Smart Sand(SND) - 2022 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This part details Smart Sand's unaudited financial statements, management's analysis, market risks, and internal controls ITEM 1. Financial Statements Presents Smart Sand, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flow statements, with detailed notes Condensed Consolidated Balance Sheets Summarizes Smart Sand, Inc.'s financial position, detailing assets, liabilities, and equity at specific reporting dates Summary Balance Sheet (in thousands) | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total current assets | $65,145 | $73,863 | $(8,718) | -11.8% | | Total assets | $373,968 | $374,019 | $(51) | -0.01% | | Total current liabilities | $53,715 | $48,550 | $5,165 | 10.6% | | Total liabilities | $137,456 | $132,859 | $4,597 | 3.5% | | Total stockholders' equity | $236,512 | $241,160 | $(4,648) | -1.9% | - Cash and cash equivalents decreased significantly from $25,588 thousand at December 31, 2021, to $2,098 thousand at June 30, 2022, representing a 91.8% decrease[11] - Accounts receivable increased by 84.3% from $17,481 thousand at December 31, 2021, to $32,224 thousand at June 30, 2022[11] Condensed Consolidated Statements of Operations Details Smart Sand, Inc.'s revenues, costs, and net income or loss over specific reporting periods Summary Statements of Operations for Three Months Ended June 30 (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Total revenue | $68,714 | $29,639 | $39,075 | 131.8% | | Cost of goods sold | $59,743 | $31,999 | $27,744 | 86.7% | | Gross profit | $8,971 | $(2,360) | $11,331 | -480.1% | | Operating income (loss) | $1,387 | $(28,669) | $30,056 | -104.8% | | Net loss | $(90) | $(27,267) | $27,177 | -99.7% | | Basic EPS | $0.00 | $(0.65) | $0.65 | -100.0% | Summary Statements of Operations for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Total revenue | $110,319 | $57,089 | $53,230 | 93.2% | | Cost of goods sold | $103,329 | $64,426 | $38,903 | 60.4% | | Gross profit | $6,990 | $(7,337) | $14,327 | -195.3% | | Operating income (loss) | $(8,561) | $(39,736) | $31,175 | -78.4% | | Net loss | $(6,013) | $(31,179) | $25,166 | -80.7% | | Basic EPS | $(0.14) | $(0.75) | $0.61 | -81.3% | Condensed Consolidated Statements of Comprehensive (Loss) Income Presents Smart Sand, Inc.'s net loss and other comprehensive income items, reflecting total comprehensive loss for the periods Summary Statements of Comprehensive (Loss) Income for Three Months Ended June 30 (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net loss | $(90) | $(27,267) | $27,177 | -99.7% | | Foreign currency translation adjustment | $(74) | $44 | $(118) | -268.2% | | Comprehensive loss | $(164) | $(27,223) | $27,059 | -99.4% | Summary Statements of Comprehensive (Loss) Income for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net loss | $(6,013) | $(31,179) | $25,166 | -80.7% | | Foreign currency translation adjustment | $(58) | $169 | $(227) | -134.3% | | Comprehensive loss | $(6,071) | $(31,010) | $24,939 | -80.4% | Condensed Consolidated Statements of Changes in Stockholders' Equity Outlines changes in Smart Sand, Inc.'s equity components, including retained earnings and additional paid-in capital Summary Statements of Changes in Stockholders' Equity (in thousands) | Metric (in thousands) | Balance at Dec 31, 2021 | Balance at June 30, 2022 | Change | % Change | | :-------------------- | :---------------------- | :----------------------- | :----- | :------- | | Total Stockholders' Equity | $241,160 | $236,512 | $(4,648) | -1.9% | | Retained earnings | $70,593 | $64,580 | $(6,013) | -8.5% | | Additional paid-in capital | $174,486 | $176,150 | $1,664 | 1.0% | - The company recorded a net loss of $5,923 thousand for the period ending March 31, 2022, and $90 thousand for the period ending June 30, 2022, contributing to the decrease in retained earnings[20] - Stock-based compensation and employee stock purchase plan activities contributed to an increase in additional paid-in capital[20] Condensed Consolidated Statements of Cash Flows Reports Smart Sand, Inc.'s cash inflows and outflows from operating, investing, and financing activities Summary Statements of Cash Flows for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net cash (used in) provided by operating activities | $(10,949) | $36,480 | $(47,429) | -130.0% | | Net cash used in investing activities | $(11,684) | $(5,041) | $(6,643) | 131.8% | | Net cash used in financing activities | $(857) | $(3,886) | $3,029 | -78.0% | | Net decrease in cash and cash equivalents | $(23,490) | $27,553 | $(51,043) | -185.3% | | Cash and cash equivalents at end of period | $2,098 | $39,278 | $(37,180) | -94.7% | - Operating cash flow shifted from a significant inflow of $36,480 thousand in H1 2021 to an outflow of $10,949 thousand in H1 2022, primarily due to changes in accounts receivable and unbilled receivables[29] - Investing activities saw a substantial increase in cash outflow, mainly due to the acquisition of the Blair facility for $6,547 thousand in H1 2022[29] NOTE 1 — Organization and Nature of Business & Market Update Describes Smart Sand, Inc.'s business, operations, and market position as a frac and industrial sand supplier - Smart Sand, Inc. is a fully integrated frac and industrial sand supply and services company, offering mine-to-wellsite proppant solutions for oil and natural gas, and industrial sand for various uses (glass, foundry, building products, etc)[32] - The company's annual processing capacity is approximately 7.1 million tons from its Oakdale and Utica facilities, with potential expansion to 10.0 million tons by bringing the acquired Blair facility online[32] - Smart Sand provides logistics solutions through unit train capable transloading terminals in North Dakota and Pennsylvania, and proprietary SmartSystems products (SmartDepot silos, SmartPath transloader, SmartSystem Tracker software) for wellsite proppant storage and management[33][34][35] NOTE 2 — Summary of Significant Accounting Policies Outlines Smart Sand, Inc.'s key accounting principles and significant estimates used in financial statement preparation - The interim financial statements are unaudited and prepared in accordance with SEC rules for Form 10-Q, not including all GAAP-required information, but all necessary adjustments for fair presentation are included[37] - Significant estimates include asset impairment, asset retirement obligations, fair value of acquired assets, deferred tax asset recoverability, inventory reserves, and collectability of receivables[40] - The company qualified for federal employee retention credits, with $4,317 thousand included in prepaid expenses and other current assets as of June 30, 2022[42] NOTE 3 — Acquisition Details Smart Sand, Inc.'s acquisition of Hi-Crush Blair LLC, including purchase price and accounting treatment - On March 4, 2022, Smart Sand acquired Hi-Crush Blair LLC (Blair facility) for $6,450 thousand cash, subject to adjustments, which was accounted for as an asset acquisition[44][47] - The Blair facility is an idle frac sand mine with approximately 2.9 million tons of annual processing capacity and unit train access to the Canadian National Railway[45] - The acquisition resulted in an $8,281 thousand increase to asset retirement obligations and a corresponding increase in property, plant, and equipment[46] NOTE 4 — Inventory Provides a breakdown of Smart Sand, Inc.'s inventory components, including raw materials, work in progress, and finished goods Inventory Breakdown (in thousands) | Inventory Type (in thousands) | June 30, 2022 | December 31, 2021 | Change | % Change | | :---------------------------- | :------------ | :---------------- | :----- | :------- | | Raw material | $727 | $293 | $434 | 148.1% | | Work in progress | $3,063 | $3,082 | $(19) | -0.6% | | Finished goods | $8,349 | $7,269 | $1,080 | 14.9% | | Spare parts | $4,736 | $4,380 | $356 | 8.1% | | Total inventory | $16,875 | $15,024 | $1,851 | 12.3% | NOTE 5 — Property, Plant and Equipment, net Details Smart Sand, Inc.'s property, plant, and equipment, including changes and depreciation expense Property, Plant and Equipment, Net (in thousands) | Asset Category (in thousands) | June 30, 2022 | December 31, 2021 | Change | % Change | | :---------------------------- | :------------ | :---------------- | :----- | :------- | | Total property, plant and equipment, net | $270,593 | $262,465 | $8,128 | 3.1% | | Railroad and sidings | $33,622 | $27,703 | $5,919 | 21.4% | | Land and land improvements | $40,172 | $35,652 | $4,520 | 12.7% | | Asset retirement obligation | $28,818 | $20,536 | $8,282 | 40.3% | - Depreciation expense increased to $6,449 thousand for the three months ended June 30, 2022, from $6,037 thousand in the prior year, and to $12,810 thousand for the six months ended June 30, 2022, from $12,213 thousand in the prior year[51] NOTE 6 — Accrued and Other Expenses Summarizes Smart Sand, Inc.'s accrued liabilities and other expenses, including employee-related costs and freight Accrued and Other Expenses (in thousands) | Expense Category (in thousands) | June 30, 2022 | December 31, 2021 | Change | % Change | | :------------------------------ | :------------ | :---------------- | :----- | :------- | | Total accrued liabilities | $14,146 | $14,073 | $73 | 0.5% | | Employee related expenses | $1,615 | $806 | $809 | 100.4% | | Accrued freight and delivery charges | $3,818 | $2,164 | $1,654 | 76.4% | | Income tax payable | $0 | $2,332 | $(2,332) | -100.0% | NOTE 7 — Debt Details Smart Sand, Inc.'s debt obligations, including current and long-term portions and credit facilities Debt Summary (in thousands) | Debt Category (in thousands) | June 30, 2022 | December 31, 2021 | Change | % Change | | :--------------------------- | :------------ | :---------------- | :----- | :------- | | Current portion of long-term debt | $6,869 | $7,127 | $(258) | -3.6% | | Long-term debt, net | $14,783 | $15,353 | $(570) | -3.7% | | ABL Credit Facility | $3,000 | $0 | $3,000 | N/A | - As of June 30, 2022, $3,000 thousand was outstanding under the ABL Credit Facility, with $16,000 thousand available to be drawn[59] - The Oakdale Equipment Financing, secured by equipment at the Oakdale facility, bears a fixed interest rate of 5.79%[60] NOTE 8 — Leases Outlines Smart Sand, Inc.'s lease assets and liabilities, along with associated lease costs and cash flows Lease Metrics (in thousands) | Lease Metric (in thousands) | June 30, 2022 | December 31, 2021 | Change | % Change | | :-------------------------- | :------------ | :---------------- | :----- | :------- | | Total right-of-use assets | $30,979 | $30,090 | $889 | 3.0% | | Total lease liabilities | $33,495 | $33,070 | $425 | 1.3% | Lease Cost for Three Months Ended June 30 (in thousands) | Lease Cost (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :------------------------ | :--------------------------- | :--------------------------- | :----- | :------- | | Total lease cost | $3,231 | $2,954 | $277 | 9.4% | - Operating cash flows used for operating leases increased significantly to $6,384 thousand for the six months ended June 30, 2022, from $4,693 thousand in the prior year[67] NOTE 9 — Asset Retirement Obligation Details changes in Smart Sand, Inc.'s asset retirement obligations, including additions and accretion expense Asset Retirement Obligation (in thousands) | Metric (in thousands) | Amount | | :-------------------- | :----- | | Balance at December 31, 2021 | $16,155 | | Additions and revisions of prior estimates | $8,282 | | Accretion expense | $379 | | Balance at June 30, 2022 | $24,816 | - The asset retirement obligation increased by 53.6% from $16,155 thousand at December 31, 2021, to $24,816 thousand at June 30, 2022, primarily due to additions and revisions of prior estimates[69] NOTE 10 — Revenue Disaggregates Smart Sand, Inc.'s revenue by type, including sand sales, logistics, and shortfall revenue Revenue by Type for Three Months Ended June 30 (in thousands) | Revenue Type (in thousands) | 3 Months Ended June 30, 2022 | % of Total Revenue | 3 Months Ended June 30, 2021 | % of Total Revenue | | :-------------------------- | :--------------------------- | :----------------- | :--------------------------- | :----------------- | | Sand sales revenue | $67,111 | 98% | $28,801 | 97% | | Logistics revenue | $1,603 | 2% | $838 | 3% | | Total revenue | $68,714 | 100% | $29,639 | 100% | Revenue by Type for Six Months Ended June 30 (in thousands) | Revenue Type (in thousands) | 6 Months Ended June 30, 2022 | % of Total Revenue | 6 Months Ended June 30, 2021 | % of Total Revenue | | :-------------------------- | :--------------------------- | :----------------- | :--------------------------- | :----------------- | | Sand sales revenue | $105,400 | 95% | $51,948 | 91% | | Shortfall revenue | $1,915 | 2% | $1,741 | 3% | | Logistics revenue | $3,004 | 3% | $3,400 | 6% | | Total revenue | $110,319 | 100% | $57,089 | 100% | - Of the $16,270 thousand deferred revenue at December 31, 2021, $5,493 thousand was recognized in the six months ended June 30, 2022, with $4,556 thousand expected to be recognized by December 31, 2022[73] NOTE 11 — Stock-Based Compensation Describes Smart Sand, Inc.'s stock-based compensation plans and related expenses - The 2016 Omnibus Incentive Plan was amended on April 22, 2022, to increase authorized common stock for issuance by an additional 3,900 shares[74] Compensation Expense for Restricted Stock (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Compensation expense for restricted stock | $802 | $572 | $230 | 40.2% | - Unrecognized compensation expense related to unvested stock awards totaled $7,155 thousand at June 30, 2022, to be recognized through 2026[75][78] NOTE 12 — Income Taxes Presents Smart Sand, Inc.'s effective and statutory tax rates and details on deferred tax assets and liabilities Effective and Statutory Tax Rates for Three Months Ended June 30 | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | | :----- | :--------------------------- | :--------------------------- | :----- | | Effective tax rate | 108.7% | (6.0)% | 114.7% | | Statutory tax rate | 21.0% | 21.0% | 0.0% | Effective and Statutory Tax Rates for Six Months Ended June 30 | Metric | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | | :----- | :--------------------------- | :--------------------------- | :----- | | Effective tax rate | 34.1% | 16.0% | 18.1% | | Statutory tax rate | 21.0% | 21.0% | 0.0% | - The company recorded a partial valuation allowance against gross deferred tax assets and a liability for uncertain tax positions related to its depletion deduction methodology[82][83] NOTE 13 — Concentrations Identifies Smart Sand, Inc.'s customer concentrations and geographical risks related to its primary product - As of June 30, 2022, three customers accounted for 69% of total accounts receivable, compared to two customers accounting for 59% at December 31, 2021[87] - For the three months ended June 30, 2022, three customers generated 72% of total revenues, while for the six months ended June 30, 2022, three customers generated 57% of total revenues[88] - The company's primary product is Northern White sand, with mining operations limited to Wisconsin and Illinois, posing risks related to environmental, legal, or economic changes in these regions or the basins they serve[91] NOTE 14 — Commitments and Contingencies Outlines Smart Sand, Inc.'s legal proceedings and performance bond commitments - The company is subject to various legal proceedings in the normal course of business, but management believes the ultimate resolution will not materially affect financial statements[92] - Total aggregate principal amount of performance bonds outstanding increased to $17,651 thousand as of June 30, 2022, from $8,600 thousand at December 31, 2021, primarily due to the Blair facility acquisition[93][165] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis of Smart Sand, Inc.'s financial condition, operating results, liquidity, and cash flows, including GAAP and non-GAAP measures Overview Provides a business overview of Smart Sand, Inc., its products, services, and operational capacity - Smart Sand is a fully integrated frac and industrial sand supply and services company, providing Northern White sand and logistics solutions (transloading terminals, SmartSystems wellsite storage)[98] - The company's current annual processing capacity is 7.1 million tons, with potential to expand to 10.0 million tons by bringing the Blair facility online[100] - The Industrial Products Solutions (IPS) business, started in late 2021, aims to diversify sales into more stable, consumer-driven markets like glass, foundry, and building products[103] Market Trends Analyzes market trends impacting Smart Sand, Inc., including frac sand demand, oil and gas prices, and regional demand - Frac sand demand declined significantly in 2020 due to COVID-19, rebounded in late 2020 and 2021, and prices began recovering in the first six months of 2022 due to improved supply-demand fundamentals[106] - The ongoing conflict in Ukraine has contributed to dramatic swings and volatility in oil and natural gas prices and the oilfield service sector[109] - Demand for high-quality Northern White sand is expected to continue, particularly in the Appalachian and Bakken basins, supported by increased proppant usage per well and the efficiency of SmartSystems logistics solutions[110] GAAP Results of Operations Presents Smart Sand, Inc.'s detailed GAAP financial results for the reported periods Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021 Compares Smart Sand, Inc.'s GAAP operating results for the three months ended June 30, 2022, versus 2021 Summary GAAP Results for Three Months Ended June 30 (in thousands) | Metric (in thousands) | 2022 | 2021 | Change | % Change | | :-------------------- | :--- | :--- | :----- | :------- | | Total revenue | $68,714 | $29,639 | $39,075 | 131.8% | | Sand sales revenue | $67,111 | $28,801 | $38,310 | 133.0% | | Logistics revenue | $1,603 | $838 | $765 | 91.3% | | Cost of goods sold | $59,743 | $31,999 | $27,744 | 86.7% | | Gross profit | $8,971 | $(2,360) | $11,331 | -480.1% | | Operating expenses | $7,584 | $26,309 | $(18,725) | -71.2% | | Operating income (loss) | $1,387 | $(28,669) | $30,056 | -104.8% | | Net loss | $(90) | $(27,267) | $27,177 | -99.7% | - Sand sales volume increased by approximately 56% (from 767,000 tons to 1,196,000 tons), driven by higher demand and average sale prices[117] - Operating expenses decreased significantly due to a non-cash bad debt expense of $19.6 million recorded in Q2 2021 that did not recur in Q2 2022[121] Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021 Compares Smart Sand, Inc.'s GAAP operating results for the six months ended June 30, 2022, versus 2021 Summary GAAP Results for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 2022 | 2021 | Change | % Change | | :-------------------- | :--- | :--- | :----- | :------- | | Total revenue | $110,319 | $57,089 | $53,230 | 93.2% | | Sand sales revenue | $105,400 | $51,948 | $53,452 | 103.0% | | Shortfall revenue | $1,915 | $1,741 | $174 | 10.0% | | Logistics revenue | $3,004 | $3,400 | $(396) | -11.6% | | Cost of goods sold | $103,329 | $64,426 | $38,903 | 60.4% | | Gross profit | $6,990 | $(7,337) | $14,327 | -195.3% | | Operating expenses | $15,551 | $32,399 | $(16,848) | -52.0% | | Operating income (loss) | $(8,561) | $(39,736) | $31,175 | -78.4% | | Net loss | $(6,013) | $(31,179) | $25,166 | -80.7% | - Sand sales volume increased by approximately 34% (from 1,527,000 tons to 2,048,000 tons), contributing to the 103% increase in sand sales revenue due to higher average sale prices[131] - Logistics revenue decreased due to a shift from mine gate sales to in-basin sales, partially offset by higher SmartSystems fleet utilization[133] Non-GAAP Financial Measures Reconciles and analyzes Smart Sand, Inc.'s non-GAAP financial measures, including Contribution Margin, EBITDA, and Free Cash Flow Contribution Margin Analyzes Smart Sand, Inc.'s contribution margin and contribution margin per ton, highlighting drivers of change Contribution Margin for Three Months Ended June 30 (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Contribution margin | $15,254 | $3,491 | $11,763 | 337.0% | | Contribution margin per ton | $12.75 | $4.55 | $8.20 | 180.2% | | Total tons sold | 1,196 | 767 | 429 | 55.9% | Contribution Margin for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Contribution margin | $19,504 | $4,527 | $14,977 | 330.8% | | Contribution margin per ton | $9.52 | $2.96 | $6.56 | 221.6% | | Total tons sold | 2,048 | 1,527 | 521 | 34.1% | - The increase in contribution margin and contribution margin per ton was primarily due to higher sales volumes and higher average sale prices relative to production and delivery costs[147] EBITDA and Adjusted EBITDA Presents and reconciles Smart Sand, Inc.'s EBITDA and Adjusted EBITDA, explaining key performance drivers EBITDA and Adjusted EBITDA for Three Months Ended June 30 (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | EBITDA | $8,243 | $(18,786) | $27,029 | -143.9% | | Adjusted EBITDA | $9,159 | $(21,511) | $30,670 | -142.6% | EBITDA and Adjusted EBITDA for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | EBITDA | $5,141 | $(23,089) | $28,230 | -122.3% | | Adjusted EBITDA | $7,258 | $(24,990) | $32,248 | -129.0% | - The significant increase in Adjusted EBITDA was primarily driven by higher sales volumes and improved average sale prices of sand, relative to costs[152] Free Cash Flow Details Smart Sand, Inc.'s free cash flow, including operating cash flows and capital expenditures Free Cash Flow for Three Months Ended June 30 (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net cash (used in) provided by operating activities | $(2,287) | $32,566 | $(34,853) | -107.0% | | Free cash flow | $(3,656) | $29,736 | $(33,392) | -112.3% | Free Cash Flow for Six Months Ended June 30 (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net cash (used in) provided by operating activities | $(10,949) | $36,480 | $(47,429) | -130.0% | | Free cash flow | $(22,633) | $31,437 | $(54,070) | -172.0% | - The decrease in free cash flow for the six months ended June 30, 2022, was primarily due to the $6.5 million acquisition of the Blair facility, an increase in accounts receivable, and a repayment of a tax refund[158] Liquidity and Capital Resources Discusses Smart Sand, Inc.'s liquidity, capital resources, projected capital expenditures, and seasonal impacts - As of June 30, 2022, the company had $2.1 million in cash and $16.0 million available under its ABL Credit Facility, which are its primary sources of liquidity[159] - Full-year 2022 capital expenditures are projected to be between $20.0 million and $25.0 million, focusing on efficiency projects and the Waynesburg terminal[161] - The company's business is affected by seasonal fluctuations in weather, impacting wet sand processing capacity and leading to higher cash operating costs in Q2 and Q3 due to overproduction for winter demand[168] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk Discusses Smart Sand, Inc.'s market risk exposure, primarily interest rate risk, noting fixed-rate debt and immaterial variable-rate borrowings - The majority of the company's debt is financed under fixed interest rates, mitigating interest rate risk[177] - Borrowings under the ABL Credit Facility are variable, but the $3.0 million outstanding balance as of June 30, 2022, does not represent a material interest rate risk[177] - No additional material changes to market risk exposure were identified during the six months ended June 30, 2022, compared to the Annual Report on Form 10-K for 2021[178] ITEM 4. Controls and Procedures Management evaluated Smart Sand, Inc.'s disclosure controls and procedures, concluding effectiveness with no material changes in internal control - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2022[179] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2022[180] PART II OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits ITEM 1. Legal Proceedings Details Smart Sand, Inc.'s routine legal proceedings, with management expecting no material adverse effect on financial statements - The company is subject to various legal proceedings in the normal course of business[182] - Management believes the ultimate resolution of these legal matters will not materially affect the financial statements[182] ITEM 1A. Risk Factors Reports no material changes to Smart Sand, Inc.'s risk factors since the prior annual report - No material changes to risk factors were reported since the Annual Report on Form 10-K for the year ended December 31, 2021[183] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the quarter ended June 30, 2022 - No unregistered sales of equity securities occurred during the quarter ended June 30, 2022[184] ITEM 3. Defaults upon Senior Securities Reports no defaults upon senior securities - There were no defaults upon senior securities[185] ITEM 4. Mine Safety Disclosures Details Smart Sand, Inc.'s mine safety regulations by MSHA and OSHA, emphasizing compliance with health and safety standards - Smart Sand's mining operations are regulated by MSHA, which performs at least two unannounced inspections annually[186] - The company is subject to regulations on respirable silica exposure by OSHA, with MSHA expected to adopt similar rules, potentially requiring capital expenditures for compliance[187] - Compliance with the Federal Mine Safety and Health Act of 1977, as amended, is crucial, as non-compliance or changes in standards could materially impact the business[188] ITEM 5. Other Information No other information was reported in this section - No other information was disclosed[189] ITEM 6. Exhibits Lists all exhibits filed with the Form 10-Q, including corporate documents, incentive plan amendments, and certifications - Exhibits include corporate organizational documents, amendments to the 2016 Omnibus Incentive Plan, and various certifications (Rule 13a-14(a), Section 302, Section 906)[191] - Mine Safety Disclosure Exhibit (95.1) and XBRL Interactive Data Files (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104) are also included[191] SIGNATURES The report was signed by the CEO and CFO on August 9, 2022, as required by the Securities Exchange Act - The report was signed by Charles E. Young, CEO, and Lee E. Beckelman, CFO, on August 9, 2022[196]