands, except per share amounts)

NOTE A—ORGANIZATION AND BASIS OF PRESENTATION
Organization
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 March 31, 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, 2018; therefore, the 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 have been included. Such adjustments are of a normal, recurring nature.
The Condensed Consolidated 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 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 determined that we are the primary beneficiary of this VIE and therefore we are required to consolidate it, including the current construction work in progress of $19.0 million. During the fourth quarter of 2018 we contributed an additional $3.8 million for a total of $7.0 million in capital contributions for the year ended December 31, 2018. We did not make any capital contributions during the three months ended March 31, 2019.
Throughout this report we refer to (i) our 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.”
NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates and Assumptions
The preparation of Consolidated Financial Statements in conformity with GAAP requires management 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 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

8



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.
Leases
We 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 consolidated balance sheets. Finance leases are included in property, plant and mine development, current portion of long-term debt, and long-term debt in our 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 the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. 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. The ROU assets also include any lease payments made at or before the commencement date of the lease and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will 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 non-lease components, the latter of which are generally accounted for separately. See Note Q - Leases
Foreign Operations
Foreign sales were approximately $15.3 million of our consolidated sales; pre-tax income was $0.9 million and net income was $0.8 million for the three months ended March 31, 2019. Foreign operations constituted approximately $10.1 million of consolidated assets as of March 31, 2019. We had no significant foreign operations during the three months ended March 31, 2018.
New Accounting Pronouncements Recently Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and issued ASU 2018-11 Leases (Topic 842): Targeted Improvements. The new standard(s) established a right-of-use ("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.
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 our existing operating leases without reassessing (a) whether the contracts contain a lease under the new standard, (b) whether classification of the operating leases would be different in accordance with the new standard, or (c) whether the unamortized initial direct costs before transition adjustments would have met the definition of initial direct costs in the new standard at lease commencement. Adoption of the new standard resulted in the recognition of operating lease right-of-use assets of $223.0 million and lease liabilities of $222.7 million. The standard did not have a material impact on our consolidated statements of operations or cash flows. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those 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 Act in accumulated other comprehensive loss may be reclassified to retained earnings. The ASU is effective January 1, 2019, with early adoption permitted. We adopted the new accounting standard on January 1, 2019, and we do not intend to exercise the option to reclassify stranded tax effects within accumulated other comprehensive income.
New Accounting Pronouncements Not Yet Adopted

9



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 that the guidance will have on our financial statements and related disclosures.
In October 2018, FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This ASU is intended to reduce the cost and complexity of financial reporting associated with consolidation of VIEs. This ASU affects organizations that are required to determine whether they should consolidate a legal entity under the guidance within Subtopic 810-10, Consolidation. The update is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the adoption of this standard and the impact to our consolidated financial statements.
In November 2018, the FASB issued 2018-18, Collaborative Arrangements (Topic 808), Clarifying the Interaction between Topic 808 and Topic 606. The amendments in this ASU provide clarification and guidance on whether certain transactions between collaborative arrangement participants should be accounting for with revenue under Topic 606 (Revenue from Contracts with Customers). The amendments provide narrow scope improvements for lessors. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. We are currently evaluating the 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 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 accounting 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 therein. 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.

NOTE 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 months ended March 31, 2019, and 2018:

10



In thousands, except per share amounts
 
Three Months Ended 
 March 31,
 
 
2019
 
2018
Numerator:
 
 
 
 
Net (loss) income attributable to U.S. Silica Holdings, Inc.
 
$
(19,324
)
 
$
31,294

 
 
 
 
 
Denominator:
 
 
 
 
Weighted average shares outstanding
 
73,040

 
79,496

Diluted effect of stock awards
 

 
813

Weighted average shares outstanding assuming dilution
 
73,040

 
80,309

 
 
 
 
 
Earnings (loss) per share attributable to U.S. Silica Holdings, Inc.:
 
 
 
 
Basic (loss) earnings per share
 
$
(0.26
)
 
$
0.39

Diluted (loss) earnings per share
 
$
(0.26
)
 
$
0.39


We excluded potentially dilutive shares of 171 for the three months ended March 31, 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. Stock awards (in thousands) excluded from the calculation of diluted earnings per common share were as follows:
 
 
Three Months Ended 
 March 31,
 
 
2019
 
2018
Stock options excluded
 
736

 
428

Restricted stock and performance share units awards excluded
 
353

 
337



NOTE 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 82,455,734 shares issued and 73,524,817 shares outstanding at March 31, 2019. There were 81,811,977 shares issued and 73,148,853 shares outstanding at December 31, 2018.
During the three months ended March 31, 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

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

11



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 March 31, 2019 or December 31, 2018. At present, we have no plans to issue any preferred stock.
Share Repurchase Program
We are authorized by our Board of Directors to repurchase shares 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 March 31, 2019, we have repurchased a total of 5,036,139 shares of our common stock at an average price of $14.59 and have $126.5 million of remaining availability 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 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 three months ended March 31, 2019:
 
For the Three Months Ended March 31, 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 gain (loss) before reclassifications
(940
)
 
(199
)
 
(76
)
 
(1,215
)
Amounts reclassified from accumulated other comprehensive loss

 

 
250

 
250

Ending Balance
$
(2,561
)
 
$
(819
)
 
$
(12,605
)
 
$
(15,985
)

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 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 $743.2 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 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. 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 is subject to adjustment until we complete our analysis, within a period of time not to exceed one year after the date of

12



acquisition, or May 1, 2019, in order to provide us with the time to complete the valuation of its assets and liabilities. We are still completing our analysis of the fair value of property, plant and mine development, mineral rights and intangible assets.
The following table sets forth the preliminary 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
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


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

 
 

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.
Unaudited Pro Forma Results
The results of EPMH's operations have been included in the 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, 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. This information does not

13



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, 2018
Sales
$
1,659,775

Net loss
$
(179,220
)
Basic loss per share
$
(2.34
)
Diluted loss per share
$
(2.34
)
 
 


NOTE F—ACCOUNTS RECEIVABLE
At March 31, 2019 and December 31, 2018, accounts receivable (in thousands) consisted of the following:
 
March 31, 
 2019
 
December 31,  
 2018
Trade receivables
$
241,100

 
$
198,435

Less: Allowance for doubtful accounts
(7,437
)
 
(6,751
)
Net trade receivables
233,663

 
191,684

Other receivables(1)
24,685

 
23,802

Total accounts receivable
$
258,348

 
$
215,486

(1
)
At March 31, 2019 and December 31, 2018, other receivables included $16.0 million of refundable alternative minimum tax credits.
Changes in our allowance for doubtful accounts (in thousands) during the three months ended March 31, 2019 and 2018 are as follows:
 
March 31, 
 2019
 
March 31, 2018
Beginning balance
$
6,751

 
$
7,100

Bad debt provision
721

 
237

Write-offs
(35
)
 
(87
)
Ending balance
$
7,437

 
$
7,250


Our ten largest customers accounted for approximately 42% and 52% of total sales during the three months ended March 31, 2019 and 2018, respectively. Sales to one of our customers accounted for 12% and 15% of our total sales during the three months ended March 31, 2019 and 2018, respectively. No other customers accounted for 10% or more of our total sales. At March 31, 2019, one of our customers' accounts receivable represented 16% of our total trade accounts receivable, net of allowance. At December 31, 2018, one of our customers' accounts receivable represented 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 G—INVENTORIES
At March 31, 2019 and December 31, 2018, inventories (in thousands) consisted of the following:
 
March 31, 2019
 
December 31, 2018
Supplies
$
44,479

 
$
41,453

Raw materials and work in process
60,910

 
68,474

Finished goods
37,760

 
52,160

Total inventories
$
143,149

 
$
162,087



14



NOTE H—PROPERTY, PLANT AND MINE DEVELOPMENT
At March 31, 2019 and December 31, 2018, property, plant and mine development (in thousands) consisted of the following:
 
March 31, 
 2019
 
December 31,  
 2018
Mining property and mine development
$
983,517

 
$
995,759

Asset retirement cost
12,727

 
12,732

Land
55,502

 
55,502

Land improvements
68,992

 
67,729

Buildings
65,047

 
64,515

Machinery and equipment
1,027,782

 
958,357

Furniture and fixtures
3,611

 
3,599

Construction-in-progress
137,982

 
167,933

 
2,355,160

 
2,326,126

Accumulated depletion, depreciation and amortization
(535,058
)
 
(499,823
)
Total property, plant and mine development, net
$
1,820,102

 
$
1,826,303


At March 31, 2019 and December 31, 2018, the aggregate cost of machinery and equipment acquired under finance leases was $0.3 million and $0.9 million, respectively, reduced by accumulated depreciation of $0.1 million and $0.2 million, respectively. The amount of interest costs capitalized in property, plant and mine development was $1.0 million and $1.8 million for the three months ended March 31, 2019 and 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 March 31, 2019, vendor incentives of $12.1 million and $28.0 million were classified in accounts payable and accrued expenses and in other long-term 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 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.

NOTE 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



 
12,184


12,184

 
12,184

 
 
 
 
 
 
 
 
 
 
Balance at March 31, 2019
$
250,267

$
(164,167
)
$
86,100

 
$
187,424


$
187,424

 
$
273,524



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

15



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:
 
 
 
March 31, 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
 
$
83,497

 
$
(12,610
)
 
$
70,887

 
$
83,616

 
$
(11,168
)
 
$
72,448

Customer relationships
13 - 15
 
68,659

 
(15,052
)
 
53,607

 
68,664

 
(13,826
)
 
54,838

 Total definite-lived intangible assets:
 
 
$
152,156

 
$
(27,662
)
 
$
124,494

 
$
152,280

 
$
(24,994
)
 
$
127,286

Trade names
 
 
65,390

 

 
65,390

 
66,640

 

 
66,640

Other
 
 
700

 

 
700

 
700

 

 
700

Total intangible assets:
 
 
$
218,246

 
$
(27,662
)
 
$
190,584

 
$
219,620

 
$
(24,994
)
 
$
194,626



Measurement period adjustments related to the Company's EPMH acquisition impacted the March 31, 2019 gross carrying amounts of the technology and intellectual property intangibles by $(1.5) million and the trade names by $(1.3) million. See Note E - Business Combinations.

Amortization expense was $2.7 million and $2.3 million for the three months ended March 31, 2019 and 2018, respectively.

The estimated amortization expense related to definite-lived intangible assets (in thousands) for the five succeeding years is as follows:
2019
$
8,022

2020
10,696

2021
10,694

2022
10,679

2023
10,674



16



NOTE J—DEBT
At March 31, 2019 and December 31, 2018, debt (in thousands) consisted of the following:
 
March 31, 
 2019
 
December 31,  
 2018
Senior secured credit facility:
 
 
 
Revolver expiring May 1, 2023 (8.50% at March 31, 2019 and December 31, 2018)
$

 
$

Term Loan facility—final maturity May 1, 2025 (6.50% at March 31, 2019 and 6.56% December 31, 2018)
1,267,200

 
1,270,400

Less: Unamortized original issue discount
(6,246
)
 
(6,511
)
Less: Unamortized debt issuance cost
(29,988
)
 
(31,310
)
Note payable secured by royalty interest
26,991

 
26,511

Equipment notes payable
267

 
321

Finance leases
130

 
344

Total debt
1,258,354

 
1,259,755

Less: current portion
(13,112
)
 
(13,327
)
Total long-term portion of debt
$
1,245,242

 
$
1,246,428


Revolving Line-of-Credit
We have a $100.0 million Revolver with zero drawn and $4.8 million allocated for letters of credit as of March 31, 2019, leaving $95.2 million available under the Revolver.
Senior Secured Credit Facility
At March 31, 2019, contractual maturities of our senior secured Credit Facility (in thousands) are as follows:
2019
$
9,600

2020
12,800

2021
12,800

2022
12,800

2023
12,800

Thereafter
1,206,400

Total
$
1,267,200


On May 1, 2018, we entered into the Credit Agreement, 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 and a $100 million Revolver 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 matures on May 1, 2025, and the Revolver expires May 1, 2023. We capitalized $38.7 million in debt issuance costs and original issue discount as a result of the new Credit Agreement.
The Credit Facility contains covenants that, among other things, 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 March 31, 2019, and December 31, 2018, we are in compliance with all covenants in accordance with our senior secured Credit Facility.

17



Note Payable Secured by Royalty Interest
In conjunction with the acquisition of 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


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 March 31, 2019, the note payable had a balance of $27.0 million. The increase in the note payable amount is due to interest paid-in-kind. The effective interest rate based on the updated projected future cash payments was 19% at March 31, 2019.
NOTE K—ASSET RETIREMENT 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 a 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 March 31, 2019 and 2018, we had a liability of $18.8 million and $16.8 million, respectively, in other long-term liabilities related to our asset retirement obligations. Changes in the asset retirement obligations (in thousands) during the three months ended March 31, 2019 and 2018 are as follows:
 
Three Months Ended 
 March 31,
 
2019
 
2018
Beginning balance
$
18,413

 
$
19,032

Accretion
373

 
326

Additions and revisions of prior estimates

 
(486
)
Disposal related to sale of transloads

 
(2,116
)
Ending balance
$
18,786

 
$
16,756



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.

18



Cash Equivalents
Due to the short-term maturity, we believe our cash equivalent instruments at March 31, 2019 and December 31, 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.
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 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 March 31, 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. See Note M - Derivative Instruments for 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 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 March 31, 2019, the fair value of our interest rate swaps was a liability of $2.3 million and a liability of $1.0 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 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 more information regarding the estimated fair values of our derivative instruments at March 31, 2019 and December 31, 2018.
 
March 31, 2019
 
 
December 31, 2018
 
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
 
$
(2,332
)
 
$
(2,332
)
 
 
2020
 

$440
 million
 
$
(1,475
)
 
$
(1,475
)
LIBOR(1) interest rate swap agreement
2020
 

$200
 million
 
$
(1,046
)