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Basis of Presentation (Policies)
9 Months Ended
Sep. 30, 2019
Accounting Policies [Abstract]  
Going Concern Policy

Going Concern

The Company continues to be subject to the ever-challenging North American oilfield environment, which has led to significant operating losses and negative operating cash flows in recent years.  While we anticipate that cash on hand will be sufficient to meet planned operating expenses and other cash needs for at least one year from the date of this Form 10-Q, our financial forecasts are based on estimates of customer demand, pricing and other variables, many of which are highly uncertain in the current volatile oilfield operating environment, and we have no committed sales backlog with our customers.  As a result, there is inherent uncertainty in our forecasts.  Our 2020 financial forecast currently reflects lower revenue relative to 2019 but improved gross margin and pretax losses as we expect a more profitable sales mix and expect to reduce our selling, general and administrative expenses. Our financial forecast also reflects periods during which our liquidity position will be below optimal operating levels and the Company will be required to closely monitor and manage its working capital position especially if actual operating results during the next 12 months vary from our financial forecast. In addition, if results are different from our financial forecast, we can further manage our cash outflows by reducing headcount, changing the cadence of production, and through working capital management.

Subsequent to September 30, 2019, the Company was notified that its largest frac sand client intends to discontinue purchases of frac sand under its existing contract with the Company.  Although the Company plans to idle all of its sand operations in the fourth quarter of 2019, and will evaluate alternatives for the sand business, it expects to continue to incur a significant amount of fixed cash costs associated with the rail cars and distribution center dedicated to this contract.  Given the existing North American oilfield market headwinds, expectations for these headwinds to continue into 2020, and the loss of revenues associated with this sand contract, there is an elevated risk associated with the Company meeting its financial forecast and the Company may ultimately conclude it is unable to continue as a going concern in a future period.  The accompanying unaudited financial statements, as of and for the periods ended September 30, 2019 contained in this Quarterly Report on Form 10-Q, have been prepared under the assumption that the Company will continue as a going concern as management concluded the Company will be able to satisfy its obligations as they come due during the one-year period following the issuance of the Form 10-Q.  

As of September 30, 2019, we had cash and cash equivalents and restricted cash of $50.2 million, and we do not have access to a credit facility that provides us with access to additional liquidity.  During the nine months ended September 30, 2019, we utilized a portion of existing cash balances to fund the Company’s operations, as our cash flow from operations was negative $7.4 million.  The Company continues to focus on areas it can control, as well as planning for scenarios that may occur as a result of events outside of our control.  The Company is focused on initiatives to preserve, and improve, our cash position.  By protecting the balance sheet, the Company believes it can continue the strategic execution to diversify and grow outside the oilfield.  Some of the areas the Company can control are cost reductions and working capital management.  

Due to our declining cash balance and negative cash flow and the ongoing difficult conditions in our industry, we are engaged in the consideration of various transactions and alternatives designed to improve our cash flow and liquidity to provide the Company with additional time to fully implement its transformation strategy, including (1) consummation of certain contemplated asset sales, (2) increasing our existing cash-generating businesses, (3) expanding into new profitable businesses as part of our transformation strategy, (4) modifying our capital structure and (5) reducing our expenditures.  No assurance can be given, however, that we will be able to implement any such transaction or alternative, on commercially reasonable terms or at all, and, even if we are successful in implementing such a transaction or alternative, such transaction or alternative may not be successful in increasing our cash from operations and liquidity.

The Company’s ability to continue as a going concern is dependent upon many factors including the Company’s ability to meet its financial forecast.  Therefore, the accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these financial statements.  

Should the Company be required to include a going concern paragraph in the year-end audit report issued by its independent registered public accounting firm and included in its audited financial statements for the year ended December 31, 2019, the existence of such paragraph would be considered a default under our Credit Agreement, and potentially an event of default if not waived by the lenders thereunder within 30 days after delivery of such financial statements. An event of default under the Credit Agreement would allow the lenders to declare the remaining balance of the loan outstanding, as well as a payment to make the lenders whole for interest that would have been payable over the entire remaining term of the loan, as due and payable in full and could trigger cross-defaults under other agreements, including our rail car and other leases, which could also result in the acceleration of those obligations by the counterparties to those agreements.

If a default or event of default occurs under our Credit Agreement or other obligations or if we lack sufficient liquidity to satisfy our debt or other obligations, then, in the absence of a strategic transaction or alternative, our creditors could potentially force us into bankruptcy or we could be forced to seek bankruptcy protection to restructure our business and capital structure, in which case we could be forced to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements. Even if we are able to implement a strategic transaction or alternative, such transaction or alternative may impose onerous terms on us. Additionally, we have a significant amount of secured indebtedness that is senior to our unsecured indebtedness and a significant amount of obligations that are senior to our existing common stock in our capital structure. Implementation of a strategic transaction or alternative or a bankruptcy proceeding could impair unsecured creditors and place equity holders at risk of losing all or a portion of their interests in our company.  

Deferred Taxes - Valuation Allowance

Deferred Taxes – Valuation Allowance

Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, provides the carrying value of deferred tax assets should be reduced by the amount not expected to be realized.  A company should reduce deferred tax assets by a valuation allowance if, based on the weight of all available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized.  ASC 740 requires all available evidence, both positive and negative, be considered to determine whether a valuation allowance for deferred tax assets is needed in the financial statements.  Additionally, there can be statutory limitations on the deferred tax assets should certain conditions arise.  As a result of the significant decline in oil and gas activities and net losses incurred over the past several years, we believe it is more likely than not that a portion of our deferred tax assets will not be realized in the future.  Our valuation allowance against a portion of our deferred tax assets as of September 30, 2019 was $87,584.  Our assessment of the realizability of our deferred tax assets is based on the weight of all available evidence, both positive and negative, including future reversals of deferred tax liabilities.

Restricted Cash

Restricted Cash

A portion of the Company’s cash balance is restricted to its use in order to provide collateral primarily for letters of credit, corporate cards and funds held in escrow relating to the sale of its Millen plant.  As of September 30, 2019 and December 31, 2018, total restricted cash was $10,359 and $10,565, respectively.

Lower of Cost or Market Adjustments

Lower of Cost and Net Realizable Value Adjustments

As of September 30, 2019, the Company reviewed the carrying values of all inventories and concluded that no adjustments were warranted for finished goods and raw materials intended for use in the Company’s manufacturing process.  As discussed further below in Note 1, the Company abandoned certain proppant inventory which it determined would not be moved at the end of the lease term in December 2020.  The inventory had a cost basis of $531, and the Company recorded a $531 expense within other operating expenses on the accompanying statement of operations.

Production Levels Below Normal Capacity Policy Text Block

Manufacturing Production Levels Below Normal Capacity

As a result of the Company substantially reducing manufacturing production levels, including by idling certain facilities, certain production costs have been expensed instead of being capitalized into inventory.  The Company expenses fixed production overhead amounts in excess of amounts that would have been allocated to each unit of production at normal production levels.  For the three months ended September 30, 2019 and 2018, the Company expensed $8,034 and $7,231, respectively, in production costs.  For the nine months ended September 30, 2019 and 2018, the Company expensed $22,380 and $23,788, respectively, in production costs.

Long-lived and Other Noncurrent Assets Impairment

Long-lived and Other Noncurrent Assets Impairment

The Company has temporarily idled production at various manufacturing facilities.  The Company does not assess temporarily idled assets for impairment unless events or circumstances indicate that the carrying amounts of those assets may not be recoverable.  Short-term stoppages of production for less than one year do not generally significantly impact the long-term expected cash flows of the idled facility. As of September 30, 2019, the Company determined that the carrying amount of the assets located at one of its proppant distribution centers would not be recoverable as efforts to lease or sell the assets have not been successful due to its location. These assets are located on leased land.  The land lease was renegotiated during the third quarter of 2019 to reduce our monthly cost, as well as to revise the lease term to end in December 2020.  The Company does not expect to exercise the company renewal options.  At the expiration of the lease term in December 2020, any remaining assets would become the property of the lessor.  These distribution center assets were previously considered a general corporate asset that was evaluated for impairment in aggregate with other long-lived assets because it was built to distribute various products manufactured from multiple asset groups and was not built to service any one single asset group.  When the Company made the decision to abandon the facility, we then evaluated these distribution center assets separately as opposed to aggregated with other long-lived assets.  When the Company built this distribution center several years ago, it was originally intended to primarily distribute ceramic proppant in the Permian Basin.  Since then, the market for ceramic proppant in that region deteriorated with the majority of operators instead using inexpensive sand proppants.  Given that the Company was no longer able to utilize this distribution center for ceramic proppant, the Company leased the facility in 2017 to a third party who used it for transloading sand in the region.  During 2019, the market in the Permian Basin further shifted to very inexpensive in-basin sand that does not require the use of a distribution center, as the sand is trucked directly to the wellsite from the mine.  Further, during the third quarter of 2019, the lease with the third party expired and was not renewed.  Given these developments and the expectation for them to continue indefinitely, there is no business need for these distribution center assets in the region.  As we do not expect to renew the lease and efforts to locate a buyer have not been successful, the Company concluded to abandon the assets and has recorded an impairment of $8,101, recorded within other operating expenses on the statement of operations.  The Company wrote the assets down to a salvage value of $0 given that no interested buyers were identified while marketing the assets at scrap values.  

In addition, the Company abandoned and wrote off $531 in inventory at this leased facility that we do not anticipate selling and expect to leave on site at the end of the lease term as it would be too costly to relocate, recorded within other operating expenses on the statement of operations.  In addition, several right of use operating lease assets were impaired during the quarter (see Note 4).  Other than the preceding, as of September 30, 2019, the Company concluded that there were no events or circumstances that would indicate that carrying amounts of its other long-lived and other noncurrent assets might be impaired.  However, as noted above, industry conditions continue to be challenging and the Company continues to monitor market conditions closely.  Further deterioration of market conditions could result in impairment charges being taken on the Company’s long-lived and other noncurrent assets, including the Company’s manufacturing plants, goodwill and intangible assets.  The Company will evaluate long-lived and other noncurrent assets for impairment at such time that events or circumstances indicate that carrying amounts might be impaired.  Subsequent to September 30, 2019, the Company was notified that its largest frac sand client intends to discontinue purchases of frac sand under its existing contract with the Company.  Although the Company plans to idle all of its sand operations in the fourth quarter of 2019, and will evaluate alternatives for the sand business, it expects to continue to incur a significant amount of fixed cash costs associated with the rail cars and distribution center dedicated to this contract, and this could result in additional impairments of long-lived assets during the fourth quarter of 2019 relating to our sand processing facility and certain right of use assets associated with leased railcars and a leased distribution center that was dedicated to the sand contract.  In addition, the Company previously recorded impairment charges on the assets used in its sand business and the carrying value of the long-lived assets was approximately $9,983 at September 30, 2019.  Further, the Company continues to explore ways to monetize assets.  Depending on the ultimate outcome of these contemplated asset sales, additional impairments or losses on the sale are possible.  

Reclassification of Prior Period Amounts

Reclassification of Prior Period Amounts

Certain prior period financial information has been reclassified to conform to current period presentation.