Significant Accounting Policies | Significant Accounting Policies In addition to the significant accounting policies listed below, a comprehensive discussion of our critical accounting policies and estimates is included in our Annual Report on Form 10-K filed with the SEC on February 20, 2019 . Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Accounts Receivable Trade receivables, which relate to sales of frac sand, related services and the sale of logistics equipment for which credit is extended based on the customer’s credit history, are recorded at the invoiced amount and do not bear interest. The Company regularly reviews the collectability of accounts receivable. When it is probable that all or part of an outstanding balance will not be collected, the Company establishes or adjusts an allowance as necessary, generally using the specific identification method. Account balances are charged against the allowance after all means of collection have been exhausted and potential recovery is considered remote. As of each of September 30, 2019 and December 31, 2018 , the Company maintained an allowance for doubtful accounts of $1,060 . Impairment of Long-lived Assets Recoverability of investments in property, plant and equipment, and other long-lived assets is evaluated if events or circumstances indicate the impairment of an asset may exist, based on reporting units, which management has defined as the mine and terminal operations and the logistics and wellsite operations. Estimated future undiscounted net cash flows are calculated using estimates, including but not limited to estimates of proven and probable sand reserves, estimated future sales prices (considering historical and current prices, price trends and related factors), operating costs and anticipated capital expenditures. Reductions in the carrying value of our investment are only recorded if the undiscounted cash flows are less than our book basis in the applicable assets. Impairment losses are recognized based on the extent that the remaining investment exceeds the fair value, which is determined based upon the estimated future discounted net cash flows to be generated by the property, plant and equipment and other long-lived assets. Management’s estimates of future sales prices, recoverable proven and probable reserves, asset utilization and operating and capital costs, among other estimates, are subject to certain risks and uncertainties which may affect the recoverability of our investments in property, plant and equipment and other long-lived assets. Although management has made its best estimate of these factors based on current conditions, it is reasonably possible that changes could occur in the near term, which could adversely affect management’s estimate of the net cash flows expected to be generated from its operating assets. During the nine months ended September 30, 2019, we saw a significant decrease in the price of our common stock resulting in an overall reduction in our market capitalization, and our recorded net book value exceeded our market capitalization as of September 30, 2019. We therefore updated our internal business outlook for the Company to consider the current economic environment that affects our operations. We allocated the enterprise fair value to the reporting units and determined that the fair value of our net assets in the logistics and wellsite operations reporting unit exceeded its carrying value and therefore there was no impairment of long-lived assets in the logistics and wellsite operations reporting unit as of September 30, 2019. Utilizing the allocation of the enterprise fair value to the mine and terminal operations reporting unit, we assessed qualitative factors and determined that we could not conclude that it was more likely than not that the fair value of our net assets exceeded its carrying value. In turn, we prepared a quantitative analysis of the fair value of the mine and terminal operations assets as of September 30, 2019, and determined there was not sufficient undiscounted cash flows to recover the value of the long-lived assets. Upon completion of the valuation exercise, it was determined that there was impairments of certain long-lived assets as of September 30, 2019. Refer to Note 5 - Property, Plant and Equipment and Note 16 - Asset Impairments for additional disclosure regarding long-lived asset impairments. Leases On January 1, 2019, we adopted Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) using the modified retrospective transition method, utilizing the simplified transition option available, which allows entities to continue to apply the legacy guidance in Topic 840 , Leases , including its disclosure requirements, in the comparative periods presented in the year of adoption. We have elected to apply certain practical expedients, whereby we will not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. Upon adoption of the new leasing standard on January 1, 2019, we recognized $135,480 of operating lease right-of-use assets, including any lease prepayments made, initial direct costs incurred and excludes lease incentives received, and $127,018 of related operating lease liabilities on the Consolidated Balance Sheet. The impact of adoption of the new leasing standard had no impact to the opening balance of retained earnings on the Consolidated Balance Sheet or to the Consolidated Statements of Operations. At inception of a contract, the Company determines if it includes a lease. The Company evaluates the lease against the lease classification criteria within Topic 842. If the direct financing or sales-type classification criteria are met, then the lease is accounted for as a finance lease. All other leases are accounted for as operating leases. When a lease is identified, a right-of-use asset and the corresponding lease liability are recorded on the Condensed Consolidated Balance Sheet. Right-of-use 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. Right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. In the event a lease does not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease right-of-use assets also include any lease prepayments made, initial direct costs incurred and excludes lease incentives received. The operating lease liabilities also include any deferred rent accrued. We generally do not include renewal or termination options in our assessment of the leases unless extension or termination for certain assets is deemed to be reasonably certain. For all leases with a term of 12 months or less, we elected the practical expedient to not recognize lease assets and liabilities. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Right-of-use assets are assessed periodically for impairment if events or circumstances occur that indicate the carrying amount of the asset may not be recovered. We monitor events and modifications of existing lease agreements that would require reassessment of the lease. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding right-of-use asset. As a result of the allocation of the enterprise fair value to the mine and terminal operations reporting unit, we assessed qualitative factors and determined that we could not conclude that it was more likely than not that the fair value of our net assets exceeded its carrying value. In turn, we prepared a quantitative analysis of the fair value of the right-of-use assets as of September 30, 2019, and determined there was not sufficient undiscounted cash flows to recover the value of certain right-of-use assets. Upon completion of the valuation exercise, it was determined that there was impairments of certain right-of-use assets as of September 30, 2019. Refer to Note 6 - Leases and Note 16 - Asset Impairments for additional disclosure regarding leases and right-of-use asset impairments. Goodwill Goodwill represents the excess of purchase price over the fair value of net assets acquired. The Company performs an assessment of the recoverability of goodwill during the third quarter of each fiscal year, or more often if events or circumstances indicate the impairment of an asset may exist. Our assessment of goodwill is based on qualitative factors to determine whether the fair value of the reporting unit is more likely than not less than the carrying value. An additional quantitative impairment analysis is completed if the qualitative analysis indicates that the fair value is not substantially in excess of the carrying value. The quantitative analysis determines the fair value of the reporting unit based on the discounted cash flow method and relative market-based approaches. Our annual assessment of goodwill performed during the third quarter of 2019 was prepared in accordance with ASU 2017-14, Simplifying the Test for Goodwill Impairment , which eliminates step two from the goodwill impairment test . Refer to Note 16 - Asset Impairments for additional disclosure regarding our goodwill impairment assessment. Fair Value Measurements The amounts reported in the balance sheet as current assets or liabilities, including cash, accounts receivable, accounts payable, accrued and other current liabilities approximate fair value due to the short-term maturities of these instruments. The Company's financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy, which are as follows: • Level 1 - observable inputs such as quoted prices in active markets; • Level 2 - inputs other than quoted prices in active markets that we can directly or indirectly observe to the extent that the markets are liquid for the relevant settlement periods; and • Level 3 - unobservable inputs in which little or no market data exists, therefore inputs reflect the Company's assumptions. The fair value of the 9.50% senior unsecured notes due 2026 (the "Senior Notes") approximated $261,000 as of September 30, 2019 , based on the market price quoted from external sources, compared with a carrying value of $450,000 . If the Senior Notes were measured at fair value in the financial statements, it would be classified as Level 2 in the fair value hierarchy. We measure the contingent consideration liability recognized in connection with the acquisition of FB Industries at fair value on a recurring basis using unobservable inputs and it would be classified as Level 3 in the fair value hierarchy. Refer to Note 10 - Commitments and Contingencies for additional disclosure regarding contingent consideration. Goodwill, other intangible assets and long-lived assets, including right-of-use assets, are subject to nonrecurring fair value measurement for the assessment of impairment or as part of the purchase price allocation process for business acquisitions. During the third quarter of 2019, the long-lived assets, including right-of-use assets, goodwill and other intangible assets were measured at fair value on a nonrecurring basis using unobservable inputs, which are categorized as Level 3 in the fair value hierarchy. Refer to Note 16 - Asset Impairments for additional disclosure regarding asset impairments. Income Taxes As a result of the Conversion completed on May 31, 2019, the Company converted from an entity treated as a partnership for U.S. federal income tax purposes to an entity treated as a corporation for U.S. federal income tax purposes and is therefore subject to U.S. federal, foreign and state and local corporate income tax. The Conversion resulted in the Company obtaining a partial step-down in the tax basis of certain assets. On the date of the Conversion, we recorded an estimated net tax expense and estimated net deferred tax liability of $115,488 relating to the Conversion as well as this partial step-down in tax basis. Our overall tax provision is based on, among other things, an estimate of the amount of such partial step-down in tax basis that is derived from an analysis of the basis of our unitholders in their ownership of Hi-Crush common units at December 31, 2018 and estimated asset values at the time of the Conversion. While this information does not completely reflect the actual basis of our unitholders at May 31, 2019, our estimate is based on our best estimate of the individual asset valuations and the most recent unitholder basis information available to us. The amount of partial step-down in tax basis cannot be finally determined until complete trading information with respect to common units of the Company for the five months ended May 31, 2019 becomes available. The Company does not currently expect such information to become available until the first quarter of 2020 and the timing and the availability of this information is not within the Company’s control. Since the unitholder basis information currently available to us does not completely reflect the actual basis of our unitholders at May 31, 2019, the amount of partial step-down in tax basis as finally determined is expected to differ, possibly materially, from the current estimate, which in turn is expected to cause the Company’s income tax provision and effective tax rate under GAAP to differ, possibly to a material extent, from the current estimate described herein. If the amount of the partial step-down in tax basis as finally determined is lower than the current estimate, the Company would record a lower net tax expense and an incrementally lower deferred tax liability, which would have the effect of decreasing the amount of taxes payable by the Company in the future. If the amount of partial step-down in tax basis as finally determined is higher than the current estimate, the Company would record a higher net tax expense and an incrementally higher deferred tax liability, which would have the effect of increasing the amount of taxes payable by the Company in the future. Excluding day one deferred taxes related to the Conversion and the Company's pre-tax loss for the five months ended May 31, 2019 prior to the Conversion, the Canadian operations income for the five months ended May 31, 2019 and the consolidated income for the months of June 2019 through September 2019 were subject to corporate tax at an estimated effective tax rate of approximately 23.5% . As such, the effective tax rate differs from the statutory rate primarily due to the following: (i) the tax expense recognized as a result of the partial step-down in tax basis of certain assets as a result of the Conversion as described above, (ii) the tax expense recognized that relates to the post-conversion book income, (iii) state income taxes, (iv) the impact of current year acquisitions, (v) certain compensation charges attributable to the Company that are not deductible for tax purposes, and (vi) certain book expenses that are not deductible for tax purposes. Prior to the Conversion, the Company was a pass-through entity and was not considered a taxable entity for federal tax purposes. Therefore, there is not a provision for income taxes for U.S. federal or certain other state jurisdictions in the accompanying Condensed Consolidated Financial Statements prior to May 31, 2019. Deferred Income Taxes Income taxes are accounted for using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred assets and liabilities of a change in tax rates is recognized in the Condensed Consolidated Statements of Operations in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. When evaluating the realizability of the deferred tax assets, all evidence, both positive and negative, is considered. Items considered when evaluating the need for a valuation allowance include the ability to carry back losses, future reversals of existing temporary differences, tax planning strategies, and expectations of future earnings. For a particular tax‑paying component of an entity and within a particular tax jurisdiction, deferred tax assets and liabilities are offset and presented as a single amount, as applicable, in the accompanying statements of financial condition. Foreign Currency Translation The Company records foreign currency translation adjustments from the process of translating the functional currency of the financial statements of its foreign subsidiary into the U.S. dollar reporting currency. The Canadian dollar is the functional currency of the Company's foreign subsidiary as it is the primary currency within the economic environment in which the subsidiary operates. Assets and liabilities of the subsidiary's operations are translated into U.S. dollars at the rate of exchange in effect on the balance sheet date and income and expenses are translated at the average exchange rate in effect during the reporting period. Adjustments resulting from the translation of the subsidiary's financial statements are reported in other comprehensive income. |